[Congressional Record Volume 147, Number 83 (Thursday, June 14, 2001)]
[Senate]
[Pages S6328-S6329]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DeWINE (for himself, Mr. Leahy, Mr. Voinovich, Mr. Breaux, 
        Mr. Conrad, Mr. Lugar, Mr. Santorum Ms. Landrieu, and Mr. 
        Hatch):
  S. 1048. A bill to amend the Internal Revenue Code of 1986 to provide 
relief for payment of asbestos-related claims; to the Committee on 
Finance.
  Mr. DeWINE. Mr. President, I ask unanimous consent that the text of 
the bill be printed in the Record.
  There being no objection the text of the bill was ordered to be 
printed in the Record.

                                S. 1048

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

     SECTION. 1. EXEMPTION FOR ASBESTOS-RELATED SETTLEMENT FUNDS.

       (a) Exemption for Asbestos-Related Settlement Funds.--
     Subsection (b) of section 468B of the Internal Revenue Code 
     of 1986 (relating to special rules for designated settlement 
     funds) is amended by adding at the end the following new 
     paragraph:
       ``(6) Exemption from tax for asbestos-related settlement 
     funds.--Notwithstanding paragraph (1), no tax shall be 
     imposed under this section or any other provision of this 
     subtitle on any settlement fund to which this section or the 
     regulations thereunder applies that is established for the 
     principal purpose of resolving and satisfying present and 
     future claims relating to asbestos.''.
       (b) Conforming Amendments.--
       (1) Paragraph (1) of section 468B(b) of such Code is 
     amended by striking ``There'' and inserting ``Except as 
     provided in paragraph (6), there''.
       (2) Subsection (g) of section 468B of such Code is amended 
     by inserting ``(other than subsection (b)(6))'' after 
     ``Nothing in any provision of law''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending on or after December 31, 
     2000.

     SEC. 2. MODIFY TREATMENT OF ASBESTOS-RELATED NET OPERATING 
                   LOSSES.

       (a) Asbestos-Related Net Operating Losses.--Subsection (f) 
     of section 172 of the Internal Revenue Code of 1986 (relating 
     to net operating loss deduction) is amended by redesignating 
     paragraphs (4), (5), and (6) as paragraphs (5), (6), and (7), 
     respectively, and by inserting after paragraph (3) the 
     following new paragraph:
       ``(4) Special rules for asbestos liability losses.--
       ``(A) In general.--At the election of the taxpayer, the 
     portion of any specified liability loss that is attributable 
     to asbestos may, for purposes of subsection (b)(1)(C), be 
     carried back to the taxable year in which the taxpayer, 
     including any predecessor corporation, was first involved in 
     the production or distribution of products containing 
     asbestos and each subsequent taxable year. In determining its 
     specified liability losses attributable to asbestos, the 
     taxpayer may elect to take into account payments of related 
     parties attributable to asbestos-related products produced or 
     distributed by the taxpayer.
       ``(B) Coordination with credits.--If a deduction is 
     allowable for any taxable year by reason of a carryback 
     described in subparagraph (A)--
       ``(i) the credits allowable under part IV (other than 
     subpart C) of subchapter A shall be determined without regard 
     to such deduction, and
       ``(ii) the amount of taxable income taken into account with 
     respect to the carryback under subsection (b)(2) for such 
     taxable year shall be reduced by an amount equal to--

       ``(I) the increase in the amount of such credits allowable 
     for such taxable year solely by reason of clause (i), divided 
     by
       ``(II) the maximum rate of tax under section 1 or 11 
     (whichever is applicable) for such taxable year.

       ``(C) Carryforwards taken into account before asbestos-
     related deductions.--For purposes of this section--
       ``(i) in determining whether a net operating loss 
     carryforward may be carried under subsection (b)(2) to a 
     taxable year, taxable income for such year shall be 
     determined without regard to the deductions referred to in 
     paragraph (1)(A) with respect to asbestos, and
       ``(ii) if there is a net operating loss for such year after 
     taking into account such carryforwards and deductions, the 
     portion of such loss attributable to such deductions shall be 
     treated as a specified liability loss that is attributable to 
     asbestos.
       ``(D) Limitation.--The amount of reduction in income tax 
     liability arising from the election described in subparagraph 
     (A) that exceeds the amount of reduction in income tax 
     liability that would have resulted if the taxpayer utilized 
     the 10-year carryback period under subsection (b)(1)(C) shall 
     be devoted by the taxpayer solely to asbestos claimant 
     compensation and related costs, through a settlement fund or 
     otherwise.
       ``(E) Coordination with other carryback limitations.--The 
     amount of asbestos-related specified liability loss that may 
     be absorbed in a prior taxable year (and the amount of refund 
     attributable to such loss absorption) shall be determined 
     without regard to any limitation under section 381, 382, or 
     1502 or the regulations thereunder.
       ``(F) Predecessor corporation.--For purposes of this 
     paragraph, a predecessor corporation shall include a 
     corporation that transferred or distributed assets to the 
     taxpayer in a transaction to which section 381(a) applies or 
     that distributed the stock of the taxpayer in a transaction 
     to which section 355 applies.''.
       (b) Conforming Amendment.--Paragraph (7) of section 172(f) 
     of such Code, as redesignated by this section, is amended by 
     striking ``10-year''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending on or after December 31, 
     2000.

  Mr. LEAHY. Mr. President, I am pleased to join with Senator DeWine in 
introducing bipartisan legislation to provide common-sense tax 
incentives to help address asbestos liability issues.
  First, our legislation would exempt investment income in an asbestos-
related designated settlement funds from Federal income tax, much as 
the investment income in a 401(k) savings plan is exempt from Federal 
income tax under current law. To qualify for this exemption from 
Federal taxation, the principal purpose of the asbestos-related 
designated settlement fund must be to pay present and future claims to 
asbestos victims and their families. This tax incentive encourages 
businesses to create settlement funds to meet their asbestos-related 
liabilities, just as the tax incentive for 401(k) savings plans 
encourages workers to invest for their retirement.
  Second, our legislation recognizes the unique nature of asbestos-
related diseases by providing a special ``carry-back'' rule for a 
company's losses from paying claims to asbestos victims and their 
families. Under current law, a company may carry back these costs from 
products sold in the last ten years. This carry-back period, however, 
fails to match the realities of asbestos-related diseases, which are 
often latent for forty or more years. In many cases, companies are 
paying asbestos-related claims for exposure to products that were 
produced a half-century ago.
  Our legislation would permit companies for whom the ten-year period 
provides no relief to carry back their current expenses from asbestos 
payments to victims and their families to the years in which the 
company produced the asbestos product. This extension of the carry-back 
tax rule is only fair given the long latency period of asbestos-related 
diseases.
  I agree with Supreme Court Justice Ruth Bader Ginsburg in the Amchem 
Products decision that Congress can provide a secure, fair and 
efficient means of compensating victims of asbestos exposure. The 
appropriate role for Congress is to provide incentives for private 
parties to reach settlements, not to take away the legal rights of 
asbestos victims and their families. Our bipartisan bill provides these 
tax incentives for private parties involved in asbestos-related 
litigation to reach global settlements and for asbestos victims and 
their families to receive the full benefit of the incentives.
  Encouraging fair settlements while still preserving the legal rights 
of all parties involved is a win-win situation for business and 
asbestos victims. For example, Rutland Fire Clay Company, a family-run, 
118-year-old small business in my home state of Vermont, recently 
reached a settlement with its insurers and the trial bar concerning the 
firm's asbestos problems. Unlike some big businesses that are trying to 
avoid any accountability for their asbestos responsibilities through 
national ``tort reform'' legislation, the Rutland Fire Clay Company and 
its President, Tom Martin, are doing the right thing within the legal 
system. The tax incentives in our bipartisan bill will support the 
Rutland Fire Clay Company and its employees while providing financial 
security for its settlement with asbestos victims and their families.
  I believe it is in the national interest to encourage fair and 
expeditious settlements between companies and asbestos victims. The 
legislation we are introducing today will encourage payments to victims 
while ensuring defendant firms remain solvent.
  I thank Senator DeWine for his leadership on this issue. I urge my 
colleagues to support our bipartisan approach to provide a secure and 
fair

[[Page S6329]]

means of compensating victims of asbestos exposure and to permit 
businesses with asbestos liabilities to efficiently meet their 
responsibilities.
                                 ______