[Congressional Record Volume 146, Number 106 (Tuesday, September 12, 2000)]
[House]
[Pages H7416-H7431]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     FSC REPEAL AND EXTRA-TERRITORIAL INCOME EXCLUSION ACT OF 2000

  Mr. ARCHER. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 4986) to amend the Internal Revenue Code of 1986 to repeal 
the provisions relating to foreign sales corporations (FSCs) and to 
exclude extraterritorial income from gross income, as amended.
  The Clerk read as follows:

                               H.R. 4986

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

     SECTION 1. SHORT TITLE.

       (a) Short Title.--This Act may be cited as the ``FSC Repeal 
     and Extraterritorial Income Exclusion Act of 2000''.
       (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. REPEAL OF FOREIGN SALES CORPORATION RULES.

       Subpart C of part III of subchapter N of chapter 1 
     (relating to taxation of foreign sales corporations) is 
     hereby repealed.

     SEC. 3. TREATMENT OF EXTRATERRITORIAL INCOME.

       (a) In General.--Part III of subchapter B of chapter 1 
     (relating to items specifically excluded from gross income) 
     is amended by inserting before section 115 the following new 
     section:

     ``SEC. 114. EXTRATERRITORIAL INCOME.

       ``(a) Exclusion.--Gross income does not include 
     extraterritorial income.
       ``(b) Exception.--Subsection (a) shall not apply to 
     extraterritorial income which is not qualifying foreign trade 
     income as determined under subpart E of part III of 
     subchapter N.
       ``(c) Disallowance of Deductions.--
       ``(1) In general.--Any deduction of a taxpayer allocated 
     under paragraph (2) to extraterritorial income of the 
     taxpayer excluded from gross income under subsection (a) 
     shall not be allowed.
       ``(2) Allocation.--Any deduction of the taxpayer properly 
     apportioned and allocated to the extraterritorial income 
     derived by the taxpayer from any transaction shall be 
     allocated on a proportionate basis between--
       ``(A) the extraterritorial income derived from such 
     transaction which is excluded from gross income under 
     subsection (a), and
       ``(B) the extraterritorial income derived from such 
     transaction which is not so excluded.
       ``(d) Denial of Credits for Certain Foreign Taxes.--
     Notwithstanding any other provision of this chapter, no 
     credit shall be allowed under this chapter for any income, 
     war profits, and excess profits taxes paid or accrued to any 
     foreign country or possession of the United States with 
     respect to extraterritorial income which is excluded from 
     gross income under subsection (a).
       ``(e) Extraterritorial Income.--For purposes of this 
     section, the term `extraterritorial income' means the gross 
     income of the taxpayer attributable to foreign trading gross 
     receipts (as defined in section 942) of the taxpayer.''
       (b) Qualifying Foreign Trade Income.--Part III of 
     subchapter N of chapter 1 is amended by inserting after 
     subpart D the following new subpart:

              ``Subpart E--Qualifying Foreign Trade Income

``Sec. 941. Qualifying foreign trade income.

[[Page H7417]]

``Sec. 942. Foreign trading gross receipts.
``Sec. 943. Other definitions and special rules.

     ``SEC. 941. QUALIFYING FOREIGN TRADE INCOME.

       ``(a) Qualifying Foreign Trade Income.--For purposes of 
     this subpart and section 114--
       ``(1) In general.--The term `qualifying foreign trade 
     income' means, with respect to any transaction, the amount of 
     gross income which, if excluded, will result in a reduction 
     of the taxable income of the taxpayer from such transaction 
     equal to the greatest of--
       ``(A) 30 percent of the foreign sale and leasing income 
     derived by the taxpayer from such transaction,
       ``(B) 1.2 percent of the foreign trading gross receipts 
     derived by the taxpayer from the transaction, or
       ``(C) 15 percent of the foreign trade income derived by the 
     taxpayer from the transaction.
     In no event shall the amount determined under subparagraph 
     (B) exceed 200 percent of the amount determined under 
     subparagraph (C).
       ``(2) Alternative computation.--A taxpayer may compute its 
     qualifying foreign trade income under a subparagraph of 
     paragraph (1) other than the subparagraph which results in 
     the greatest amount of such income.
       ``(3) Limitation on use of foreign trading gross receipts 
     method.--If any person computes its qualifying foreign trade 
     income from any transaction with respect to any property 
     under paragraph (1)(B), the qualifying foreign trade income 
     of such person (or any related person) with respect to any 
     other transaction involving such property shall be zero.
       ``(4) Rules for marginal costing.--The Secretary shall 
     prescribe regulations setting forth rules for the allocation 
     of expenditures in computing foreign trade income under 
     paragraph (1)(C) in those cases where a taxpayer is seeking 
     to establish or maintain a market for qualifying foreign 
     trade property.
       ``(5) Participation in international boycotts, etc.--Under 
     regulations prescribed by the Secretary, the qualifying 
     foreign trade income of a taxpayer for any taxable year shall 
     be reduced (but not below zero) by the sum of--
       ``(A) an amount equal to such income multiplied by the 
     international boycott factor determined under section 999, 
     and
       ``(B) any illegal bribe, kickback, or other payment (within 
     the meaning of section 162(c)) paid by or on behalf of the 
     taxpayer directly or indirectly to an official, employee, or 
     agent in fact of a government.
       ``(b) Foreign Trade Income.--For purposes of this subpart--
       ``(1) In general.--The term `foreign trade income' means 
     the taxable income of the taxpayer attributable to foreign 
     trading gross receipts of the taxpayer.
       ``(2) Special rule for cooperatives.--In any case in which 
     an organization to which part I of subchapter T applies which 
     is engaged in the marketing of agricultural or horticultural 
     products sells qualifying foreign trade property, in 
     computing the taxable income of such cooperative, there shall 
     not be taken into account any deduction allowable under 
     subsection (b) or (c) of section 1382 (relating to patronage 
     dividends, per-unit retain allocations, and nonpatronage 
     distributions).
       ``(c) Foreign Sale and Leasing Income.--For purposes of 
     this section--
       ``(1) In general.--The term `foreign sale and leasing 
     income' means, with respect to any transaction--
       ``(A) foreign trade income properly allocable to activities 
     which--
       ``(i) are described in paragraph (2)(A)(i) or (3) of 
     section 942(b), and
       ``(ii) are performed by the taxpayer (or any person acting 
     under a contract with such taxpayer) outside the United 
     States, or
       ``(B) foreign trade income derived by the taxpayer in 
     connection with the lease or rental of qualifying foreign 
     trade property for use by the lessee outside the United 
     States.
       ``(2) Special rules for leased property.--
       ``(A) Sales income.--The term `foreign sale and leasing 
     income' includes any foreign trade income derived by the 
     taxpayer from the sale of property described in paragraph 
     (1)(B).
       ``(B) Limitation in certain cases.--Except as provided in 
     regulations, in the case of property which--
       ``(i) was manufactured, produced, grown, or extracted by 
     the taxpayer, or
       ``(ii) was acquired by the taxpayer from a related person 
     for a price which was not determined in accordance with the 
     rules of section 482,
     the amount of foreign trade income which may be treated as 
     foreign sale and leasing income under paragraph (1)(B) or 
     subparagraph (A) of this paragraph with respect to any 
     transaction involving such property shall not exceed the 
     amount which would have been determined if the taxpayer had 
     acquired such property for the price determined in accordance 
     with the rules of section 482.
       ``(3) Special rules.--
       ``(A) Excluded property.--Foreign sale and leasing income 
     shall not include any income properly allocable to excluded 
     property described in subparagraph (B) of section 943(a)(3) 
     (relating to intangibles).
       ``(B) Only direct expenses taken into account.--For 
     purposes of this subsection, any expense other than a 
     directly allocable expense shall not be taken into account in 
     computing foreign trade income.

     ``SEC. 942. FOREIGN TRADING GROSS RECEIPTS.

       ``(a) Foreign Trading Gross Receipts.--
       ``(1) In general.--Except as otherwise provided in this 
     section, for purposes of this subpart, the term `foreign 
     trading gross receipts' means the gross receipts of the 
     taxpayer which are--
       ``(A) from the sale, exchange, or other disposition of 
     qualifying foreign trade property,
       ``(B) from the lease or rental of qualifying foreign trade 
     property for use by the lessee outside the United States,
       ``(C) for services which are related and subsidiary to--
       ``(i) any sale, exchange, or other disposition of 
     qualifying foreign trade property by such taxpayer, or
       ``(ii) any lease or rental of qualifying foreign trade 
     property described in subparagraph (B) by such taxpayer,
       ``(D) for engineering or architectural services for 
     construction projects located (or proposed for location) 
     outside the United States, or
       ``(E) for the performance of managerial services for a 
     person other than a related person in furtherance of the 
     production of foreign trading gross receipts described in 
     subparagraph (A), (B), or (C).
     Subparagraph (E) shall not apply to a taxpayer for any 
     taxable year unless at least 50 percent of its foreign 
     trading gross receipts (determined without regard to this 
     sentence) for such taxable year is derived from activities 
     described in subparagraph (A), (B), or (C).
       ``(2) Certain receipts excluded on basis of use; subsidized 
     receipts excluded.--The term `foreign trading gross receipts' 
     shall not include receipts of a taxpayer from a transaction 
     if--
       ``(A) the qualifying foreign trade property or services--
       ``(i) are for ultimate use in the United States, or
       ``(ii) are for use by the United States or any 
     instrumentality thereof and such use of qualifying foreign 
     trade property or services is required by law or regulation, 
     or
       ``(B) such transaction is accomplished by a subsidy granted 
     by the government (or any instrumentality thereof) of the 
     country or possession in which the property is manufactured, 
     produced, grown, or extracted.
       ``(3) Election to exclude certain receipts.--The term 
     `foreign trading gross receipts' shall not include gross 
     receipts of a taxpayer from a transaction if the taxpayer 
     elects not to have such receipts taken into account for 
     purposes of this subpart.
       ``(b) Foreign Economic Process Requirements.--
       ``(1) In general.--Except as provided in subsection (c), a 
     taxpayer shall be treated as having foreign trading gross 
     receipts from any transaction only if economic processes with 
     respect to such transaction take place outside the United 
     States as required by paragraph (2).
       ``(2) Requirement.--
       ``(A) In general.--The requirements of this paragraph are 
     met with respect to the gross receipts of a taxpayer derived 
     from any transaction if--
       ``(i) such taxpayer (or any person acting under a contract 
     with such taxpayer) has participated outside the United 
     States in the solicitation (other than advertising), the 
     negotiation, or the making of the contract relating to such 
     transaction, and
       ``(ii) the foreign direct costs incurred by the taxpayer 
     attributable to the transaction equal or exceed 50 percent of 
     the total direct costs attributable to the transaction.
       ``(B) Alternative 85-percent test.--A taxpayer shall be 
     treated as satisfying the requirements of subparagraph 
     (A)(ii) with respect to any transaction if, with respect to 
     each of at least 2 subparagraphs of paragraph (3), the 
     foreign direct costs incurred by such taxpayer attributable 
     to activities described in such subparagraph equal or exceed 
     85 percent of the total direct costs attributable to 
     activities described in such subparagraph.
       ``(C) Definitions.--For purposes of this paragraph--
       ``(i) Total direct costs.--The term `total direct costs' 
     means, with respect to any transaction, the total direct 
     costs incurred by the taxpayer attributable to activities 
     described in paragraph (3) performed at any location by the 
     taxpayer or any person acting under a contract with such 
     taxpayer.
       ``(ii) Foreign direct costs.--The term `foreign direct 
     costs' means, with respect to any transaction, the portion of 
     the total direct costs which are attributable to activities 
     performed outside the United States.
       ``(3) Activities relating to qualifying foreign trade 
     property.--The activities described in this paragraph are any 
     of the following with respect to qualifying foreign trade 
     property--
       ``(A) advertising and sales promotion,
       ``(B) the processing of customer orders and the arranging 
     for delivery,
       ``(C) transportation outside the United States in 
     connection with delivery to the customer,
       ``(D) the determination and transmittal of a final invoice 
     or statement of account or the receipt of payment, and
       ``(E) the assumption of credit risk.
       ``(4) Economic processes performed by related persons.--A 
     taxpayer shall be treated as meeting the requirements of this 
     subsection with respect to any sales transaction involving 
     any property if any related person has met such requirements 
     in such transaction or any other sales transaction involving 
     such property.

[[Page H7418]]

       ``(c) Exception From Foreign Economic Process 
     Requirement.--
       ``(1) In general.--The requirements of subsection (b) shall 
     be treated as met for any taxable year if the foreign trading 
     gross receipts of the taxpayer for such year do not exceed 
     $5,000,000.
       ``(2) Receipts of related persons aggregated.--All related 
     persons shall be treated as one person for purposes of 
     paragraph (1), and the limitation under paragraph (1) shall 
     be allocated among such persons in a manner provided in 
     regulations prescribed by the Secretary.
       ``(3) Special rule for pass-thru entities.--In the case of 
     a partnership, S corporation, or other pass-thru entity, the 
     limitation under paragraph (1) shall apply with respect to 
     the partnership, S corporation, or entity and with respect to 
     each partner, shareholder, or other owner.

     ``SEC. 943. OTHER DEFINITIONS AND SPECIAL RULES.

       ``(a) Qualifying Foreign Trade Property.--For purposes of 
     this subpart--
       ``(1) In general.--The term `qualifying foreign trade 
     property' means property--
       ``(A) manufactured, produced, grown, or extracted within or 
     outside the United States,
       ``(B) held primarily for sale, lease, or rental, in the 
     ordinary course of trade or business for direct use, 
     consumption, or disposition outside the United States, and
       ``(C) not more than 50 percent of the fair market value of 
     which is attributable to--
       ``(i) articles manufactured, produced, grown, or extracted 
     outside the United States, and
       ``(ii) direct costs for labor (determined under the 
     principles of section 263A) performed outside the United 
     States.
     For purposes of subparagraph (C), the fair market value of 
     any article imported into the United States shall be its 
     appraised value, as determined by the Secretary under section 
     402 of the Tariff Act of 1930 (19 U.S.C. 1401a) in connection 
     with its importation, and the direct costs for labor under 
     clause (ii) do not include costs that would be treated under 
     the principles of section 263A as direct labor costs 
     attributable to articles described in clause (i).
       ``(2) U.S. taxation to ensure consistent treatment.--
     Property which (without regard to this paragraph) is 
     qualifying foreign trade property and which is manufactured, 
     produced, grown, or extracted outside the United States shall 
     be treated as qualifying foreign trade property only if it is 
     manufactured, produced, grown, or extracted by--
       ``(A) a domestic corporation,
       ``(B) an individual who is a citizen or resident of the 
     United States,
       ``(C) a foreign corporation with respect to which an 
     election under subsection (e) (relating to foreign 
     corporations electing to be subject to United States 
     taxation) is in effect, or
       ``(D) a partnership or other pass-thru entity all of the 
     partners or owners of which are described in subparagraph 
     (A), (B), or (C).
     Except as otherwise provided by the Secretary, tiered 
     partnerships or pass-thru entities shall be treated as 
     described in subparagraph (D) if each of the partnerships or 
     entities is directly or indirectly wholly owned by persons 
     described in subparagraph (A), (B), or (C).
       ``(3) Excluded property.--The term `qualifying foreign 
     trade property' shall not include--
       ``(A) property leased or rented by the taxpayer for use by 
     any related person,
       ``(B) patents, inventions, models, designs, formulas, or 
     processes whether or not patented, copyrights (other than 
     films, tapes, records, or similar reproductions, and other 
     than computer software (whether or not patented), for 
     commercial or home use), goodwill, trademarks, trade brands, 
     franchises, or other like property,
       ``(C) oil or gas (or any primary product thereof),
       ``(D) products the transfer of which is prohibited or 
     curtailed to effectuate the policy set forth in paragraph 
     (2)(C) of section 3 of Public Law 96-72, or
       ``(E) any unprocessed timber which is a softwood.
     For purposes of subparagraph (E), the term `unprocessed 
     timber' means any log, cant, or similar form of timber.
       ``(4) Property in short supply.--If the President 
     determines that the supply of any property described in 
     paragraph (1) is insufficient to meet the requirements of the 
     domestic economy, the President may by Executive order 
     designate the property as in short supply. Any property so 
     designated shall not be treated as qualifying foreign trade 
     property during the period beginning with the date specified 
     in the Executive order and ending with the date specified in 
     an Executive order setting forth the President's 
     determination that the property is no longer in short supply.
       ``(b) Other Definitions and Rules.--For purposes of this 
     subpart--
       ``(1) Transaction.--
       ``(A) In general.--The term `transaction' means--
       ``(i) any sale, exchange, or other disposition,
       ``(ii) any lease or rental, and
       ``(iii) any furnishing of services.
       ``(B) Grouping of transactions.--To the extent provided in 
     regulations, any provision of this subpart which, but for 
     this subparagraph, would be applied on a transaction-by-
     transaction basis may be applied by the taxpayer on the basis 
     of groups of transactions based on product lines or 
     recognized industry or trade usage. Such regulations may 
     permit different groupings for different purposes.
       ``(2) United states defined.--The term `United States' 
     includes the Commonwealth of Puerto Rico. The preceding 
     sentence shall not apply for purposes of determining whether 
     a corporation is a domestic corporation.
       ``(3) Related person.--A person shall be related to another 
     person if such persons are treated as a single employer under 
     subsection (a) or (b) of section 52 or subsection (m) or (o) 
     of section 414, except that determinations under subsections 
     (a) and (b) of section 52 shall be made without regard to 
     section 1563(b).
       ``(4) Gross and taxable income.--Section 114 shall not be 
     taken into account in determining the amount of gross income 
     or foreign trade income from any transaction.
       ``(c) Source Rule.--Under regulations, in the case of 
     qualifying foreign trade property manufactured, produced, 
     grown, or extracted within the United States, the amount of 
     income of a taxpayer from any sales transaction with respect 
     to such property which is treated as from sources without the 
     United States shall not exceed--
       ``(1) in the case of a taxpayer computing its qualifying 
     foreign trade income under section 941(a)(1)(B), the amount 
     of the taxpayer's foreign trade income which would (but for 
     this subsection) be treated as from sources without the 
     United States if the foreign trade income were reduced by an 
     amount equal to 4 percent of the foreign trading gross 
     receipts with respect to the transaction, and
       ``(2) in the case of a taxpayer computing its qualifying 
     foreign trade income under section 941(a)(1)(C), 50 percent 
     of the amount of the taxpayer's foreign trade income which 
     would (but for this subsection) be treated as from sources 
     without the United States.
       ``(d) Treatment of Withholding Taxes.--
       ``(1) In general.--For purposes of section 114(d), any 
     withholding tax shall not be treated as paid or accrued with 
     respect to extraterritorial income which is excluded from 
     gross income under section 114(a). For purposes of this 
     paragraph, the term `withholding tax' means any tax which is 
     imposed on a basis other than residence and for which credit 
     is allowable under section 901 or 903.
       ``(2) Exception.--Paragraph (1) shall not apply to any 
     taxpayer with respect to extraterritorial income from any 
     transaction if the taxpayer computes its qualifying foreign 
     trade income with respect to the transaction under section 
     941(a)(1)(A).
       ``(e) Election To Be Treated as Domestic Corporation.--
       ``(1) In general.--An applicable foreign corporation may 
     elect to be treated as a domestic corporation for all 
     purposes of this title if such corporation waives all 
     benefits to such corporation granted by the United States 
     under any treaty. No election under section 1362(a) may be 
     made with respect to such corporation.
       ``(2) Applicable foreign corporation.--For purposes of 
     paragraph (1), the term `applicable foreign corporation' 
     means any foreign corporation if--
       ``(A) such corporation manufactures, produces, grows, or 
     extracts property in the ordinary course of such 
     corporation's trade or business, or
       ``(B) substantially all of the gross receipts of such 
     corporation may reasonably be expected to be foreign trading 
     gross receipts.
       ``(3) Period of election.--
       ``(A) In general.--Except as otherwise provided in this 
     paragraph, an election under paragraph (1) shall apply to the 
     taxable year for which made and all subsequent taxable years 
     unless revoked by the taxpayer. Any revocation of such 
     election shall apply to taxable years beginning after such 
     revocation.
       ``(B) Termination.--If a corporation which made an election 
     under paragraph (1) for any taxable year fails to meet the 
     requirements of subparagraph (A) or (B) of paragraph (2) for 
     any subsequent taxable year, such election shall not apply to 
     any taxable year beginning after such subsequent taxable 
     year.
       ``(C) Effect of revocation or termination.--If a 
     corporation which made an election under paragraph (1) 
     revokes such election or such election is terminated under 
     subparagraph (B), such corporation (and any successor 
     corporation) may not make such election for any of the 5 
     taxable years beginning with the first taxable year for which 
     such election is not in effect as a result of such revocation 
     or termination.
       ``(4) Special rules.--
       ``(A) Requirements.--This subsection shall not apply to an 
     applicable foreign corporation if such corporation fails to 
     meet the requirements (if any) which the Secretary may 
     prescribe to ensure that the taxes imposed by this chapter on 
     such corporation are paid.
       ``(B) Effect of election, revocation, and termination.--
       ``(i) Election.--For purposes of section 367, a foreign 
     corporation making an election under this subsection shall be 
     treated as transferring (as of the first day of the first 
     taxable year to which the election applies) all of its assets 
     to a domestic corporation in connection with an exchange to 
     which section 354 applies.
       ``(ii) Revocation and termination.--For purposes of section 
     367, if--

       ``(I) an election is made by a corporation under paragraph 
     (1) for any taxable year, and
       ``(II) such election ceases to apply for any subsequent 
     taxable year,

     such corporation shall be treated as a domestic corporation 
     transferring (as of the 1st day of the first such subsequent 
     taxable year

[[Page H7419]]

     to which such election ceases to apply) all of its property 
     to a foreign corporation in connection with an exchange to 
     which section 354 applies.
       ``(C) Eligibility for election.--The Secretary may by 
     regulation designate one or more classes of corporations 
     which may not make the election under this subsection.
       ``(f) Rules Relating to Allocations of Qualifying Foreign 
     Trade Income From Shared Partnerships.--
       ``(1) In general.--If--
       ``(A) a partnership maintains a separate account for 
     transactions (to which this subpart applies) with each 
     partner,
       ``(B) distributions to each partner with respect to such 
     transactions are based on the amounts in the separate account 
     maintained with respect to such partner, and
       ``(C) such partnership meets such other requirements as the 
     Secretary may by regulations prescribe,
     then such partnership shall allocate to each partner items of 
     income, gain, loss, and deduction (including qualifying 
     foreign trade income) from any transaction to which this 
     subpart applies on the basis of such separate account.
       ``(2) Special rules.--For purposes of this subpart, in the 
     case of a partnership to which paragraph (1) applies--
       ``(A) any partner's interest in the partnership shall not 
     be taken into account in determining whether such partner is 
     a related person with respect to any other partner, and
       ``(B) the election under section 942(a)(3) shall be made 
     separately by each partner with respect to any transaction 
     for which the partnership maintains separate accounts for 
     each partner.
       ``(g) Exclusion for Patrons of Agricultural and 
     Horticultural Cooperatives.--Any amount described in 
     paragraph (1) or (3) of section 1385(a)--
       ``(1) which is received by a person from an organization to 
     which part I of subchapter T applies which is engaged in the 
     marketing of agricultural or horticultural products, and
       ``(2) which is designated by the organization as allocable 
     to qualifying foreign trade income in a written notice mailed 
     to its patrons during the payment period described in section 
     1382(d),
     shall be treated as qualifying foreign trade income of such 
     person for purposes of section 114. The taxable income of the 
     organization shall not be reduced under section 1382 by 
     reason of any amount to which the preceding sentence 
     applies.''

     SEC. 4. TECHNICAL AND CONFORMING AMENDMENTS.

       (1) The second sentence of section 56(g)(4)(B)(i) is 
     amended by inserting before the period ``or under section 
     114''.
       (2) Section 245 is amended by adding at the end the 
     following new subsection:
       ``(d) Certain Dividends Allocable to Qualifying Foreign 
     Trade Income.--In the case of a domestic corporation which is 
     a United States shareholder (as defined in section 951(b)) of 
     a controlled foreign corporation (as defined in section 957), 
     there shall be allowed as a deduction an amount equal to 100 
     percent of any dividend received from such controlled foreign 
     corporation which is distributed out of earnings and profits 
     attributable to qualifying foreign trade income (as defined 
     in section 941(a)).''
       (3) Section 275(a) is amended--
       (A) by striking ``or'' at the end of paragraph (4)(A), by 
     striking the period at the end of paragraph (4)(B) and 
     inserting ``, or'', and by adding at the end of paragraph (4) 
     the following new subparagraph:
       ``(C) such taxes are paid or accrued with respect to 
     qualifying foreign trade income (as defined in section 
     941).'', and
       (B) by adding at the end the following the following new 
     sentence: ``A rule similar to the rule of section 943(d) 
     shall apply for purposes of paragraph (4)(C).''
       (4) Paragraph (3) of section 864(e) is amended--
       (A) by striking ``For purposes of'' and inserting:
       ``(A) In general.--For purposes of'', and
       (B) by adding at the end the following new subparagraph:
       ``(B) Assets producing exempt extraterritorial income.--For 
     purposes of allocating and apportioning any interest expense, 
     there shall not be taken into account any qualifying foreign 
     trade property (as defined in section 943(a)) which is held 
     by the taxpayer for lease or rental in the ordinary course of 
     trade or business for use by the lessee outside the United 
     States (as defined in section 943(b)(2)).''
       (5) Section 903 is amended by striking ``164(a)'' and 
     inserting ``114, 164(a),''.
       (6) Section 999(c)(1) is amended by inserting 
     ``941(a)(5),'' after ``908(a),''.
       (7) The table of sections for part III of subchapter B of 
     chapter 1 is amended by inserting before the item relating to 
     section 115 the following new item:

``Sec. 114. Extraterritorial income.''
       (8) The table of subparts for part III of subchapter N of 
     chapter 1 is amended by striking the item relating to subpart 
     E and inserting the following new item:

``Subpart E. Qualifying foreign trade income.''
       (9) The table of subparts for part III of subchapter N of 
     chapter 1 is amended by striking the item relating to subpart 
     C.

     SEC. 5. EFFECTIVE DATE.

       (a) In General.--The amendments made by this Act shall 
     apply to transactions after September 30, 2000.
       (b) No New FSCs; Termination of Inactive FSCs.--
       (1) No new fscs.--No corporation may elect after September 
     30, 2000, to be a FSC (as defined in section 922 of the 
     Internal Revenue Code of 1986, as in effect before the 
     amendments made by this Act).
       (2) Termination of inactive fscs.--If a FSC has no foreign 
     trade income (as defined in section 923(b) of such Code, as 
     so in effect) for any period of 5 consecutive taxable years 
     beginning after December 31, 2001, such FSC shall cease to be 
     treated as a FSC for purposes of such Code for any taxable 
     year beginning after such period.
       (c) Transition Period for Existing Foreign Sales 
     Corporations.--
       (1) In general.--In the case of a FSC (as so defined) in 
     existence on September 30, 2000, and at all times thereafter, 
     the amendments made by this Act shall not apply to any 
     transaction in the ordinary course of trade or business 
     involving a FSC which occurs--
       (A) before January 1, 2002, or
       (B) after December 31, 2001, pursuant to a binding 
     contract--
       (i) which is between the FSC (or any related person) and 
     any person which is not a related person, and
       (ii) which is in effect on September 30, 2000, and at all 
     times thereafter.
     For purposes of this paragraph, a binding contract shall 
     include a purchase option, renewal option, or replacement 
     option which is included in such contract and which is 
     enforceable against the seller or lessor.
       (2) Election to have amendments apply earlier.--A taxpayer 
     may elect to have the amendments made by this Act apply to 
     any transaction by a FSC or any related person to which such 
     amendments would apply but for the application of paragraph 
     (1). Such election shall be effective for the taxable year 
     for which made and all subsequent taxable years, and, once 
     made, may be revoked only with the consent of the Secretary 
     of the Treasury.
       (3) Related person.--For purposes of this subsection, the 
     term ``related person'' has the meaning given to such term by 
     section 943(b)(3) of such Code, as added by this Act.
       (d) Special Rules Relating to Leasing Transactions.--
       (1) Sales income.--If foreign trade income in connection 
     with the lease or rental of property described in section 
     927(a)(1)(B) of such Code (as in effect before the amendments 
     made by this Act) is treated as exempt foreign trade income 
     for purposes of section 921(a) of such Code (as so in 
     effect), such property shall be treated as property described 
     in section 941(c)(1)(B) of such Code (as added by this Act) 
     for purposes of applying section 941(c)(2) of such Code (as 
     so added) to any subsequent transaction involving such 
     property to which the amendments made by this Act apply.
       (2) Limitation on use of gross receipts method.--If any 
     person computed its foreign trade income from any transaction 
     with respect to any property on the basis of a transfer price 
     determined under the method described in section 925(a)(1) of 
     such Code (as in effect before the amendments made by this 
     Act), then the qualifying foreign trade income (as defined in 
     section 941(a) of such Code, as in effect after such 
     amendments) of such person (or any related person) with 
     respect to any other transaction involving such property (and 
     to which the amendments made by this Act apply) shall be 
     zero.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Texas (Mr. Archer) and the gentleman from New York (Mr. Rangel) each 
will control 20 minutes.
  Mr. STARK. Mr. Speaker, I oppose the bill, and I would like to claim 
the time in opposition.
  The SPEAKER pro tempore. Is the gentleman from New York (Mr. Rangel) 
opposed to the motion?
  Mr. RANGEL. No, I am not, Mr. Speaker. I support the bill.
  The SPEAKER pro tempore. The gentleman from New York (Mr. Rangel) is 
not opposed to the motion. Therefore, the gentleman from California 
(Mr. Stark) may claim the 20 minutes of debate reserved for opposition 
to the motion under clause 1(c) of Rule XV.
  Mr. RANGEL. Mr. Speaker, I ask whether the gentleman from California 
(Mr. Stark) would yield 10 minutes of his time for those of us on the 
committee that support the motion.
  Mr. STARK. I am not prepared at this point, Mr. Speaker, to yield any 
time.
  The SPEAKER pro tempore. Under the rule, the gentleman from Texas 
(Mr. Archer) and the gentleman from California (Mr. Stark) each will 
control 20 minutes.
  The Chair recognizes the gentleman from Texas (Mr. Archer).


                             General Leave

  Mr. ARCHER. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days within which to revise and extend their remarks 
and include extraneous material on H.R. 4986.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Texas?

[[Page H7420]]

  There was no objection.
  Mr. ARCHER. Mr. Speaker, I yield such time as he may consume to the 
gentleman from New York (Mr. Rangel).
  Mr. RANGEL. Mr. Speaker, I thank the gentleman from Texas (Chairman 
Archer) for yielding me this time and for this opportunity in working 
with him on this very important issue that has affected our Foreign 
Sale Corporation legislation.
  As most everyone knows, the World Trade Organization has required the 
administration and, indeed, this Congress to work together to replace a 
tax treatment consistent with our trade agreements.
  I would like to commend the Republicans and Democrats on this 
committee, the leadership, as well as the administration, to commend 
Treasury Undersecretary Stuart Eizenstat and Assistant Secretary John 
Talisman in the way they approached this very sensitive situation, 
which, of course, the World Trade Organization has made such an issue.
  We in Congress could have ignored the WTO ruling down in April much 
as the European Union has ignored many of the issues and beef hormones 
and other disputes. But we have sought to work it out diplomatically. 
When that has failed, we have now come with a legislative resolution.
  It is a very sensitive situation, and I thank the gentleman from 
Texas (Chairman Archer) so much for giving me the opportunity to 
support the overwhelming majority of the people on the committee as 
well as this leadership on this issue.
  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, whether or not one agrees that tobacco, pharmaceutical, 
and military industries should be exempt from receiving this subsidy, 
which is referred to as the foreign sales credit, everyone should be 
opposed to the bill before us today.
  Whether or not one agrees that the new tax scheme is, in fact, an 
export subsidy, which most of us feel it is, as does the World Trade 
Organization, in a form of egregious corporate welfare, one should be 
opposed to the bill.
  This bill spends $5 billion of taxpayers' money every year in 
perpetuity, and our leadership is allowing a mere 40 minutes of debate 
and not allowing amendments.
  I can understand why the administration and my colleagues want to 
rush this legislation through, and I understand they want as little 
debate as possible to avoid public disclosure that will aid the 
European Union in their case before the World Trade Organization.
  However, our commitment first and foremost should be to our 
constituents. Our first commitment should be to the health and welfare 
of our seniors and children. Does not every taxpayer have a right to 
know how their hard-earned taxpayer dollars are being spent? Of course 
they do.
  The new FSC has a new name and a new face, but it is the same old 
subsidy. If it quacks like a subsidy and walks like a subsidy, it still 
is a subsidy. The new scheme essentially leaves the export benefit in 
place, but now the Treasury will forego an additional $300 million a 
year to subsidy our exporters. The Treasury will give more than $5 
billion a year to help Boeing, R.J. Reynolds and Monsato peddle their 
products overseas. The exporters will receive lower tax rate on income 
from export sales than they do from domestic sales. Clearly this is 
prohibited under the WTO Agreement on Subsidies and Countervailing 
Measures.
  Proponents of the FSC claim that it is needed to compete with 
Europe's value-added tax. That is simply nonsense.
  International trade allows rebates on consumption taxes such as the 
VAP and U.S. excise and State sales tax. That is a level playing field.
  Europe's corporate income tax is comparable to ours and in fact 
investors often criticize Europe for imposing too high a corporate 
income tax.
  The FSC replacement is an export subsidy that will help industry such 
as the pharmaceutical, tobacco, and military weapons industries 
capitalize on the generosity of the Congress and on taxpayers.
  Let us start, for example, with the pharmaceutical industry. Is there 
anyone who says that we should encourage the U.S. pharmaceutical 
companies to sell cheaper drugs to foreigners while selling them at 
higher prices here at home to our uninsured and our seniors? That is 
exactly what we will be doing if we vote for H.R. 4986.

                              {time}  1630

  The pharmaceutical company does not need another corporate subsidy at 
the expense of the American taxpayer. This offers incentives for the 
pharmaceutical companies to sell their products in other developed 
countries for less than they sell them here at home. Drug companies 
already reap huge tax benefits that lower their average effective rate 
40 percent below other U.S. industries in America.
  The richest drug company had greater profits than the entire airline 
industry and more than twice the profits of the entire engineering and 
construction industry. Yet, studies show that American seniors without 
drug coverage often pay twice as much as people in Canada and Mexico.
  Last week, the Committee on Ways and Means rejected my amendment, 
which would have prohibited pharmaceutical companies from receiving 
this FSC subsidy if they charged American consumers 5 percent more than 
what they charge foreign consumers. That amendment made sense. Why 
should our seniors who go without their prescription drugs further have 
to subsidize the pharmaceutical companies who sell them abroad? It is 
an insult to American seniors and all taxpayers.
  I urge my colleagues to vote to help the seniors obtain affordable 
prescription drugs and to do away with this egregious corporate 
welfare.
  Without an option to offer or an amendment, no amendments are allowed 
under today's rules, the American public will be forced to help a 
pharmaceutical industry that cares nothing about the well-being of 
American citizens. The tobacco industry indeed will get subsidized 
exporting their poison to help kill and addict millions of children 
around the world.
  The weapons industry, who does nothing to encourage the sale of their 
weapons of destruction because those sales are made for them by the 
Department of Defense and by the U.S. State Department, why should they 
get a subsidy to sell nuclear materials or tanks or weapons of 
destruction when that is arranged for them? Why should we subsidize 
this arms race?
  The answer is we should not. We should not go through this, and when 
we want to promote world law, we should not be here with a second-rate 
subterfuge trying to call a subsidy something it is not. We should give 
up. We should recognize that the World Trade Organization is correct. 
We should allow our American industry to compete as they can on quality 
and on ingenuity and not have to subsidize these large manufacturers as 
a mere give-away just before election.
  Mr. Speaker, as the only member of the Ways and Means to vote against 
H.R. 4986, the FSC Repeal and Extraterritorial Income Exclusion Act of 
2000, I must explain the reasons for my vote.
  I believe that this bill will not suffice under the scrutiny of the 
World Trade Organization. H.R. 4986 is as much of a subsidy as the 
current FSC. The entire process was undemocratic, constituting backroom 
consultations with private industry and select members of Congress. 
Finally, the bill is expanded and additional taxpayer dollars will be 
lost under the new scheme. It is not right that we ask U.S. taxpayers 
to pay for an export subsidy for large pharmaceutical corporations when 
the U.S. pharmaceutical industry is charging less in wealthy foreign 
markets for the same prescription drugs that our seniors are unable to 
afford here.


                                process

  Select members of the House Ways and Means Committee and Senate 
Finance Committee were consulted on revising the Foreign Sales 
Corporation (FSC) prior to the World Trade Organization's October 2000 
deadline. In addition, those who will benefit from the new subsidy were 
also consulted--private industry. However, there were many members of 
the Ways and Means Committee who were not consulted on the details of 
the new proposal. This hardly reflects the democratic process under 
which this legislative body is supposed to operate.
  I was one of the members who was not consulted on repealing and 
replacing the current FSC for a new plan, yet

[[Page H7421]]

I was one of the members who was here to vote in 1984 to repeal the 
Domestic International Sales Corporation and replace it with the 
Foreign Sales Corporation.


                 benefits to military weapons exporters

  In 1976, I led Congress in voting to decrease the benefit to weapons 
dealers. Therefore, I was dismayed to see that the new FSC benefit will 
actually be expanded to increase the benefit of the subsidy to military 
weapons exporters.
  The U.S. already spends about $8 billion annually to subsidize U.S. 
weapons manufacturers. These subsidies include taxpayer-backed loans, 
grants, and government promotional activities that assist U.S. weapons 
makers to sell their products to foreign customers. Under the current 
Foreign Sales Corporation scheme, weapons exporters may qualify for up 
to 50 percent of the FSC benefit. Under the new scheme, arms dealers 
will be able to reap the full benefit of the subsidy. It is 
incomprehensible that we would allow an industry that already receives 
more than its fair share of pork barrel spending to receive increased 
subsidies through the new FSC plan.


                  benefits to pharmaceutical industry

  The pharmaceutical industry is another branch of corporate America 
that clearly does not need an export subsidy at the expense of the 
American taxpayer. H.R. 4986 offers export incentives to pharmaceutical 
companies who sell their products to other developed countries for less 
than the U.S. consumer can purchase the exact same drugs.
  Drug companies already reap huge benefits that lowered their average 
effective tax rates nearly 40 percent relative to the other major U.S. 
industries from 1990 to 1996. Fortune magazine again rated the 
pharmaceutical industry the most profitable industry in 1999. Merck, 
the richest drug company, had greater profits than the entire airline 
industry and more than twice the profits of the engineering-
construction industry. Drug spending increased more than 15 percent in 
1998, 18 percent in 1999 and is expected to continue to increase at 
phenomenal rates in the future. Yet, studies have shown that American 
seniors without drug coverage often pay about twice as much as people 
in Canada and Mexico.
  The Ways and Means Committee rejected my amendment which would have 
prohibited pharmaceutical companies from receiving the full FSC benefit 
if they discounted more than 5 percent to foreign consumers relative to 
U.S. consumers. This amendment simply makes sense. It is only fair to 
the millions of U.S. seniors who go without their much needed 
prescription drugs. Why subsidize an industry already receiving huge 
corporate tax credits? We should have exempted pharmaceutical 
companies. The members of the Ways and Means Committee chose otherwise. 
This is an insult not only to American seniors, but to all U.S. 
taxpayers.


                             export subsidy

  Finally, H.R. 4986 does not address the concerns of the WTO dispute 
panel. The new scheme attempts to allay the European Unions' concerns 
by allowing some foreign operations to also receive the subsidy. The 
new scheme eliminates the requirement on a firm to sell its exports 
through a separately chartered foreign corporation in order to receive 
the benefit. The only portion that is eliminated is the paper 
subsidiary. Instead of creating a tax haven, U.S. exporters will be 
able to receive the benefit outright. The new scheme doesn't prevent 
arms exporters or any other industry from receiving the entire benefit 
of the subsidy.
  The new scheme essentially leaves the export benefit in place but now 
the U.S. Treasury will forego an additional $300 million per year to 
subsidize U.S. exporters. The U.S. Treasury will forego more than $3 
billion per year to help companies like Boeing and R.J. Reynolds peddle 
their products. Exporters will continue to receive a lower tax rate on 
income from export sales than from domestic sales. This is clearly 
prohibited under the WTO Agreement on Subsidies and Countervailing 
Measures.
  It is a sad commentary on the Ways and Means Committee that is 
willing to fight a WTO ruling all in the name of corporate profits but 
ignores environmental, human rights and labor interests.
  Mr. Speaker, I reserve the balance of my time.
  Mr. ARCHER. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, the one thing this bill is not is corporate welfare. The 
one thing this bill is not is a subsidy to corporations.
  Almost every one of our foreign competitors singly taxes the earnings 
of their corporations overseas. We double tax in an ill-advised, 
antiquated system the earnings of our corporations overseas and place 
them at a gigantic disadvantage against their foreign competitors.
  The FSC program simply mollifies to a small degree this giant 
disadvantage to our corporations, a disadvantage which is so great that 
it is causing one by one major corporations to move overseas instead of 
having their headquarters in the U.S., signified recently by Chrysler 
having to become a German corporation.
  The gentleman from California (Mr. Stark) can speak his rhetoric, but 
he is ill-advised when he calls this a subsidy or corporate welfare.
  This bill is critical for continued U.S. competitiveness in the 
global marketplace. It is critical for our economy. And most important, 
it is critical to preserve as many as five million jobs for American 
workers and their families. That is right, approximately 4.8 million 
American jobs are directly related to the manufacture of products 
benefiting from the Foreign Sales Corporation provisions in the Tax 
Code.
  So while this is a complex issue, we must succeed for the most basic 
reasons.
  This bill enables the U.S. to comply with a decision of the World 
Trade Organization, which last year held that our FSC provisions of the 
Internal Revenue Code violated certain provisions of the WTO rules 
which prohibit export subsidies. The Clinton administration and the 
Congress strongly disagreed with this decision and the case was 
appealed. Unfortunately, the appeal was not granted.
  Unless Congress changes the law to comply with the decision, U.S. 
consumers and businesses face the possibility of retaliation by the 
European Union on or after October 1. This would negate the ability of 
our domestically produced goods to enter the European market in an 
amount of anywhere from 4 to $40 billion a year with devastation on the 
workers in those industries in this country.
  I believe the approach in this legislation is the best way to comply 
with the decision, continue to honor our trade agreements consistent 
with the obligations they impart, and maintain our global 
competitiveness.
  This legislation enjoys strong bipartisan support in both Houses of 
Congress and is strongly supported by the administration.
  Deputy Treasury Secretary Eizenstat has been involved in the 
construction of this legislation from the very beginning, as well as 
Members and staff from both the majority and the minority.
  I also mention the extraordinary work of the Joint Committee on 
Taxation to develop this product in a short period of time. This bill 
is the product of extensive deliberations of a bipartisan, bicameral, 
and administration working group which consulted with both tax and 
trade experts on how best to fashion a measure to allow the U.S. to 
comply with the WTO decision.
  This bill is also supported by U.S. companies and their workers who 
would be most negatively impacted by the WTO ruling.
  I also hope that this legislation ends the longstanding challenge by 
the EU to our tax system. It is an important step in making our tax 
system not only compliant with our obligations under the WTO rules but 
in also making our system relevant to the global marketplace in which 
our citizens and businesses must compete.
  I look forward to continuing to work in a bipartisan fashion to see 
this bill signed into law to help preserve American jobs, businesses, 
and our economy in the next century.
  Starting this week, America's Olympic athletes will compete against 
the world's best in Sydney, Australia, and all competitors will play by 
the rules.
  In the far fiercer global economic competition of the 21st century, 
we must work hard to give U.S. workers and companies that same 
opportunity. That is exactly what this bill is designed to do.

[[Page H7422]]

  I urge all Members to support this vital legislation.
  Mr. Speaker, I reserve the balance of my time.
  Mr. STARK. Mr. Speaker, I yield 2 minutes to the gentleman from 
California (Mr. Waxman).
  Mr. WAXMAN. Mr. Speaker, I rise in opposition to H.R. 4986.
  While I believe that we must promote U.S. competitiveness in global 
markets, I strongly object to forcing American taxpayers to support the 
export of tobacco and tobacco addiction.
  The most recent IRS statistics reveal that tobacco companies have 
used the FSC for a tax break of more than $100 million a year. Under 
the new system unveiled in this bill, they will benefit even more. This 
is wrong.
  The dangers of nicotine are well known, and these dangers do not stop 
at our borders. Smoking causes more than 3.5 million deaths each year 
throughout the world. That number is expected to rise to 10 million 
people within 20 years, with 70 percent of all smoking-related deaths 
projected to occur in developing countries that are the newest targets 
of the tobacco industry.
  This Congress has done nothing to address the tobacco epidemic that 
rages both here and abroad. Tragically, this bill only helps big 
tobacco promote it. We could easily address this problem by allowing 
for consideration of the Doggett amendment to exempt manufacture of 
tobacco from the bill. Instead, the bill was added to the suspension 
calendar, which allows no amendments and very limited debate.
  Mr. Speaker, we have FSC exemption for national security. We have 
exemptions to protect certain domestic industries. It is long overdue 
to have an exemption for public health.
  The American taxpayers should not be a partner in the export of death 
and disease. We should not be enabling big tobacco to escape public 
health restrictions in our market by peddling cigarettes to children 
around the globe.
  I urge my colleagues to oppose this bill because the procedure does 
not allow us to engage in a meaningful debate on this issue or to vote 
on the Doggett amendment.
  Mr. ARCHER. Mr. Speaker, I yield 3 minutes to the gentleman from 
California (Mr. Thomas), a respected member of the Committee on Ways 
and Means.
  (Mr. THOMAS asked and was given permission to revise and extend his 
remarks.)
  Mr. THOMAS. Mr. Speaker, I thank the chairman very much for yielding 
me the time.
  Mr. Speaker, first of all, I want to compliment the chairman and the 
ranking member. There has been an unprecedented degree of cooperation 
not only between the Democrats and the Republicans in the House, but 
between the House and the Senate and the administration in responding 
to what is clearly a crisis in our international responsibilities.
  Very often adults are prone in dealing with children to in essence 
say, Do as I say, not as I do. And today we are seeing an example of 
this country telling the rest of the world, Do as we do, not as we say.
  In stark contrast, for example, to the Europeans and their abject 
failure to respond to adverse decisions in the World Trade 
Organization, continuing to drag their feet when the international 
community says they are wrong, what we have here is an example of the 
United States moving with clear rapidity to make fundamental changes to 
bring us into compliance. Do not just take my word for it.
  Mr. Speaker, I include for the Record the following text of a letter 
from Deputy Secretary Eizenstat to the European Union Commissioner for 
Trade:

                                    Dep Sec. Eizenstat FSC Letter,


                        Date: August 11, 2000-Inside US Trade,

                                                    July 28, 2000.
     Mr. Pascal Lamy,
     Commissioner for Trade, Rue du la Loi 200, B-1049, Brussels, 
         Belgium.
       Dear Pascal: Following passage yesterday by the House Ways 
     and Means Committee of legislation to repeal the FSC, I am 
     writing to you to enclose a copy of the proposal and briefly 
     explain the details of this new proposal.
       The new proposal embodied in the Chairman's mark represents 
     a major departure from the FSC and, furthermore, a 
     significant evolution from the proposal I discussed with you 
     in May. This proposal directly addresses the issues raised by 
     the WTO Appellate Body. Further, it addresses additional 
     concerns raised by the EU, as expressed in our meeting on May 
     2, in your letter to me of May 26, and in our telephone call 
     of July 14.
       In compliance with the Appellate Body decision, the FSC 
     provisions are to be repealed from the Internal Revenue Code. 
     The new tax provisions embodied in the Chairman's mark have 
     the following key elements.
       The Chairman's work provides an exclusion of tax on certain 
     extraterritorial income. Because this would be our general 
     rule, there is no foregone revenue that is otherwise due and 
     thus no subsidy.
       Further, because it treats foreign sales alike, whether the 
     goods were manufactured in the U.S. or abroad, it is not 
     export-contingent. Thus, a company would receive the same tax 
     treatment on foreign sales regardless of whether it exports.
       The Chairman's mark excludes qualifying foreign trade 
     income directly at the level of the entity that produces the 
     relevant good or produces the qualifying service. It does not 
     require foreign sales transactions to be routed through 
     separate offshore companies. Thus it eliminates the 
     Administrative Pricing Rules for transfer pricing between 
     affiliated companies, which the EU alleged violated the arms 
     length provision of the Subsidies Agreement, Further, it 
     eliminates the dividends received deduction.
       Likewise, this approach address EU concerns about alleged 
     incentives to use low or no-tax jurisdictions since a 
     separated affiliate would not be necessary for this 
     exclusion.
       The Chairman's mark is the product of an unprecedented 
     bipartisan effort in which Congress and the Administration 
     worked together both to develop a proposal that is WTO 
     compliant and to act quickly in an effort to comply with the 
     October 1 deadline set by the WTO.
       The House Ways and Means Committee voted 34-to-1 yesterday 
     to support this legislation that meets our WTO obligations. 
     Our key Congressional tax and trade committees understand 
     that we have left the door open to further consultation with 
     the EU as this legislation moves forward. We remain prepared 
     to negotiate a solution on the basis of this proposal.
       I hope that we can work together to avoid an escalation of 
     this conflict. It would not be in the interest of either the 
     U.S. or Europe to engage in a major trade war over this 
     issue. Both U.S. and European businesses would needlessly 
     suffer the consequences.
       The legislation I am attaching herewith represents a 
     serious effort on the part of the U.S. to comply with the 
     Appellate Body's decision before its October 1st deadline. As 
     we move to pass this legislation before that deadline, I hope 
     that we can have a dialogue to resolve this conflict on the 
     basis of this new proposal.
       For your review I'm attaching three documents: (1) A copy 
     of the statement I delivered at the Committee mark up, (2) 
     the joint Tax Committee's description of the bill, and (3) 
     the text of the legislation as reported by the Ways and Means 
     Committee; please note that the formal bill is not yet 
     available.
       I look forward to talking with you again about these 
     matters.
           Yours Very Truly,
                                               Steve E. Eizenstat.

  Mr. Speaker, a portion of that letter states: ``The Chairman's mark 
is the product of an unprecedented bipartisan effort in which Congress 
and the administration worked together both to develop a proposal that 
is WTO compliant and to act quickly in an effort to comply with the 
October 1 deadline set by the WTO.''
  He goes on to quote, ``The House Ways and Means Committee voted 34-1 
to support this legislation.''
  I believe what we are seeing worked out on the floor is the result of 
that 34-1 vote.
  Let me say also to everyone in this country that when we are dealing 
on an international basis, one of the things we need to do is to show 
bipartisanship.
  I want to compliment the ranking member from New York who has done 
that. I want to compliment the chairman.
  For those friends of ours who are listening and not part of our 
system, I do want to refer to a section of the Constitution. It is in 
Article I, section VI. To a degree, what is occurring here today is 
going to be covered, thankfully, for some of the participants by that 
portion of section VI, which says: ``And for any speech or debate in 
either House, they shall not be questioned in any other place.''
  That is, on the floor of the House, we are allowed to say certain 
things for which we can never be questioned anywhere else.
  As we discuss this bill and statements are made, keep in mind the 
speech-and-debate clause, which allows some folks to say what they are 
saying.
  Mr. STARK. Mr. Speaker, I yield 4 minutes to the gentleman from 
Oregon (Mr. DeFazio).

[[Page H7423]]

                              {time}  1645

  Mr. DeFAZIO. Mr. Speaker, this is an extraordinary debate, a $5 
billion per year perpetual tax break to the largest, most profitable 
corporations in the world; forty minutes of debate and that is it. No 
amendments are allowed.
  This bill was secretly negotiated, this bipartisan group, very secret 
and small group, revealed to members of the committee on the same day 
that the secret negotiations were concluded; perfunctory markup was 
held and now it is being rushed through.
  We cannot agree on marriage penalty relief. We cannot agree on small 
business relief. We cannot agree on inheritance tax relief but, by God, 
the administration, the Republican leadership, they can put this one 
together behind closed doors because it benefits the largest, most 
profitable corporations in this country.
  Over the last decade, almost $2 billion of these proceeds went to two 
companies, Boeing and General Electric, mostly for arms manufacturers. 
Now, we need to help our arms manufacturers. They already dominate the 
world market, but we need to give them another leg up because not 100 
percent of the arms being bought out there by our enemies and our 
allies are U.S. made yet. We have to give them a leg up.
  The pharmaceutical manufacturers, well, they need an incentive to 
export because overseas they sell drugs cheaper than they sell them to 
the Americans who subsidize their manufacture here. So we have to give 
them a little tax break to export those cheap drugs to foreigners but 
not provide affordable drugs here at home.
  The tobacco companies, of course we want to export tobacco. Maybe 
that will hurt the productivity of our competitors around the world as 
they become sick and die from this product that is being promoted 
through this tax break.
  This is outrageous. We are taking $5 billion of hard-earned 
taxpayers' money and shifting it to some of the largest, most 
profitable corporations in this country under the dubious assumption 
that somehow this is countering unfair things the Europeans are doing. 
If they are doing unfair and illegal things, you people wanted this 
rules-based trade agreement, you wanted a WTO with a secret, 
deliberative body that would adjudicate these complaints. I did not. I 
voted against it.
  Well then file a complaint against the Europeans. Do not extend an 
unfair subsidy that does not even meet the laugh test. This does not 
comply with the last ruling. The Europeans will still get to penalize 
U.S. industries if this goes into effect, and they may well not 
penalize with tariffs the industries that are getting the tax break. 
Other U.S. manufacturers might be hurt.
  You are doing this country a double disservice today with this 
legislation. It is extraordinary that this would be rushed through in 
this manner while there is virtually nobody in this Chamber; virtually 
half the Members are probably not even in town yet. They are still 
enjoying the hospitality of some of our airlines.
  If it is an Endangered Species Act provision, by God, we have to 
comply. If it is a Clean Air Act provision, by God, the U.S. has to 
comply. If we can make the Europeans eat beef that has been treated 
with bovine growth hormone, which they have protested against because 
of health concerns, by God, they have to comply. But when it comes to 
corporate tax breaks, we will not comply.
  This is the highest and best use of trade policy. That is what it is 
all about. Trade policy was written for, by, and about the largest 
corporations in this country; and we will do anything behind closed 
doors or even here on the floor of the House under very restrictive 
conditions to defend those tax breaks in the name of free trade.
  If you have a problem with the European tax system, file a complaint. 
Answer that one. Why not file a complaint against OPEC? They are 
violating the WTO. It is awfully strange that we will not use this 
rules-based organization. Well, we are told we had a gentleman's 
agreement on taxes, gentleman's agreement.
  I voted against entering into the WTO. I never heard any discussion 
on the floor about gentleman's agreements that were binding as part of 
this that went to the Tax Code. Pretty strange way to have an 
enforceable rules-based trade agreement with gentlemen's agreements 
that no one knows about.
  If you have a problem with the Europeans, file a complaint. Do not 
use the tax dollars of American taxpayers to continue this outrageous 
subsidy, double the subsidy to arms manufacturers, extend it to 
pharmaceuticals and tobacco. It is outrageous.
  Mr. ARCHER. Mr. Speaker, I yield myself such time as I may consume to 
briefly respond to the gentleman from Oregon (Mr. DeFazio).
  The gentleman speaks passionately but he does not speak the facts, 
and passion is no substitute for the facts. The facts are that the 
current law already gives incentives to overcome the double taxation 
that our corporations face competing overseas, and this replaces that 
in the code. It does not cost $5 billion. He knows that.
  If there is such opposition to the existing incentives that are in 
the code or the reduction of the barriers that are in the code, why 
were they not out front a long time ago? Why are there not amendments 
offered over and over again in committee? And they were not.
  Mr. DeFAZIO. Mr. Speaker, will the gentleman yield?
  Mr. ARCHER. I do not have the time, as the gentleman knows.
  Mr. DeFAZIO. I did introduce legislation to repeal these provisions 
of law.
  The SPEAKER pro tempore (Mr. Stearns). The gentleman is not 
recognized.
  Mr. ARCHER. Mr. Speaker, they come forward now, claim secret 
clandestine negotiations, when we had a full, open markup in the 
Committee on Ways and Means, as a matter of public record. As my 
colleague from California said, the Constitution protects whatever one 
wants to say on the floor of the House.
  Mr. Speaker, I yield 2 minutes to the gentleman from Texas (Mr. Sam 
Johnson), a respected colleague and member of the Committee on Ways and 
Means.
  (Mr. SAM JOHNSON of Texas asked and was given permission to revise 
and extend his remarks.)
  Mr. SAM JOHNSON of Texas. Mr. Speaker, listen, it is wrong, wrong, 
wrong to say secret or totally Republican. This was a measured response 
to an injustice by the WTO and it was a measured response from the 
President, from the Trade Commission, from the Democrats and from the 
Republicans.
  This thing was not done in secret, and it is for all businesses in 
this country that are legal. We should not question that. It is for 
America.
  Know what? This bill replaces the FSC in its entirety. It changes it. 
In its place, it adopts key features of the certain European tax 
systems moving the United States closer to a territorial system. It 
eliminates administrative pricing rules which the European Union 
objected to. Most importantly, this legislation is not export 
contingent.
  I sincerely hope that this legislation will end our dispute with the 
European Union. They must understand they cannot use the WTO to impose 
a permanent tax advantage over United States companies. We are doing 
this for America, for the people of America, for the businesses in 
America. God bless America.
  Mr. STARK. Mr. Speaker, I yield 5 minutes to the gentleman from Texas 
(Mr. Doggett) to discuss a bill which is not yet complete and which 
nobody in this room has read.
  Mr. DOGGETT. Mr. Speaker, God bless America and God bless the 
democracy that involves public participation--a concept at the core of 
what our American government is all about. Such public participation 
was not very evident in the process that produced this bill.
  This bill was conceived behind closed doors with no public 
participation, no public hearings, no public involvement. It was 
designed to continue what is, in essence, a legal scheme of tax 
avoidance for the world's largest corporations by channeling some of 
their profits through foreign tax havens.
  This bill is basically a product of meetings between the Treasury 
Department and those who benefit from the tax subsidy. The lobbyists 
have met with the Treasury Department, but the Treasury Department 
official responsible for the bill was unwilling to answer questions in 
public from even the members of the Committee on Ways and Means.

[[Page H7424]]

  I voted for this bill in committee. I am committed to promoting 
international trade, but it was a very contrived circumstance that 
produced this bill, and the arrogance and the deception associated with 
this bill as well as the additional information that I now have about 
this bill cause me today to reconsider my position and to oppose 
strongly H.R. 4986.
  This bill is not actually the bill that our committee considered. 
Rather this is a bill that the lobby has massaged for another few weeks 
after the initial bill was approved in the Committee on Ways and Means. 
This particular version has never had a hearing or a vote. There are 
not three Members on this floor today that can say they have even read 
the particular bill that is before us today.
  The cost of this bill, however, is $4 million to $6 million, 
according to the best estimates we can get: every year that has to be 
made up by other American taxpayers. With this bill, the Congress would 
be saying basically that local stores that sell groceries or clothes to 
people on any Main Street or at any mall in America, those businesses 
would have to pay higher taxes so that multinational corporations that 
sell tobacco and cigarettes and machine guns abroad can pay lower 
taxes.
  Even then, an independent analysis of this bill by the Congressional 
Research Service says that it has ``a negligible effect on the trade 
balance.'' That its overall impact in creating trade is practically 
nil.
  Now, it was suggested that only some ill-informed people here on the 
floor were condemning this bill as corporate welfare. Well, perhaps the 
gentleman is unfamiliar with the recommendation of his own Republican 
Congressional Budget Office, I think for about 3 years in a row, 
suggesting that the Foreign Sales Corporation Act be repealed just as 
the gentleman from Oregon (Mr. DeFazio) has proposed in his own 
separate legislation. Perhaps he did not listen to Senator John McCain 
on ABC's This Week when in February he said he was opposed to the 
Foreign Sales Corporation Act.


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore. The gentleman from Texas (Mr. Doggett) will 
refrain from characterizing positions of individual Senators.
  The gentleman may proceed.
  Mr. DOGGETT. A distinguished Arizona citizen commenting on ABC's This 
Week program made very clear his opposition to foreign sales 
corporations, as did the Washington Times which referred to the 
bipartisan involvement, called it ``an almost unanimous blunder.'' Let 
us be very clear about what this bill does.
  An eligible product need have little or no U.S. manufactured content 
in order to qualify for this special new tax treatment. If one has a 
pair of Levis and it is made entirely outside the United States but one 
slaps on a label that says ``Levis,'' under this bill's supporters are 
unable to say that this foreign manufactured product will not qualify 
for special tax relief.
  If one has a Marlboro cigarette that does not have one percentage 
point of tobacco from American tobacco farmers in it but one slaps 
``Marlboro'' on it, and that gives it more than 50 percent value, it 
qualifies for a tax break. If one has a zocor tablet that is 
manufactured outside the United States but one puts ``zocor'' on it and 
adds 50 percent of the value, it qualifies for a tax break.
  Every one of those under this bill is going to receive a special tax 
subsidy, and that is not going to help American workers, and it 
certainly is unfair to American consumers who have to pay the highest 
pharmaceutical costs in the entire world; to pay a higher cost here and 
then to add insult to injury by being forced to provide a tax subsidy 
on top of that for the pharmaceutical company to sell it to someone 
else at a lesser price in another country.
  It is particularly outrageous that this bill would be taken up on the 
floor of the Congress on the very day that a new study is announced 
showing that tobacco is even more addictive for children than we ever 
knew previously. Only a couple of weeks of contact with cigarettes can 
addict children to a life of nicotine, posing the resulting threat of 
death and disease, very painful disease.
  This bill allows Phillip Morris to continue marketing to children 
around the world and addicting them as a part of what is becoming a 
pandemic that will kill 10 million people every year in this world as a 
result of our promotion of tobacco. Today the American people are asked 
to be an unwilling accomplice, to give $100 million a year to Phillip 
Morris and the other big tobacco companies that are in the addiction 
business to go around the world promoting their tobacco to other 
people's kids. Well, those other children of the world have value, too, 
and we ought to be concerned about their health and their lives. We 
certainly ought not to encourage these tobacco companies with $100 
million per year in tax subsidy to cause death and disease for children 
around this world.
  Mr. ARCHER. Mr. Speaker, I yield 5 minutes to the gentleman from New 
York (Mr. Rangel), the minority leader of the Committee on Ways and 
Means, and I ask unanimous consent that he be able to yield the time as 
he sees fit.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Texas?
  There was no objection.

                              {time}  1700

  Mr. RANGEL. Mr. Speaker, I yield such time as she may consume to the 
gentlewoman from the Virgin Islands (Mrs. Christensen).
  (Mrs. CHRISTENSEN asked and was given permission to revise and extend 
her remarks.)
  Mrs. CHRISTENSEN. Mr. Speaker, I rise to express my views on the 
adverse effect that the loss of FSC will have to my district, but I am 
in support of H.R. 4986.
  Mr. RANGEL. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from 
Michigan (Mr. Levin), the ranking Democrat on the Subcommittee on 
Trade.
  Mr. ARCHER. Mr. Speaker, I yield 30 seconds to the gentleman from 
Michigan.
  (Mr. LEVIN asked and was given permission to revise and extend his 
remarks.)
  Mr. LEVIN. Mr. Speaker, let me try quickly to put this in 
perspective. The U.S. has a worldwide taxation system; we tax income on 
earnings wherever earned. The Europeans have a territorial system, and 
I will not go into a lot of detail. In essence, what that does is to 
favor exports over other transactions, especially domestic 
transactions, so they have a system that nurtures exports.
  We responded by creating a system, a DISC system that was an effort 
to put our producers of goods, manufacturing goods and agricultural 
goods, on a level playing field with Europe. It went into effect, and 
it lasted for a couple of decades; and then it was decided by the 
European community, I think, partly tactically to challenge it, and the 
WTO said it was an illegal subsidy. So what we are faced with is an 
October 1 deadline; and it is being faced by producers of goods, 
manufacturing goods and agricultural goods.
  We have been striving to find a replacement, and now we have one here 
facing the October 1 deadline. I want to make it clear this bill does 
not provide an incentive for U.S. producers to move their operations 
overseas. No more, under this provision, than 50 percent of the fair 
market value of such property can consist of a non-U.S. component plus 
non-U.S. direct labor.
  This provision has been carefully reviewed by Democrats, by 
Republicans, by the Treasury Department, and by outside groups. Let me 
be clear, if we fail to enact this bill by October 1, and that is the 
constraint we are under, there is a serious risk that the EU will go 
back to the WTO and seek authority to retaliate by raising tariffs on 
potentially billions of dollars of goods made in the U.S. and exported 
from the U.S., causing great harm to the U.S., both businesses, workers 
and farmers.
  Look, there are other issues, tobacco issues, pharmaceutical issues. 
They cannot be considered within this context. If we need to amend U.S. 
laws, we can do so later on. We have a constraint, October 1; and if we 
fail to act by that date, we are going to hurt American businesses and 
the workers who work for them; and we are simply going to help European 
competitors, nothing to do with tobacco, nothing to do with 
pharmaceuticals, nothing at all.
  If we want to help European producers, vote against this. If we want 
to help American workers, businesses, manufacturing goods, we are not 
talking about services, vote in favor of this bill; and then we will go 
on to these other issues at some other point.
  Mr. RANGEL. Mr. Speaker, I yield myself the balance of my time.
  Mr. Speaker, I think it is great that we in the Congress can take 
issue with

[[Page H7425]]

our domestic policy, our foreign policy, our trade policy. That is what 
makes America such a great country, and we should always be able to 
challenge the procedure in which legislation is brought to the House, 
but I know that sometimes when I have series problems with my country's 
foreign policy, one place I do not have a problem with it, and that is 
in foreign countries. This is not a question of liberals against 
conservatives, Republicans against Democrats, or the Congress against 
the administration. It is the European Union that has challenged us, 
and we can bet our life, they are not concerned with our economic 
health.
  They are not concerned with pharmaceuticals. They are not concerned 
with arms. They are concerned in having a better-than-an-equal chance 
to compete against the United States of America.
  We had plenty of opportunity to work out our differences. We had 
approaches that we have taken to them, and this is one time that we 
came behind the administration and said try to work this out and avoid 
an economic crisis. And it has been rejected.
  What the administration has asked those of us on the Committee on 
Ways and Means to do is to come together with a piece of legislation, 
to say that we stand behind the United States of America in trying to 
resolve the differences we have with the European Union and the World 
Trade Organization.
  If we do nothing, if we debate among ourselves, if we say let us see 
what is going to happen, then sanctions come against us; and there is 
no other body for us to take this to. I think it is a great country. We 
have internal differences, political differences, and they should be 
worked out; but it just seems to me that when other countries are 
challenging our country, whether they are challenging our foreign 
policy or whether they are challenging our trade policy, when that flag 
goes up with the United States of America, that the President should be 
supported by the administration, and this Congress should support the 
administration.
  We are a long way from resolving this issue; but if we do nothing and 
find that our corporations are unable to effectively compete, we will 
not have the opportunity to say but we had concerns about the policy. I 
hope nobody in this Chamber ever is completely satisfied with any 
policy of any administration, but there has to come a time when we do 
come together to say America first, America first with exports for the 
jobs that are provided and America when that flag goes up.
  Mr. STARK. Mr. Speaker, I yield 2 minutes to the gentleman from 
Massachusetts (Mr. Tierney).
  Mr. TIERNEY. Mr. Speaker, I thank the gentleman from California (Mr. 
Stark) for yielding time to me, and I want to say that today this is 
supposedly an effort on the part of the United States to comply with 
the ruling by the WTO in an effort to expedite this action is actually 
an effort that purports to repeal the corporate tax subsidy called the 
Foreign Sales Corporation.
  Unfortunately, what happens when we turn around we are going to 
actually increase this subsidy. There has been little dispute and far-
ranging agreement that existing FSCs have long been a tax windfall to 
companies like Boeing, General Motors, Big Tobacco, many in the 
pharmaceutical industry and other corporate giants. As they export, 
those companies need only set up offshore paper companies and 
subsidiaries, and they receive the benefit. And that has been a pretty 
substantial benefit, the single loophole that cost taxpayers more than 
$10 billion, with $8 billion of that flowing to the very largest 
corporations all for simply funneling it through an offshore office.
  Adding insult to injury, the publication Inside U.S. Trade recently 
reported that supporters of this bill have admitted that companies 
could qualify for the tax preference now even if little or no physical 
production actually occurs outside the United States. For example, a 
bluejean company could relocate its operations and American jobs 
abroad, produce an entirely foreign-manufactured product and still 
receive this subsidy financed by American taxes simply by slapping its 
American brand name on the tag.
  Since this tax break was originally written with the expressed 
purpose of keeping jobs here in the United States, such an expansion of 
the provision would appear to be the product of corporation pandering 
at its very worst.
  Congress is proposing to expand it by another $1.5 billion over the 
next 5 years, on top of the $15.6 billion the loophole has already cost 
taxpayers. As the gentleman from Texas (Mr. Doggett), my colleague, 
pointed out, this bill amounts to a $100 million subsidy to the tobacco 
industry to market their products to children around the world, a 
practice that they are rightfully forbidden from doing here in the 
United States.
  And as the gentleman from California (Mr. Stark), my colleague, 
argues correctly, this bill actually subsidizes pharmaceutical 
companies to charge less for prescription drugs.
  With all due respect, this is not an argument about us against them, 
it is an argument about the workers in this country and setting things 
straight and not pandering to corporate interests.
  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I include for the Record my dissenting views on the 
bill.
  Mr. Speaker, today, in an effort to comply--unsuccessfully, it 
appears--with a February ruling by the WTO, the majority is suspending 
its usual rules to expedite a vote on H.R. 4986, a bill that purports 
to repeal a corporate tax subsidy called the ``Foreign Sales 
Corporation'' (FSC).
  Wide ranging agreement exists that FSCs have long been a tax windfall 
to companies like Boeing, GM, Big Tobacco, many in the pharmaceutical 
industry, and other corporate giants, as exporting companies need only 
set up an offshore paper subsidiary to receive the tax benefit. And 
what a benefit it is: in the 1990's alone, this single loophole cost 
taxpayers more than $10 billion, with $8 billion of that flowing to the 
very largest corporations, all for simply funneling sales through an 
offshore office.
  In an effort to comply with the WTO ruling last February deeming FSCs 
to be an illegal export subsidy, H.R. 4986 would replace FSCs with an 
even worse tax boondoggle, this time without the paper subsidiary.
  Adding insult to injury, the publication ``Inside U.S. Trade'' 
recently reported that supporters of the bill have admitted that 
companies could qualify for the tax preference even if little or no 
physical production actually occurs in the U.S. For example, a blue-
jean company could relocate its operations--and American jobs--abroad, 
produce a entirely foreign-manufactured product, and still receive this 
subsidy financed by American taxpayers, simply by slapping its American 
brand-name on the tag. Since this tax break was originally written with 
the express purpose of keeping jobs here in the United States, such an 
expansion of the provision would appear to be the product of corporate 
pandering at its very worst.
  Now Congress is proposing to expand it by another $1.5 billion over 
the next five years, on top of $15.6 billion the loophole already will 
cost taxpayers.
  As my colleague from Texas, Mr. Doggett has argued, this bill also 
amounts to a $100 million subsidy to the Tobacco Industry to market 
their products to children around the world, a practice they are 
rightfully forbidden to do here in the U.S. And, as my colleague from 
California, Mr. Stark correctly argues, this bill actually subsidizes 
pharmaceutical companies to charge less for prescription drugs overseas 
than they do here in the U.S., where such drugs prices have skyrocketed 
out of the range of what many Americans seniors can afford.
  As the EU rejected the terms of H.R. 4986 last month (with the WTO 
likely soon to follow), it sends the wrong message to WTO, implying 
that we do not wish to seriously negotiate terms of compliance. It 
subsidizes corporations that do not need subsidizing. It subsidizes 
corporations that should not be subsidized. And perhaps more 
importantly, were Congress to approve this bill, it would represent 
exactly the sort of behavior which so often leaves voters cynical with 
regard to political process, further giving evidence to the argument 
that it is corporations, not the people, whose interests Congress 
represents.
  Second, while exports are, indeed, increased, such a subsidy actually 
triggers international exchange-rate adjustments, which has the effect 
of increasing U.S. imports as well, leaving the impact on the trade 
deficit negligible at best, as witnessed by the recent news that the 
trade deficit had hit an all-time high.
  Lastly, the entire legislative process regarding H.R. 4986 has been 
the worst sort of backroom dealing with industry virtually writing the 
bill and many House Members of the committee of jurisdiction, Ways and 
Means, shut

[[Page H7426]]

out of the process. Additionally, leadership in both parties, with the 
blessing of the Administration, hoped to expedite the process by 
shuttling the bill through Congress with limited debate and no 
amendments.
  While the U.S. should conform to WTO guidelines by the October 2000 
date the organization has set, this corporate welfare bill is certainly 
not the right approach, substantively or tactically.
  Not only is the argument that FSCs are not a subsidy not credible, 
but the arguments that VATs are, verges on laughable. VATs are 
equivalent to an added sales tax that European countries rebate to 
companies when such goods are exported. Since the U.S. doesn't apply a 
sales tax to exports in the first place, the argument is effectively 
moot.
  The rationale behind tax policy such as FSC is that it encourages 
other countries to buy our exports by bringing prices down (for 
foreigners) and thus reduces the trade deficit. But here, too, its 
defenders' argument is not supported by the facts. In the first place, 
to the extent that export prices actually fall, this is a transfer of 
benefits from U.S. taxpayers to foreign consumers.
  Mr. Speaker, I yield such time as he may consume to the gentleman 
from Texas (Mr. Doggett).
  (Mr. DOGGETT asked and was given permission to revise and extend his 
remarks.)
  Mr. DOGGETT. Mr. Speaker, I include for the Record additional views 
that I offered individually to the Committee on Ways and Means report 
on H.R. 4986 and the additional views that I offered on behalf of 
myself, the gentleman from Georgia (Mr. Lewis), and the gentleman from 
California (Mr. Stark) to the same report.
  Mr. Speaker, I also include for the Record a copy of the story in 
today's Washington Post entitled ``Tobacco Exports Get Aid in Bill Set 
for House Vote.''

                    Additional Views by Mr. Doggett

       In what is hardly a model of the way the democratic process 
     should operate, this legislation has involved no public 
     participation, no hearings, and no involvement of any but a 
     handful of Committee members. This bill is basically a 
     product of meetings between the Treasury Department and 
     groups that will benefit from preferential tax treatment. The 
     Chairman even went so far as to attempt to preclude the 
     Committee members from making comments or offering 
     amendments. The members were even denied the right to 
     question Secretary Eizenstat, the principal Administration 
     official responsible for this bill.
       The cost of this legislation to the Treasury, which must be 
     paid for by American taxpayers, is between $4 billion and $6 
     billion per year, and growing. In response to the European 
     community's criticism that tax advantages to American 
     businesses are illegal, this legislation seeks to generously 
     increase those advantages by $300 million a year.
       With this legislation, the Committee has basically made a 
     public policy statement that local stores, which sell 
     groceries or clothing to customers within our country, should 
     pay higher taxes than multinational corporations, which sell 
     cigarettes or machine guns abroad. Contrary to proponents' 
     arguments that small and medium sized businesses share 
     significantly in this tax break, the Internal Revenue Service 
     Statistics of Income Division reports that 78% of FSC tax 
     benefits go to companies with assets exceeding $1 billion. 
     Another study based on a sample of corporate financial 
     statements published in Tax Notes, August 14, 2000, indicates 
     that, ``the top 20% of FSC beneficiaries (ranked by size of 
     reported FSC benefit in 1998) obtained 87% of the FSC 
     benefits.''
       Moreover, there is substantial question as to the benefits 
     that Americans truly will receive from this legislation. The 
     Congressional Research Service summarized the most recent 
     Treasury analysis of the Foreign Sales Corporation tax 
     benefit by concluding that ``[r]epealing this provision would 
     have a negligible effect on the trade balance.'' Treasury 
     determined that such a repeal would reduce U.S. exports by 
     \3/10\ of one percent and U.S. imports by \2/10\ of one 
     percent.


                  Encouraging Foreign Armaments Sales

       Because the benefits to ordinary Americans of this costly 
     tax advantage are at best remote, every aspect of this law 
     deserves the type of scrutiny that was wholly lacking during 
     committee consideration. One glaring example of both what is 
     wrong with this legislation and what is wrong with the 
     process that produced it is the generosity shown to arms 
     manufacturers. Their tax savings are doubled by this bill. 
     The supposed justification for such largesse to those who 
     promote arms sales abroad was previously rejected by the 
     Treasury Department in August 1999:
       We have seen no evidence that granting full FSC benefits 
     would significantly affect the level of defense exports, and 
     indeed, we are given to understand that other factors, such 
     as the quality of the product and the quality and level of 
     support services, tend to dominate a buyer's decision whether 
     to buy a U.S. defense product.
       Ironically, in 1997, the Congressional Budget Office, whose 
     director was appointed by Republican leaders had reached a 
     similar conclusion:
       U.S. defense industries have significant advantages over 
     their foreign competitors and thus should not need additional 
     subsidies to attract sales. Because the U.S. defense 
     procurement budget is nearly twice that of all Western 
     European countries combined, U.S. industries can realize 
     economics of scale not available to other competitors. The 
     U.S. defense research and development budget is five times 
     that of all Western European countries combined, which 
     ensures that U.S. weapon systems are and will remain 
     technologically superior to those of other suppliers.
       Even the Department of Defense conceded the same in 1994:
       The forecasts support a continuing strong defense trade 
     performance for U.S. defense products through the end of the 
     decade and beyond. In a large number of cases, the U.S. is 
     clearly the preferred provider, and there is little 
     meaningful competition with suppliers from other countries. 
     An increase in the level of support the U.S. government 
     currently supplies is unlikely to shift the U.S. export 
     market share outside a range of 53 to 59 percent of worldwide 
     arms trade.
       In 1999, without the bonanza provided by this bill, US 
     defense contractors sold almost $11.8 billion in weapons 
     overseas--more than a third of the world's total and more 
     than all European countries combined.
       A paper prepared for the Cato Institute in August 1999 by 
     William D. Hartung, President's Fellow at the World Policy 
     Institute, highlights the bad judgment shown here: ``If the 
     government wanted to level the playing field between the 
     weapons industry and other sectors, it would have to reduce 
     weapons subsidies, not increase them.'' (These subsidies 
     include thousands of federal employees at the Pentagon and 
     other agencies whose very purpose is to increase arms sales.) 
     He continued, ``Considering those massive subsidies to weapon 
     manufacturers, granting additional tax breaks to an industry 
     that is being so pampered by the U.S. government makes no 
     sense.''
       With no evidence to warrant its action, the Committee 
     rejected fiscal responsibility in favor of wholly unjustified 
     preferential tax treatment that means millions in savings to 
     defense contractors. This costly decision is also bad for our 
     country's true security interests. Instead of subsidizing 
     arms promotion, our nation should be encouraging arms 
     control. American armaments too often contribute to one arms 
     race after another around the globe.
       Doubling this subsidy only encourages the sales of more 
     arms overseas and creates more challenges to the maintenance 
     of our own ``military superiority''--and, of course, more 
     pressure for additional costly increases in the defense 
     budget. As Lawrence Korb, President Reagan's Assistant 
     Secretary for Defense for Manpower, Reserve Affairs, 
     Installations and Logistics, has said:
       It has become a money game: an absurd spiral in which we 
     export arms only to have to develop more sophisticated ones 
     to counter those spread out all over the world . . . It is 
     very hard for us to tell other people--the Russians, the 
     Chinese, the French--not to sell arms, when we are out there 
     peddling and fighting to control the market.
       Former Costa Rican President and 1987 Nobel Peace Prize 
     winner, Oscar Arias offers another reason for rejecting the 
     Committee's decision to increase the arms subsidy:
       By selling advanced weaponry throughout the world, wealthy 
     military contractors not only weaken national security and 
     squeeze taxpayers at home but also strengthen dictators and 
     human misery abroad.
                                  ____


          Additional views by Messrs. Doggett, Lewis and Stark


              Promoting Tobacco Related Disease and Death

       The way in which this legislation was rushed through the 
     Committee avoided any explanation as to why American 
     taxpayers should continue to subsidize the tobacco industry, 
     whose product actually kills one-third of the people who use 
     it. The Committee ignored the pleas of the American Medical 
     Association, the American Cancer Society, the American Heart 
     Association, Campaign for Tobacco-Free Kids, and other public 
     health groups that tobacco should be denied a tax benefit. It 
     also rejected the written request of 97 Members of Congress 
     that tobacco be excluded.
       Nicotine addiction represents a public health crisis. 
     Within 20 years, almost 10 million people are expected to die 
     annually from tobacco-related illnesses. Seventy percent of 
     these deaths will occur in the developing countries that are 
     being targeted by big tobacco's continued addiction to making 
     money at the expense of human lives. In fact, tobacco will 
     soon become the leading cause of disease and premature death 
     worldwide--bypassing communicable diseases such as AIDS, 
     malaria and tuberculosis.
       Instead of being accountable for its deadly products, the 
     tobacco industry has responded by conspiring to undermine the 
     efforts of the World Health Organization to cope with this 
     global pandemic. During recent litigation, Philip Morris was 
     forced to produce documents, which can be found at the 
     Minnesota Tobacco Document Depository, stating that the 
     company sought to ``discredit key individuals'' and 
     ``allocate the resources to stop [WHO] in their tracks.'' An 
     August 2000 WHO report entitled, Tobacco Company Strategies 
     to Undermine Tobacco Control Activities at the World Health 
     Organization states:
       The [industry] documents also show that tobacco company 
     strategies to undermine

[[Page H7427]]

     WHO relied heavily on international and scientific experts 
     with hidden financial ties to the industry. Perhaps most 
     disturbing, the documents show that tobacco companies quietly 
     influenced other U.N. agencies and representatives of 
     developing countries to resist WHO's tobacco control 
     initiatives.
       Geoffrey C. Bible, Chairman of Philip Morris, a company 
     that has often hidden its malicious tobacco influence through 
     its holdings in Kraft Foods, even wrote in 1988 of the ``need 
     to think through how we can use our food companies [to help 
     governments] with their food problems and give us a more 
     balanced profile with the government than we now have against 
     WHO's powerful influence.''
       The tobacco industry certainly cannot justify the public 
     subsidy offered through this proposed legislation. Philip 
     Morris, R.J. Reynolds, and Brown and Williamson have acquired 
     tremendous marketing expertise from decades of success in 
     targeting American children. This offers them tremendous 
     advantage over foreign competitors in addicting children 
     around the world; they hardly need help from the American 
     taxpayer in order to spread death and disease to children in 
     developing countries.
       Philip Morris spends millions in American television 
     advertising to contend that it no longer markets to youth. It 
     finally claims to have abandoned tobacco company billboards, 
     transit ads, cartoon characters, cigarette-branded apparel 
     and merchandise, paid placement of its products in movies and 
     television shows, and most brand sponsorship of team sports 
     and entertainment events. But, it has steadfastly declined to 
     apply these modest safeguards in its international 
     operations; indeed, it relies heavily on these and other 
     tactics to target the world's children.
       Both petroleum and unprocessed timber are excluded from 
     this legislation. Yet tobacco, the single largest public 
     health menace, will continue to be subsidized at a cost to 
     American taxpayers of about $100 million per year. This 
     legislation constitutes just another way of forcing American 
     taxpayers to be partners in this export of death and disease. 
     Little wonder that there was so much eagerness to silence 
     discussion of this disgrace.
                                  ____


               [From the Washington Post, Sept. 12, 2000]

           Tobacco Exports Get Aid in Bill Set for House Vote

                           (By Marc Kaufman)

       The Clinton administration has never been shy about trying 
     to cut smoking in the United States. But in a move that has 
     confounded its usual allies, the administration is backing an 
     export subsidy bill this year that would give American 
     tobacco companies about $100 million in tax breaks yearly for 
     tobacco products they sell abroad.
       The bill, which is scheduled for a full House vote today, 
     would continue subsidies for many American industries at a 
     cost of between $4 and $6 billion annually. While these tax 
     incentives have generally sparked little opposition in 
     Congress, the willingness to continue export subsidies for 
     tobacco has sparked criticism from public health advocates 
     and other industry critics.
       ``I think it's a very difficult position for the 
     administration to explain,'' said Rep. Lloyd Doggett (D-
     Tex.), who tried unsuccessfully to deny the subsidy to 
     tobacco companies in the Ways and Means Committee. ``What 
     we're doing here is promoting and subsidizing the sale of 
     cigarettes to people abroad, and I find it unacceptable for 
     that to be American policy.''
       Doggett said that during the White House lobbying for the 
     China trade bill earlier this year, President Clinton had 
     told him that he generally supported the amendment to remove 
     tobacco from the export subsidy list.
       But a House Democratic aide familiar with the matter said 
     White House officials did not attempt to dismantle the 
     program's tobacco subsidy for fear of jeopardizing bipartisan 
     accord on the legislation. ``The administration is caught a 
     little bit between a rock and a hard place,'' the aide said.
       A senior administration official said yesterday that 
     Doggett's amendment was ``consistent with our tobacco 
     policy'' but said the administration went along with House 
     Ways and Means Committee Chairman Bill Archer (R-Tex.) in the 
     position ``that no amendments be added to the legislation to 
     ensure it be passed on a timely basis.''
       Trent Duffy, spokesman for Archer, said Democrats and 
     Republicans alike agreed to preserve the general subsidy 
     program to compensate for European countries' favorable tax 
     treatment of their companies' activities abroad. Duffy said 
     the provisions in the bill ``are the only way we can stay 
     competitive with our competitors overseas. . . . Once you 
     start changing who receives the benefit of this regime, then 
     you get into rewriting United States tax law, and that's not 
     what this is about.''
       The export bill deals with a long-standing trade dispute 
     with the European Union. The Europeans have complained that 
     the corporate tax breaks now offered to American exporters 
     constitute an illegal export subsidy, and the World Trade 
     Organization agreed with this position. The bill before the 
     House today would address those concerns, though EU officials 
     say little has changed.
       When the bill came before the Ways and Means Committee in 
     July, the American Medical Association, the Campaign for 
     Tobacco-Free Kids and other public health organizations 
     lobbied to remove tobacco from the subsidy list, but the bill 
     passed unchanged with little public debate.
       Democratic Ways and Means Committee members Doggett, John 
     Lewis (Ga.) and Fortney ``Pete'' Stark (Calif.) published a 
     sharp critique of the bill's handling as part of the 
     committee report on the legislation. They pointed out that 
     both petroleum and unprocessed timber do not qualify for the 
     export tax incentives although tobacco does.
       ``This legislation constitutes just another way of forcing 
     American taxpayers to be partners in this export of death and 
     disease,'' they wrote. Critics of the subsidies said they 
     would try to remove them when the bill comes up for 
     consideration in the Senate.
       Sales of cigarettes have been stable or declining in the 
     U.S. market for some time, but rose dramatically abroad until 
     last year. Tobacco is now a $6 billion export industry.
       Today's administration support of the export bill with 
     tobacco subsidies contrasts sharply with earlier efforts to 
     reduce government support for tobacco sales abroad. The 
     administration sent cables to all American embassies last 
     year directing them not to promote cigarette sales because of 
     public health concerns.
       Doggett plans to denounce the tobacco subsidy in today's 
     House debate, and said he may vote against the entire export 
     subsidy bill because of its inclusion. His earlier amendment 
     eliminating the tobacco subsidy had won the support of 96 
     other representatives, mostly Democrats.
       But Democrats are unlikely to have a chance to change the 
     bill once it reaches the House floor. It is slated to be 
     brought up under suspension of the rules, which requires a 
     two-thirds vote for approval with no amendments allowed.

  Mr. STARK. Mr. Speaker, I yield 1 minute to the gentleman from Texas 
(Mr. Doggett), noting that it is now the 1-hour anniversary since this 
bill was printed, at 4:09 this afternoon, to celebrate that momentous 
occasion to close debate on this in opposition.
  Mr. DOGGETT. Mr. Speaker, to those who say it is not significant, nor 
should it be debated today that the American taxpayers will be asked to 
be unwilling accomplices to the tobacco industry at a cost of $100 
million per year; that the pharmaceutical industry will get about $123 
million per year as a reward for selling pharmaceuticals at lower 
prices abroad than they do here at home; that military contractors will 
get a doubling of their tax subsidy under this bill as they sell 
machine guns and land mines and other armaments around the world to 
fuel the world's arms races; that all of these things should be 
ignored, because in order to protect American jobs, we have to beat the 
clock before October 1, one wonders why it is that we do not even have 
this bill presented until 4:09 in the afternoon on September 12, if we, 
indeed, face such a crisis. In fact, we do not face such a crisis.
  The United States has never asked the Europeans for an extension of 
this deadline in order to explore other alternatives, and our country 
has every right to make that request. An opinion article in an 
authority no more extreme than Business Week on September 4 correctly 
said ``it's time to call a halt to such waste by both sides . . . the 
administration should drop its plan to expand FSC, get back to the 
negotiating table, and start proposing some real solutions such as 
eliminating export subsidies.''
  Mr. ARCHER. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Pennsylvania (Mr. English).
  Mr. ENGLISH. Mr. Speaker, I rise in strong support of this 
legislation.
  Mr. Speaker, the international playing field is titled against our 
employers and their workers.
  Without the Foreign Sales Corporation rule in our tax code, the 
situation will only be made worse--to the point of being intolerable.
  With the World Trade Organization's ruling disallowing FSC, we face a 
double edge sword.
  By refusing to repeal the FSC, the United States will be inviting 
massive retaliation against U.S. export trade but if we repeal FSC 
without adopting alternative legislation, our exporters and their 
employees will be left high and dry.
  I urge my colleagues to support the Foreign Sales Corporations 
Extraterritorial Income Exclusion Act of 2000, which corrects the 
problems that the WTO had with FSC while protecting American workers.
  This legislation grandfathers transactions begun prior to Oct. 1 and 
allows for manufacturing and/or a binding contract to continue under 
current FSC law until the end of next year.
  FSC was made necessary only because the U.S. maintains an archaic 
worldwide tax system which taxes foreign-source income and because the 
U.S. taxes export income.
  Allowing FSC to stand or abolishing it will make an already tough 
global market next to

[[Page H7428]]

impossible to compete in for U.S. employers. We must act now to avoid 
putting American workers onto a playing field for which they are not 
equipped.
  Mr. ARCHER. Mr. Speaker, I yield myself the balance of the time.
  Mr. Speaker, there has been a great deal of rhetoric today on the 
floor, but let us try to cut through all of it. If this bill does not 
pass, the FSC provisions that have been railed against by the opponents 
will continue to be in the law. None of that will change.
  What they call a subsidy, which is actually a reduction of the 
impediment of double taxation on our companies, will still be in the 
law. Nothing will change. They act like suddenly everything will 
change, but what will happen is this: American products will have 
sanctions put against them between $4 billion and $40 billion a year by 
the Europeans, all justified by the WTO. And who will then be hit?
  Will it be the big corporations? The first sanction will be on 
agriculture. Our farmers will be hit. Then they will put sanctions on 
man-made staple fibers. Our textile industry will be hit. Then they 
will put sanctions on cotton and yarns and woven fabrics. Then they 
will put sanctions on fruits and vegetables and likely our wine, which 
competes with the French wine.
  They will pick the sensitive spots to apply these sanctions, but the 
FSC provisions that have been railed against will still be in the code. 
This is our only opportunity to protect American workers so that we can 
continue to export, even in those areas which do not currently get FSC 
treatment, the injury to the U.S. and the potential beginning of the 
mother of all trade wars is something to be avoided and avoided by this 
bill. It is the only option before us, vote yes.
  Mrs. CHRISTENSEN, Mr. Speaker, I rise to speak on H.R. 4986, the 
Foreign Sales Corporation Repeal and Extraterritorial Income Act of 
2000 because of the effect it will have on my district, the U.S. Virgin 
Islands.
  Mr. Speaker, almost from the inception of the Foreign Sales 
Corporation Act of 1984, the U.S. Virgin Islands positioned itself to 
act as the premiere location where U.S. companies that were exporting 
U.S.-made goods could locate to reduce their tax liability. 
Approximately 3,900 of a total 7,000 FSC's are located in the U.S. 
Virgin Islands where they provide approximately 40 direct jobs to 
Virgin Islands residents and indirect employment in the thousands, 
through 12 law and management firms that serve them. They provide 
similar benefits on our sister territory of Guam--both of us being a 
part of this country.
  FSC companies in the Virgin Islands generate about $7 to $10 million 
dollars annually and they have contributed almost $70 million to the 
cash-strapped treasury of the Government of the Virgin Islands since 
1983. Through no fault of our own, and despite our working with the 
relevant agencies to mitigate the adverse effects, with passage of this 
bill, we will lose an important tool of our economy at a time when we 
can least afford it--when the government of the Virgin Islands is 
facing a severe financial crisis. Our accumulated budget deficit, as of 
January of last year was estimated to be in excess of $250 million and 
the Government's debt obligations has reached an unimaginable $1.12 
billion.
  While Virgin Islands Governor Turnbull has made strides in addressing 
this problem, the loss of revenues generated by FSC's to our Territory 
will be a major blow.
  I am therefore looking forward to working with Chairman Archer and 
Ranking Member Rangel to find a way to assist us in replacing the loss 
of revenue that this bill will mean to the Virgin Islands. I hope for 
the support of all my colleagues in this effort.
  Mr. PAUL. Mr. Speaker, H.R. 4986, brought up under suspension, 
deserves serious consideration by all Members.
  There are three reasons to consider voting against this bill. First, 
it perpetuates an international trade war. Second, this bill is brought 
to the floor as a consequence of a WTO ruling against the United 
States. Number three, this bill gives more authority to the President 
to issue Executive Orders.
  Although this legislation deals with taxes and technically actually 
lower taxes, the reason the bill has been brought up has little to do 
with taxes per se. To the best of my knowledge there has been no 
American citizen making any request that this legislation be brought to 
the floor. It was requested by the President to keep us in good 
standing with the WTO.
  We are now witnessing trade war protectionism being administered by 
the World (Government) Trade Organization--the WTO. For two years now 
we have been involved in an ongoing trade war with Europe and this is 
just one more step in that fight. With this legislation the U.S. 
Congress capitulates to the demands of the WTO. The actual reason for 
this legislation is to answer back to the retaliation of the Europeans 
for having had a ruling against them in favor of the United States on 
meat and banana products. The WTO obviously spends more time managing 
trade wars than it does promoting free trade. This type of legislation 
demonstrates clearly the WTO is in charge of our trade policy.
  The Wall Street Journal reported on 9/5/00, ``After a breakdown of 
talks last week, a multi billion-dollar trade war is now about certain 
to erupt between the European union and the U.S. over export tax breaks 
for U.S. companies, and the first shot will likely be fired just weeks 
before the U.S. election.''
  Already, the European Trade Commissioner, Pascal Lamy, has rejected 
what we're attempting to do here today. What is expected is that the 
Europeans will quickly file a new suit with the WTO as soon as this 
legislation is passed. They will seek to retaliate against United 
States companies and they have already started to draw up a list of 
those products on which they plan to place punitive tariffs.
  The Europeans are expected to file suit against the United States in 
the WTO within 30 days of this legislation going in to effect.
  This legislation will perpetuate the trade war and certainly support 
the policies that have created the chaos of the international trade 
negotiations as was witnessed in Seattle, Washington.
  The trade war started two years ago when the United States obtained a 
favorable WTO ruling and complained that the Europeans refused to 
import American beef and bananas from American owned companies.
  The WTO then, in its administration of the trade war, permitted the 
United States to put on punitive tariffs on over $300 million worth of 
products coming in to the United States from Europe. This only 
generated more European anger who then objected by filing against the 
United States claiming the Foreign Sales Corporation tax benefit of 
four billion dollars to our corporations was ``a subsidy''.
  On this issue the WTO ruled against the United States both initially 
and on appeal. We have been given till October 1st to accommodate our 
laws to the demands of the WTO.
  That's the sole reason by this legislation is on the floor today.
  H.R. 4986 will only anger the European Union and accelerate the trade 
war. Most likely within two months the WTO will give permission for the 
Europeans to place punitive tariffs on hundreds of millions of dollars 
of U.S. exports. These trade problems will only worsen if the world 
slips into a recession when protectionist sentiments are strongest. 
Also, since currency fluctuations by their very nature stimulate trade 
wars, this problem will continue with the very significant weakness of 
the EURO.

  The United States is now rotating the goods that are to receive the 
100 to 200 percent tariff in order to spread the pain throughout the 
various corporations in Europe in an effort to get them to put pressure 
on their governments to capitulate to allow American beef and bananas 
to enter their markets. So far the products that we have placed high 
tariffs on have not caused Europeans to cave in. The threat of putting 
high tariffs on cashmere wool is something that the British now are 
certainly unhappy with.
  The Europeans are already well on their way to getting their own list 
ready to ``scare'' the American exporters once they get their 
permission in November.
  In addition to the danger of a recession and a continual problem with 
currency fluctuation, there are also other problems that will surely 
aggravate this growing trade war. The Europeans have already complained 
and have threatened to file suit in the WTO against the Americans for 
selling software products over the Internet. Europeans tax their 
Internet sales and are able to get their products much cheaper when 
bought from the United States thus penalizing European countries. Since 
the goal is to manage things in a so-called equitable manner the WTO 
very likely could rule against the United States and force a tax on our 
international Internet sales.
  Congress has also been anxious to block the Voice Stream 
Communications planned purchase by Deutch Telekom, a German government-
owned phone monopoly. We have not yet heard the last of this 
international trade fight.
  The British also have refused to allow any additional American 
flights into London. In the old days the British decided these 
problems, under the WTO the United States will surely file suit and try 
to get a favorable ruling in this area thus ratchening up the trade 
war.
  Americans are especially unhappy with the French who have refused to 
eliminate their farm subsidies--like we don't have any in this country.
  The one group of Americans that seem to get little attention are 
those importers whose businesses depend on imports and thus get hit by 
huge tariffs. When 100 to 200 percent

[[Page H7429]]

tariffs are placed on an imported product, this virtually puts these 
corporations out of business.
  The one thing for certain is this process is not free trade; this is 
international managed trade by an international governmental body. The 
odds of coming up with fair trade or free trade under WTO are zero. 
Unfortunately, even in the language most commonly used in the Congress 
in promoting ``free trade'' it usually involves not only international 
government managed trade but subsidies as well, such as those obtained 
through the Import/Export Bank and the Overseas Private Investment 
Corporation and various other methods such as the Foreign Aid and our 
military budget.
  Free trade should be our goal. We should trade with as many nations 
as possible. We should keep our tariffs as low as possible since 
tariffs are taxes and it is true that the people we trade with we are 
less likely to fight with. There are many good sound, economic and 
moral reasons why we should be engaged in free trade. But managed trade 
by the WTO does not qualify for that definition.

 U.S., EU Risk Trade War Over Export Tax Shelters--Europe Is Likely To 
           Seek the WTO's Permission To Levy Punitive Tariffs

            (By Geoff Winestock of the Wall Street Journal)

       Brussels.--After a breakdown of talks last week, a 
     multibillion-dollar trade war is now almost certain to erupt 
     between the European Union and the U.S. over export tax 
     breaks for U.S. companies, and the first shot will likely be 
     fired just weeks before the U.S. elections.
       European Trade Commissioner Pascal Lamy rejected on 
     Thursday the latest U.S. proposal for resolving a dispute 
     over a $4 billion-a-year tax shelter for U.S. exporters that 
     the World Trade Organization ruled illegal in February.
       With chances now slim for an agreement on how to bring the 
     U.S. tax code into line with WTO rules, the EU will likely 
     file a new suit with the WTO in October. And this time, the 
     EU will seek permission to retaliate against U.S. companies 
     with trade sanctions. At a minimum, EU officials say, they 
     will ask for punitive tariffs on $4 billion of U.S. goods.
       The U.S. Congress is considering a bill designed to bring 
     U.S. tax law into line with WTO rules. But hopes that this 
     would yield a quick solution disappeared last week when Mr. 
     Lamy sent a letter criticizing the bill to Deputy Treasury 
     Secretary Stuart Eizenstat. Mr. Lamy said the proposal for 
     amending the U.S. tax code ``failed to render it compatible 
     with international trade rules,'' according to an EU briefing 
     note. Indeed, EU officials say, the bill was marginally worse 
     than a White House proposal that the EU rejected in May.
       Describing the EU letter as ``disappointing'' and 
     ``unconstructive,'' a senior U.S. official says the EU's 
     attitude could sour trans-Atlantic trade ties. ``What we're 
     trying to do is avert a trade war,'' the official says. 
     ``We're doing everything we can to avoid it. If there's to be 
     one, it will be in their hands, not in ours.''
       The official says that the White House would continue to 
     support the bill, which he says would be fully WTO-compliant. 
     Unless the U.S. makes some change to the tax program by the 
     WTO's Oct. 1 deadline, the official says, the U.S. will have 
     no chance of avoiding a confrontation with the EU or winning 
     its case in the WTO. The EU will have 30 days after Oct. 1 to 
     lodge a complaint with the WTO, which will then take a few 
     months to rule on what, if any, retaliation can be taken.
       At the core of the dispute is a tax-law provision that 
     allows U.S. companies to channel overseas sales of 
     domestically produced goods through so-called foreign sales 
     corporations--offshore subsidiaries, usually in tax havens, 
     whose profits on those exports are subject to lower federal 
     income taxes than are other profits. The FSC shelter saved 
     U.S. companies about $4 billion last year. Boeing Corp., 
     which used the shelter to save $230 million last year, 
     included a warning about the trade dispute in its annual 
     financial reports.
       The U.S. says the congressional bill would replace the WTO-
     illegal tax breaks with a much broader exemption for all 
     foreign-source income, both from exports and from goods 
     manufactured abroad. The U.S. official says this is 
     comparable with tax exemptions offered by EU countries, 
     including the Netherlands and France.
       But EU officials and some U.S. analysts say the analogy is 
     inaccurate and that the proposed revision simply repackages 
     the FSC program, retaining its preference for exports over 
     domestic sales. ``U.S. industries which are benefiting from 
     FSCs are being very stubborn,'' says Peter Morici, a senior 
     fellow at the Economic Strategy Institute, a Washington, D.C. 
     think tank. ``They do not want to make a real fundamental 
     change in the law.''

  Mr. DeFAZIO. Mr. Speaker, let's briefly review why we find ourselves 
here today to debate replacing a rather arcane section of the tax code 
that allows corporations to avoid a portion of their tax bill by 
establishing largely paper entities in a filing cabinet in a tax haven 
like Barbados with the equally arcane tax provisions of H.R. 4986, the 
FSC Repeal and Extraterritorial Income Exclusion Act of 2000.
  Creating this new, expanded loophole to assist corporations in 
escaping their fair share of the tax burden in the U.S. makes a mockery 
of pleas by my colleagues to simplify the tax code and improve 
fairness.
  For nearly two decades, beginning with the Revenue Act of 1971 (P.L. 
92-178), the U.S. provided tax incentives for exports. However, our 
trading partners complained that these incentives violated our 
commitments under the General Agreement on Tariffs and Trade (GATT). 
While not conceding the violation, in 1984, Congress scrapped the 
Domestic International Sales Corporation (DISC) provisions and created 
the Foreign Sales Corporation (FSC) provisions. The differences are 
highly technical and probably only understood by international tax 
bureaucrats.
  Under the FSC provision, corporations can exempt between 15 and 30 
percent of their export income from taxation by routing a portion of 
their exports through a FSC. Our trading partners, specifically the 
European Union (EU), were not satisfied with the somewhat cosmetic 
changes made to the U.S. tax code.
  Going back on a verbal gentleman's agreement not to challenge our 
respective tax codes under global trading rules, the EU filed a 
complaint with the World Trade Organization (WTO), successor to GATT, 
essentially arguing the same thing that was argued about DISCs. Namely 
that export subsidies were illegal under global trading rules by 
conferring an unfair advantage on recipient companies.
  A secretive WTO tribunal ruled against the U.S. Dutifully, the U.S. 
appealed the decision. Earlier this year, the WTO appeals panel upheld 
the earlier decision and ordered the U.S. to repeal the FSC provision 
or risk substantial retaliatory measures.
  Specifically, the WTO appeals panel wrote, ``By entering into the WTO 
Agreement, each Member of the WTO has imposed on itself an obligation 
to comply with all terms of that Agreement. This is a ruling that the 
FSC measure does not comply with all those terms. The FSC measure 
creates a `subsidy' because it creates a `benefit' by means of a 
`financial contribution', in that government revenue is foregone that 
is `otherwise due.' This `subsidy' is a `prohibited export subsidy' 
under the SCM Agreement [Agreement on Subsidies and Countervailing 
Measures] because it is contingent on export performance. It is also an 
export subsidy that is inconsistent with the Agreement on Agriculture. 
Therefore, the FSC measure is not consistent with the WTO obligations 
of the United States.''
  In other words, it is unfair and illegal under global trade rules for 
the U.S. tax code to provide welfare for corporations by allowing them 
to escape taxes that would otherwise be due.
  At this point, one would expect that my colleagues who, on most 
occasions eloquently defend the need for ``rules based trade'' and 
``free markets'', to adhere to the WTO directive and repeal FSC. 
Because I assumed my colleagues would want to be intellectually 
consistent, I introduced legislation shortly after the WTO ruling to 
repeal FSC.
  After all, precedent proved the U.S. was more than willing to bend to 
the will of the WTO. When the WTO ruled against a provision of the 1990 
Clean Air Act, the Environmental Protection Agency gutted its clean air 
regulations in order to allow dirtier gasoline from Venezuela to be 
sold in the U.S.
  Similarly, when Mexico threatened a WTO enforcement action on a 1991 
GATT case it had won that eviscerated the Dolphin Protection Act, the 
U.S. went along to get along. In fact, the Clinton Administration sent 
a letter to Mexican President Ernesto Zedillo declaring that weakening 
the standard by which tuna must be caught in ``dolphin-safe'' nets ``is 
a top priority for my administration and me personally.''
  The WTO also ruled against the Endangered Species Act provisions that 
required U.S. and foreign shrimpers to equip their nets with 
inexpensive turtle excluder devices if they wanted to sell shrimp in 
the U.S. market. The goal was to protect endangered sea turtles. The 
Clinton Administration agreed to comply with the ruling.
  Given this record of acquiescing to the WTO, one could be forgiven 
for assuming the Clinton Administration and Congress would behave in a 
similar manner when losing a case on tax breaks for corporations.
  Of course, sea turtles and dolphins don't make massive campaign 
contributions, or any campaign contributions for that matter. But, the 
large corporations who would be impacted by the WTO decision against 
FSCs do.
  Apparently not bothered by the hypocrisy, immediately after the 
ruling by the WTO appeals panel, the Clinton Administration, a few 
Members of Congress, and the business community openly declared the 
need to maintain the subsidy in some form and began meeting in secret 
to work out the details on how to circumvent the WTO ruling and 
maintain these valuable, multi-billion dollar tax incentives.
  Now, it is well-known that I am not a big fan of the WTO. It is an 
unaccountable, secretive, undemocratic bureaucracy that looks out 
solely for the interests of multinational corporations

[[Page H7430]]

and investors at the expense of human rights, labor standards, national 
sovereignty, and the environment.
  But, by pointing out that export subsidies like FSCs are corporate 
welfare, however, the WTO has done U.S. taxpayers a favor. 
Unfortunately, this legislation before us today only does wealthy 
corporations a favor.
  I have several problems with H.R. 4986 besides the intellectual 
inconsistency. I will touch on each of these now.
  First, and perhaps most importantly, there is little or no economic 
rationale for export subsidies like FSCs or the provisions of H.R. 
4986. In its April 1999 Maintaining Budgetary Discipline report, the 
Congressional Budget Office (CBO) noted ``Export subsidies, such as 
FSCs, reduce global economic welfare and may even reduce the welfare of 
the country granting the subsidy, even though domestic export-producing 
industries may benefit.''
  Similarly, in August 1996, CBO wrote ``Export subsidies do not 
increase the overall level of domestic investment and domestic 
employment . . . In the long run, export subsidies increase imports as 
much as exports. As a result, investment and employment in import-
competing industries in the United States would decline about as much 
as they increased in the export industries.''
  Need further evidence? The Congressional Research Service (CRS) has 
written ``Economic analysis suggests that FSC does increase exports, 
but likely triggers exchange rate adjustments that also result in an 
increase in U.S. imports; the long run impact on the trade balance is 
probably nil. Economic theory also suggests that FSC probably reduces 
aggregate U.S. economic welfare.''
  Of course, protests will be heard from supporters of H.R. 4986 that 
it gets rid of the export requirement. In testimony before the Ways and 
Means Committee, Deputy Secretary Eizenstat said the Chairman's mark is 
``not export-contingent.'' Of course, that claim is absurd. If a 
company sells products solely in the U.S., they don't qualify for the 
tax subsidy. That is, by definition, an export subsidy. Therefore, the 
criticisms of export subsidies previously mentioned would apply to this 
new legislation as well.
  President Nixon originally prosed export subsidies, which became the 
DISC and then FSC, because he was alarmed at the size of the U.S. trade 
deficit, which was $1.4 billion in 1971, a number that seems almost 
quaint by today's standards. As Paul Magnusson noted in the September 
4, 2000, Business Week FSC ``produced some hefty tax savings for big 
U.S. exporters, but it never did actually do much to narrow the trade 
deficit, which hit a record $339 billion last year.'' And which, I 
should add, has continued to set new records virtually every month this 
year.
  I can't understand why it makes sense to subsidize U.S. exporters to 
the tune of $5 billion or more when the economic impact is ``probably 
nil'' or worse.
  The economic rationale further deteriorates when one realizes, as the 
previous quotes suggest, that export subsidies discriminate against 
mom-and-pop stores who don't have the resources to export and against 
U.S. industries that must compete with imports. This means that export 
subsidies distort markets by pre-ordaining winners and losers. The 
winners? Large exporters and foreign consumers who get to enjoy lower 
priced U.S. products subsidized by U.S. taxpayers. The losers? Small 
businesses, U.S. taxpayers, and import-competing industries.
  I find it interesting while Treasury has spent a great deal of time 
figuring out how to combat corporate tax shelters that have no economic 
rationale, as discussed in a July 1999 report, that they would push 
this corporate welfare, which also has no economic rationale.
  So, who specifically benefits? The journal Tax Notes conducted a 
revealing study of FSCs in its August 14, 2000, edition. The article 
profiled the 250 companies that reported $1.2 billion in FSC tax 
savings in 1998. The top 20 percent of the companies in the sample 
claimed 87 percent of the benefits. The two largest FSC beneficiaries 
were the General Electric Company and Boeing, which saw their tax bills 
reduced by $750 million and $686 million, respectively from 1991-1998.
  What are some of the other top FSC corporate welfare queens? 
Motorola, Caterpillar, Allied-Signal, Cisco Systems, Monsanto, Archer 
Daniels Midland, Oracle, Raytheon, RJR Nabisco, International Paper, 
and ConAgra. The list reads like a who's who of extraordinarily 
profitable multinational corporations. Hardly companies that should 
need to feed from the taxpayer trough.
  Furthermore, American subsidiaries of European firms take advantage 
of U.S. taxpayers through export subsidies. British Petroleum, 
Unilever, BASF, Daimler Benz, Hoescht, and Rhone-Poulenc are all FSC 
beneficiaries. The fact that foreign companies can also claim export 
benefits pokes a large hole in the argument that these tax benefits are 
needed to ensure the competitiveness of U.S. businesses.
  Simiarly, isn't it a bit odd that economist and U.S. policymakers 
like to lecture European nation's about their high tax burdens, but 
now, suddenly their tax burden is too low and, therefore, U.S. 
companies need subsidies in order to compete?
  Let's be clear, this legislation is not about the competitiveness of 
large, wealthy, multinational corporations based in the United States. 
It is about wealthy campaign contributors wanting to keep and expand 
their $5 billion-plus tax subsidies and elected officials willing to do 
their bidding.
  Not only does H.R. 4986 allow these companies to continue receiving 
billions in tax breaks, but it actually expands them. This legislation 
will cost U.S. taxpayers another $300 million a year or more.
  It is also unfortunate that this legislation subsidizes a number of 
industries--such as defense contractors, tobacco companies, and 
pharmaceutical firms--that have no business receiving any more taxpayer 
hand-outs.
  Take the defense industry, for example. Under the current FSC regime, 
defense contractors can only claim 50 percent of the tax available to 
other industries. The legislation before us today allows the defense 
industry to claim the full benefit available to others.

  Leaving aside the fact that U.S. taxpayers are already overly 
generous to defense contractors, which no doubt they are, expanding 
this corporate welfare will have no discernible impact on overseas 
sales. The Treasury Department noted in August 1999, ``We have seen no 
evidence that granting full FSC benefits would significantly affect the 
level of defense exports.''
  In 1997, the CBO made a similar point, ``U.S. defense industries have 
significant advantages over their foreign competitors and thus should 
not need additional subsidies to attract sales.''
  Even the Pentagon has acknowledged this fact by concluding in 1994, 
``In a large number of cases, the U.S. is clearly the preferred 
provider, and there is little meaningful competition with suppliers 
from other countries. An increase in the level of support the U.S. 
government currently supplies is unlikely to shift the U.S. export 
market share outside a range of 53 to 59 percent of worldwide arms 
trade.''
  As Ways and Means Committee Member, Representative Doggett, noted in 
his dissenting views on H.R. 4986, ``In 1999, without the bonanza 
provided by this bill, U.S. defense contractors sold almost $11.8 
billion in weapons overseas--more than a third of the world's total and 
more than all European countries combined.''
  The U.S. should stop the proliferation of weapons and war, not expand 
it as this bill intends.
  The pharmaceutical industry is another industry that does not need or 
deserve additional subsidies from U.S. taxpayers. The industry already 
receives substantial research and development tax credits as well as 
the benefits flowing from discoveries by government scientists. As 
Representative Stark noted in his dissenting views, drug companies 
lowered their effective tax rate by nearly 40 percent relative to other 
industries from 1990 to 1996 and were named the most profitable 
industry in 1999 by Fortune Magazine.
  The industry sells prescription drugs at far cheaper prices abroad 
than here in the U.S. For example, seniors in the U.S. pay twice as 
much for prescriptions as those in Canada or Mexico. It is an affront 
to U.S. taxpayers to force them to further subsidize an industry that 
is already gouging them at the pharmacy as this bill would do.
  In direct contradiction of various federal policies to combat tobacco 
related disease and death in the U.S., this legislation would force 
U.S. taxpayers to subsidize the spread of big tobacco's coffin nails to 
foreign countries. This violates the American taxpayers' sense of 
decency and respect. Their money should not be used to push a product 
onto foreign countries that kills one-third of the people who use it as 
intended.
  By placing H.R. 4986 on the suspension calendar, debate is 
prematurely cut off and amendments to reduce support for drug 
companies, the defense industry or tobacco companies can not be 
considered. But, I guess that's just par for the course for a process 
that has taken place in relative secrecy between a few Members of 
Congress, the Administration, and the industries that stand to benefit 
from this legislation.
  You may not hear this in the debate much, but it is important to 
point out that the EU has already put the U.S. on notice that H.R. 4986 
does not satisfy its demands. According to the EU, H.R. 4986 still 
provides an export subsidy, maintains a requirement that a portion of a 
product contain U.S.-made components, and does not repeal FSCs by the 
October 1st deadline. Therefore, it is likely the EU will ask the WTO 
to rule on the legality of the U.S. reforms. Most independent analysts 
agree with the EU critique of H.R. 4986.
  So, it is reasonable to assume the WTO will again rule against the 
U.S. and allow the EU to impose retaliatory sanctions against U.S.

[[Page H7431]]

products. According to some press accounts, the EU would be able to 
impose 100 percent tariffs on around $4 billion worth of U.S. goods. 
These would be the largest sanctions ever imposed in a trade dispute. 
In other words, this inadequate reform of export subsidies will open up 
the U.S. to retaliatory action by the EU, which will harm exports as 
much or more than any perceived benefit that would be provided by H.R. 
4986. Of course, the exporters that will be hurt by retaliatory 
sanctions probably won't be the same businesses that will enjoy the tax 
windfall provided by this legislation.
  Mr. Speaker, ADM is not suffering. Cisco Systems is not suffering. 
Raytheon is not suffering. Microsoft is not struggling mightily to keep 
its head above water. But, the American people are. Schools are 
crumbling, 45 million Americans have no health insurance, individuals 
are working longer hours for less money with the predictable stress on 
families, millions of seniors do not have access to affordable 
prescription drugs, and poverty remains stubbornly high, particularly 
among children.
  Rather than debating how to preserve billions in tax subsidies for 
some of our largest corporations, we should be figuring out how to 
address some of these issues. How many times over are we going to spend 
projected, and I stress projected, surpluses, if we want to pay down 
the national debt, provide prescription drugs, shore up Social Security 
and Medicare, and increase funding for education, Congress cannot keep 
showering wealthy corporations with unjustifiable tax subsidies.
  I will end with a quote from a newspaper I'm not normally inclined to 
agree with editorially, the Washington Times. In an editorial on 
September 5, 2000, the Washington Times wrote, ``The Ways and Means 
Committee boasts that support for its revised FSC bill was bipartisan 
and near unanimous. It remains a bipartisan and near unanimous 
blunder.''
  I urge my colleagues to vote against H.R. 4986.
  Mr. UNDERWOOD. Mr. Speaker, I rise to express my concern about the 
impact of H.R. 4986, The FSC Repeal and Extraterritorial Income 
Exclusion Act of 2000, on the U.S. territories, particularly the U.S. 
Virgin Islands and Guam.
  Since the WTO decision last fall on Foreign Sales Corporations 
(FSCs), I know that the Administration has worked closely with House 
Ways and Means Committee Chairman Archer and Representative Rangel, the 
ranking member, to ensure that the United States passes legislation to 
meet the October 1, 2000, deadline set by the WTO to comply with its 
ruling.
  As many of you know, the WTO panel issued a ruling last fall that 
subsidies for Foreign Sales Corporations under U.S. tax laws violated 
the WTO Subsidies Agreement. U.S. negotiators have since worked in good 
faith on a proposal to retain many of the tax benefits of the FSC 
structure, while establishing a new structure which would be responsive 
to the European Union's challenge.
  However, I simply want to express my concern over the impact that 
H.R. 4986 would have on the U.S. territories. Under the current FSC 
system, U.S. territories have been able to benefit through tax 
exemptions for U.S. exporting industries. With the repeal of the FSC 
system, we will no longer be able to offer this incentive although I 
understand that current contracts will be honored.
  In Guam, there are around 211 FSC licensees, generating around 
$170,000 to the Government of Guam. However, license fees are only some 
of the direct benefits from FSCs. Other direct benefits include 
compensation for Guam attorneys and other professionals, bank deposits, 
and funds generated through the hotel and restaurant industries that 
host FSC corporate meetings. Indirect benefits would be the cumulative 
effect that FSCs and other tax incentives have on attracting U.S. 
businesses to Guam.
  Be it as it may, the writing is on the wall for FSCs as we now know 
it. Therefore, I am appealing to the Clinton Administration, 
particularly the Treasury Department, to offset the economic impact of 
today's legislation with the means necessary to allow the U.S. 
territories to promote economic self-sufficiency during any 
negotiations with the Congress on any final omnibus budget or tax 
package.
  Apart from H.R. 3247, which would provide empowerment zones for the 
U.S. territories, I have worked closely with my colleagues to enact 
legislation that I authored which would level the playing field for 
foreign investors in Guam through the passage of the Guam Foreign 
Direct Investment Equity Act (H.R. 2462/S. 2983).
  My legislation would provide Guam with the same tax rates as the 
fifty states under international tax treaties. Since the U.S. cannot 
unilaterally amend treaties to include Guam in its definition of united 
States, my bill amends Guam's Organic Act, which has an entire tax 
section that ``mirrors'' the U.S. Internal Revenue Code.
  As background, under the U.S. Code, there is a 30% withholding tax 
rate for foreign investors in the United States. Since Guam's tax law 
``mirrors'' the rate established under the U.S. Code, the standard rate 
for foreign investors in Guam is 30%.
  The Guam Foreign Direct Investment Equity Act provides the Government 
of Guam with the authority to tax foreign investors at the same rates 
as states under U.S. tax treaties with foreign countries since Guam 
cannot change the withholding tax rate on its own under current law. 
Under U.S. tax treaties, it is a common feature for countries to 
negotiate lower withholding rates on investment returns. Unfortunately, 
while there are different definitions for the term ``United States'' 
under these treaties, Guam is not included. Such an omission has 
adversely impacted Guam since 75% of Guam's commercial development is 
funded by foreign investors. As an example, with Japan, the U.S. rate 
for foreign investors is 10%. That means while Japanese investors are 
taxed at a 10% withholding tax rate on their investments in the fifty 
states, those same investors are taxed at a 30% withholding rate on 
Guam.
  While the long term solution is for U.S. negotiators to include Guam 
in the definition of the term ``United States'' for all future tax 
treaties, the immediate solution is to amend the Organic Act of Guam 
and authorize the Government of Guam to tax foreign investors at the 
same rates as the fifty states. Other territories under U.S. 
jurisdiction have already remedied this problem through delinkage, 
their unique covenant agreements with the federal government, or 
through federal statute. Guam, therefore, is the only state or 
territory in the United States which is unable to take advantage of 
this tax benefit.
  Section 3 of H.R. 2462, which I introduced last year, and has bi-
partisan support, passed the House on July 25, 2000. Senators Akaka and 
Inouye introduced a companion measure, S. 2983, on July 27, 2000.
  As we consider today's measure on the repeal of FSCs, I simply ask 
that my colleagues support my legislation on equal tax treaty rates for 
Guam and I implore the Clinton Administration to also support such 
economic relief for the people of Guam. Please include equitable tax 
treatment for foreign investors in Guam during any final omnibus budget 
or tax package.

                              {time}  1715

  The SPEAKER pro tempore (Mr. Stearns). All time has expired.
  The question is on the motion offered by the gentleman from Texas 
(Mr. Archer) that the House suspend the rules and pass the bill, H.R. 
4986, as amended.
  The question was taken.
  Mr. STARK. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the 
Chair's prior announcement, further proceedings on this motion will be 
postponed until tomorrow.

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