Congressional Record, Volume 147 Issue 72 (Wednesday, May 23, 2001)

[Congressional Record Volume 147, Number 72 (Wednesday, May 23, 2001)]
[Senate]
[Pages S5544-S5553]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

By Mr. BAUCUS:
S. 935. A bill to authorize the negotiation of a Free Trade Agreement
with the commonwealth of Australia, and to provide for expedited
congressional consideration of such an agreement; to the Committee on
Finance.
By Mr. BAUCUS:
S. 943. A bill to authorize the negotiation of a Free Trade Agreement
with New Zealand, and to provide for expedited congressional
consideration of such an agreement; to the Committee on Finance.
By Mr. BAUCUS:
S. 944. A bill to authorize the negotiation of a Free Trade Agreement
with the Republic of Korea and to provide for expedited congressional
consideration of such an agreement; to the Committee on Finance.
Mr. BAUCUS. Mr. President, I rise to send three separate bills to the
desk, S. 935, S. 943, and S. 944. The bills I am introducing provide
authority to negotiate bilateral free trade agreements with three
important trading partners: New Zealand, Australia, and the Republic of
Korea.
Over the next several months, the Senate will turn its attention to
international trade. As we do so, we find ourselves under serious
scrutiny. Will we be able to reach consensus? Will we be able to break
the impasse?
I don't know the answers to these questions. I have been working hard
to find common ground on issues like labor and the environment, and on
ensuring the strength of our trade laws. I will continue to do so. But
we have a long way to go.
As we think about these issues, though, there is another, more subtle
logjam within the trade agenda. Right now, our vision of the future
seems locked in on sweeping, multilateral agreements, Free Trade for
the Americas, the launch of a new round of global trade negotiations
under the WTO.
These are enormous and complicated undertakings. These agreements are
also major opportunities for trade liberalization, and we should
continue to work hard to get agreements that are good for our workers,
farmers, and companies.
But it is interesting to listen to the rhetoric. Why can't we advance
labor and environment issues in the WTO? Some say developing countries
simply would not allow it. Why can't we agree that our fair trade laws
are not for sale in FTAA negotiations? Some say Brazil will never
relent.
Indeed, our trade policy seems to have become so focused on sweeping
multilateral agreements, that we ignore other avenues to trade
liberalization--much to the detriment of U.S. competitiveness.
Take a closer look at this so-called trade impasse: The U.S.-Jordan
Free Trade Agreement contains extensive and enforceable provisions on
labor and the environment. Our free trade agreement with Canada and
Mexico also addresses labor and environmental issues, with potential
recourse to trade sanctions. We are moving towards completing an
agreement with Chile--a country we know is open to labor and
environment issues because they just recently struck a free trade
agreement with Canada that includes enforceable provisions on both.
What's the moral of this story? It's simple. These agreements
demonstrate we can break the impasse on trade.
Indeed, we must move forward where we can, whenever we can. If not
fast track for all, then fast-track for some, specifically, those
countries where we have strategic commercial and political interests.
Those countries that will share our commitment to open markets, and our
values for environmental quality and labor rights.
Today, I am introducing legislation that would authorize trade
negotiations with Australia, New Zealand, and the Republic of Korea. It
would grant fast track consideration for these agreements, while also
establishing a general policy framework for future negotiations.
Trade agreements must address the full range of issues, from
guaranteeing national treatment and market access, to protecting
intellectual property. From promoting electronic commerce to ensuring
that countries do not gain unfair advantage by lowering labor and
environmental standards. And these agreements must not weaken our fair
trade laws.
I believe there are many countries ready to take that deal. Australia
and New Zealand are two countries eager to negotiate free trade
agreements. We must continue to build our economic alliances in the
Asia-Pacific region, and both countries have been strong partners in
trade. We must also be realistic. An FTA would present tremendous
opportunities, but we must recognize where there are differences. One
such difference is the operation of the Australian wheat board, which,
despite recent reforms, still works to distort world markets.
Agriculture negotiations with both countries would require careful
treatment, but should allow us to better work together to reduce unfair
trade barriers in other parts of the world.
A trade agreement with Korea will take more time, as the issues are
more difficult to resolve. For example, Korea maintains very high
tariffs on beef, hurting ranchers in my home state of Montana. High
tariffs, high taxes, and other trade-restrictive practices in Korea,
reduce the competitiveness of American automobiles from Michigan and
Ohio. Government subsidies in Korea undercut American semiconductor
manufacturers in Idaho and Utah.
But we must not wait to negotiate agreements until all these problems
are solved. Rather, we should use FTA negotiations as part of the
solution. And with Korea, there are benefits that extend well beyond
trade. An FTA would help lock in Korea's economic and political
progress, and would also be an important part of our strategic
interests in Asia.
The bottom line is this: while America hesitates on trade
liberalization, and while many reject trying to reach a bipartisan
consensus, the rest of the world continues to move forward. Regional
trade arrangements in Europe, Latin America, and Asia put U.S.
exporters at a competitive disadvantage. We lose overseas markets to
foreign competitors who enjoy trade preferences for which our farmers,
manufacturers, and service providers are ineligible.
I hope this legislation will send a strong signal to the rest of the
world: America intends to continue its leadership in the global trading
system.
______

By Mr. ALLARD (for himself, Mr. Johnson, and Mr. Thomas):
S. 936. A bill to amend the Internal Revenue Code of 1986 to expand S
corporation eligibility for banks, and for other purposes; to the
Committee on Finance.
Mr. ALLARD. Mr. President, today I am pleased to introduce
legislation that will expand and improve Subchapter S of the Internal
Revenue Code. I am joined in this effort by Senators Tim Johnson and
Craig Thomas. I have introduced this legislation over the last few
years and I am hopeful that this year we can get this important tax
legislation enacted.
The Subchapter S provision of the Internal Revenue Code reflect the
desire of Congress to eliminate the double tax burden on small business
corporations. Pursuant to that desire, Subchapter S has been
liberalized a number of times, most recently in 1996. This legislation
contains several provisions that will make the Subchapter S election
more widely available to small businesses in all sectors. It also
contains several provisions of particular benefit to community banks
that may be contemplating a conversion to Subchapter S. Financial
institutions were first made eligible for the Subchapter S election in
1996. This legislation builds on and clarifies the Subchapter S
provisions applicable to financial institutions.
I ask unanimous consent that the text of the bill and an explanation
of

[[Page S5545]]

the provisions of the bill be printed in the Record.
There being no objection, the additional material was ordered to be
printed in the Record, as follows:

S. 936

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

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Small Business and Financial
Institutions Tax Relief Act of 2001''.

SEC. 2. EXPANSION OF S CORPORATION ELIGIBLE SHAREHOLDERS TO
INCLUDE IRAS.

(a) In General.--Section 1361(c)(2)(A) of the Internal
Revenue Code of 1986 (relating to certain trusts permitted as
shareholders) is amended by inserting after clause (v) the
following:
``(vi) A trust which constitutes an individual retirement
account under section 408(a), including one designated as a
Roth IRA under section 408A.''.
(b) Treatment as Shareholder.--Section 1361(c)(2)(B) of the
Internal Revenue Code of 1986 (relating to treatment as
shareholders) is amended by adding at the end the following:
``(vi) In the case of a trust described in clause (vi) of
subparagraph (A), the individual for whose benefit the trust
was created shall be treated as a shareholder.''.
(c) Sale of Stock in IRA Relating to S Corporation Election
Exempt From Prohibited Transaction Rules.--Section 4975(d) of
the Internal Revenue Code of 1986 (relating to exemptions) is
amended by striking ``or'' at the end of paragraph (14), by
striking the period at the end of paragraph (15) and
inserting ``; or'', and by adding at the end the following:
``(16) a sale of stock held by a trust which constitutes an
individual retirement account under section 408(a) to the
individual for whose benefit such account is established if
such sale is pursuant to an election under section
1362(a).''.
(d) Conforming Amendment.--Section 512(e)(1) of the
Internal Revenue Code of 1986 is amended by inserting
``1361(c)(2)(A)(vi) or'' before ``1361(c)(6)''.
(e) Effective Date.--The amendments made by this section
shall apply to trusts which constitute individual retirement
accounts on the date of the enactment of this Act in taxable
years beginning after December 31, 2001.

SEC. 3. EXCLUSION OF INVESTMENT SECURITIES INCOME FROM
PASSIVE INCOME TEST FOR BANK S CORPORATIONS.

(a) In General.--Section 1362(d)(3)(C) of the Internal
Revenue Code of 1986 (defining passive investment income) is
amended by adding at the end the following:
``(v) Exception for banks; etc.--In the case of a bank (as
defined in section 581), a bank holding company (as defined
in section 246A(c)(3)(B)(ii)), or a qualified subchapter S
subsidiary bank, the term `passive investment income' shall
not include--

``(I) interest income earned by such bank, bank holding
company, or qualified subchapter S subsidiary bank, or
``(II) dividends on assets required to be held by such
bank, bank holding company, or qualified subchapter S
subsidiary bank to conduct a banking business, including
stock in the Federal Reserve Bank, the Federal Home Loan
Bank, or the Federal Agricultural Mortgage Bank or
participation certificates issued by a Federal Intermediate
Credit Bank.''.

(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
1996.

SEC. 4. INCREASE IN NUMBER OF ELIGIBLE SHAREHOLDERS TO 150.

(a) In General.--Section 1361(b)(1)(A) of the Internal
Revenue Code of 1986 (defining small business corporation) is
amended by striking ``75'' and inserting ``150''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2001.

SEC. 5. TREATMENT OF QUALIFYING DIRECTOR SHARES.

(a) In General.--Section 1361 of the Internal Revenue Code
of 1986 (defining s corporation) is amended by adding at the
end the following:
``(f) Treatment of Qualifying Director Shares.--
``(1) In general.--For purposes of this subchapter--
``(A) qualifying director shares shall not be treated as a
second class of stock, and
``(B) no person shall be treated as a shareholder of the
corporation by reason of holding qualifying director shares.
``(2) Qualifying director shares defined.--For purposes of
this subsection, the term `qualifying director shares' means
any shares of stock in a bank (as defined in section 581) or
in a bank holding company registered as such with the Federal
Reserve System--
``(i) which are held by an individual solely by reason of
status as a director of such bank or company or its
controlled subsidiary; and
``(ii) which are subject to an agreement pursuant to which
the holder is required to dispose of the shares of stock upon
termination of the holder's status as a director at the same
price as the individual acquired such shares of stock.
``(3) Distributions.--A distribution (not in part or full
payment in exchange for stock) made by the corporation with
respect to qualifying director shares shall be includible as
ordinary income of the holder and deductible to the
corporation as an expense in computing taxable income under
section 1363(b) in the year such distribution is received.''.
(b) Conforming Amendments.--
(1) Section 1361(b)(1) of the Internal Revenue Code of 1986
is amended by inserting ``, except as provided in subsection
(f),'' before ``which does not''.
(2) Section 1366(a) of such Code is amended by adding at
the end the following:
``(3) Allocation with respect to qualifying director
shares.--The holders of qualifying director shares (as
defined in section 1361(f)) shall not, with respect to such
shares of stock, be allocated any of the items described in
paragraph (1).''.
(3) Section 1373(a) of such Code is amended by striking
``and'' at the end of paragraph (1), by striking the period
at the end of paragraph (2) and inserting ``, and'', and
adding at the end the following:
``(3) no amount of an expense deductible under this
subchapter by reason of section 1361(f)(3) shall be
apportioned or allocated to such income.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1996.

SEC. 6. BAD DEBT CHARGE OFFS IN YEARS AFTER ELECTION YEAR
TREATED AS ITEMS OF BUILT-IN LOSS.

The Secretary of the Treasury shall modify Regulation
1.1374-4(f) for S corporation elections made in taxable years
beginning after December 31, 1996, with respect to bad debt
deductions under section 166 of the Internal Revenue Code of
1986 to treat such deductions as built-in losses under
section 1374(d)(4) of such Code during the entire period
during which the bank recognizes built-in gains from changing
its accounting method for recognizing bad debts from the
reserve method under section 585 of such Code to the charge-
off method under section 166 of such Code.

SEC. 7. INCLUSION OF BANKS IN 3-YEAR S CORPORATION RULE FOR
CORPORATE PREFERENCE ITEMS.

(a) In General.--Section 1363(b) of the Internal Revenue
Code of 1986 (relating to computation of corporation's
taxable income) is amended by adding at the end the following
new flush sentence:

``Paragraph (4) shall apply to any bank whether such bank is
an S corporation or a qualified subchapter S subsidiary.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2001.

SEC. 8. C CORPORATION RULES TO APPLY FOR FRINGE BENEFIT
PURPOSES.

(a) In General.--Section 1372 of the Internal Revenue Code
of 1986 (relating to partnership rules to apply for fringe
benefit purposes) is repealed.
(b) Partnership Rules To Apply for Health Insurance Costs
of Certain S Corporation Shareholders.--Paragraph (5) of
section 162(l) of the Internal Revenue Code of 1986 (relating
to special rules for health insurance costs of self-employed
individuals) is amended to read as follows:
``(5) Treatment of certain s corporation shareholders.--
``(A) In general.--This subsection shall apply in the case
of any 2-percent shareholder of an S corporation, except
that--
``(i) for purposes of this subsection, such shareholder's
wages (as defined in section 3121) from the S corporation
shall be treated as such shareholder's earned income (within
the meaning of section 401(c)(1)), and
``(ii) there shall be such adjustments in the application
of this subsection as the Secretary may by regulations
prescribe.
``(B) 2-percent shareholder defined.--For purposes of this
paragraph, the term `2-percent shareholder' means any person
who owns (or is considered as owning within the meaning of
section 318) on any day during the taxable year of the S
corporation more than 2 percent of the outstanding stock of
such corporation or stock possessing more than 2 percent of
the total combined voting power of all stock of such
corporation.''.
(c) Conforming Amendment.--The table of sections for part
III of subchapter S of chapter 1 of the Internal Revenue Code
of 1986 is amended by striking the item relating to section
1372.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.

SEC. 9. EXPANSION OF S CORPORATION ELIGIBLE SHAREHOLDERS TO
INCLUDE FAMILY LIMITED PARTNERSHIPS.

(a) In General.--Section 1361(b)(1)(B) of the Internal
Revenue Code of 1986 (defining small business corporation) is
amended--
(1) by striking ``or an organization'' and inserting ``an
organization'', and
(2) by inserting ``, or a family partnership described in
subsection (c)(7)'' after ``subsection (c)(6)''.
(b) Family Partnership.--Section 1361(c) of the Internal
Revenue Code of 1986 (relating to special rules for applying
subsection (b)) is amended by adding at the end the
following:
``(7) Family partnerships.--
``(A) In general.--For purposes of subsection (b)(1)(B),
any partnership or limited liability company may be a
shareholder in an S corporation if--
``(i) all partners or members are members of 1 family as
determined under section 704(e)(3), and
``(ii) all of the partners or members would otherwise be
eligible shareholders of an S corporation.
``(B) Treatment as shareholders.--For purposes of
subsection (b)(1)(A), in the case

[[Page S5546]]

of a partnership or limited liability company described in
subparagraph (A), each partner or member shall be treated as
a shareholder.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.

SEC. 10. ISSUANCE OF PREFERRED STOCK PERMITTED.

(a) In General.--Section 1361 of the Internal Revenue Code
of 1986 (defining s corporation), as amended by section 5(a),
is amended by adding at the end the following:
``(g) Treatment of Qualified Preferred Stock.--
``(1) In general.--For purposes of this subchapter--
``(A) qualified preferred stock shall not be treated as a
second class of stock, and
``(B) no person shall be treated as a shareholder of the
corporation by reason of holding qualified preferred stock.
``(2) Qualified preferred stock defined.--For purposes of
this subsection, the term `qualified preferred stock' means
stock which meets the requirements of subparagraphs (A), (B),
and (C) of section 1504(a)(4). Stock shall not fail to be
treated as qualified preferred stock solely because it is
convertible into other stock.
``(3) Distributions.--A distribution (not in part or full
payment in exchange for stock) made by the corporation with
respect to qualified preferred stock shall be includible as
ordinary income of the holder and deductible to the
corporation as an expense in computing taxable income under
section 1363(b) in the year such distribution is received.''.
(b) Conforming Amendments.--
(1) Section 1361(b)(1) of the Internal Revenue Code of
1986, as amended by section 5(b)(1), is amended by striking
``subsection (f)'' and inserting ``subsections (f) and (g)''.
(2) Section 1366(a) of such Code, as amended by section
5(b)(2), is amended by adding at the end the following:
``(4) Allocation with respect to qualified preferred
stock.--The holders of qualified preferred stock (as defined
in section 1361(g)) shall not, with respect to such stock, be
allocated any of the items described in paragraph (1).''.
(3) Section 1373(a)(3) of such Code, as added by section
5(b)(3), is amended by inserting ``or 1361(g)(3)'' after
``section 1361(f)(3)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.

SEC. 11. CHARITABLE CONTRIBUTIONS STOCK BASIS ADJUSTMENT.

(a) Stock Basis Adjustment.--Paragraph (1) of section
1367(a) of the Internal Revenue Code of 1986 (relating to
adjustments to basis of stock of shareholders, etc.) is
amended by striking ``and'' at the end of subparagraph (B),
by striking the period at the end of subparagraph (C) and
inserting ``, and'', and by adding at the end the following:
``(D) the excess of the deductions for charitable
contributions over the basis of the property contributed.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2001.

SEC. 12. CONSENT TO ELECTIONS.

(a) 90 Percent of Shares Required for Consent to
Election.--Section 1362(a)(2) of the Internal Revenue Code of
1986 (relating to all shareholders must consent to election)
is amended--
(1) by striking ``all persons who are shareholders in'' and
inserting ``shareholders holding at least 90 percent of the
shares of'', and
(2) by striking ``All shareholders'' in the heading and
inserting ``At least 90 percent of shares''.
(b) Rules for Consent.--Section 1362(a) of the Internal
Revenue Code of 1986 (relating to election) is amended by
adding at the end the following:
``(3) Rules for consent.--For purposes of making any
consent required under paragraph (2) or subsection
(d)(1)(B)--
``(A) each joint owner of shares shall consent with respect
to such shares,
``(B) the personal representative or other fiduciary
authorized to act on behalf of the estate of a deceased
individual shall consent for the estate,
``(C) one parent, the custodian, the guardian, or the
conservator shall consent with respect to shares owned by a
minor or subject to a custodianship, guardianship,
conservatorship, or similar arrangement,
``(D) the trustee of a trust shall consent with respect to
shares owned in trust,
``(E) the trustee of the estate of a bankrupt individual
shall consent for shares owned by a bankruptcy estate,
``(F) an authorized officer or the trustee of an
organization described in subsection (c)(6) shall consent for
the shares owned by such organization, and
``(G) in the case of a partnership or limited liability
company described in subsection (c)(8)--
``(i) all general partners shall consent with respect to
shares owned by such partnership,
``(ii) all managers shall consent with respect to shares
owned by such company if management of such company is vested
in 1 or more managers, and
``(iii) all members shall consent with respect to shares
owned by such company if management of such company is vested
in the members.''.
(c) Treatment of Nonconsenting Shareholder Stock.--
(1) In general.--Section 1361 of the Internal Revenue Code
of 1986 (defining s corporation), as amended by section
10(a), is amended by adding at the end the following:
``(h) Treatment of Nonconsenting Shareholder Stock.--
``(1) In general.--For purposes of this subchapter--
``(A) nonconsenting shareholder stock shall not be treated
as a second class of stock,
``(B) such stock shall be treated as C corporation stock,
and
``(C) the shareholder's pro rata share under section
1366(a)(1) with respect to such stock shall be subject to tax
paid by the S corporation at the highest rate of tax
specified in section 11(b).
``(2) Nonconsenting shareholder stock defined.--For
purposes of this subsection, the term `nonconsenting
shareholder stock' means stock of an S corporation which is
held by a shareholder who did not consent to an election
under section 1362(a) with respect to such S corporation.
``(3) Distributions.--A distribution (not in part or full
payment in exchange for stock) made by the corporation with
respect to nonconsenting shareholder stock shall be
includible as ordinary income of the holder and deductible to
the corporation as an expense in computing taxable income
under section 1363(b) in the year such distribution is
received.''.
(2) Conforming amendment.--Section 1361(b)(1) of the
Internal Revenue Code of 1986, as amended by section
10(b)(1), is amended by striking ``subsections (f) and (g)''
and inserting ``subsections (f), (g), and (h)''.
(d) Effective Date.--The amendments made by this section
shall apply to elections made in taxable years beginning
after December 31, 2001.

SEC. 13. INFORMATION RETURNS FOR QUALIFIED SUBCHAPTER S
SUBSIDIARIES.

(a) In General.--Section 1361(b)(3)(A) of the Internal
Revenue Code of 1986 (relating to treatment of certain wholly
owned subsidiaries) is amended by inserting ``and in the case
of information returns required under part III of subchapter
A of chapter 61'' after ``Secretary''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2001.
____

Small Business and Financial Institutions Tax Relief Act of 2001--
Summary

This legislation expands Subchapter S of the IRS Code.
Subchapter S corporations do not pay corporate income taxes,
earnings are passed through to the shareholders where income
taxes are paid, eliminating the double taxation of
corporations. By contrast, Subchapter C corporations pay
corporate income taxes on earnings, and shareholders pay
income taxes again on those same earnings when they pass
through as dividends. Subchapter S of the IRS Code was
enacted in 1958 to reduce the tax burden on small business.
The Subchapter S provisions have been liberalized a number of
times over the last two decades, significantly in 1982, and
again in 1996. This reflects a desire on the part of Congress
to reduce taxes on small business.
This S corporation legislation would benefit many small
businesses, but its provisions are particularly applicable to
banks. Congress made S corporation status available to small
banks for the first time in the 1996 ``Small Business Job
Protection Act'' but many banks are having trouble qualifying
under the current rules. The proposed legislation:
Permits S corporation shares to be held as Individual
Retirement Accounts (IRAs), and permit IRA shareholders to
purchase their shares from the IRA in order to facilitate a
Subchapter S election.
Clarifies that interest and dividends on investments
maintained by a bank for liquidity and safety and soundness
purposes shall not be ``passive'' income. This is necessary
because S corporations are restricted in the amount of
passive investment income they may generate.
Increases the number of S corporation eligible shareholders
from 75 to 150.
Provides that any stock that bank directors must hold under
banking regulations shall not be a disqualifying second class
of stock. This is necessary because S corporations are
permitted only one class of stock.
Permits banks to treat bad debt charge offs as items of
built in loss over the same number of years that the
accumulated bad debt reserve must be recaptured (four years)
for built in gains tax purposes. This provision is necessary
to properly match built in gains and losses relating to
accounting for bad debts. Banks that are converting to S
corporations must convert from the reserve method of
accounting to the specific charge off method and the
recapture of the accumulated bad debt reserve is built in
gain. Presently the presumption that a bad debt charge off is
a built in loss applies only to the first S corporation year.
Clarifies that the general 3 Year S corporation rule for
certain ``preference'' items applies to interest deductions
by S corporation banks, thereby providing equitable treatment
for S corporation banks. S corporations that convert from C
corporations are denied certain interest deductions
preference items for up to 3 years after the conversion, at
the end of 3 years the deductions are allowed.
Provides that non-health care related fringe benefits such
as group-term life insurance will be excludable from wages
for ``more-than-two-percent'' shareholders. Current law taxes
the fringe benefits of these shareholders. Health care
related benefits are not included because their deductibility

[[Page S5547]]

would increase the revenue impact of the legislation.
Permits Family Limited Partnerships to be shareholders in
subchapter S corporations. Many family owned small businesses
are organized as Family Limited Partnerships or controlled by
Family Limited Partnerships for a variety of reasons. A
number of small banks have Family Limited Partnership
shareholders, and this legislation would for the first time
permit those partnerships to be S corporation shareholders.
Permits S corporations to issue preferred stock in addition
to common. Prohibited under current law which permits S
corporations to have only one class of stock. Because of
limitations on the number of common shareholders, banks need
to be able to issue preferred stock in order to have adequate
access to equity.
Facilitates charitable giving by S corporation shareholders
by providing a basis increase for the excess of the
charitable contribution deduction over the basis of property
contributed. Current law penalizes a shareholder who makes a
charitable contribution through an S corporation by limiting
the charitable deduction that flows through to the
shareholder to the basis of the donated property. This means
that the shareholder is unable to benefit from the full fair
market value deduction when the basis does not reflect the
appreciation in the property. This differs from the full
value deduction afforded the taxpayer who donates property in
an individual capacity or through a partnership, instead of
through an S corporation.
Reduces the required level of shareholder consent to
convert to an S corporation from unanimous to 90 percent of
shares.
Clarifies that Qualified Subchapter S Subsidiaries (QSSS)
provide information returns under their own tax id number.
This can help avoid confusion by depositors and other parties
over the insurance of deposits and the payer of salaries and
interest.
______

By Mr. CLELAND (for himself, Mr. Warner, Mr. Levin, Mr. Kennedy,
Mr. Reed, Ms. Landrieu, Mrs. Carnahan, Mr. Dayton, Mr.
Bingaman, and Mr. Lieberman):
S. 937. A bill to amend title 38, United States Code, to permit the
transfer of entitlement to educational assistance the Montgomery GI
bill by members of the Armed Forces, and for other purposes; to the
Committee on Veterans' Affairs.
Mr. CLELAND. Mr. President, I come before you today to introduce
legislation that addresses the educational needs of our men and women
in uniform and their families. I appreciate the support of my
colleagues who have supported my provisions to enhance the GI bill,
Senators Levin, Kennedy, Bingaman, Reed, Dayton, Landrieu, and
Carnahan. I also like to recognize the Chairman of the Senate Armed
Services Committee, Senator Warner, who himself went to school on the
GI bill. I want to thank him for his cosponsorship, support and
encouragement in improving the GI bill for military personnel and their
families.
I call this measure the HOPE, Help Our Professionals Educationally,
Act.
In 1999, Time magazine named the American GI as the Person of the
Century. That alone is a statement about the value of our military
personnel. They are recognized around the world for their dedication
and commitment to fight for our country and for peace in the world.
This past century has been filled with strife and conflict. During this
period, the American GI has fought in the trenches during the first
World War, the beaches at Normandy, in the jungles of Vietnam, in the
deserts of the Persian Gulf, and most recently in the Balkans and
Kosovo.
The face of our military and the people who fight our wars has
changed. The traditional image of the single, mostly male, drafted, and
disposable soldier is gone. Today we are fielding the force for the
21st century. This new force is a volunteer force, filled with men and
women who are highly skilled, married, and definitely not disposable.
Gone are the days when quality of life for a GI included a beer in the
barracks and a three-day pass. Now, we know we have to recruit a
soldier and retain a family.
We have won the cold war, this victory has changed the world and our
military. The new world order has given us a new world disorder. The
United States is responding to crises around the globe, whether it be
strategic bombing or humanitarian assistance, and our military is the
our most effective response. In order to meet these challenges, we are
retooling our forces to be lighter, leaner and meaner. This is a
positive move. Along with this lighter force, our military
professionals must be highly educated and highly trained.
Our Nation has recently experienced the longest running peacetime
economic growth in history. This economic expansion has been a boom for
our Nation. However, there is a negative impact of this growing
economy. With the enticement of quick prosperity in the civilian sector
it is more difficult than ever to recruit and retain our highly skilled
force.
The services have increased their budgets for advertising and
refocused attention on recruiting. However, we still face problems in
retaining some of the key skills that our service men and women
possess--skills that our new economy is demanding. The highly trained
technical skilled personnel are leaving the military to seek a better
quality of life for their family outside of our military.
As I have heard so often, the decision to stay in the military is
made at the dinner table. It was the wisdom of a young enlisted soldier
at Schofield Barracks who noted, when the choice is `stay in the
military or stay married,' the soldier opts to stay married. In my
travels across Georgia, around the country, and abroad, I have found
that our men and women in uniform want to do what is right, for
themselves and the country. However, our benefits systems have not kept
pace and forcing our personnel to choose between family and service.

In talking with our military personnel, we know that money alone is
not enough. Education is the number one reason service members come
into the military and the number one reason its members are leaving. In
recent years the Senate began to address this issue by supporting
improved education benefits for military members and their families.
My amendment will improve and enhance the current educational
benefits and create the GI bill for the 21st century and beyond.
One of the most important provisions of my amendment would give the
Service Secretaries the authority to authorize a service member to
transfer half of his or her basic MGIB benefits to family members. Many
service members tell us that they really want to stay in the service,
but do not feel that they can stay and provide an education for their
families. This will give them, in affect, an educational savings
account, so that they can stay in the service and still provide an
education for their spouses and children. This will give the
Secretaries a very powerful retention tool.
The measure would allow the Services to authorize transfer of unused
basic GI bill benefits of a servicemember who has been in the military
for 6 years. The spouse would be able to use these benefits immediately
upon authorization by the services. This provision is designed to
assist the spouse of a military member in pursuing their own education
or assist them in gaining the necessary skills to prepare for an
occupation in the new economy.
The measure also includes language that permits a servicemember with
ten years of service to transfer GI bill benefits to a dependent child.
This provision is designed to help a servicemember with the expected
costs of a child's education. It could be used to help with secondary
expenses as well as with college costs.
I believe that the Services can use this much like a reenlistment
bonus to keep valuable service members in the service. It can be
creatively combined with reenlistment bonuses to create a very powerful
and cost effective incentive for highly skilled military personnel to
stay in the Service. In talking with service members upon their
departure from the military, we have found that the family plays a
crucial role in the decision of a member to continue their military
career. Reality dictates that we must address the needs of the family
in order to retain our soldiers, sailors, airmen, and marines.
Another enhancement to the current MGIB would extend the period in
which the members of Reserve components can use this benefit. Currently
they lose this benefit when they leave the service or after 10 years of
service. They have no benefit when they leave service. My amendment
will permit them to use the benefit up to 5 years

[[Page S5548]]

after their separation. This will encourage them to stay in the
Reserves for a full career.
I believe that this is a necessary next step for improving our
education benefits for our military members and their families. We must
offer them credible choices. If we offer them choices, and treat the
members and their families properly, we will show them our respect for
their service and dedication. Maybe then we can turn around our current
retention statistics. This GI bill is an important retention tool for
the services. I believe that education begets education. We must
continue to focus our resources in retaining our personnel based their
needs.
______

By Mr. JEFFORDS (for himself, Mr. Dodd, Mr. Fitzgerald, and Mr.
Brownback):
S. 938. A bill to amend the Internal Revenue Code of 1986 to provide
that the exclusion from gross income for foster care payments shall
also apply to payments by qualifying placement agencies, and for other
purposes; to the Committee on Finance.
Mr. JEFFORDS. Mr. President, I am introducing today a bill that will
simplify and make more fair the tax treatment of foster care payments.
The bill will eliminate unnecessary distinctions drawn by the Internal
Revenue Code in the treatment of payments received by people who open
their homes to foster children and adults. I introduced this same bill
in the 106th Congress, and it was passed by both Houses as part of a
larger tax bill that was subsequently vetoed by the President. I am re-
introducing the bill now, as I believe that this issue should not be
overlooked as we debate tax reform this year. This bill not only
simplifies the tax treatment of foster care payments, it will also
remove inequities and uncertainties inherent in current law.
In my home State of Vermont, we are proud that we have been able to
reduce our reliance on the institutional care of children and adults.
We have accomplished this by developing an array of services that can
be provided in typical family homes, in a cost-effective and fiscally
responsible manner. I believe that this is not only good public policy,
but that whenever possible we should encourage these alternatives.
Equal tax treatment for all tax families that provide foster care
services should provide some encouragement.
Under current law, foster care families are required to include
foster care payments in income. They can offset this income with
deductions for the expenditures they incur. Families must maintain
detailed records to substantiate these deductions. In lieu of detailed
record keeping, Section 131 of the Internal Revenue Code allows certain
foster care families to exclude from income the payments they receive
for providing foster care. Eligibility for this exclusion depends upon
a complicated analysis of three factors: the age of the person in
foster care; the type of foster care placement agency; and the source
of the foster care payments. For children under age 19 in foster care,
Section 131 permits families to exclude payments when a State, or one
of its political subdivisions, or a tax-exempt charitable placement
agency places the individual in foster care and makes the foster care
payments. For persons age 19 and older, Section 131 permits families to
exclude foster care payments from income only when a State, or one of
its political subdivisions, places the individual and makes the
payments.
This bill is designed to provide tax fairness; it will simplify the
anachronistic tax rules by amending the tax code's current exclusion to
include foster care payments for all persons in foster care, regardless
of age. The exclusion will also be available when the foster care
placement is made by a private foster care placement agency and even
when the foster care payments are received through a private foster
care placement agency, rather than directly from a State. To ensure
appropriate oversight, the bill requires that the placement agency be
either licensed or certified by a State.
A qualified foster care payment under this bill must be made pursuant
to a foster care program run by a State or county. My intention is for
this bill to cover the wide variety of foster care programs developed
by States. Recognizing foster care as an effective approach to provide
support within the community to people with mental retardation and
other disabilities, these programs place children, and in some cases
adults, in homes of unrelated families who provide foster care on a
full-time basis. Families providing foster care give those in their
care the daily support and supervision typically given to a family
member. Like traditional families, foster care families ensure that
foster children and adults have a healthy physical environment, get
routine and emergency medical care, are adequately clothed and fed, and
have satisfying leisure activities. Foster families provide those in
their care with stimulation and emotional support all too often lacking
in large congregate and institutional settings.

In some State, the State itself administers both child and adult
foster care programs. Many States, however, are increasingly entrusting
administration of these programs to private placement agencies,
approved through licensing or certification procedures, or to
government-designated intermediary tax-exempt organizations. Through
the approval process, private placement agencies are accountable for
their use of funds and for the quality of services they provide. This
bill is intended to cover governmental foster care programs funded
solely by State or political subdivision monies, and, especially in the
case of adult foster care, programs funded by the federal government,
typical through a State's Medicaid Home and Community-Based Waiver
program.
While foster care for children has been in existence for decades,
foster care for adults is a more recent phenomenon. Sometimes referred
to as ``host homes'' or ``developmental homes,'' adult foster care
facilities have proven to be an effective alternative to institutional
care for adults with disabilities. In 1993, Vermont closed the State
institution for people with developmental disabilities, choosing
instead to rely on foster families. Under this approach, Vermonters
with developmental disabilities can live in homes and participate in
the routines of daily life that most of us take for granted. Vermont's
approach has provided people with disabilities a cost-effective
opportunity for successful lives in communities, with valued
relationships with their foster families.
Vermont authorizes local developmental disability service
organizations to act as placement agencies and contract with families
willing to provide foster care in their homes. The current tax law's
disparate tax treatment of foster care payments impedes these types of
arrangements. Persons providing foster care for individuals placed in
their homes by the government can exclude foster care payments from
income, while foster care families receiving the same payments through
private agencies under contract with State or local governments are not
eligible for this exclusion, unless the individual in foster care is
under age 19 and the placement agency is a nonprofit organization.
Because of the complexity of current law, families often receive
conflicting advice from tax professionals regarding the proper tax
treatment of foster care payments. In addition, the law's complex rules
discourage willing families from providing foster care in their homes
to persons placed by private agencies, reducing the availability of
care alternatives.
This bill will advance the development of family-based foster care
services, a highly valued alternative to institutionalization. My home
State of Vermont is proud of having closed its institutions and leading
the nation in developing other support systems. The use of foster care
services has facilitated this effort. I believe this represents good
policy and is something to be encouraged. We should be removing
disincentives and barriers to quality support for people with
disabilities in our communities. I urge my colleagues to support this
bill.
______

By Mrs. HUTCHISON:
S. 939. A bill amend the Immigration and Nationality Act to confer
citizenship automatically on children residing abroad in the legal and
physical custody of a citizen parent serving in a Government or
military position abroad; to the Committee on the Judiciary.
Mrs. HUTCHISON. Mr. President, I am pleased to offer legislation on
an issue important to many of our military and government families
assigned

[[Page S5549]]

overseas. Currently, if one of these families adopts a child who is a
citizen of the United States, that child is not automatically eligible
for citizenship. Current law allows U.S. citizens residing in the
United States to adopt children from overseas and to automatically
confer citizenship on these children who are residing in the legal and
physical custody of the citizen parent. My bill would allow U.S.
military and government employees who are stationed overseas and adopt
a child to enjoy the same ability to have citizenship automatically
conferred.
Today many of our service members and government employees are
stationed overseas serving their country. Some of these families want
to offer their home and their hearts to children needing a good, loving
family. The opportunity is often missed by these families because of
this oversight in the current law. This amendment will ensure that
those who are serving our nation and our government overseas are not
penalized when adopting children during their tour.
______

By Mr. DODD (for himself, Mr. Kennedy, and Mr. Wellstone):
S. 940. A bill to leave no child behind; to the Committee on Finance.
Mr. DODD. Mr. President, on behalf of myself, Senator Kennedy, and
Senator Wellstone, I rise today to introduce the Leave No Child Behind
Act, legislation that will address the needs of our nation's children
to deliver them from poverty, violence, abuse, neglect, and poor
education.
This measure combines the best public and private ideas, policies,
and practices into a comprehensive measure to improve the lives of all
children. Not just poor children. But all children.
Many Members of Congress have contributed to this legislation, adding
their ideas and their thoughts, including: Senator Kennedy, Senator
Jeffords, Senator Rockefeller, Senator DeWine, Senator Harkin, Senator
Stevens, Senator Biden, Senator Snowe, Senator Boxer, Senator Grassley,
Senator Daschle, Senator Gordon Smith, Senator Reed, Senator Chafee,
Senator Wellstone, Senator Kerry, Senator Durbin, Senator Feinstein,
Senator Kohl, Senator Torricelli, Senator Schumer, and Senator Bayh. A
number of Members of the House have also contributed to this
legislation. It is without hesitation that I say that this bill would
not have been possible without the help of so many of my colleagues.
For the first time in more than a generation, our budget is in
balance. Indeed, we have a surplus. At long last, we can talk about
meeting the needs of the future, rather than paying off the debts of
the past. For the first time in decades, we have an opportunity to put
children first, to move them out of poverty, to end their hunger, to
heal their wounds, to enrich and inform their minds.
We are on the verge of doing what many of us have long dreamed of
doing for America's young people.
The legislation we are introducing today represents a vision for
children in the 21st century.
It's more than a bill. More than pages of legislative language. It's
a covenant that we are entering into today. Not only with each other,
but with those who will stand in this place long after we have gone.
It's a declaration that we need to put children first, and that we
intend to put children first. In doing so, we put America first.
A question that we must all ask ourselves and ask this country, is,
what should our highest priority be? When I ask this question, the
response I most often receive is our children.
Children are one-quarter of our population. But they are one hundred
percent of our future.
Despite that fact, they are getting a fraction of our attention and a
fraction of our resources.
Having languished in budget deficits for years, we now have the
largest projected federal budget surpluses in the history of this
Nation. We have witnessed unprecedented prosperity. We are so lucky to
live in this free and dynamic society, a Nation at peace, of such great
wealth.
But some are not so lucky. Some families struggle through each day.
They live paycheck to paycheck. Their children are hungry. They're
cold. They might have difficulty following the teacher's instructions
on the blackboard because they can't see it clearly. But their parents
haven't taken them to the doctor because they don't have health
insurance.
Over 12 million children live in poverty.
Nearly 11 million children have no health coverage.
About 7 million children go home alone each week after school.
This is America, too.
The legislation we are introducing today is called, ``An Act to Leave
No Child Behind''. We are committed to one principle beyond all others.
Not just as a slogan, but as a means to define an urgent national
priority.
Regrettably, however, for some those words are slogans, and nothing
more. There are those who utter the words ``Leave No Child Behind'' in
front of microphones and television cameras. They have adopted the
words as a political mantra, repeating it endlessly during ``photo-
ops'' with children and in press conferences with reporters.
We need to make sure that we not only talk about leaving no child
behind, but that we actually take steps to do so. Introducing this bill
is the first step.
Every word on every page is focused on the same purpose--lifting our
children up, giving each child an opportunity, helping each child to
have a safe and rewarding life.
Under the Act to Leave No Child Behind, every child in America would
have health coverage. No child in America would go to bed at night
aching from hunger. We would use our tax code to lift millions of
children out of poverty.
It's time to ensure that every American child has an opportunity to
attend Head Start, Pre-K, or child care to begin a lifetime of
learning. That every American child can read by 4th grade, and read at
grade level. It's time to take dramatic new steps to address the needs
of children who are abused and neglected every year.
Those who are truly committed to leaving no child behind will support
this bill. It's about priorities. It's about values.
As we speak, Congress is considering how to spend our nation's
surplus.
Sadly, a disproportionate share of that surplus will not go to our
nation's children, but to those who least need our help and attention.
Most of the surplus will go to the tax cut. And, most of the tax cut
will go to those who are doing the best in our society, those who least
need a helping hand or a step up.
Are those the values that we want to instill in our children? That as
a Nation we care not for those who need our help most?
It's time to take a stance for children.
It's time to invest in the needs of our children. Not in a token way,
but in a real way. A meaningful way that will make a difference in a
child's life.
We have the resources. The time is right.
If we join together, we can transform this Nation and give each and
every child his God-given right to grow and flourish to all he can be.
To grow to his or her fullest potential. We want an America where all
children can realize their dreams.
I ask unanimous consent that a summary of the Act to Leave No Child
Behind be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

The Act To Leave No Child Behind--Detailed Summary, May 23, 2001

Title I. Healthy Start--Every uninsured child should have comprehensive
health coverage.

Section A. Children's health insurance

Create a new federal health program with comprehensive
benefits similar to Medicare for uninsured children, who are
not covered by existing programs.

Section B. Children's health insurance eligibility expansion and
enrollment improvements

Expand existing federal children's health programs (CHIP/
Medicaid) up to 300% of poverty through age 21 and require
states to allow families above 300% of poverty to buy into
the program for their uninsured children on a sliding scale
premium basis.
Give states the option of providing coverage under CHIP and
Medicaid to legal immigrant children and legal immigrant
pregnant women.
Give states the option to allow families with too much
income to qualify for Medicaid to purchase coverage for their
disabled children.

[[Page S5550]]

Simplify outreach and enrollment for CHIP and Medicaid and
enroll all children at birth.

Section C. Improving access to care

Establish Children's Access To Care Commission that shall
make recommendations for improving children's access to care,
removing barriers to care, and improving children's health
status.
Strengthen the care of children under HMO's.
Require DHHS to collect data from states participating in
the Medicaid program on the delivery of services to children
through the early and Periodic Screening, Diagnosis and
Treatment component of the program, in order to document the
delivery of services through all service delivery
arrangements.

Section D. Reducing public health risks for children

Appropriate $50 million per year for grants to state to
develop programs to prevent, treat and manage children
asthma.
Implement an aggressive youth smoking cessation and
education program and provide the FDA authority to regulate
the marketing of tobacco products to children.
Increase funding for HUD's Lead-Based Paint Hazard Control
grants and Healthy Homes grants.
All private insurance policies would be required to pay for
immunizations as a benefit of coverage.

Section E. Reducing environmental health risks for children.

Require testing of chemicals to determine safe exposure
levels for children.
Reduce the use of toxic chemicals in schools.

Title II. Healthy Start--All Parents Deserve Help to Support Their
Children's Healthy Development

Promote State and Local Parenting Support and Education
Programs. Provide grants to state parenting support and
education councils to develop and expand local activities to
help parents appropriately care for and respond to their
children's needs, without having to wait until problems
develop.
Extend Supports for Parents Caring for Children. Expand the
Family and Medical Leave Act to apply to employers with 25 or
more employees, rather than 50 as in current law.
Paid Family Leave. Establish demonstration projects with
paid leave for new parents so that they are able to spend
time with a new infant or newly adopted child.
Extend Health Care to Uninsured Parents. Expand the federal
children's health programs, CHIP and Medicaid, to cover
uninsured parents of children who are eligible for CHIP or
Medicaid and to pregnant women.
Help Parents Reduce Environmental Health Risks for their
Children. Strengthen consumer right-to-know laws to ensure
that parents are fully aware of the presence of potentially
harmful substances in products to which their children are
exposed.
Encourage Support from Non-Custodial Parents. Provide
grants to localities or non-profit providers for services to
low-income non-custodial parents so that they can contribute
financially, emotionally and in other positive ways to their
children's development.

title III. Head start--all children should enter school ready to learn
and reach their highest potential while in school

Section A. Infants and toddlers

Increase the Early Head Start set-aside for infants and
toddlers from 10 percent to 40 percent.
Allocate 5% of total CCDBG funds in FY 2003 to improve and
expand infant child care, rising to 10% in FY 2007.

Section B. Child care access

Increase funding proportionately each year to ensure that
every child eligible for assistance under the Child Care and
Development Block Grant (CCDBG) receives assistance by 2011.
Require that states make children in foster care an
eligible category for CCDBG.
Require states to pay not less than the 100th percentile of
the market rate for child care, with higher rates for higher
quality care, hard-to-find care, care for children with
special needs, and care in low-income and rural communities.
States would also be required to adjust rates by inflation
between market surveys.
Require that the CCDBG agency coordinate with the TANF
agency to ensure that child care assistance staff are located
on-site at TANF offices. Require that state CCDBG plans
describe how they will ensure that TANF and other low-income
working families are aware of their eligibility for child
care assistance as part of their consumer education strategy.
Require no more than annual eligibility determination.

Section C. Child care quality improvements

Create a program to improve wages and skills of child care
staff.
Improve child care quality by increasing the CCDBG quality
set aside from 4 to 12 percent.
Require every state to have a state-based office that is
charged with developing a system of local resource and
referral agencies to provide parents with information and
support, collect data on the supply and demand of child care
in the community, develop linkages to businesses, and help to
build the supply of quality child care.
Require child care centers operated on federal or
legislative property to comply with either state and local
child care operation and safety laws or similar safety rules
established by the General Services Administration.
Provide $500 million per year to support the construction
of new child care facilities.
Expand the existing national 1% CCDBG set-aside to 2%. This
set-aside will be used for training and technical assistance
to states, communities, and CCDBG grantees.
Require all providers receiving CCDBG, or who work in
programs receiving CCDBG, to have training in early childhood
development.
Require at a minimum two annual unannounced visits for each
facility accepting CCDBG funding.

Section D. Head Start and Early Head Start access

Increase funds proportionately each year to ensure that
every three and four-year-old eligible for Head Start may
participate by 2006 and 25% of eligible infants and toddlers
may participate in Early Head Start by 2011.
Expand investments in the Early Learning Opportunities Act
to provide increased resources to communities for early
learning initiatives.

Section E. Education improvements

Early learning
Provide grants to states to ensure access to pre-
kindergarten for families who choose to participate.
Amend the Reading Excellence Act to require that states
support early literacy efforts in child care, pre-
kindergarten, and Head Start programs.
Create a book stamp program that would enable proceeds from
a children's literacy postage stamp to support a system to
expand books in the homes of low income children that are
enrolled in child care programs.
Authorize $30 million in ESEA for the Education Excellence
Act, which would provide professional development for early
childhood educators in high poverty communities.
Increased accountability
Amend Title I of the Elementary and Secondary Education Act
(ESEA) to require states and local school districts to
establish specific goals and performance benchmarks aimed at
improving the performance of all students, to strengthen
requirements mandating corrective actions for failing schools
such as school reconstitution and transfers to other public
schools, and to require states to issue report cards
detailing the performance of individuals schools.
Reduce class size
Provide funding to help local school districts recruit,
train, and hire additional teachers to reduce class size in
grades K through 3.
Quality teaching and leadership
Provide incentives to teachers to obtain certification from
the National Board for Professional Teaching Standards.
Improve student loan forgiveness program for aspiring
teachers.
Provide support to recruit, prepare and place career-
changing professionals as teachers.
Award competitive grants to establish programs for teacher
quality improvement.
Provide for professional development services to increase
leadership skills of school principals.
School construction
Provide new tax incentives for school construction/
modernization bonds.
Establish a grant program to assist LEA's to increase the
involvement of parents, teachers, students, and others in the
planning and design of new and renovated elementary and
secondary schools.
Community schools
Encourage communities to foster school-based or school-
linked family centers.

Title IV. Fair Start--Lifting All Children Out of Poverty--Tax Relief
To Assist Low-Income Working Families

Increase the child tax credit from $500 to $1000 and make
if fully refundable.
Expand the EITC for families with three or more children
and reduce the marriage penalty for families eligible for the
EITC.
Expand the Dependent Care Tax Credit to increase the slide
to 50%, make it refundable, and annually index income phase-
outs and cost of care for inflation.

Title V. Fair Start--Ensure that Children and Families Receive Supports
to Promote Work and Reduce Poverty

Section A. Ensure children and families receive all supports for which
they are eligible

Initiate a Gateways Program that provides grants to states,
localities, and/or community based organizations to (a) train
caseworkers about available support programs and their
eligibility requirements; (b) expand outreach about available
support assistance; (c) improve automation and application
procedures; and (d) track the extent to which low-income
families receive the benefits and services for which they are
eligible.

Section B. Support from both parents

Improve child support collections and let families keep the
money collected for their children; provide federal
incentives for states to pass through payments collected for
families receiving Temporary Assistance for Needy Families
(TANF); and require families who have left TANF to receive
any support collected through IRS intercepts.
Provide funding for child support assurance demonstration
projects.

Section C. Fair wages and unemployment insurance

Increase the federal minimum wage to $6.65 over three
installments and index it for inflation.

[[Page S5551]]

Implement ``living wage'' policy for employees of federal
contractors or subcontractors.
Make Unemployment Insurance more accessible to low income
families with children, including more favorable counting of
wages for the purpose of determining eligibility, expanding
benefits to part-time workers, and making domestic violence
and lack of child care causes for separation from employment.

Section D. Helping low income parents get and keep jobs with above
poverty income

Add poverty reduction as a goal of the TANF program.
For those families who are working and playing by the
rules, the TANF time limit is interrupted.
Allow a broader range of education and training to count as
work activities under TANF.
Initiate a TANF poverty reduction bonus for states.
Require state and local TANF officials to participate in
the Workforce Investment Boards.

Section E. Create incentives to serve families effectively

The Secretary of Health and Human Services shall develop
model training materials for caseworkers.
TANF funds used by states to provide caseworker bonuses and
new state initiatives to break down barriers to work shall
not count towards the 15 percent administrative cap.
Strengthen Individual Responsibility Plans.

Section F. Addressing work barriers

Expand funding for the Department of Transportation's
Access to Jobs program to allow parents better access to jobs
and child care.
Require caseworkers with adequate training to identify work
barriers of TANF recipients, including domestic violence,
mental health, drug or alcohol problems, homelessness, or
disability and to provide appropriate services to address
these barriers.
Allow states to exempt families with severe barriers to
employment from TANF time limits, even if the total exempted
exceeds 20 percent of the current caseload.

Section G. Protections for families in need

Earn back months of TANF assistance for months worked.
Hold agencies accountable for ensuring that families who
are unable to comply with complex TANF rules are afforded a
real conciliation process.

Section H. TANF reauthorization

Reauthorize TANF.
Prohibit supplantation of state funding for programs
serving needy families with children with federal TANF funds.

title vi. fair start--all families with children should receive the
support they need to live above poverty--nutrition

Section A. Child care nutrition

Allow for-profit child care centers to participate in the
Child and Adult Care Food Program (CACFP) if 25 percent of
their enrolled children are eligible for free and reduced-
priced lunch.
Allow youth in after-school programs up to age 19 to
participate in CACFP if they are enrolled in community-based
programs including those outside of low-income areas.
Provide a dinner for after-school programs.
Standardize the categorical eligibility requirements for
income determination in the family child care portion of
CACFP.
Increase the CACFP sponsors' administrative reimbursement
rate to reflect the increased administrative burden of the
means test system.

Section B. Food stamp program

Restore Food Stamp eligibility to legal immigrants.
Provide six months of transitional food stamp benefits to
those who leave TANF.
Index the standard deduction for family size and inflation.
Eliminate the cap on excess shelter costs for families with
children.
Include child support in earnings disregard.
Increase funding for The Emergency Food Assistance Program
(TEFAP).
Reduce burden on eligible families in renewing benefits.
Improve incentives for states to serve low-income working
families better.

title vii. fair start--all families should receive the supports they
need to live above poverty--housing

Provide 1 million new Section 8 vouchers over 10 years.
Establish a Voucher Success program for communities
experiencing problems utilizing Section 8 vouchers.
Redirect surplus generated by federal housing programs into
National Affordable Housing Trust to help alleviate the
housing crisis by funding new construction of affordable
rental housing.
Promote preservation of affordable housing units by
providing matching grants to states that have developed and
funded programs for preservation of privately owned housing
that is affordable to low-income families.

title viii. safe start--ensuring every child a safe, nurturing, and
permanent family

Section A. Promoting permanency for children

Enhance the likelihood that the goals for children in the
Adoption and Safe Families Act will be met by offering states
funding for preventive, protective, and crisis services for
children and parents who come to the attention of the child
welfare system, permanency services for families whose
children end up in foster care, independent living services
for young people transitioning from foster care, and post-
permanency services for children who are reunited with their
families, adopted, or placed permanently with relatives or
other legal guardians.
Improve the quality of services for children by extending
funding for training of staff of private child welfare
agencies, judges and other court staff, and other children's
service providers that serve abused and neglected children.
Offer kinship guardianship assistance payments to
grandparents and other relatives who commit to care
permanently for children for whom they have legal
guardianship and that they have cared for in foster care.
Eliminate current federal disincentives to ensure that
children who have been abused or neglected or are at risk of
maltreatment receive the services and supports they need.
Eliminate current federal disincentives to promote adoption
for children with special needs.
Support young people aging out of foster care by offering
them increased opportunities for supervised living
arrangements and tuition assistance to help them pursue a
range of educational opportunities.
Increase accountability within the child welfare system to
improve outcomes for children and services available to
children and families.
Expand opportunities for Indian tribes to offer foster care
and adoption assistance to Indian children.

Section B. Promoting safe and stable families

Reauthorize and increase funding for the Promoting Safe and
Stable Families Program.

Section C. Social services block grant

Restore funding for the Social Services Block Grant, which
supports a range of services for abused, neglected and other
children, and also provides help for persons with
disabilities, senior citizens, and other special populations.

Section D. Child protection and alcohol and drug partnerships

Address the treatment needs of families with alcohol and
drug problems who come to the attention of the child welfare
system by giving state child protection and alcohol and drug
agencies incentives to offer joint screening, assessment,
comprehensive treatment and after care services, and
training.

Section E. One-time permanency grants

Offer one-time assistance to state child welfare agencies
to help move children who were in foster care when the
Adoption and Safe Families Act was passed, and will not be
returning home, into adoptive families or other permanent
placements with kin.

Section F. Helping children exposed to domestic violence

Promote multi-system partnerships to respond to the needs
of children who have been exposed to domestic violence.
Promote cross-training for staff of child welfare agencies
and domestic violence service providers about domestic
violence and its impact on children and relevant child
welfare policies.
Enhance research and data collection on the impact of
domestic violence on children.
Offer grants to elementary and secondary schools and early
care and education programs to help prevent domestic violence
and its impact on its adult and child victims.
Support training for law enforcement and court personnel
about domestic violence and its impact on children.

Section G. Enhancing healthy emotional development in young children

Assist networks of early childhood, child welfare,
substance abuse, and/or domestic violence programs to promote
the mental health and healthy emotional development of the
young children they serve.

title ix. successful transitions to adulthood--youth development

Section A. Youth development: Strengthening 21st Century Community
Learning Centers

Increase funding for the 21st Century Community Learning
Centers Program.
Allow community-based organizations to apply for 21st
Century funds.
Create a 3 percent set-aside for training and technical
assistance.

Section B. Youth development: Promoting positive activities for
America's youth

Creation of a comprehensive program (the proposed Younger
Americans Act) to mobilize and support communities in
carrying out youth development activities.
Increase funding for Americorps, Youthbuild, Job Corps, and
the Workforce Investment Act youth employment programs to
open up more employment opportunities for teens.

Title X. Safe Start--Every Child Should Have A Safe Environment In
Which To Learn And To Live--Juvenile Justice

Amend the Juvenile Justice and Delinquency Prevention Act
(JJDPA) by adding the definition of a ``juvenile'' as an
individual less than 18 years of age.
Amend the JJDPA to mandate that not less than 75 percent of
title V funds be used solely for the purposes of carrying out
section 505. Increase funding for Title V to $250 million for
fiscal year 2002.
Disproportionate Minority Confinement (DMC)--Strengthen
accountability standards

[[Page S5552]]

for states to take action to address the disparate treatment
of minorities at all stages of the juvenile justice system,
including intake, arrest, detention, adjudication,
disposition and transfer.
Create a fifth core protection for juveniles by requiring
that states provide every adjudicated juvenile with
reasonable safety and security, with adequate food, heat,
light, sanitary facilities, bedding, clothing, recreation,
counseling, education, training, and medical care, including
necessary mental health services.
Increase funding for the JJDPA Title II, Part B formula
grants, to raise the small state minimum to $750,000, create
a 3% set-aside for the establishment of state juvenile
justice coalitions and (include language that coalitions
include participation of youth), and a 3% set aside for
states to carry out state plans with respect to the DMC core
requirement.
Repeal Part H of JJDPA (juvenile boot camps).
Amend title II of the JJDPA by adding Access to Mental
Health and Substance Abuse Treatment, a grant program
encouraging states to invest in and coordinate with other
systems to provide appropriate treatment and other services
for incarcerated juvenile offenders.
Fund Services for Youth Offenders at $40 million for fiscal
year 2002, providing funding for after care or wrap-around
services for youth discharged from the adult criminal or
juvenile justice system.
Authorize the Juvenile Accountability Block Grant, which
would authorize and significantly modify the Juvenile
Accountability Incentive Block Grant (JAIBG) to provide
incentives to: build and maintain smaller juvenile
facilities, including separate units within juvenile
facilities for juveniles tried as adults; require all staff,
whether supervising juveniles adjudicated in the adult or
juvenile system, are trained appropriately; develop and
utilize accountable community-based alternatives to
incarceration; risk assessment; and enact Child Access
Prevention (CAP) laws.
In order to receive funds under the new block grant, states
are prohibited from applying the death penalty to juvenile
offenders.
Increase funding for the Runaway and Homeless Youth Act to
$120 million for fiscal year 2002.

Title XI. Safe Start--Every Child Should Have A Safe Environment In
Which To Learn And TO Live--Gun Safety

Close the gun show loophole by applying the Brady
background check to gun sales conducted through private
dealers at events where 50 or more firearms are offered for
sale.
Require mandatory safety locks with the sale of all
handguns and establish consumer safety standards for such
safety locks.
Ban the importation of large capacity ammunition clips
capable of holding more than 10 rounds.
Ban the possession of assault weapons by juveniles.
Require FTC study on marketing practices of gun industry.
Ban the possession of handguns by individuals under 21
years of age.
One-gun-a-month purchase limitation.
Regulation of internet sales of firearms.
ENFORCE--enhancements (both authorizing and appropriation)
to strengthen enforcement of gun laws.

Title XII. Miscellaneous

Direct the Secretary of HHS to establish a blue-ribbon
commission to identify and highlight family-friendly
practices that the private sector and other employers can
promote.
Provide for collection and dissemination of data on the
status of children and families who are or have been
recipients of government assistance.
______

By Mrs. FEINSTEIN (for herself and Mrs. Boxer):
S. 941. A bill to revise the boundaries of the Golden Gate National
Recreation Area in the State of California, to extend the term of the
advisory commission for the recreation area, and for other purposes; to
the Committee on Energy and Natural Resources.
Mrs. FEINSTEIN. Mr. President, today I am pleased to introduce
legislation to add approximately 5,000 acres of pristine natural land
to the Golden Gate National Recreation Area in San Mateo County. This
addition will protect the sweeping views of the San Mateo Coast and
ensure the protection of rich farmland, several miles of public trails,
and incredible array of wildlife and vegetation. I am happy to be
joined by Senator Boxer in sponsoring this legislation.
The property to be added is one of the most visible and important
pieces of land on the San Mateo coast north of Half Moon Bay. The
largest parcel to be added is a 4,262 acre stretch of land known as the
Rancho Corral de Tierra. The Rancho Corral de Tierra is one of the
largest undeveloped tracts remaining on the San Mateo Coast and is
constantly under threat of development.
The mountainous property, which surrounds the coastal towns of Moss
Beach and Montara, was previously purchased by the Peninsula Open Space
Trust. The Trust has agreed to transfer the land to the Federal
Government for about half of the purchase cost. It is this type of
public-private partnership that Congress needs to support in our
efforts to preserve open space.
The Rancho Corral de Tierra Golden Gate National Recreation Area
Boundary Act of 2001 has the support of the entire Bay Area
Congressional Delegation. Similar legislation is being introduced today
in the House of Representatives by Tom Lantos with co-sponsors Anna
Eshoo, Nancy Pelosi, George Miller, Lynn Woolsey, Ellen Tauscher, Peter
Stark, Mike Thompson, Barbara Lee, Mike Honda, and Zoe Lofgren.
The addition of the Rancho Corral de Tierra property will result in
the protection of all or part of four watersheds, and several
endangered species such as the peregrine falcon, San Bruno elfin
butterfly, San Francisco garter snake, and the red-legged frog.
Moreover, due to the coastal marine influence and dramatic altitude
changes, plants grow on the property that are found nowhere else in the
world.
This legislation will also reauthorize the Golden Gate National
Recreation Area and Point Reyes National Seashore Advisory Commission
for another 20 years. The Advisory Commission was established by
Congress in 1972 to provide for the free exchange of ideas between the
National Park Service and the public. The Commission holds open and
accessible public meetings monthly at which the public has an
opportunity to comment on park-related issues.
I have always felt that protecting our nation's unique natural areas
should be one of our highest priorities. The Golden Gate National
Recreation Area is one of our Nation's most heavily visited urban
national parks as it is in close proximity to millions of people. I
invite my colleagues to join me in supporting this legislation.
______

By Mr. GRAHAM (for himself, Mrs. Hutchison, Mr. Bingaman, Mr.
Hutchinson, Mr. Breaux, Mr. Ensign, Mrs. Lincoln, and Mr.
Thompson):
S. 942. A bill to authorize the supplemental grant for population
increases in certain states under the temporary assistance to needy
families program for fiscal year 2002; to the Committee on Finance.
Mr. GRAHAM. Mr. President, I rise today on behalf of Senators
Hutchison, Bingaman, Hutchinson, Breaux, Ensign, Baucus, Lincoln,
Thompson, and myself to introduce a piece of legislation which will
extend the Temporary Assistance for Needy Families supplemental grants
for one year. This grant program has been critical to the success of
welfare reform in our States.
The TANF block grant, as it is commonly known, was established in the
1996 welfare law. These were modest supplemental grants for 17
relatively poor or rapidly growing States. The grants were intended to
reduce the very large disparity in welfare funding between poorer and
wealthier States that resulted from the basic TANF funding formula. The
TANF supplemental grants have afforded States, like ours a more
adequate opportunity to achieve TANF goals. While TANF is scheduled to
be reauthorized in 2002, the supplemental grants included in the 1996
law were authorized only through October 2001.
If the grants expire, 17 States will lose as much as 10 percent of
their TANF funding beginning in October 1 of this year. Wealthy, low-
growth States will experience no reduction.
These grants are not supplemental in the sense of being add-ons. They
were designed as an integral part of the TANF allocation formula and
are critical to the success of the TANF programs in the States that
receive them. The decision to end the grants a year before
reauthorizing the entire program was not a policy consideration, only a
financial one. It was done in order to ensure a balanced budget by
2002.
The 2001 budget resolution, passed by both the House and the Senate,
provides $319 million for a one-year extension of these important
grants. This provision acknowledges the Senate's commitment to
maintaining the tools that many of our States require to continue
efforts to help people move from welfare to work, from jobs to careers.

[[Page S5553]]

Since the passage of the welfare reform law in 1996, more is expected
of state welfare systems that ever before. TANF agencies provide a
broad range of social services that include job training and employment
counseling, reducing out-of-wedlock births and promoting family
formation, and addressing individual challenges such as domestic
violence--just to name a few. Without the TANF supplemental grants,
impacted states will find themselves unable to provide many of the
programs that have enabled their citizens to successfully move from
public assistance to independence.
Given the significant costs of work supports, many of the 17 States
that receive supplemental TANF grants are now spending more TANF funds
each year than they receive from their basic TANF grant. In fiscal year
2000, for example, TANF expenditures in nine of the 17 States that
receive TANF supplemental grants exceeded 100 percent of their basic
TANF allocation. These States are my own home State of Florida, Alaska,
Arizona, Arkansas, Idaho, New Mexico, North Carolina, Tennessee, and
Texas.
For these reasons, we are requesting that a one year extension of the
TANF supplemental grants. This step will help to ensure that high-
growth States can continue their welfare reform efforts and will enable
the supplemental grants to be considered as part of the overall TANF
reauthorization next year.
Support for the extension of this program should come from all
Senators who want to see the goals of welfare reform fulfilled. Whether
or not one comes from a State that receives TANF supplemental grant
dollars, support for this bill will send a loud and clear message that
the United States Senate adheres to the goal of ensuring that all
States have the means to provide the services necessary to help all
Americans, regardless of where they live, to move from dependence to
independence.
That is a goal worth fighting for and I encourage all of my Senate
colleagues to cosponsor this important piece of legislation.
Mr. BAUCUS. Mr. President, I am glad to cosponsor this bill from my
colleagues Senators Graham and Hutchison. It's an important matter for
those of us who represent less prosperous States. I have worked hard to
promote economic development in Montana. It is crucial to providing a
better future for the children of my great State. Until the economy
improves in Montana, I will advocate for measures such as this one,
which help alleviate the difficulties that stem from our circumstances.
When we enacted welfare reform in 1996, a law I am glad to have
supported, there was much discussion here about the appropriate way to
allocate welfare funds among States. The old funding formula had
produced wide disparities, especially between high per capita income
States and low per capita income States. In the end it was resolved to
provide additional funding in the form of ``TANF supplemental grants''
to certain states which were poorer or had high growth rates or both.
However, the funding was only provided through fiscal year 2001, while
the rest of the welfare funds were provided through fiscal year 2002,
as part of an effort to balance the budget.
Well, the budget is in surplus now. And we need to continue the TANF
supplemental grants for one more year, as this legislation would do, so
that we can assess it as a part of the policy on overall welfare
funding during next year's reauthorization of the 1996 welfare reform
law. The TANF supplemental grants represent a substantial source of
welfare funds in several states. Failing to continue this funding would
mean, in effect, a 10 percent reduction in the allocations for states
such as Georgia, North Carolina, Florida, and Louisiana. My own state
of Montana received $1 million last year. I assure you we can use those
funds to help poor children in Montana, especially the many who have
low-income working parents, the kind who hold down two or three part-
time minimum wage jobs, which is all too common in my State.
I thank my colleagues for their leadership and look forward to
working with them on this bill.

____________________