[Congressional Record Volume 147, Number 131 (Wednesday, October 3, 2001)]
[Senate]
[Pages S10156-S10165]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. ROCKEFELLER (by request):
S. 1488. A bill to amend title 38, United States Code, to authorize a
cost-of-living adjustment in the rates of disability compensation for
veterans with service-connected disabilities and dependency and
indemnity compensation for the survivors of certain disabled veterans,
to make modifications in the veterans home loan guaranty program, to
make permanent certain temporary authorities, and for other purposes;
to the Committee on Veterans' Affairs.
Mr. ROCKEFELLER. Madam President, today I introduce legislation
requested by the Secretary of Veterans Affairs, as a courtesy to the
Secretary and the Department of Veterans Affairs, VA. Except in unusual
circumstances, it will be my practice to introduce legislation
requested by the administration so that such measures will be available
for review and consideration.
This ``by-request'' bill is titled the ``Veterans' Benefits Act of
2001.'' It would, among other things, authorize a cost-of-living
adjustment for fiscal year 2002 for VA disability compensation, make
modifications the VA home loan guaranty program, and make permanent
certain temporary authorities.
I ask unanimous consent that the text of the bill and Secretary
Principi's transmittal letter that accompanied the draft legislation be
printed in the Record.
There being no objection, the bill and the letter were ordered to be
printed in the Record, as follows:
S. 1488
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCES TO TITLE 38, UNITED STATES
CODE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Veterans'
Benefits Act of 2001''.
(b) References.--Except as otherwise expressly provided,
whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other
provision, the reference shall be considered to be made to a
section or other provision of title 38, United States Code.
(c) Table of Contents.--The table of contents for this Act
is as follows:
Section 1. Short title; references to title 38, United States Code;
table of contents.
TITLE I--COMPENSATION PROGRAM
Sec. 101. Increase in compensation rates and limitations.
Sec. 102. Rounding down of cost-of-living adjustments in compensation
and DIC rates.
TITLE II--HOUSING LOANS
Sec. 201. Vendee loan authority.
Sec. 202. Loan fees.
Sec. 203. Procedures on default.
TITLE III--TEMPORARY AUTHORITIES MADE PERMANENT
Sec. 301. Income verification authority.
Sec. 302. Limitation on pension for certain recipients of medicaid-
covered nursing home care.
Sec. 303. Health-care and medication copayments.
Sec. 304. Third-party insurance collections.
TITLE I--COMPENSATION PROGRAM
SEC. 101. INCREASE IN COMPENSATION RATES AND LIMITATIONS.
(a) Rate Adjustment.--The Secretary of Veterans Affairs
shall, effective on December 1, 2001, increase the dollar
amounts in effect for the payment of disability compensation
and dependency and indemnity compensation by the Secretary,
as specified in subsection (b).
(b) Amounts To Be Increased.--The dollar amounts to be
increased pursuant to subsection (a) are the following:
(1) Compensation.--Each of the dollar amounts in effect
under section 1114 of title 38, United States Code.
(2) Additional compensation for dependents.--Each of the
dollar amounts in effect under section 1115(1) of such title.
(3) Clothing allowance.--The dollar amount in effect under
section 1162 of such title.
(4) New dic rates.--The dollar amounts in effect under
paragraphs (1) and (2) of section 1311(a) of such title.
(5) Old dic rates.--Each of the dollar amounts in effect
under section 1311(a)(3) of such title.
(6) Additional dic for surviving spouses with minor
children.--The dollar amount in effect under section 1311(b)
of such title.
(7) Additional dic for disability.--The dollar amounts in
effect under sections 1311(c) and 1311(d) of such title.
(8) DIC for dependent children.--The dollar amounts in
effect under sections 1313(a) and 1314 of such title.
(c) Determination of Increase.--(1) The increase under
subsection (a) shall be made in the dollar amounts specified
in subsection (b) as in effect on November 30, 2001.
(2) Except as provided in paragraph (3), each such amount
shall be increased by the same percentage as the percentage
by which benefit amounts payable under title II of the Social
Security Act (42 U.S.C. 401 et seq.) are increased effective
December 1, 2001, as a result of a determination under
section 215(i) of such Act (42 U.S.C. 415(i)).
(3) Each dollar amount increased pursuant to paragraph (2)
shall, if not a whole dollar amount, be rounded down to the
next lower whole dollar amount.
(d) Special Rule.--The Secretary may adjust
administratively, consistent with the increases made under
subsection (a), the rates of disability compensation payable
to persons within the purview of section 10 of Public Law 85-
857 (72 Stat. 1263) who are not in receipt of compensation
payable pursuant to chapter 11 of title 38, United States
Code.
(e) Publication Requirement.--At the same time as the
matters specified in section 215(i)(2)(D) of the Social
Security Act (42 U.S.C. 415(i)(2)(D)) are required to be
published by reason of a determination made under section
215(i) of such Act during fiscal year 2002, the Secretary
shall publish in the Federal Register the amounts specified
in subsection (b) as increased under this section.
[[Page S10157]]
SEC. 102. ROUNDING DOWN OF COST-OF-LIVING ADJUSTMENTS IN
COMPENSATION AND DIC RATES.
(a) Compensation COLAs.--Section 1104(a) is amended by
striking out ``fiscal years 1998 through 2002.''
(b) DIC COLAs.--Section 1303(a) is amended by striking out
``fiscal years 1998 through 2002.''
TITLE II--HOUSING LOANS
SEC. 201. VENDEE LOAN AUTHORITY.
(a) Termination of Vendee Loan Authority.--Section 3733(a)
is amended by striking out paragraphs (1) and (2) in their
entirety and inserting in lieu thereof:
``(1) Prior to October 1, 2001, the Secretary may sell real
property acquired by the Secretary as the result of a default
on a loan guaranteed or made under this chapter with the
purchase financed by a loan made by the Secretary.''
(b) Internal Revenue Code Amendment.--Section 6103(I)(7)(D)
of the Internal Revenue Code of 1986, is amended by striking
out ``Clause (viii) shall not apply after September 30,
2003.''
SEC. 302. LIMITATION ON PENSION FOR CERTAIN RECIPIENTS OF
MEDICAID-COVERED NURSING HOME CARE.
Section 5503(f) is amended by striking out paragraph (7).
SEC. 303. HEALTH CARE AND MEDICATION COPAYMENTS.
(a) Section 1710 is amended by striking out ``before
September 30, 2002,'' in subsection (f)(2)(B).
(b) Section 1722A is amended by striking out subsection
(d).
SEC. 304. THIRD-PARTY INSURANCE COLLECTIONS.
Section 1729 is amended by striking out ``before October 1,
2002,'' in subsection (a)(2)(E).
____
The Secretary of Veterans Affairs,
Washington, August 2, 2001.
Hon. Richard B. Cheney,
President of the Senate,
Washington, DC.
Dear Mr. Vice President: There is transmitted herewith a
draft bill, the ``Veterans' Benefits Act of 2001,'' to
authorize a cost-of-living adjustment (COLA) for fiscal year
(FY) 2002 in the rates of disability compensation and
dependency and indemnity compensation (DIC), to make
modifications in the veterans home loan guaranty program, to
make permanent certain temporary authorities, and for other
purposes. All of the bill's provisions are in support of the
President's FY 2002 budget request for the Department of
Veterans Affairs (VA). I request that this bill be referred
to the appropriate committee for prompt consideration and
enactment.
Compensation and DIC COLA
Section 101 of the draft bill would direct the Secretary of
Veterans Affairs to increase administratively the rates of
compensation for service-disabled veterans and of DIC for the
survivors of veterans whose deaths are service related,
effective December 1, 2001. As provided in the President's FY
2002 budget request, the rate of increase would be the same
as the COLA that will be provided under current law to
veterans' pension and Social Security recipients, which is
currently estimated to be 2.5 percent. We estimate that
enactment of this section would cost $376 million during FY
2002, $7.1 billion over the period FYs 2002-2006 and $27.6
billion over the period FYs 2002-2011. Although this section
is subject to the pay-as-you-go (PAYGO) requirement of the
Omnibus Budget Reconciliation Act of 1990 (OBRA), the paygo
effect would be zero because OBRA requires that the full
compensation COLA be assumed in the baseline. We believe this
proposed COLA is necessary and appropriate in order to
protect the benefits of affected veterans and their survivors
from the eroding effects of inflation. These worthy
beneficiaries deserve no less.
Section 102 of the draft bill would amend 38 U.S.C.
Sec. Sec. 1104(a) and 1303(a), respectively, to provide that,
in calculating the cost-of-living adjustment in the rates of
disability compensation and dependency and indemnity
compensation pursuant to the enactment of authorizing
legislation governing payment of benefits in FY 2002 and
thereafter, the Secretary of Veterans Affairs shall round
down to the next lower whole dollar any rate that is not
evenly divisible by one dollar. Currently, section 1104(a)
requires the Secretary to utilize this round-down
calculation method during FYs 1998 through 2002. This
requirement was added by Public Law No. 105-33,
Sec. 8031(a)(1), 111 Stat. 251, 668 (1997). This section
was renumbered (from 1103 to 1104) by Public Law No. 105-
368, Sec. 1005(a), 112 Stat. 3315, 3364 (1998). Section
102 is subject to the PAYGO requirement of OBRA. Enactment
of this section would result in no cost savings in FY
2002, but would result in savings of $14.5 million in FY
2003, $196 million over the period FYs 2002-2006 and $996
million over the period FYs 2002-2011.
Housing Loans
Section 201 of the draft bill would terminate, effective
October 1, 2001, the authority of the Secretary to provide
financing in connection with the sale of a single-family home
acquired by (VA) following the foreclosure of a loan
guaranteed or made by VA. Such financing is commonly referred
to as a ``vendee loan.'' After that date, purchasers of VA-
owned properties would need to obtain financing from private
lenders. Vendee loans are not a veterans benefit. Currently,
all members of the public may purchase VA-owned homes and
obtain vendee financing. Veterans receive a very limited
preference with regard to purchasing such properties.
Subsection (a) would amend 38 U.S.C. Sec. 3733 to terminate
vendee loans effective October 1, 2001, except with respect
to properties for which VA accepted a purchase before such
date.
Subsection (b) would make a conforming amendment to 38
U.S.C. Sec. 3720 regarding the powers of the Secretary to
dispose of property acquired under the housing loan program.
Section 201 is subject to the PAYGO requirement of OBRA.
Enactment of this section would result in a cost of $18
million in FY 2002, and then savings of $50 million over the
period FYs 2002-2006 and savings of $227 million over the
period FYs 2002-2011.
Section 202 of the draft bill would make permanent the
increases in the fees collected from most veterans obtaining
or assuming a loan guaranteed, insured, or made by VA. These
increases were originally enacted by the Omnibus Budget
Reconciliation Act of 1993 (OBRA '93). OBRA '93 increased the
fees for most VA guaranteed housing loans by 75 basis points,
or 0.75 percent of the loan amount, and established a fee of
3 percent of the loan amount on veterans who obtain a second
no-downpayment loan under the VA program. The increased fees
are now set to expire on September 30, 2008.
Section 202 is subject to the PAYGO requirement of OBRA.
The enactment of section 202 would not result in cost savings
until FY 2009. In FY 2009, cost savings would be $275
million, and cost savings for the period FYs 2002-2011 would
be $841 million.
Section 203 would make permanent the VA ``no-bid formula''
contained in 38 U.S.C. Sec. 3732(c). This formula determines
VA's liability to a loan holder under the guaranty and
whether or not the holder would have the election to convey
the property to VA following the foreclosure. As amended by
OBRA '93, the no-bid formula requires VA to consider, in
addition to other costs, VA's loss on the resale of the
property. The no-bid formula currently applies to all loans
closed before October 1, 2008.
Section 203 is subject to the PAYGO requirement of OBRA.
The enactment of section 203 would not result in cost savings
until FY 2009. In FY 2009, $23 million would be saved as a
result of enactment of this section. Total savings from FYs
2002-2011 would be $2 million.
Extension of Temporary Authorities
Section 301 of the draft bill would amend 38 U.S.C.
Sec. 5317 and 26 U.S.C. Sec. 6103, respectively, to
permanently authorize VA to verify the eligibility of
recipients of, or applicants for, VA's needs-based programs
through data matching with the Internal Revenue Service and
the Social Security Administration. VA's authority under 38
U.S.C. Sec. 5317 expires on September 30, 2008. However,
authority under the Internal Revenue Code for this data
matching expires on September 30, 2003. This section is
subject to the PAYGO requirement of OBRA. Enactment of this
section would result in cost savings of $6 million in FY
2004, and would result in cumulative cost savings of $18
million for the period FYs 2002-2006 and $48 million for the
period FYs 2002-2011.
Section 302 of the draft bill would make permanent the $90
limitation on monthly VA pension payments that may be made to
beneficiaries, without dependents, who are receiving
Medicaid-covered nursing-home care by removing the existing
September 30, 2008, expiration date set forth in 38 U.S.C.
Sec. 5503(f). By reducing pension income, this provision
reduces beneficiaries' share of their nursing home expenses.
State Medicaid programs pay the difference, with a percentage
of their expenditures reimbursed by the Federal government.
This section is subject to the PAYGO requirement of OBRA.
While section 302 would maintain higher State and Federal
Medicaid costs, enactment of this section would result in VA
cost savings of $527 million in FY 2009. VA cost savings for
the period FYs 2002-2011 would be $1.6 billion.
Section 303(a) would amend 38 U.S.C. Sec. 1710(f)(2)(B) to
make permanent a requirement that veterans eligible for
health care under 38 U.S.C. Sec. 1710(a)(3) pay a copayment
of $10 for each day they receive VA hospital care. The
requirement that veterans pay the copayment expires on
September 30, 2002. Section 303(a) would also extend the
current $5 copayment for each day a veteran receives nursing
home care. However, that $5 copayment will continue only
until such time that VA publishes final regulations
establishing a new copayment for nursing home care in
accordance with requirements of 38 U.S.C. Sec. 1710B, a new
provision added to title 38 by the Millennium Health Care and
Benefits Act, Public Law No. 106-117. This section is subject
to the PAYGO requirement of OBRA; however, the PAYGO effect
would be zero because OBRA requires that collections be
assumed in the baseline. Enactment of this section would
result in continued collections of $8 million beginning in FY
2003. For FYs 2002-2006, the collections would total $40
million. For the period FYs 2002-2011, total collections
would be $80 million.
Subsection (b) would amend 38 U.S.C. Sec. 1722A to make
permanent a requirement that certain veterans pay VA a
copayment for each 30-day supply of medication that they
receive on an outpatient basis. The requirement that veterans
pay the copayment expires on September 30, 2002. The
copayment amount is currently $2 for each prescription, but
section 1722A contains provisions allowing VA to increase the
copayment
[[Page S10158]]
amount and VA is likely to increase the amount during FT
2002. This section is subject to the PAYGO requirement of
OBRA; however, the PAYGO effect would be zero because OBRA
requires that collections be assumed in the baseline.
Assuming continuation of only a $2 copayment, enactment of
this section would result in collections of $100 million in
FY 2003, $500 million over the period FYs 2002-2006, and $1
billion over the period FYs 2002-2011. In addition, enactment
of this section would allow VA to implement the provision of
the Veterans Millennium Health Care and Benefits Act
increasing co-payments, which would result in collections of
$268 million in FY 2003.
Section 304 would amend 38 U.S.C. Sec. 1729(a)(2)(E) to
permanently authorize VA to collect from third-party private
insurers for care VA provides to insured service-connected
veterans for their nonservice-connected disabilities. Under
existing law, the authority to collect from insurers expires
on September 30, 2002. This section is subject to the PAYGO
requirement of OBRA; however, the PAYGO effect would be zero
because OBRA requires that collections be assumed in the
baseline. Enactment of this section would result in
collections of $591 million in FY 2003. It would result in
collections of $2.5 billion for the period FYs 2002-2006 and
$5.9 billion over the period FYs 2002-2011.
Because this draft bill would affect direct spending and
receipts, it is subject to the PAYGO requirement of OBRA. The
Office of Management and Budget estimates that the provisions
authorized by this draft bill would result in a total PAYGO
cost of $19 million for FY 2002, but a PAYGO savings of $265
million for FYs 2002-2006, and $2.6 billion for FYs 2002-
2011.
The Office of Management and Budget has advised that there
is no objection to the submission of this legislative
proposal to the Congress, and that its enactment would be in
accord with the program of the President.
Sincerely yours,
Anthony J. Principi.
______
By Ms. SNOWE (for herself and Mrs. Feinstein):
S. 1489. A bill to provide for the sharing of information between
Federal departments, agencies, and other entities with respect to
aliens seeking admission to the United States, and for other purposes;
to the Committee on the Judiciary.
______
By Ms. SNOWE:
S. 1490. A bill to establish terrorist lookout committees in each
United States Embassy; to the Committee on Foreign Relations.
______
By Ms. SNOWE (for herself and Mrs. Feinstein):
S. 1491. A bill to provide for the establishment and implementation
of a fingerprint processing system to be used whenever a visa is issued
to an alien; to the Committee on the Judiciary.
Ms. SNOWE. Madam President, I rise today to introduce three bills
that will provide our first line of defense, our Consular Officers at
our embassies and INS Inspectors at our ports-of-entry, with the
resources and information they need to determine whether to grant a
foreign national a visa or permit them entry to the United States. They
are: The Terrorist Lookout Committee Act, the Visa Fingerprinting Act,
and the Information Sharing to Strengthen America's Security Act.
I saw firsthand the consequences of serious inadequacies in
coordination and communication during my twelve years as ranking member
of the House Foreign Affairs International Operations Subcommittee and
chair of the International Operations Subcommittee of the Senate
Foreign Relations Committee. It was this lack of coordination that
permitted the radical Egyptian Sheik Rahman, the mastermind of the 1993
World Trade Center bombing, to enter and exit the U.S. five times
unimpeded even after he was put on the State Department's Lookout List
in 1987, and allowed him to get permanent residence status by the INS
even after the State Department issued a certification of visa
revocation.
These bills are an essential step toward removing a vulnerability in
our national security that has continued through the years. For
example, the Inman report of 1984, which was commissioned by Secretary
Shultz after three terrorist attacks against the U.S. Embassy and
marines in Lebanon in 1983 and 1984, found that coordination between
agencies must be improved. After the 1998 bombings of U.S. embassies in
Kenya and Tanzania, the Accountability Review Board, a board which is
required by law to make findings and recommendations upon the loss of
life or property, made a recommendation that the FBI and State
Department should improve their information sharing on terrorism. The
2000 National Commission on Terrorism also recommended that the FBI
should establish a cadre of reports officers to distill and disseminate
terrorism-related information once it is collected.
While intelligence is frequently exchanged, no law requires law
enforcement and intelligence agencies to share information on dangerous
aliens with the State Department. The information sharing that does
occur among agencies is done on a voluntary basis. Accordingly, the
first bill I am introducing, the Information Sharing to Strengthen
America's Security Act, requires all U.S. law enforcement agencies and
the intelligence community to share information on foreign nationals
with the State Department so that visas can be granted with the
assurance that the sum total of the U.S. government has no knowledge
why an alien should not be granted a visa to travel to the U.S.
This bill increases the information sharing among our law enforcement
agencies, our intelligence community, and the State Department, so that
foreign nationals who are known by any entity of the U.S. Government to
be associated with, or members of, terrorist organizations are denied a
visa. This includes the FBI, DEA, INS, Customs, CIA and the Defense
Intelligence Agency, DIA, all vital agencies in the war on terrorism.
The second bill I am introducing--the Terrorist Lookout Committee
Act, builds on the Information Sharing to Strengthen America's Security
Act by requiring a Terrorist Lookout Committee to be established in
every one of our embassies. This committee, which would be chaired by
the Deputy Chief of Mission, will be comprised of the senior
representatives of all law enforcement agencies and the intelligence
community. The purpose of the mandated monthly meeting is to provide a
forum for these officials to add names to the State Department's
Consular Lookout and Support System, CLASS, of those who are considered
dangerous aliens and, if they applied for a visa, should undergo a
thorough review and possible denial of the visa.
If no names are submitted to the list then the chair is required to
certify, subject to an Accountability Review Board, that no member had
knowledge of any name that should be included. This requirement will
elevate awareness of, and focus constant attention on, the necessity of
maintaining the most accurate and current information possible.
Finally, quarterly reports by the Secretary of State are to be
submitted to the House International Relations Committee and the Senate
Foreign Relations Committee.
To ensure that the foreign national who received the visa from our
Embassy is the same person using it to enter the United States, I have
introduced the Visa Fingerprinting Act. This bill requires the
Secretary of State and the INS Commissioner to jointly establish and
implement a fingerprint-backed check system. Foreign nationals would be
fingerprinted before a visa could be issued, with information
catalogued in a database accessible to Immigration officials. INS
authorities at port-of-entry would then be required to match
fingerprint data with that of the foreign nationals seeking entry into
the U.S., with the INS certifying to the match before permitting entry.
My bill authorizes a one-time congressional expenditure to establish
and implement the system, but the cost of operating the system would be
funded through an increase in the visa service charge required for each
visa.
The use of biometric technology such as fingerprint imaging, retinal
and iris scans, and voice recognition, is no longer just a part of our
science-fiction movies, but has become a widely used means of identity
verification. The U.S. Government uses it at military and secret
installations for access to both information and the installations
themselves. Airports, such as Charlotte-Douglas International which
utilizes iris scanning technology, have incorporated biometric
technology to limit access to particular areas of the airport to
authorized personnel only.
Interestingly, the INS already started down this road when, in 1998,
it began to issue biometric crossing cards to Mexicans who cross the
border frequently. These cards have a digital fingerprint image which,
upon crossing, is
[[Page S10159]]
matched to the fingerprint of the person possessing the card.
The bottom line is, we must stop terrorists not only at their points
of entry, but more critically, at their point of origin. In America's
war on terrorism, we can do no less.
______
By Mr. BOND:
S. 1493. A bill to forgive interest payments for a 2-year period on
certain disaster loans to small business concerns in the aftermath of
the terrorist attacks perpetrated against the United States on
September 11, 2001, to amend the Internal Revenue Code of 1986 to
provide tax relief for small business concerns, and for other purposes;
to the Committee on Finance.
Mr. BOND. Madam President, I rise today to introduce the ``Small
Business Leads to Economic Recovery Act of 2001.'' The senseless
terrorist attacks of September 11th have dealt a severe blow to the
Nation and to our already struggling economy. The Small Business
Administration estimates that 14,000 small businesses are within the
disaster area in New York alone. These businesses clearly have been
directly affected by this national disaster. But the economic impact
does not stop there. For months small enterprises and self-employed
individuals across the country have been struggling with the slowing
economy. The recent terrorist attacks makes their situation even more
dire.
In light of these events, the increasing calls from the small
business community for economic stimulus legislation have
understandably increased. As the Ranking Member of the Committee on
Small Business and Entrepreneurship, I receive on a daily basis pleas
for help from small business in Missouri and across the Nation: small
restaurants who have lost much of their business due to the fall off in
business travel; local flight schools that have been grounded as a
result of the recent terrorist attacks; and Main Street retailers who
are struggling to survive in the slowing economy. Clearly, we must act
and act soon.
In response to these urgent calls for help, I have prepared the Small
Business Leads to Economic Recovery Act of 2001, which is designed to
provide effective economic stimulus in three distinct but complementary
ways: increasing access to capital for the Nation's small enterprises;
providing tax relief and investment incentives for our small firms and
the self-employed; and directing one of the Nation's largest
consumers--the Federal Government--to shop with small business in
America.
When the Disaster Relief Program at the Small Business
Administration, SBA, was first established, the terrorist attack on New
York City and the Pentagon was hardly contemplated. Now that we as a
Nation are confronted with this nightmare, it is easy to see that are
traditional approach to disaster relief will not be helpful to the
thousands of small businesses located at or around the World Trade
Center and the Pentagon.
In New York City, it may be a year or more before many of the small
businesses destroyed or shut down by the terrorist attacks can reopen
their doors for business. Small firms near the Pentagon, such as those
at the Reagan National Airport or Crystal City, Virginia, are also shut
down or barely operating. And there are small businesses throughout the
United States that have been shut down for national security concerns.
For example, General Aviation aircraft remain grounded, closing all
flight schools and other small businesses dependent on single engine
aircraft.
Regular small business disaster loans fall short of providing
effective disaster relief to help these small businesses. Therefore, my
bill will allow small businesses to defer for up to two years repayment
of principal and interest on their SBA disaster relief loans. Interest
that would otherwise accrue during the deferment period would be
forgiven. It is my intention that this essential new ingredient will
allow the small businesses to get back on their feet without
jeopardizing their credit or diving them into bankruptcy.
Small enterprises located in the presidentially declared disaster
areas surrounding the World Trade Center and the Pentagon are not the
only business experiencing extreme hardship as the direct result of the
terrorist attacks of September 11th. Nationwide, thousands of small
businesses are unable to conduct business or are operating at a bare-
minimum level. Tens of thousands of jobs are at risk of being lost as
our nation's small businesses weather the fall out from the September
11th attacks.
My bill provides a special financial tool to assist small businesses
as they deal with these significant business disruptions. Small
businesses in need of working capital would be able to obtain SBA-
guaranteed ``Emergency Relief Loans'' from their banks to help them
during this period. Fees normally paid by the borrower to the SBA would
be eliminated, and the SBA would guarantee 95 percent of the loan. A
key feature of my bill is the authorization for the bank to defer
repayment of principal for up to one year.
My colleagues and I have been hearing time and time again during the
last three weeks since the terrorist attacks that small businesses are
experiencing significant hardship. Many small businesses were already
experiencing a downturn in business activity prior to September 11th.
As the White House Chief of Staff recently commented, our economy was
in a downturn before September 11, and this downturn was further
exacerbated by the terrorist attacks.
Historically, when our economy slows or turns into a recession, the
strength of the small business sector helps to right our economic ship,
leading the nation to economic recovery. Today, small businesses employ
58 percent of the U.S. workforce and create 75 percent of the net new
jobs. Clearly, we cannot afford to ignore America's small businesses as
we consider measures to stimulate our economy.
The Small Business Leads to Economic Recovery Act of 2001 also
provides for changes in the SBA 7(a) Guaranteed Business Loan Program
and the 504 Certified Development Company Loan Program to stimulate
lending to small businesses that are most likely to grow and add new
employees. These enhancements to the SBA's 7(a) and 504 loan programs
are to extend for one year. They are designed to make the program more
affordable during the period when the economy is weak and banks have
tightened their underwriting requirements for small business loans.
Specifically, when the economy is slowing, it is normal for banks to
raise the bar for obtaining commercial loans. However, making it harder
for small businesses to survive is the wrong reaction to a slowing
economy. By tweaking the 7(a) and 504 loans to make them more
affordable to borrowers and lenders, we will be working against
history's rules governing a slowing economy, thereby adding a stimulus
for small businesses. Essentially, we will be providing a counter-
cyclical action in the face a slow economy with the express purpose of
accelerating the recovery.
I have agreed to cosponsor a bill that Senator John Kerry, Chairman
of the Committee on Small Business and Entrepreneurship, intends to
introduce in the near future to improve and strengthen the credit and
management assistance programs at the SBA in response to the September
11th terrorist attack. I am pleased to report that his bill will
incorporate key ingredients of Title I of the Small Business Leads to
Economic Recovery Act of 2001 by adopting the three tier approach to
enhance the SBA's credit programs so they can respond more effectively
and efficiently to the September 11th disaster.
With the contraction of the private-equity market over the past year,
the Small Business Investment Company, SBIC, program has taken on a
significant role in providing venture capital to small businesses
seeking investments in the range of $500,000 to $3 million. In the
current economic environment, the SBIC program represents an
increasingly important source of capital for small enterprises.
While Debenture SBICs qualify for SBA-guaranteed borrowed capital,
the government guarantee forces a number of potential investors, namely
pension funds, to avoid investing in SBICs because they would be
subject to tax liability for unrelated business taxable income, UBTI.
When free to choose, tax-exempt investors generally opt to invest in
venture capital funds that do not create UBTI.
[[Page S10160]]
As a result, 60 percent of the private-capital potentially available
to these SBICs is effectively ``off limits.'' The Small Business Leads
to Economic Recovery Act of 2001 corrects this problem by excluding
government-guaranteed capital borrowed by Debenture SBICs from debt for
purposes of the UBTI rules. This change would permit tax-exempt
organizations to invest in SBICs without the burdens of UBTI
recordkeeping or tax liability. More importantly, this change in the
law could double the amount of private capital being invested in small
businesses through the Debenture SBIC program.
The access-to-capital provisions of the bill will go a long way
toward easing the cash-flow burdens that small firms are now facing,
but we can also tackle this problem from another perspective, reducing
the tax burden of small businesses. Accordingly, the second component
of my Small Business Leads to Economic Recovery Act provides
substantial tax relief for small businesses. These provisions hold the
greatest potential, in my opinion, for fast and effective tax stimulus
for small enterprises.
First and foremost, this bill would permit small businesses to
expense substantially more of their new equipment purchases by raising
the expensing limit to $100,000 per year and by increasing the
expensing phase-out threshold to $500,000. In addition, for small
businesses that cannot qualify for expensing, the bill reduces the
depreciation-recovery period for computers, peripheral equipment and
software to two years.
Together, these provisions have several important advantages for
America's small businesses, especially in light of the current economic
conditions. By allowing more equipment purchases to be deducted
currently and reducing the recovery period for technology purchases
that must be depreciated, we can provide much needed capital for small
businesses. With that freed-up capital, a business can invest in new
computer equipment, which will benefit the small enterprise and, in
turn, stimulate the sagging technology industry. Finally, new computer
equipment will contribute to continued productivity growth in the
business community, which Federal Reserve Chairman Alan Greenspan has
stressed is essential to the long-term vitality of our economy.
Finally, these modifications will simplify the tax law for countless
small businesses. Greater expensing means less equipment subject to the
onerous depreciation rules. And for businesses that do not qualify for
expensing, shortening the recovery period for computer equipment from
the current five-year period will add some common sense to the tax law.
Since most computers have outlived their usefulness after two to three
years, let alone five years, too many businesses are left to depreciate
this property long after it has become obsolete.
In short, the equipment-expensing and depreciation changes I propose
are a win-win for small businesses, the technology industry, and our
national economy as a whole. But we do not stop there. The bill also
addresses the limitation on depreciation that many small firms face
with regard to the automobiles, light trucks and vans that are so
essential to their operations.
Specifically, the Small Business Leads to Economic Recovery Act
amends the limitations under section 280F of the tax code, which
currently prohibit a small business from claiming a full depreciation
deduction if the vehicle costs more than $14,460, for vehicles placed
in service in 2000. Although these limitations have been subject to
inflation adjustments since they were adjusted in 1986, they have not
kept pace with the actual cost of new vehicles in most cases. For many
small businesses, the use of a car, light truck or van is an essential
asset for transporting personnel to sales and service appointments and
for delivering their products. Accordingly, the bill adjusts the
thresholds so that a business will not lose any of its depreciation
deduction for vehicles costing less than $25,000, which will continue
to be indexed for inflation.
This provision of the bill will help ease the cash flow strains for
many small businesses, freeing critical capital that can be used for
investments in new business vehicles. In turn, purchases of new cars,
light trucks or vans will offer much-needed stimulus for the nation's
automotive industry. Again, multiple benefits for a small change in our
tax code.
My bill also responds to the difficult times facing the nation's
restaurant industry, which the National Restaurant Association
estimates lost 60,000 jobs in September due to slower sales caused by
the current economic conditions and the recent terrorist attacks. While
by no means a complete solution, we can lend a hand to the restaurant
industry, which is dominated by small businesses, by increasing the
business-meals deduction to 100 percent. This will provide an
incentive for businesses to return to their local restaurants, and at
the same time assist non-restaurant businesses and the self-employed
for whom business meals are an unavoidable fact of life.
At the National Women's Small Business Summit, which I hosted last
June, a number of participants noted that unlike their large
competitors, small enterprises often sell their products and services
by word of mouth and close many business transactions on the road or in
a local diner. In many ways the business breakfast with a potential
customer is akin to formal advertising that larger businesses purchase
in newspapers or on radio or television. While the newspaper ad is
fully deductible, however, the business meal is only 50 percent
deductible for the small business owner.
In addition, many self-employed individuals like sales
representatives spend enormous amounts of time on the road with no
choice but to eat in restaurants while away from home. For these
individuals the current 50 percent limitation on the deductibility of
business meals is a severe strain on cash flow, especially with the
soft market conditions they face for selling their products and
services. A 100 percent deduction will ease those strains and help
small firms in these situations to weather the current economic storm.
The final tax provisions of my bill relate to a growing problem for
small businesses--the alternative minimum tax, AMT. For the sole
proprietors, partners, and S corporation shareholders, the individual
AMT increases their tax liability by, among other things, reducing
depreciation and depletion deductions, limiting net operating loss
treatment, eliminating the deductibility of state and local taxes, and
curtailing the expensing of research and experimentation costs. In
addition, because of its complexity, this tax forces small business
owners to waste precious funds on tax professionals to determine
whether the AMT even applies. For these reasons, the bill includes the
recommendation of the Taxpayer Advocate to repeal the individual AMT.
In light of the current economic situation facing our nation's small
enterprises, my bill will repeal the individual AMT beginning this
year.
For small corporations, the AMT story is much the same, high
compliance costs and additional taxes draining away scarce capital from
the business. Accordingly, for small corporate taxpayers, the bill
increases the current exemption from the corporate AMT. As a result, a
small corporation will initially qualify for the exemption if its
average gross receipts are $7.5 million or less, up from the current $5
million, during its first three taxable years. Thereafter, a small
corporation will continue to qualify for the AMT exemption for as long
as its average gross receipts for the prior three-year period do not
exceed $10 million, up from the current $7.5 million.
The tax component of the Small Business Leads to Economic Recovery
Act will provide significant cash-flow relief for small enterprises and
many incentives for them to continue investing in our economy for their
long-term well being. Together with the access-to-capital component,
the tax relief will give a significant boost to small businesses and
our economy. But we can do more, we can call on the Nation's largest
consumer, the Federal Government, to shop with small business in
America.
Toward that end, my bill would make some subtle changes in the laws
governing Federal procurement that will have a dramatic impact on
expanding contracting opportunities for small businesses. For example,
when the Brooks Act was enacted in 1982, it prohibited small business
set asides for
[[Page S10161]]
contracts to provide architectural and engineering services valued at
$85,000 or more. It has been almost twenty years, and the ceiling has
not been adjusted, not even once, to reflect inflation or other changes
in the economy. My bill would increase this ceiling to $300,000 and
would create immediate opportunities for contracting officers in
Federal agencies to increase the number of contracts set aside for
small businesses.
It is also the Federal Government's policy that contracts valued at
less than $100,000 be reserved for small businesses. This policy,
however, is not followed by the General Services Administration, GSA,
with respect to the Federal Supply Schedule, FSS. Too often contracts
for less than $100,000 are filed by large businesses. Therefore, my
bill would require that all Federal agency contracts, requirements or
procurements valued at less than $100,000 be reserved for small
businesses. Again, this change in our law would have an immediate
positive effect by making more contracting opportunities available to
small businesses.
For contracts for property or services not on the GSA's FSS, my bill
would require that contracts valued at less than $100,000 be reserved
for competition among small businesses registered on the SBA's PRO-Net
and the Central Contractor Register, CCR, at the Department of Defense,
DoD. By using the two registries, small businesses would know where to
go to begin the process of competing for government contracts, and
contracting officers would have at their fingertips a list of hundreds
of thousands of small businesses listed by industry category.
My bill would provide for a six-month announcement period, which
would be followed by a one year phase-in period during which 25 percent
of the dollar value of all contracts valued less than $100,000 would be
set aside for small businesses. After the first year, the set aside
would increase to 50 percent in the second and subsequent years.
Minority-owned small businesses and small businesses located in
economically distressed urban and rural areas are at a particular
disadvantage when competing for Federal government contracts. My bill
would offer improved opportunities for these small businesses as part
of the disaster-recovery effort. It would provide that when a
contracting officer directs a contract to a HUBZone or 8(a) small
businesses, the current ceiling on sole-source contracting would be
removed. This change would apply only to the money that is appropriated
by the Congress specifically targeted to the September 11 disaster-
recovery effort.
The Small Business Leads to Economic Recovery Act is a comprehensive
bill to help the Nation as well as the owners and employees of small
businesses. Its relief is targeted and is designed to work tomorrow and
in the immediate future. Now is not the time to focus on ten year plans
and lengthy phase-in periods. Small businesses need help, today, and my
bill will put cash in the business' bank account and in employees'
pockets. Small businesses have been the champions of past economic
recoveries. My bill gives small businesses the tools to accelerate a
recovery, so that our Nation's economic fortunes are reversed sooner
rather than later.
Madam President, I ask unanimous consent that the text of the bill
and a summary of its provisions be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
S. 1493
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Small
Business Leads to Economic Recovery Act of 2001''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title; table of contents.
TITLE I--SMALL BUSINESS EMERGENCY LOAN ASSISTANCE
Sec. 101. Short title.
Sec. 102. Definitions.
Sec. 103. Deferment of disaster loan payments.
Sec. 104. Refinancing existing disaster loans.
Sec. 105. Emergency relief loan program.
Sec. 106. Economic recovery loan and financing programs.
TITLE II--SMALL BUSINESS TAX PROVISIONS FOR ECONOMIC STIMULUS
Sec. 201. Amendment of 1986 Code.
Sec. 202. Increase in expense treatment of certain depreciable business
assets for small businesses.
Sec. 203. Expensing of computer software.
Sec. 204. Modification of depreciation rules for computers and
software.
Sec. 205. Adjustments to depreciation limits for business vehicles.
Sec. 206. Increased deduction for business meal expenses.
Sec. 207. Modification of unrelated business income limitation on
investment in certain debt-financed properties.
Sec. 208. Repeal of alternative minimum tax on individuals.
Sec. 209. Exemption from alternative minimum tax for small
corporations.
TITLE III--SMALL BUSINESS PROCUREMENTS
Sec. 301. Expansion of opportunity for small businesses to be awarded
department of defense contracts for architectural and
engineering services and construction design.
Sec. 302. Procurements of property and services in amounts not in
excess of $100,000 from small businesses.
Sec. 303. Sole Source Procurements of Property and Services under the
2001 Emergency Supplemental Appropriations Act for
Recovery From and Response to Terrorist Attacks on the
United States.
TITLE I--SMALL BUSINESS EMERGENCY LOAN ASSISTANCE
SEC. 101. SHORT TITLE.
This title may be cited as the ``Small Business Emergency
Loan Assistance Act of 2001''.
SEC. 102. DEFINITIONS.
In this title--
(1) the term ``Administration'' means the Small Business
Administration;
(2) the term ``covered loan'' means a loan made by the
Administration to a small business concern--
(A) under section 7(b) of the Small Business Act (15 U.S.C.
636(b)); and
(B) located in an area which the President has designated
as a disaster area as a result of the terrorist attacks
perpetrated against the United States on September 11, 2001;
and
(3) the term ``small business concern'' has the same
meaning as in section 3 of the Small Business Act (15 U.S.C.
632).
SEC. 103. DEFERMENT OF DISASTER LOAN PAYMENTS.
(a) In General.--Notwithstanding any other provision of
law, payments of principal or interest on a covered loan
shall be deferred, and no interest shall accrue with respect
to a covered loan, during the 2-year period following the
date of issuance of the covered loan.
(b) Resumption of Payments.--At the end of the 2-year
period described in subsection (a), the payment of periodic
installments of principal and interest shall be required with
respect to a covered loan, in the same manner and subject to
the same terms and conditions as would otherwise be
applicable to a loan made under section 7(b) of the Small
Business Act (15 U.S.C. 636(b)).
SEC. 104. REFINANCING EXISTING DISASTER LOANS.
(a) In General.--Any loan made under section 7(b) of the
Small Business Act (15 U.S.C. 636(b)) that was outstanding as
to principal or interest on September 11, 2001, may be
refinanced by a small business concern that is also eligible
to receive a covered loan under this Act, and the refinanced
amount shall be considered to be part of the covered loan for
purposes of this title.
(b) No Affect on Eligibility.--A refinancing under
subsection (a) by a small business concern shall be in
addition to any covered loan eligibility for that small
business concern under this title.
SEC. 105. EMERGENCY RELIEF LOAN PROGRAM.
(a) Business Loan Authority.--Section 7(a) of the Small
Business Act (15 U.S.C. 636(a)) is amended by adding at the
end the following:
``(31) Temporary loan authority following terrorist
attacks.--
``(A) In general.--During the 1-year period beginning on
the date of enactment of this paragraph, the Administration
may make loans under this subsection to a small business
concern that has suffered, or that is likely to suffer,
significant economic injury as a result of the terrorist
attacks perpetrated against the United States on September
11, 2001.
``(B) Loan terms.--With respect to a loan under this
paragraph--
``(i) for purposes of paragraph (2)(A), participation by
the Administration shall be equal to 95 percent of the
balance of the financing outstanding at the time of
disbursement of the loan;
``(ii) no fee may be required or charged under paragraph
(18);
``(iii) the applicable rate of interest shall not exceed a
rate that is one percentage point above the prime rate as
published in a national financial newspaper published each
business day;
``(iv) no such loan shall be made if the total amount
outstanding and committed (by participation or otherwise) to
the borrower under this paragraph would exceed $1,000,000;
``(v) upon request of the borrower, repayment of principal
due on a loan made under
[[Page S10162]]
this paragraph shall be deferred during the 1-year period
beginning on the date of issuance of the loan; and
``(vi) the repayment period shall not exceed 7 years,
including any period of deferment under clause (v).
``(C) Applicability.--The loan terms described in
subparagraph (B) shall apply to a loan under this paragraph
notwithstanding any other provision of this subsection, and
except as specifically provided in this paragraph, a loan
under this paragraph shall otherwise be subject to the same
terms and conditions as any other loan under this subsection.
``(D) Significant economic injury.--In this paragraph, the
term`substantial economic injury' means an economic harm to a
small business concern that results in the inability of the
small business concern--
``(i) to meet its obligations as they mature;
``(ii) to pay its ordinary and necessary operating
expenses; or
``(iii) to market, produce, or provide a product or service
ordinarily marketed, produced, or provided by the business
concern.''.
SEC. 106. ECONOMIC RECOVERY LOAN AND FINANCING PROGRAMS.
(a) One-Year Suspension of Section 7(a) Fees.--Section
7(a)(18) of the Small Business Act (15 U.S.C. 636(a)(18)) is
amended by adding at the end the following:
``(C) One-year waiver of fees following terrorist
attacks.--No fee may be collected or charged, and no fee
shall accrue under this paragraph during the 1-year period
beginning on the date of enactment of the Small Business
Terrorism Relief and Economic Stimulus Act of 2001.''.
(b) One-Year Increase in Participation Levels.--Section
7(a)(2) of the Small Business Act (15 U.S.C. 636(a)(2)) is
amended--
(1) in subparagraph (A), by striking ``subparagraph (B)''
and inserting ``subparagraphs (B) and (E)''; and
(2) by adding at the end the following:
``(E) Temporary participation levels following terrorist
attacks.--During the 1-year period beginning on the date of
enactment of the Small Business Terrorism Relief and Economic
Stimulus Act of 2001, clauses (i) and (ii) of subparagraph
(A) shall be construed to read as follows:
`` `(i) 85 percent of the balance of the financing
outstanding at the time of disbursement of the loan, if such
balance exceeds $150,000; or
`` `(ii) 90 percent of the balance of the financing
outstanding at the time of disbursement of the loan, if such
balance is less than or equal to $150,000.'.''.
(c) One-Year Suspension of Other Fees.--Section 503 of the
Small Business Investment Act of 1958 (15 U.S.C. 697) is
amended--
(1) in subsection (b)(7)(A), by striking ``which amount
shall'' and inserting ``which amount shall not be assessed or
collected, and no amount shall accrue, during the 1-year
period beginning on the date of enactment of the Small
Business Terrorism Relief and Economic Stimulus Act of 2001,
and which amount shall otherwise''; and
(2) in subsection (d)(2), by adding at the end the
following: ``No fee may be assessed or collected under this
paragraph, and no fee shall accrue, during the 1-year period
beginning on the date of enactment of the Small Business
Terrorism Relief and Economic Stimulus Act of 2001.''.
TITLE II--SMALL BUSINESS TAX PROVISIONS FOR ECONOMIC STIMULUS
SEC. 201. AMENDMENT OF 1986 CODE.
Except as otherwise expressly provided, whenever in this
title an amendment or repeal is expressed in terms of an
amendment to, or repeal of, a section or other provision, the
reference shall be considered to be made to a section or
other provision of the Internal Revenue Code of 1986.
SEC. 202. INCREASE IN EXPENSE TREATMENT OF CERTAIN
DEPRECIABLE BUSINESS ASSETS FOR SMALL
BUSINESSES.
(a) In General.--Section 179(b)(1) (relating to dollar
limitation) is amended to read as follows:
``(1) Dollar limitation.--
``(A) In general.--The aggregate cost which may be taken
into account under subsection (a) for any taxable year shall
not exceed $100,000.
``(B) Inflation adjustment.--In the case of any taxable
year beginning in a calendar year after 2001, the dollar
amount contained in subparagraph (A) shall be increased by an
amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting ``calendar year 2000'' for
``calendar year 1992'' in subparagraph (B) thereof.
If any amount as adjusted under this subparagraph is not a
multiple of $1,000, such amount shall be rounded to the
nearest multiple of $1,000.''.
(b) Expansion of Phase-Out of Limitation.--Section
179(b)(2) is amended to read as follows:
``(2) Reduction in limitation.--
``(A) In general.--The limitation under paragraph (1) for
any taxable year shall be reduced (but not below zero) by the
amount by which the cost of section 179 property for which a
deduction is allowable (without regard to this subsection)
under subsection (a) for such taxable year exceeds
$500,000.''
``(B) Inflation adjustment.--In the case of any taxable
year beginning in a calendar year after 2001, the dollar
amount contained in subparagraph (A) shall be increased by an
amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting ``calendar year 2000'' for
``calendar year 1992'' in subparagraph (B) thereof.
If any amount as adjusted under this subparagraph is not a
multiple of $10,000, such amount shall be rounded to the
nearest multiple of $10,000.''.
(c) Time of Deduction.--The second sentence of section
179(a) (relating to election to expense certain depreciable
business assets) is amended by inserting ``(or, if the
taxpayer elects, the preceding taxable year if the property
was purchased in such preceding year)'' after ``service''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 203. EXPENSING OF COMPUTER SOFTWARE.
(a) Computer Software Eligible for Expensing.--The heading
and first sentence of section 179(d)(1) (relating to section
179 property) are amended to read as follows:
``(1) Section 179 property.--For purposes of this section,
the term `section 179 property' means property--
``(A) which is--
``(i) tangible property to which section 168 applies, or
``(ii) computer software (as defined in section
197(e)(3)(B)) to which section 167 applies,
``(B) which is section 1245 property (as defined in section
1245(a)(3)), and
``(C) which is acquired by purchase for use in the active
conduct of a trade or business.''.
(b) No Computer Software Included as Section 197
Intangible.--
(1) In general.--Section 197(e)(3)(A) is amended to read as
follows:
``(A) In general.--Any computer software.''.
(2) Conforming amendment.--Section 167(f)(1)(B) is amended
by striking ``; except that such term shall not include any
such software which is an amortizable section 197
intangible''.
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service after December 31,
2000.
SEC. 204. MODIFICATION OF DEPRECIATION RULES FOR COMPUTERS
AND SOFTWARE.
(a) 2-Year Applicable Recovery Period for Depreciation of
Computers and Peripheral Equipment.--
(1) In general.--Section 168(c) (relating to applicable
recovery period) is amended by adding at the end the
following flush sentence:
``In the case of 5-year property which is a computer or
peripheral equipment, the applicable recovery period shall be
2 years.''.
(2) Conforming amendments.--
(A) Section 168(g)(3)(C) (relating to alternative
depreciation system for certain property) is amended to read
as follows:
``(C) Qualified technological equipment.--
``(i) In general.--Except as provided in clause (ii), in
the case of any qualified technological equipment, the
recovery period used for purposes of paragraph (2) shall be 5
years.
``(ii) Computers or peripheral equipment.--In the case of
any computer or peripheral equipment, the recovery period
used for purposes of paragraph (2) shall be 2 years.''.
(B) Section 168(j)(2) (relating to depreciation of property
on Indian reservations) is amended by adding at the end the
following flush sentence:
``In the case of 5-year property which is a computer or
peripheral equipment, the applicable recovery period shall be
1 year.''.
(C) Section 467(e)(3)(A) (relating to certain payments for
the use of property or services) is amended by adding at the
end the following flush sentence:
``In the case of 5-year property which is a computer or
peripheral equipment, the applicable recovery period shall be
2 years.''.
(b) 2-Year Depreciation Period for Computer Software.--
Section 167(f)(1)(A) of the Internal Revenue Code of 1986 is
amended by striking ``36 months'' and inserting ``24
months''.
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service after December 31,
2000.
SEC. 205. ADJUSTMENTS TO DEPRECIATION LIMITS FOR BUSINESS
VEHICLES.
(a) In General.--
(1) Increase in limitation.--Section 280F(a)(1)(A)
(relating to limitation on amount of depreciation for luxury
automobiles) is amended--
(A) by striking ``$2,560'' in clause (i) and inserting
``$5,400'';
(B) by striking ``$4,100'' in clause (ii) and inserting
``$8,500'';
(C) by striking ``$2,450'' in clause (iii) and inserting
``$5,100''; and
(D) by striking ``$1,475'' in clause (iv) and inserting
``$3,000''.
(2) Conforming amendment.--Section 280F(a)(1)(B)(ii)
(relating to disallowed deductions allowed for years after
recovery period) is amended by striking ``$1,475'' each place
that it appears and inserting ``$3,000''.
(b) Effective Date.--The amendments made by this section
shall apply to property placed in service after December 31,
2000.
SEC. 206. INCREASED DEDUCTION FOR BUSINESS MEAL EXPENSES.
(a) In General.--Section 274(n)(1) (relating to only 50
percent of meal and entertainment expenses allowed as
deduction) is amended
[[Page S10163]]
by striking ``50 percent'' in the text and inserting ``the
allowable percentage''.
(b) Allowable Percentage.--Section 274(n) is amended by
redesignating paragraphs (2) and (3) as paragraphs (3) and
(4), respectively, and by inserting after paragraph (1) the
following new paragraph:
``(2) Allowable percentage.--For purposes of paragraph (1),
the allowable percentage is--
``(A) in the case of amounts for items described in
paragraph (1)(B), 50 percent, and
``(B) in the case of expenses for food or beverages, 100
percent.''.
(c) Clarification of Special Rule for Individuals Subject
to Federal Hours of Service.--Section 274(n)(4) (relating to
limited percentages of meal and entertainment expenses
allowed as deduction), as redesignated by subsection (b), is
amended to read as follows:
``(4) Special rule for individuals subject to federal hours
of service.--In the case of any expenses for food or
beverages consumed while away from home (within the meaning
of section 162(a)(2)) by an individual during, or incident
to, the period of duty subject to the hours of service
limitations of the Department of Transportation, paragraph
(2)(B) shall apply to such expenses.''.
(d) Conforming Amendment.--The heading for subsection (n)
of section 274 is amended by striking ``50 Percent'' and
inserting ``Limited Percentages''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 207. MODIFICATION OF UNRELATED BUSINESS INCOME
LIMITATION ON INVESTMENT IN CERTAIN DEBT-
FINANCED PROPERTIES.
(a) In General.--Section 514(c)(6) (relating to acquisition
indebtedness) is amended--
(1) by striking ``include an obligation'' and inserting
``include--
``(A) an obligation'',
(2) by striking the period at the end and inserting ``,
or'', and
(3) by adding at the end the following:
``(B) indebtedness incurred by a small business investment
company licensed under the Small Business Investment Act of
1958 which is evidenced by a debenture--
``(i) issued by such company under section 303(a) such Act,
or
``(ii) held or guaranteed by the Small Business
Administration.''.
(b) Effective Date.--The amendments made by subsection (a)
shall apply to acquisitions made on or after the date of the
enactment of this Act.
SEC. 208. REPEAL OF ALTERNATIVE MINIMUM TAX ON INDIVIDUALS.
(a) In General.--
(1) Repeal.--Section 55(a) (relating to alternative minimum
tax) is amended by adding at the end the following new flush
sentence:
``For purposes of this title, the tentative minimum tax on
any taxpayer other than a corporation for any taxable year
beginning after December 31, 2000, shall be zero.''.
(2) Nonrefundable personal credits fully allowed against
regular tax liability.--
(A) In general.--Section 26(a) (relating to limitation
based on amount of tax) is amended to read as follows:
``(a) Limitation Based on Amount of Tax.--The aggregate
amount of credits allowed by this subpart for the taxable
year shall not exceed the taxpayer's regular tax liability
for the taxable year.''.
(B) Child credit.--Section 24(d) is amended by striking
paragraph (2) and by redesignating paragraph (3) as paragraph
(2).
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 209. EXEMPTION FROM ALTERNATIVE MINIMUM TAX FOR SMALL
CORPORATIONS.
(a) In General.--Section 55(e)(1)(A) (relating to exemption
for small corporations) is amended to read as follows:
``(A) $10,000,000 gross receipts test.--The tentative
minimum tax of a corporation shall be zero for any taxable
year if the corporation's average annual gross receipts for
all 3-taxable-year periods ending before such taxable year
does not exceed $10,000,000. For purposes of the preceding
sentence, only taxable years beginning after December 31,
1997, shall be taken into account.''.
(b) Gross Receipts Test For First 3-year Period.--Section
55(e)(1)(B) is amended to read as follows:
``(B) $7,500,000 gross receipts test for first 3-year
period.--Subparagraph (A) shall be applied by substituting
`$7,500,000' for `$10,000,000' for the first 3-taxable-year
period (or portion thereof) of the corporation which is taken
into account under subparagraph (A).''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
TITLE III--SMALL BUSINESS PROCUREMENTS
SEC. 301. EXPANSION OF OPPORTUNITY FOR SMALL BUSINESSES TO BE
AWARDED DEPARTMENT OF DEFENSE CONTRACTS FOR
ARCHITECTURAL AND ENGINEERING SERVICES AND
CONSTRUCTION DESIGN.
Section 2855(b)(2) of title 10, United States Code, is
amended by striking ``$85,000'' and inserting ``$300,000''.
SEC. 302. PROCUREMENTS OF PROPERTY AND SERVICES IN AMOUNTS
NOT IN EXCESS OF $100,000 FROM SMALL
BUSINESSES.
(a) Small Business Set-Asides.--Section 15 of the Small
Business Act (15 U.S.C. 644) is amended by adding at the end
the following:
``(q) Procurements of Property and Services not in Excess
of $100,000.--
``(1) Federal supply schedule items.--The head of an agency
procuring items listed on a Federal Supply Schedule in a
total amount not in excess of $100,000 shall procure the
items from a small business.
``(2) Other property and services.--The head of an agency
procuring property or services not listed on a Federal Supply
Schedule in a total amount not in excess of $100,000 shall
procure the property or services from a small business
registered on PRO-Net or the Centralized Contractor
Registration System. Competitive procedures shall be used in
the selection of sources for procurements from small
businesses under this subsection.''.
(b) Phased Implementation.--
(1) First 2 years.--During the 2-year period beginning on
the effective date determined under subsection (c), the
requirement of subsection (q)(1) of section 15 of the Small
Business Act (as added by subsection (a) of this section)
shall apply with respect to 25 percent of the procurements
described in that subsection (determined on the basis of
amount), and the requirement in subsection (q)(2) of that
section shall apply with respect to 25 percent of the
procurements described in subsection (q)(2) (determined on
the basis of amount).
(2) Ensuing 2 years.--During the 2-year period beginning on
the day after the expiration of the period described in
paragraph (1), the requirement of subsection (q)(1) of
section 15 of the Small Business Act (as added by subsection
(a) of this section) shall apply with respect to 50 percent
of the procurements described in that subsection (determined
on the basis of amount), and the requirement in subsection
(q)(2) of that section shall apply with respect to 50 percent
of the procurements described in subsection (q)(2)
(determined on the basis of amount).
(c) Effective Date.--Section 15(q) of the Small Business
Act (as added by subsection (a) of this section) shall take
effect on the first day of the first month that begins not
less than 180 days after the date of enactment of this Act.
SEC. 303. SOLE SOURCE PROCUREMENTS OF PROPERTY AND SERVICES
UNDER THE 2001 EMERGENCY SUPPLEMENTAL
APPROPRIATIONS ACT FOR RECOVERY FROM AND
RESPONSE TO TERRORIST ATTACKS ON THE UNITED
STATES.
Notwithstanding the provisions of sections
8(a)(1)(D)(i)(II) and subclauses (I) and (II) of section
31(b)(2)(A)(ii) of the Small Business Act (15 U.S.C.
637(a)(1)(D)(i)(II), 658(b)(2)(A)(ii)(I), and
658(b)(2)(A)(ii)(II), respectively), a contracting officer
may award non-competitive contracts with the budget authority
provided by the 2001 Emergency Supplemental Appropriations
Act for Recovery from and Response to Terrorist Attacks on
the United States (Public Law 107-38) or by subsequent
emergency appropriations bill adopted pursuant thereto, if--
(a) such contracts are to be awarded to an eligible Program
Participant under section 8(a) or to a qualified HUBZone
small business concern under section 3(p)(5) of the Small
Business Act (15 U.S.C. 637(a) and 632(p)(5)), and
(b) the head of the procuring agency certifies that the
property or services needed by the agency are of such an
unusual and compelling urgency that the United States would
be seriously harmed by use of competitive procedures,
pursuant to--
(1) section 2304(c)(2) of Title 10, United States Code, or
(2) section 303(c)(2) of the Federal Property and
Administrative Services Act of 1949 (41 U.S.C. 253(c)(2)).
____
S. 1493: Small Business Leads to Economic Recovery Act of 2001
description of provisions
TITLE I--SMALL BUSINESS EMERGENCY LOAN ASSISTANCE
Section 101. Short Title
This section sets forth the title, ``Small Business Leads
to Economic Recovery Act of 2001.''
Section 102. Definitions
This section provides the definitions of key words used in
Title I.
Section 103. Deferment of Disaster Loan Payments
In recognition that the small businesses eligible for
Disaster Assistance Loans will not be able to begin repayment
of the loans for up to two years, the bill provides that both
principal and interest payment will be deferred for two years
from the date of loan origination. Interest that accrues
during the deferment period would be forgiven.
Section 104. Refinancing Existing Disaster Loans
As the result of the World Trade Center bombing in 1993,
there are small businesses in the Presidentially-declared
disaster area that have outstanding SBA disaster loans. This
section will permit small businesses to refinance outstanding
disaster loans in the new disaster loans with the two-year
deferment provision.
Section 105. Emergency Relief Loan Program
This section creates a special one-year program at the SBA
using key components of the 7(a) guaranteed business loan
program to create a working capital loan program for small
businesses suffering significant economic injury as the
result of the September
[[Page S10164]]
11, 2001, terrorist attacks on the World Trade Center and the
Pentagon. The loans would have a 95 percent guarantee, and
there would be no up-front borrower fee. The interest rate
would be the Prime Rate plus 1 percent. Banks would have the
option to defer principal payments for up to one year.
This special working capital loan program recognizes there
are small businesses nationwide that are experiencing serious
cash flow difficulties as the result of the terrorist
attacks, e.g., travel agencies, flight training and other
commercial users of single-engine VFR aircraft.
Section 106. Economic Recovery Loan and Financing Programs
As the result of the deteriorating economy, which was
experiencing a downturn prior to September 11, 2001, banks
had initiated steps to tighten the availability of credit to
small businesses. For Fiscal Year 2001, it is projected that
new loan originations may drop as much as 25 percent from the
projections on October 1, 2000.
This section will make significant changes for one year to
the 7(a) guaranteed business loan program. Loans would be
available for all qualified borrowers. The up-front loan
origination fee paid by the borrower, which ranges from 2.0
percent to 3.5 percent depending on loan size, would be
eliminated. The guarantee percentage for the general loan
program would be increased from 75 percent to 85 percent. For
the LowDoc program, the guarantee percentage would increase
from 80 percent to 90 percent.
This section would also make similar changes to the 504
Certified Development Company Loan Program. For one year, the
up-front fee paid by the bank making the loan in the first
loss position would be eliminated. Further, the annual fee
paid by the borrower would also be dropped.
Section 107. Small Business Investment Company Enhancement Program
The Administration and the SBIC industry has recommended
that the SBIC/Participating Securities Program become a fee-
based program, which would eliminate the need for an annual
appropriation. This change would entail enacting legislation
to increase the SBIC fee from 1 percent to at least l.38
percent. This section would allow the SBA to increase the
annual fee to no more than 1.50 percent, which would support
a program level fo $3.5 billion in Fiscal Year 2002.
TITLE II--SMALL BUSINESS TAX PROVISIONS FOR ECONOMIC STIMULUS
Section 201. Amendment of 1986 Code
This section clarifies that all changes in the bill are to
the Internal Revenue Code of 1986, as previously amended.
Section 202. Increase in Expense Treatment of Certain Depreciable
Business Assets for Small Businesses.
The bill amends section 179 of the Internal Revenue Code to
increase the amount of equipment purchases that small
businesses may expense each year from the current $24,000 to
$100,000. This change will eliminate the burdensome
recordkeeping involved in depreciating such equipment and
free up capital for small businesses to grow and create jobs.
The bill also increases the phase-out limitation for
equipment expensing from the current $200,000 to $500,000,
thereby expanding the type of equipment that can qualify for
expensing treatment. This limitation along with the annual
expensing amount will be indexed for inflation under the
bill.
Following the recommendation of the National Taxpayer
Advocate, the bill also amends section 179 to permit
expensing in the year that the property is purchased or the
year that the property is placed in service, whichever is
earlier. This will eliminate the difficulty that many small
enterprises have encountered when investing in new equipment
in one tax year, e.g., 2001 that cannot be placed in service
until the following year, e.g., 2002. The equipment-
expensing provisions will be effective for taxable years
beginning after December 31, 2000.
Section 203. Expensing of Computer Software
In connection with the expanded equipment-expensing limits,
the bill also permits taxpayers to expense computer software
up to the new $100,000 limit on annual equipment expensing.
This provision will eliminate the compliance costs and
burdens of depreciation software over a three-year period,
which is often inconsistent with the product's actual useful
life. This provision will be effective for taxable years
beginning after December 31, 2000.
Section 204. Modification of Depreciation Rules for Computers and
Software
For small business taxpayers who do not qualify for
expensing treatment, the bill modifies the outdated
depreciation rules to permit taxpayers to depreciate computer
equipment and software over a two-year period. Under present
law, computer equipment is generally depreciated over a five-
year period and software is usually depreciated over three
years. With the rapid advancements in technology, these
depreciation periods are sorely out of date and can result in
small businesses having to exhaust their depreciation
deductions well after the equipment or software is obsolete.
The bill makes the tax code in this area more consistent with
the technological reality of the business world. This
provision will be effective for computers and software placed
in service in taxable years beginning after December 31,
2000.
Section 205. Adjustments to Depreciation Limits for Business Vehicles
The bill amends section 280F of the Internal Revenue Code,
which limits the amount of depreciation that a business may
claim with respect to a vehicle used for business purposes.
Under the current thresholds, a business loses a portion of
its depreciation deduction if the vehicle costs more than
$14,460, for vehicles placed in service in 2000. Although
these limitations have been subject to inflation adjustments,
they have not kept pace with the actual cost of new cars,
light trucks and vans in most cases. For many small
businesses, the use of a car, light truck or van is an
essential asset for transporting personnel to sales and
service appointments and for delivering their products.
Accordingly, the bill adjusts the thresholds so that a
business will not lose any of its depreciation deduction for
vehicles costing less than $25,000, which will continue to be
indexed for inflation. This provision will be effective for
vehicles placed in service in taxable years beginning after
December 31, 2000.
Section 206. Increased Deduction for Business Meal Expenses
The bill increases the limitation on the deductibility of
business meals from the current 50 percent to 100 percent
beginning in 2001 to provide an incentive for businesses to
return to their local restaurants. At the same time, this
provision will assist non-restaurant businesses and self-
employed individuals level the playing field. Unlike their
large competitors, small enterprises often sell their
products and services by word of mouth and close many
business transactions on the road or in a local diner. In
many ways the business breakfast with a potential customer is
akin to formal advertising that larger businesses purchase in
newspapers or on radio or television. While the newspaper
ad is fully deductible, however, the business meal is only
50 percent deductible for the small business owner.
In addition, many self-employed individuals like sales
representatives spend enormous amounts of time on the road
with no choice but to eat in restaurants while away from
home, further straining their cash flow. By increasing the
deduction to 100 percent, the bill addresses these problems,
as well as the lack of parity that small business owners face
with respect to individuals subject to the Federal hours-of-
service limitations of the Department of Transportation, such
as truck drivers, who are currently able to deduct a larger
portion of their business meals.
Section 207. Modification of Unrelated Business Income Limitation on
Investments in Certain Debt-Financed Properties
With the recent contraction of the private-equity market,
the Small Business Investment Company, SBIC program, which is
overseen by the SBA, has taken on a significant role in
providing venture capital to small businesses seeking
investments in the range of $500,000 to $3 million. Debenture
SBICs qualify for SBA-guaranteed borrowed capital, which
subjects tax-exempt investors that would otherwise be
inclined to invest in Debenture SBICs to tax liability for
unrelated business taxable income, UBTI. When free to choose,
tax-exempt investors generally opt to invest in venture
capital funds that do not create UBTI. As a result, 60
percent of the private-capital potentially available to
Debenture SBICs is effectively ``off limits.''
The bill would exclude government-guaranteed capital
borrowed by Debenture SBICs from debt for purposes of the
UBTI rules. This change would permit tax-exempt organizations
to invest in Debenture SBICs without the burdens of UBTI
recordkeeping or tax liability, thereby providing additional
capital for investment in small businesses across the nation.
This provision would be effective for acquisitions made on or
after the date of enactment of this bill.
Section 208. Repeal of Alternative Minimum Tax on Individuals
The bill repeals the individual Alternative Minimum Tax,
AMT effective for taxable years beginning after December 31,
2000. For individual taxpayers, the individual AMT has become
an increasingly burdensome tax. For the sole proprietors,
partners, and S corporation shareholders, the individual AMT
increases their tax liability by, among other things,
limiting depreciation and depletion deductions, net operating
loss treatment, the deductibility of state and local taxes,
and expensing of research and experimentation costs. In
addition, because of its complexity, this tax forces small
business owners to waste precious funds on tax professionals
to determine whether the AMT even applies.
Section 209. Expansion of the Exemption From the Alternative Minimum
Tax for Small Corporations
For small corporate taxpayers, the bill increases the
current exemption from the corporate AMT, under section 55(e)
of the Internal Revenue Code. Under the bill, a small
corporation will initially qualify for the exemption if its
average gross receipts are $7.5 million or less, up from the
current $5 million, during its first three taxable years.
Thereafter, a small corporation will continue to qualify for
the AMT exemption for so long as its average gross
receipts for the prior three-year period do not exceed $10
million, up from the current $7.5 million. The increased
limits for the small-corporation exemption from the
corporate AMT will be effective for taxable years
beginning after December 31, 2000.
[[Page S10165]]
TITLE III--SMALL BUSINESS PROCUREMENTS
Section 301. Expansion of Opportunity for Small Businesses To Be
Awarded Department of Defense Contracts for Architectural and
Engineering Services and Construction Design
The Brooks Act was enacted in 1982 and prohibits any small
businesses set asides for architectural and engineering
contracts valued at $85,000 or more. No change in this
ceiling has been made since enactment of the Brooks Act. This
section would increase the ceiling to $300,000, which would
create, almost immediately, new Federal contracting
opportunities for small businesses.
Section 302. Procurements of Property and Services in Amounts Not in
Excess of $100,000 From Small Businesses
This section would make more contracts valued at less than
$100,000 available to small businesses. Under the Federal
Supply Schedule, FSS, at GSA, all agency contracts,
requirements, or procurements valued at less than $100,000
would be made from small businesses.
For contracts for property or services not on the GSA's
FSS, the procuring agency would set aside such contracts,
valued at less than $100,000, for competition among small
businesses registered on the SBA's PRO-Net and the DoD's
Centralized Contractor Registration, CCR, System. There would
be a two-year phase-in period. After an initial six-month
period, during the first year, 25 percent of the dollar value
of all contracts less than $100,000 would be awarded to small
businesses. This would increase to 50 percent in the second
and subsequent years.
Section 303. HUBZone and 8(a) Sole-Source Contracts
Contracts for property and services made with funds from
the ``2001 Emergency Supplemental Appropriations Act for
Recovery From and Response to Terrorist Attacks on the United
States'' will be exempt from the ceiling on sole-source
contracts under the HUBZone and 8(a) programs. Currently, the
ceilings are $3 million for service contracts and $5 million
for manufacturing contracts.
______
By Mr. GRAHAM:
S. 1496. A bill to clarify the accounting treatment for Federal
income tax purposes of deposits and similar amounts received by a tour
operator for a tour arranged by such operator; to the Committee on
Finance.
Mr. GRAHAM. Madam President, today I am introducing the Tour
Operators Up-front Deposit Relief, TOUR, Act. This legislation codifies
a longstanding practice used by the tour operator industry to account
for prepaid deposits received in advance of a customers travel.
A tour operator puts together travel ``packages'' often involving a
number of different elements: airlines, ground transportation, hotels,
restaurants, local guides and other services for one or more
destinations. Services often include the direct provision of tour
components such as motor coaches. The packages are sold to the public,
usually through travel agents. Approximately 70 percent of retail
travel agent sales involve tour operator packages. A vacation package
combines multiple travel elements into an all-inclusive price. A tour
is a trip taken by a group of people who travel together and follow a
pre-planned itinerary. In both instances, the travel has been planned
by professionals whose group purchasing power insures substantial
savings. In addition, prepayment covers all major expenses which
minimizes budgeting concerns.
Tour operators employ a long standing, universally accepted method of
accounting which recognizes deposits as income upon the date of
departure of the passenger. This treatment defers income recognition
while the customer still has the right to cancel the travel without
substantial conditions and prior to the tour operator's performing many
of the tasks and making many of the commitments required to insure a
timely, safe and reliable trip.
Recently, the Internal Revenue Service, IRS, has adopted a position
in selected tour operator audits which would, if generally applied,
require virtually all tour operators to change their method of
accounting for deposits. The IRS position is that tour operators must
recognize deposits as income upon receipt even though they may not
incur expenses for months, or in some cases, more than a year. This
position is in direct contrast to guidance previously provided by the
IRS. Revenue Procedure 71-21 acknowledges that accrual basis taxpayers
should be allowed to defer advanced payment for services under certain
circumstances but has improperly refused to interpret this ruling to
apply to tour operators.
If the IRS continues to pursue its position, it will raise the cost
of operations for tour operators. This added cost will be passed on to
Americans seeking to travel. Given the difficulties facing this
industry in light of the events of September 11, the IRS position is
particularly misguided.
The legislation being introduced today clarifies that Revenue
Procedure 71-21 applies to the tour operator industry. Under this
Procedure, deposits become taxable income on the date the tour departs.
I ask unanimous consent that the text of the bill be printed in the
Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 1496
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 ``Tour Operators Up-Front-
Deposit Relief (TOUR) Act''.
SEC. 2. METHOD OF ACCOUNTING FOR DEPOSITS RECEIVED BY ACCRUAL
BASIS TOUR OPERATORS.
In the case of a tour operator using an accrual method of
accounting, amounts received from or on behalf of passengers
in advance of the departure of a tour arranged by such
operator--
(1) shall be treated as properly accounted for under the
Internal Revenue Code of 1986 if they are accounted for under
a method permitted by Section 3 of Revenue Procedure 71-21,
and
(2) for purposes of Revenue Procedure 71-21, shall be
deemed earned as of the date the tour departs.
____________________