[Congressional Record Volume 149, Number 44 (Wednesday, March 19, 2003)]
[Senate]
[Pages S3996-S4020]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. BINGAMAN (for himself and Mr. Dorgan).
S. 658. A bill to extend the authority for Energy Savings Performance
Contracts and for other purposes; to the Committee on Energy and
Natural Resources.
Mr. BINGAMAN. Mr. President, I rise today to introduce legislation
that will ensure the continuation of a program that has provided a
flexible and cost-effective way to reduce the Federal Government's
energy bills.
Since the 1970's Federal Government agencies have been required by
law or Executive Order to steadily improve the energy efficiency of
Federal buildings. For example, the Energy Policy Act of 1992 set a
goal of reducing energy use per square foot by 20 percent in FY 2000
compared to FY 1985. Preliminary data from the Department of Energy
indicates that agencies exceeded this goal by 2.7 percent and spent
$2.3 billion less for energy in FY 2000 than in FY 1985.
One of the reasons the Federal Government was successful was the
availability of an innovative financing method for energy efficiency
improvements. In the 1992 Energy Policy Act, Congress created Energy
Savings Performance Contracting ESPC, which offered a way to invest in
energy savings improvements at no capital cost to the government by
leveraging private sector capital.
Under the ESPC authority, private sector companies enter into
contracts with Federal agencies to install energy savings equipment and
make operational or maintenance changes to improve building efficiency.
The companies pay the up-front costs of the energy efficiency
improvements and guarantee the agency a fixed amount of cost savings
through the life of the contract. The energy service company recoups
its investment over time from the energy cost savings. Since 1992,
nearly $1.1 billion in private sector capital has been invested in
Federal energy improvement projects under ESPCs resulting in hundreds
of millions of dollars in permanent savings to the US taxpayer.
Unfortunately the authority for this successful program expires at
the end of September 2003. Congress must act quickly to continue ESPC
authority.
Our legislation would extend the authority for the ESPC program
permanently. The bill also makes several changes designed to improve
and expand the program. It adds ``water cost savings'' as an allowable
measure for Energy Savings Performance Contracting for civilian
agencies, as they have been for Department of Defense facilities for
several years.
The legislation also addresses the problem of improving energy
efficiency in a building that has long since passed its useful life and
is in constant need of maintenance and repair. To prevent this waste of
funds, the legislation
[[Page S3997]]
would allow Energy Savings Performance Contracting to include the
savings anticipated from operation and maintenance efficiencies of a
replacement facility. The Department of Energy conducted a feasibility
study for replacing a complex of 50 year old army barracks in my
State--now used as DOE's Albuquerque operations office. The study
demonstrated that the costs savings created by energy, operations and
maintenance efficiencies of a new replacement building can pay for the
new facility.
These provisions were agreed to last fall by the House and Senate
conference committee on the Energy Policy Act of 2002. They are good
policy for energy efficiency and for the Federal taxpayer.
In addition, our bill would authorize a pilot program to determine
whether the ESPC concept can be applied to non-building projects. About
60 percent of the Federal Government's energy consumption occurs in
government vehicles, cars, trucks, ships and air craft. Another 7
percent occurs in energy intensive operations such as irrigation,
manufacturing and research activities. Increased efficiency for these
activities could yield tremendous savings. This program was discussed
favorably at the Energy Committee's March 11 hearing on energy
efficiency.
I look forward to working with my cosponsor Senator Dorgan, and other
interested Senators to enact this legislation as soon as possible.
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. 658
Be it enacted by the Senate and the House of
Representatives of the United States of America in Congress
assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Energy Savings Performance
Contracts Amendments Act of 2003''.
SEC. 2. PERMANENT EXTENSION.
Section 801(c) of the National Energy Conservation Policy
Act (42 U.S.C. 8287(c)) is repealed.
SEC. 3. COST SAVINGS FROM REPLACEMENT FACILITIES.
Section 801(a) of the National Energy Conservation Policy
Act (42 U.S.C. 8287(a)) is amended by adding at the end the
following new paragraph:
``(3)(A) In the case of an energy savings contract or
energy savings performance contract providing for energy
savings through the construction and operation of one or more
buildings or facilities to replace one or more existing
buildings or facilities, benefits ancillary to the purpose of
such contract under paragraph (1) may include savings
resulting from reduced costs of operation and maintenance at
such replacement buildings or facilities when compared with
costs of operation and maintenance at the buildings or
facilities being replaced.
``(B) Notwithstanding paragraph (2)(B), aggregate annual
payments by an agency under an energy savings contract or
energy savings performance contract referred to in
subparagraph (A) may take into account (through the
procedures developed pursuant to this section) savings
resulting from reduced costs of operation and maintenance as
described in subparagraph (A).''.
SEC. 4. ENERGY SAVINGS.
Section 804(2) of the National Energy Conservation Policy
Act (42 U.S.C. 8287c(2)) is amended to read as follows:
``(2) The term `energy savings' means--
``(A) a reduction in the cost of energy or water, from a
base cost established through a methodology set forth in the
contract, used in an existing federally owned building or
buildings or other federally owned facilities as a result
of--
``(i) the lease or purchase of operating equipment,
improvements, altered operation and maintenance, or technical
services;
``(ii) the increased efficient use of existing energy
sources by cogeneration or heat recovery, excluding any
cogeneration process for other than a federally owned
building or buildings or other federally owned facilities; or
``(iii) the increased efficient use of existing water
sources; or
``(B) in the case of a replacement building or facility
described in section 801(a)(3), a reduction in the cost of
energy, from a base cost established through a methodology
set forth in the contract, that would otherwise be utilized
in one or more existing federally owned buildings or other
federally owned buildings by reason of the construction and
operation of the replacement building or facility.''.
SEC. 5. ENERGY SAVINGS CONTRACT.
Section 804(3) of the National Energy Conservation Policy
Act (42 U.S.C. 8287c(3)) is amended to read as follows:
``(3) The terms `energy savings contract' and `energy
savings performance contract' means a contract which provides
for--
``(A) the performance of services for the design,
acquisition, installation, testing, operation, and, where
appropriate, maintenance and repair, of an identified energy
or water conservation measure or series of measures at one or
more locations; or
``(B) energy savings through the construction and operation
of one or more buildings or facilities to replace one or more
existing buildings or facilities.''.
SEC. 6. ENERGY OR WATER CONSERVATION MEASURE.
Section 804(4) of the National Energy Conservation Policy
Act (42 U.S.C. 8287c(4)) is amended to read as follows:
``(4) The term `energy or water conservation measure'
means--
``(A) an energy conservation measure, as defined in section
551(4)(42 U.S.C. 8259(4)); or
``(B) a water conservation measure that improves water
efficiency, is life cycle cost effective, and involves water
conservation, water recycling or reuse, improvements in
operation or maintenance efficiencies, retrofit activities or
other related activities, not at a Federal hydroelectric
facility.''.
SEC. 7. REVIEW.
Within 180 days after the date of the enactment of this
Act, the secretary of Energy shall complete a review of the
Energy Savings Performance Contract program to identify
statutory, regulation, and administration obstacles that
prevent Federal agencies from fully utilizing the program. In
addition, this review shall identify all areas for increasing
program flexibility and effectiveness, including audit and
measurement verification requirements, accounting for energy
use in determining savings, contracting requirements, and
energy efficient services covered. The Secretary shall report
these findings to the Committee on Energy and Commerce of the
House of Representatives and the Committee on Energy and
Natural Resources of the Senate, and shall implement
identified administrative and regulatory changes to
increase program flexibility and effectiveness to the
extent that such changes are consistent with statutory
authority.
SEC. 8. PILOT PROGRAM TO EXPAND ENERGY SAVINGS PERFORMANCE
CONTRACTS TO NON-BUILDING PROJECTS.
Title VIII of the National Energy Conservation Policy Act
(42 U.S.C. 8287-8287c) is amended by adding at the end the
following:
``SEC. 805. PILOT PROGRAM FOR ENERGY SAVINGS PERFORMANCE
CONTRACT INVESTMENTS IN NON-BUILDING ENERGY
SAVINGS PROJECTS.
``(a) Authorization.--The Secretary of Defense and the
heads of other interested Federal agencies are authorized, on
a pilot basis, to enter into up to ten energy savings
performance contracts under this Title for the purpose of
achieving savings, secondary savings, and benefits incidental
to those purpose, in non-building energy efficiency
improvement projects.
``(b) Selection of Projects.--The Secretary of Energy, in
consultation with the Secretary of Defense and the heads of
other interested Federal agencies, shall select up to ten
contract projects for this pilot program. The projects shall
be selected to demonstrate the applicability and benefit of
energy savings performance contracting to a range of non-
building energy efficiency improvement projects.
``(c) Definitions.--For the purposes of this section:
``(1) The term `non-building' means any vehicle, device, or
equipment that is transportable under its own power by land,
sea, or air and consumes energy from any fuel source for the
purpose of such transportability, or to maintain a controlled
environment within such vehicle, device or equipment; or any
Federally owned equipment used to generate electricity or
transport water.
``(2) The term `secondary savings', means additional energy
or cost savings that are a direct consequence of the energy
savings that result from the energy efficiency improvements
that were financed and implemented pursuant to the energy
savings performance contract. Such `secondary savings' may
include, but are not limited to, energy and cost savings that
result from a reduction in the need for fuel delivery and
logistical support. In the case of electric generation
equipment, secondary savings may include the benefits of
increased efficiency in the production of electricity.
``(d) Report.--No later than three years after the
enactment of this section, the Secretary of Energy shall
report to the Congress on the progress and results of this
program. Such report shall include: a description of all
projects undertaken; the energy and cost savings, secondary
savings, other benefits and problems resulting from such
projects; and the overall cost-benefit of such projects. The
report shall also include recommendations, developed in
consultation with those agencies that undertook projects
under the program, as to whether the authorization to enter
into energy savings performance contract for non-building
projects should be extended, expanded, or otherwise
modified.''
SEC. 9. UTILITY INCENTIVE PROGRAMS.
Section 546(c)(3) of the National Energy Conservation
Policy Act (42 U.S.C. 8256(c)(3)) is amended by striking
``facilities'' and inserting ``facilities, equipment and
vehicles''.
______
By Mr. CRAIG (for himself, Mr. Baucus, Mr. Alexander, Mr. Allard,
Mr. Allen, Mr. Bennett, Mr. Bond, Mr. Breaux,
[[Page S3998]]
Mr. Brownback, Mr. Bunning, Mr. Burns, Mr. Campbell, Mr.
Chambliss, Mr. Cochran, Mr. Coleman, Ms. Collins, Mr. Cornyn,
Mr. Crapo, Mrs. Dole, Mr. Domenici, Mr. Dorgan, Mr. Ensign, Mr.
Enzi, Mr. Frist, Mr. Graham of South Carolina, Mr. Grassley,
Mr. Gregg, Mr. Hagel, Mr. Hatch, Mrs. Hutchison, Mr. Inhofe,
Mr. Johnson, Mr. Kyl, Ms. Landrieu, Mrs. Lincoln, Mr. Lott, Mr.
McConnell, Mr. Miller, Ms. Murkowski, Mr. Nelson of Nebraska,
Mr. Nickles, Mr. Reid, Mr. Roberts, Mr. Santorum, Mr. Sessions,
Mr. Shelby, Mr. Smith, Mr. Specter, Mr. Stevens, Mr. Sununu,
Mr. Talent, and Mr. Thomas):
S. 659. A bill to prohibit civil liability actions from being brought
or continued against manufacturers, distributors, dealers, or importers
of firearms or ammunition for damages resulting from the misuse of
their products by others; to the Committee on the Judiciary.
Mr. CRAIG. Mr. President, I am pleased to join with Senator Baucus in
introducing the Protection of Lawful Commerce in Arms Act, on behalf of
ourselves and more than half of our colleagues in the United States
Senate: Senators Alexander, Allard, Allen, Bennett, Bond, Breaux,
Brownback, Bunning, Burns, Campbell, Chambliss, Cochran, Coleman,
Collins, Cornyn, Crapo, Dole, Domenici, Dorgan, Ensign, Enzi, Frist,
Graham of South Carolina, Grassley, Gregg, Hagel, Hatch, Hutchison,
Inhofe, Johnson, Kyl, Landrieu, Lincoln, Lott, McConnell, Miller,
Murkowski, Nelson of Nebraska, Nickles, Reid, Roberts, Santorum,
Sessions, Shelby, Smith, Specter, Stevens, Sununu, Talent, and Thomas.
This is an extraordinary showing of support for a bill, and I believe
it is a testament to the gravity of the threat addressed by the
legislation: the abuse of our courts through lawsuits filed to force
law-abiding businesses to pay for criminal acts by individuals beyond
their control.
The businesses I am talking about are collectively known as the U.S.
firearms industry. The lawsuits in question claim that even though
these businesses comply with all laws and sell a legitimate product,
they should be responsible for the misuse or illegal use of the firearm
by a criminal. These actions are pursued with the intent of driving
this industry out of business, regardless of the thousands of jobs that
would be lost in the process and the impact on citizens across the
Nation who would never contemplate committing a crime with a gun.
Let me be clear about this. These lawsuits are not brought by
individuals seeking relief for injuries done to them by anyone in the
industry. Instead, this is a politically-inspired initiative trying to
force social goals through an end-run around the Congress and state
legislatures.
The theory on which these lawsuits are based would be laughable, if
it weren't so dangerous: to pin the responsibility for a criminal act
on an innocent party who wasn't there and had nothing to do with it.
They argue that merely by virtue of the fact that a gun was present,
those who were part of the commercial distribution chain should be held
responsible for the gun's misuse.
This isn't a legal theory--it's just the latest twist in the gun
controllers' notion that it's the gun, and not the criminal, that
causes crime.
The truth of the matter is that there are millions of firearms in
this country today, yet only a tiny fraction of them have ever been
used in the commission of a crime. The truth of the matter is that
again and again, law-abiding firearm owners are using their guns, often
without even firing a shot, to defend life and property. The truth of
the matter is that the intent of the user, not the gun, is what
determines whether that gun will be used in a crime. The trend of
abusive litigation targeting the firearms industry not only defies
common sense and concepts of fundamental fairness, but it would do
nothing to curb criminal gun violence. Furthermore, the burdens it
seeks to impose would jeopardize Americans' constitutionally-protected
access to firearms for self defense and other lawful uses.
The bill that more than half of the United States Senate has already
endorsed is a measured response that would put a stop to this abusive
trend without endangering legitimate claims for relief. Let me
emphasize that it does not insulate the firearms industry from all
lawsuits or deprive legitimate victims of their day in court, as some
critics have charged. Indeed, it specifically provides that actions
based on the wrongful conduct of those involved in the business of
manufacturing and selling firearms--breaches of contract, defects in
firearms, negligent entrustment, criminal behavior--would not be
affected by this legislation. It is solely directed at stopping
frivolous, politically-driven litigation against law-abiding
individuals for the misbehavior of criminals over whom they had no
control.
The courts of our Nation are supposed to be forums for resolving
controversies between citizens and providing relief where warranted,
not a mechanism for achieving political ends that are rejected by the
people's representatives in Congress and the state legislatures. I hope
all our colleagues will join us in taking a measured, principled stand
against this abusive litigation by supporting the Protection of Lawful
Commerce In Arms Act.
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. 659
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 ``Protection of Lawful
Commerce in Arms Act''.
SEC. 2. FINDINGS; PURPOSES.
(a) Findings.--The Congress finds the following:
(1) Citizens have a right, protected by the Second
Amendment to the United States Constitution, to keep and bear
arms.
(2) Lawsuits have been commenced against manufacturers,
distributors, dealers, and importers of firearms that operate
as designed and intended, which seek money damages and other
relief for the harm caused by the misuse of firearms by third
parties, including criminals.
(3) The manufacture, importation, possession, sale, and use
of firearms and ammunition in the United States are heavily
regulated by Federal, State, and local laws. Such Federal
laws include the Gun Control Act of 1968, the National
Firearms Act, and the Arms Export Control Act.
(4) Businesses in the United States that are engaged in
interstate and foreign commerce through the lawful design,
manufacture, marketing, distribution, importation, or sale to
the public of firearms or ammunition that has been shipped or
transported in interstate or foreign commerce are not, and
should not, be liable for the harm caused by those who
criminally or unlawfully misuse firearm products or
ammunition products that function as designed and intended.
(5) The possibility of imposing liability on an entire
industry for harm that is solely caused by others is an abuse
of the legal system, erodes public confidence in our Nation's
laws, threatens the diminution of a basic constitutional
right and civil liberty, invites the disassembly and
destabilization of other industries and economic sectors
lawfully competing in the free enterprise system of the
United States, and constitutes an unreasonable burden on
interstate and foreign commerce of the United States.
(6) The liability actions commenced or contemplated by the
Federal Government, States, municipalities, and private
interest groups are based on theories without foundation in
hundreds of years of the common law and jurisprudence of the
United States and do not represent a bona fide expansion of
the common law. The possible sustaining of these actions by a
maverick judicial officer or petit jury would expand civil
liability in a manner never contemplated by the framers of
the Constitution, by Congress, or by the legislatures of the
several States. Such an expansion of liability would
constitute a deprivation of the rights, privileges, and
immunities guaranteed to a citizen of the United States under
the Fourteenth Amendment to the United States Constitution.
(b) Purposes.--The purposes of this Act are as follows:
(1) To prohibit causes of action against manufacturers,
distributors, dealers, and importers of firearms or
ammunition products for the harm caused by the criminal or
unlawful misuse of firearm products or ammunition products by
others when the product functioned as designed and intended.
(2) To preserve a citizen's access to a supply of firearms
and ammunition for all lawful purposes, including hunting,
self-defense, collecting, and competitive or recreational
shooting.
(3) To guarantee a citizen's rights, privileges, and
immunities, as applied to the States, under the Fourteenth
Amendment to the United States Constitution, pursuant to
section 5 of that Amendment.
[[Page S3999]]
(4) To prevent the use of such lawsuits to impose
unreasonable burdens on interstate and foreign commerce.
(5) To protect the right, under the First Amendment to the
Constitution, of manufacturers, distributors, dealers, and
importers of firearms or ammunition products, and trade
associations, to speak freely, to assemble peaceably, and to
petition the Government for a redress of their grievances.
SEC. 3. PROHIBITION ON BRINGING OF QUALIFIED CIVIL LIABILITY
ACTIONS IN FEDERAL OR STATE COURT.
(a) In General.--A qualified civil liability action may not
be brought in any Federal or State court.
(b) Dismissal of Pending Actions.--A qualified civil
liability action that is pending on the date of enactment of
this Act shall be immediately dismissed by the court in which
the action was brought.
SEC. 4. DEFINITIONS.
In this Act, the following definitions shall apply:
(1) Engaged in the business.--The term ``engaged in the
business'' has the meaning given that term in section
921(a)(21) of title 18, United States Code, and, as applied
to a seller of ammunition, means a person who devotes, time,
attention, and labor to the sale of ammunition as a regular
course of trade or business with the principal objective of
livelihood and profit through the sale or distribution of
ammunition.
(2) Manufacturer.--The term ``manufacturer'' means, with
respect to a qualified product, a person who is engaged in
the business of manufacturing the product in interstate or
foreign commerce and who is licensed to engage in business as
such a manufacturer under chapter 44 of title 18, United
States Code.
(3) Person.--The term ``person'' means any individual,
corporation, company, association, firm, partnership,
society, joint stock company, or any other entity, including
any governmental entity.
(4) Qualified product.--The term ``qualified product''
means a firearm (as defined in subparagraph (A) or (B) of
section 921(a)(3) of title 18, United States Code), including
any antique firearm (as defined in section 921(a)(16) of such
title), or ammunition (as defined in section 921(a)(17) of
such title), or a component part of a firearm or ammunition,
that has been shipped or transported in interstate or foreign
commerce.
(5) Qualified civil liability action.--
(A) In general.--The term ``qualified civil liability
action'' means a civil action brought by any person against a
manufacturer or seller of a qualified product, or a trade
association, for damages resulting from the criminal or
unlawful misuse of a qualified product by the person or a
third party, but shall not include--
(i) an action brought against a transferor convicted under
section 924(h) of title 18, United States Code, or a
comparable or identical State felony law, by a party directly
harmed by the conduct of which the transferee is so
convicted;
(ii) an action brought against a seller for negligent
entrustment or negligence per se;
(iii) an action in which a manufacturer or seller of a
qualified product knowingly and willfully violated a State or
Federal statute applicable to the sale or marketing of the
product, and the violation was a proximate cause of the harm
for which relief is sought;
(iv) an action for breach of contract or warranty in
connection with the purchase of the product; or
(v) an action for physical injuries or property damage
resulting directly from a defect in design or manufacture of
the product, when used as intended.
(B) Negligent entrustment.--In subparagraph (A)(ii), the
term ``negligent entrustment'' means the supplying of a
qualified product by a seller for use by another person when
the seller knows, or should know, the person to whom the
product is supplied is likely to, and does, use the product
in a manner involving unreasonable risk of physical injury to
the person and others.
(6) Seller.--The term ``seller'' means, with respect to a
qualified product--
(A) an importer (as defined in section 921(a)(9) of title
18, United States Code) who is engaged in the business as
such an importer in interstate or foreign commerce and who is
licensed to engage in business as such an importer under
chapter 44 of title 18, United States Code;
(B) a dealer (as defined in section 921(a)(11) of title 18,
United States Code) who is engaged in the business as such a
dealer in interstate or foreign commerce and who is licensed
to engage in business as such a dealer under chapter 44 of
title 18, United States Code; or
(C) a person engaged in the business of selling ammunition
(as defined in section 921(a)(17) of title 18, United States
Code) in interstate or foreign commerce at the wholesale or
retail level, consistent with Federal, State, and local law.
(7) State.--The term ``State'' includes each of the several
States of the United States, the District of Columbia, the
Commonwealth of Puerto Rico, the Virgin Islands, Guam,
American Samoa, and the Commonwealth of the Northern Mariana
Islands, and any other territory or possession of the United
States, and any political subdivision of any such place.
(8) Trade association.--The term ``trade association''
means any association or business organization (whether or
not incorporated under Federal or State law) that is not
operated for profit, and 2 or more members of which are
manufacturers or sellers of a qualified product.
______
By Mr. SCHUMER (for himself, Mr. Warner, Mr. Sarbanes, Mr.
Kennedy, and Mrs. Clinton):
S. 661. A bill to amend the Internal Revenue Code of 1986 to equalize
the exclusion from gross income of parking and transportation fringe
benefits and to provide for a common cost-of-living adjustment, and for
other purposes; to the Committee on Finance.
Mr. SCHUMER. Mr. President, 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. 661
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 ``Commuter Benefits Equity Act
of 2003''.
SEC. 2. UNIFORM DOLLAR LIMITATION FOR ALL TYPES OF
TRANSPORTATION FRINGE BENEFITS.
(a) In General.--Section 132(f)(2) of the Internal Revenue
Code of 1986 (relating to limitation on exclusion) is
amended--
(1) by striking ``$100'' in subparagraph (A) and inserting
``$190'', and
(2) by striking ``$175'' in subparagraph (B) and inserting
``$190''.
(b) Inflation Adjustment Conforming Amendments.--
Subparagraph (A) of section 132(f)(6) of the Internal Revenue
Code of 1986 (relating to inflation adjustment) is amended--
(1) by striking the last sentence,
(2) by striking ``1999'' and inserting ``2003'', and
(3) by striking ``1998'' and inserting ``2002''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 3. CLARIFICATION OF FEDERAL EMPLOYEE BENEFITS.
Section 7905 of title 5, United States Code, is amended--
(1) in subsection (a)--
(A) in paragraph (2)(C) by inserting ``and'' after the
semicolon;
(B) in paragraph (3) by striking ``; and'' and inserting a
period; and
(C) by striking paragraph (4); and
(2) in subsection (b)(2)(A) by amending subparagraph (A) to
read as follows:
``(A) a qualified transportation fringe as defined in
section 132(f)(1) of the Internal Revenue Code of 1986;''.
Mr. SARBANES. Mr. President, I am pleased to join with my colleagues
in introducing the Commuter Benefits Equity Act of 2003. This measure
is another important step forward in our efforts to make transit
services more accessible and improve the quality of life for commuters
throughout the Nation.
All across the Nation, congestion and gridlock are taking their toll
in terms of economic loss, environmental impacts, and personal
frustration. According to the Texas Transportation Institute, in 2000,
Americans in 75 urban areas spent 3.6 billion hours stuck in traffic,
with an estimated cost to the Nation of $67.5 billion in lost time and
wasted fuel, and the problem is growing. One way in which Federal,
State, and local governments are responding to this problem is by
promoting greater use of transit as a commuting option. The American
Public Transportation Association estimates that last year, Americans
took over 9.5 billion trips on transit, the highest level in more than
40 years. But we need to do more to encourage people to get out of
their cars and onto public transportation.
The Internal Revenue Code currently allows employers to provide a
tax-free transit benefit to their employees. Under this ``Commuter
Choice'' program, employers can set aside up to $100 per month of an
employee's pre-tax income to pay for the cost of commuting by public
transportation or vanpool. Alternatively, an employer can choose to
offer the same amount as a tax-free benefit in addition to an
employee's salary. This program is designed to encourage Americans to
leave their cars behind when commuting to work.
By all accounts, this program is working. In the Washington area, for
example, the Washington Metropolitan Area Transit Authority estimates
that over 200,000 commuters take advantage of transit pass programs
offered by their employers. That means fewer cars on our congested
streets and highways.
Employees of the federal government account for a large percentage of
those benefitting from this program in the
[[Page S4000]]
Washington area. Under an Executive Order, all Federal agencies in the
National Capital Region, which includes Montgomery, Prince George's,
and Frederick Counties, Maryland, as well as several counties in
Northern Virginia, are required to offer this transit benefit to their
employees. The Commuter Choice program is now being used by an
estimated 130,000 Washington-area Federal employees who are choosing to
take transit to work.
However, despite the success of the Commuter Choice program, our tax
laws still reflect a bias toward driving. The Internal Revenue Code
allows employers to offer a tax-free parking benefit to their employees
of up to $190 per month. The striking disparity between the amount
allowed for parking--$190 per month--and the amount allowed for
transit--$100 per month--undermines our commitment to supporting public
transportation use.
The Commuter Benefits Equity Act would address this discrepancy by
raising the maximum monthly transit benefit to $190, equal to the
parking benefit, and providing that the benefits will be adjusted
upward together in future years. The Federal Government should not
reward those who drive to work more richly than those who take public
transportation. Indeed, since the passage of the Intermodal Surface
Transportation Efficiency Act of 1991, Federal transportation policy
has endeavored to create a level playing field between highways and
transit, favoring neither mode above the other. The Commuter Benefits
Equity Act would ensure that our tax laws reflect this balanced
approach.
In addition, the Commuter Benefits Equity Act would remedy another
inconsistency in current law. Private-sector employers can offer their
employees the transit benefit in tandem with the parking benefit, to
help employees pay for the costs of parking at transit facilities,
commuter rail stations, or other locations which serve public
transportation or vanpool commuters. However, under current law,
Federal agencies cannot offer a parking benefit to their employees who
use park-and-ride lots or other remote parking locations. The Commuter
Benefits Equity Act would remove this restriction, allowing Federal
employees access to the same benefits enjoyed by their private-sector
counterparts.
The Washington Metropolitan Region is home to thousands of Federal
employees. It is also one of the Nation's most highly congested areas,
ranking fourth in per capita congestion. This area has the third
longest average commute time in the country. It is clearly in our
interest to support programs which encourage Federal employees to make
greater use of public transportation for their commuting needs.
The simple change made by the Commuter Benefits Equity Act would
provide a significant benefit to those Federal employees whose commute
to work includes parking at a transit facility. For example, a commuter
who rides the Metrorail to work and parks at the Rockville park-and-
ride lot pays about $45 monthly for parking, on top of the cost of
riding the train. A private-sector employee whose employer provides the
parking benefit in addition to salary could receive $540 a year tax
free to help pay these parking costs. Federal government employees
should be allowed the same benefit.
I support the Commuter Benefits Equity Act because it creates
parity--parity in the tax code between the parking and transit
benefits, and parity for Federal employees with their private-sector
counterparts. Both of these improvements will aid our efforts to fight
congestion and pollution by supporting public transportation. I
encourage my colleagues to join me in supporting the Commuter Benefits
Equity Act.
______
By Mrs. FEINSTEIN:
S. 662. A bill to extend to Nepal certain preferential treatment with
respect to apparel articles; to the Committee on Finance.
Mrs. FEINSTEIN. Mr. President, I rise today to introduce legislation
to grant garment imports from Nepal duty free status in the United
States for two years. We have an opportunity the help one of the
world's most impoverished countries sustain a vital export industry and
promote political and economic stability after years of conflict.
My interest in Nepal goes back over 25 years and I have had the
pleasure to travel there and visit with friends on many occasions. The
warmth and friendliness of the people and the vitality and richness of
the culture are only matched by the beauty of the breathtaking
landscape.
Nevertheless, Nepal faces some serious challenges in the years ahead
as it attempt to build a prosperous economy and raise the living
standards of its people.
It ranks as the 12th poorest country in the world, with a per capita
income of $240. Approximately 42 percent of the 24 million people live
in poverty. Unemployment stands at 47 percent.
On top of this, Nepal has had to confront a Maoist insurgency which
has claimed the lives of more than 7,200 people since 1996 with two
thirds of the deaths occurring since November 2001. Estimated to
include between 5,000 and 10,000 armed soldiers, the Maoists control
between one-quarter and one-half of the country.
As a result of the political instability, for the first time in
twenty years Nepal's economy contracted in 2002 by 0.6 percent and
tourism, one of the main sources of income, fell by 27 percent. The
situation became so dire last year that one advisor to Nepal's king
noted that ``Nepal is on the verge of becoming a failed state.''
Yet there is reason for hope. On January 29, 2003 the Government of
Nepal and the Maoist rebels reached a cease-fire agreement, opening the
door for negotiations for a permanent end to the conflict. I am hopeful
they will be successful. We now have the opportunity to build on the
hopes of a peaceful solution to conflict and really make a difference
in the lives of the Nepalese people.
Humanitarian and development assistance should be an important part
of that effort. But we should also help the Nepalese help themselves
and open the U.S. market to a critical export industry. In the end,
economic growth and prosperity can best be achieved when Nepal is given
the chance to compete and grow in a free and open global marketplace.
Success in that marketplace will lead to a lesser dependence on
foreign aid and encourage Nepal to develop other viable export
industries.
Since the mid-1980s, garments have emerged as a key part of Nepal's
manufacturing sector. The garment industry in Nepal is entirely export
oriented and accounts for 40 percent of the foreign exchange earnings.
It employs over 100,000 workers half of them women and sustains the
livelihood of over 350,000 people. The United States is the largest
market for Nepalese garments and accounts for 80-90 percent of Nepal's
total exports every year.
Yet, despite Nepal's poverty and the importance of the garment
industry and the U.S. market, Nepalese garments are subject to U.S.
tariffs of 17-35 percent. This is simply not acceptable and does harm
to a country that can least afford it.
I might point out that this tariff rate is in contrast to the
European Union, Canada, and Australia which allow or will soon allow
Nepalese garments into their markets duty free.
The United States can make a real difference now to sustain the
garment industry in Nepal and promote economic growth and higher living
standards. My bill is simple and straightforward. It grants duty free
status to imports of Nepalese garments and textiles for a two year
period. This is the same status granted to participating lesser
developed countries under the African Growth and Opportunity Act.
For those of my colleagues who are concerned about the impact that
duty free status for Nepalese garments and textiles would have on the
domestic industry, it is worth noting that Nepalese garments, at their
highest level, accounted for 0.1 percent of all garment and textile
imports in the United States generating $29.5 million in revenue.
Nepal is, and will continue to be, a small player in the U.S. garment
market, but the importance of the garment industry in Nepal compels us
to action.
Let us not miss this chance to help Nepal build a better future for
its people and demonstrate to them and the rest of the world the desire
of the United States to see developing nations rise from poverty to
economic prosperity. I urge my colleagues to support this legislation.
[[Page S4001]]
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. 662
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. TREATMENT OF CERTAIN TEXTILES AND APPAREL.
Notwithstanding any other provision of law, the
preferential treatment extended to apparel articles under
section 112(b)(3)(B) of the African Growth and Opportunity
Act (19 U.S.C. 3721(b)(3)(B)) shall also apply to apparel
articles that are imported directly into the customs
territory of the United States from Nepal in accordance with
the provisions set forth in such section as if such articles
were articles of a lesser developed beneficiary sub-Saharan
African country, if Nepal has satisfied the requirements set
forth in section 113 of such Act (19 U.S.C. 3722), except
that--
(1) any reference in section 112(b) or section 113 of the
African Growth and Opportunity Act to a lesser developed
beneficiary sub-Saharan African country or countries) shall
be treated as a reference to Nepal; and
(2) such preferential treatment shall apply to apparel
articles imported into the customs territory of the United
States during the period beginning on October 1, 2003, and
ending on September 30, 2005.
______
By Mr. INOUYE:
S. 663. A bill for the relief of the Pottawatomi Nation in Canada for
settlement of certain claims against the United States; to the
Committee on the Judiciary.
Mr. INOUYE. Mr. President, almost eight years ago, I stood before you
to introduce a bill ``to provide an opportunity for the Pottawatomi
Nation in Canada to have the merits of their claims against the United
States determined by the United States Court of Federal Claims.''
That bill was introduced as Senate Resolution 223, which referred the
Pottawatomi's claim to the Chief Judge of the U.S. Court of Federal
Claims and required the Chief Judge to report back to the Senate and
provide sufficient findings of fact and conclusions of law to enable
the Congress to determine whether the claim of the Pottawatomi Nation
in Canada is legal or equitable in nature, and the amount of damages,
if any, which may be legally or equitably due from the United States.
Last year, the Chief Judge of the Court of Federal Claims reported
back that the Pottawatomi Nation in Canada has a legitimate and
credible legal claim. Thereafter, by settlement stipulation, the United
States has taken the position that it would be ``fair, just and
equitable'' to settle the claims of the Pottawatomi Nation in Canada
for the sum of $1,830,000. This settlement amount was reached by the
parties after seven years of extensive, fact-intensive litigation.
Independently, the court concluded that the settlement amount is ``not
a gratuity'' and that the ``settlement was predicated on a credible
legal claim.'' Pottawatomi Nation in Canada, et al. v. United States,
Cong. Ref. 94-1037X at 28 (Ct. Fed. Cl., September 15, 2000) (Report of
Hearing Officer).
The bill I introduce today is to authorize the appropriation of those
funds that the United States has concluded would be ``fair, just
and equitable'' to satisfy this legal claim. If enacted, this bill will
finally achieve a measure of justice for a tribal nation that has for
far too long been denied.
For the information of our colleagues, this is the historical
background that informs the underlying legal claim of the Canadian
Pottawatomi.
The members of the Pottawatomi Nation in Canada are one of the
descendant groups--successors-in-interest--of the historical
Pottawatomi Nation and their claim originates in the latter part of the
18th Century. The historical Pottawatomi Nation was aboriginal to the
United States. They occupied and possessed a vast expanse in what is
now the States of Ohio, Michigan, Indiana, Illinois, and Wisconsin.
From 1795 to 1833, the United States annexed most of the traditional
land of the Pottawatomi Nation through a series of treaties of
cession--many of these cessions were made under extreme duress and the
threat of military action. In exchange, the Pottawatomis were
repeatedly made promises that the remainder of their lands would be
secure and, in addition, that the United States would pay certain
annuities to the Pottawatomi.
In 1829, the United States formally adopted a Federal policy of
removal--an effort to remove all Indian tribes from their traditional
lands east of the Mississippi River to the west. As part of that
effort, the government increasingly pressured the Pottawatomis to cede
the remainder of their traditional lands--some five million acres in
and around the city of Chicago and remove themselves west. For years,
the Pottawatomis steadfastly refused to cede the remainder of their
tribal territory. Then in 1833, the United States, pressed by settlers
seeking more land, sent a Treaty Commission to the Pottawatomi with
orders to extract a cession of the remaining lands. The Treaty
Commissioners spent two weeks using extraordinarily coercive tactics--
including threats of war--in an attempt to get the Pottawatomis to
agree to cede their territory. Finally, those Pottawatomis who were
present relented and on September 26, 1933, they ceded their remaining
tribal estate through what would be known as the Treaty of Chicago.
Seventy-seven members of the Pottawatomi Nation signed the Treaty of
Chicago. Members of the ``Wisconsin Band'' were not present and did not
assent to the cession.
In exchange for their land, the Treaty of Chicago provided that the
United States would give to the Pottawatomis five million acres of
comparable land in what is now Missouri. The Pottawatomi were familiar
with the Missouri land, aware that it was similar to their homeland.
But the Senate refused to ratify that negotiated agreement and
unilaterally switched the land to five million acres in Iowa. The
Treaty Commissioners were sent back to acquire Pottawatomi assent to
the Iowa land. All but seven of the original 77 signatories refused to
accept the change even with promises that if they were dissatisfied
``justice would be done.'' Treaty of Chicago, as amended, Article 4.
Nevertheless, the Treaty of Chicago was ratified as amended by the
Senate in 1834. Subsequently, the Pottawatomis sent a delegation to
evaluate the land in Iowa. The delegation reported back that the land
was ``not fit for snakes to live on.''
While some Pottawatomis removed westward, many of the Pottawatomis--
particularly the Wisconsin Bank, whose leaders never agreed to the
Treaty--refused to do so. By 1836, the United States began to
forcefully remove Pottawatomis who remained in the east--with
devastating consequences. As is true with many other American Indian
tribes, the forced removal westward came at great human cost. Many of
the Pottawatomi were forcefully removed by mercenaries who were paid on
a per capita basis government contract. Over one-half of the Indians
removed by these means died en route. Those who reached Iowa were
almost immediately removed further to inhospitable parts of Kansas
against their will and without their consent.
Knowing of these conditions, many of the Pottawatomis including most
of those in the Wisconsin Bank vigorously resisted forced removal. To
avoid Federal troops and mercenaries, much of the Wisconsin Bank
ultimately found it necessary to flee to Canada. They were often
pursued to the border by government troops, government-paid mercenaries
or both. Official files of the Canadian and United States governments
disclose that many Pottawatomis were forced to leave their homes
without their horses or any of their possessions other than the clothes
on their backs.
By the late 1830s, the government refused payment of annuities to any
Pottawatomi groups that had not removed west. In the 1860s, members of
the Wisconsin Band--those still in their traditional territory and
those forced to flee to Canada--petitioned Congress for the payment of
their treaty annuities promised under the Treaty of Chicago and all
other cession treaties. By the Act of June 25, 1864, 13 Stat. 172, the
Congress declared that the Wisconsin Band did not forfeit their
annuities by not removing and directed that the share of the
Pottawatomi Indians who had refused to relocate to the west should be
retained for their use in the United States Treasury. H.R. Rep. No.
470, 64th Cong., p. 5, as quoted on page 3 of
[[Page S4002]]
memo dated October 7, 1949. Nevertheless, much of the money was never
paid to the Wisconsin Band.
In 1903, the Wisconsin Band--most of whom now resided in three areas,
the States of Michigan and Wisconsin and the Province of Ontario--
petitioned the Senate once again to pay them their fair portion of
annuities as required by the law and treaties. Sen. Doc. No. 185, 57th
Cong., 2d Sess. By the Act of June 21, 1906, 34 Stat. 380, the Congress
directed the Secretary of the Interior to investigate claims made by
the Wisconsin Band and establish a roll of the Wisconsin Band
Pottawatomis that still remained in the East. In addition, the Congress
ordered the Secretary to determine ``the[] [Wisconsin Bands]
proportionate shares of the annuities, trust funds, and other moneys
paid to or expended for the tribe to which they belong in which the
claimant Indians have not shared, [and] the amount of such monies
retained in the Treasury of the United States to the credit of the
clamant Indians as directed the provisions of the Act of June 25,
1864.''
In order to carry out the 1906 Act, the Secretary of Interior
directed Dr. W.M. Wooster to conduct an enumeration of Wisconsin Band
Pottawatomi in both the United States and Canada. Dr. Wooster
documented 2007 Wisconsin Pottawatomis: 457 in Wisconsin and Michigan
and 1550 in Canada. He also concluded that the proportionate share of
annuities for the Pottawatomis in Wisconsin and Michigan was $477,339
and the proportionate share of annuities due the Pottawatomi Nation in
Canada was $1,517,226. The Congress thereafter enacted a series of
appropriation Acts from June 30, 1913 to May 29, 1928 to satisfy most
of money owed to those Wisconsin Band Pottawatomis residing in the
United States. However, the Wisconsin Band Pottawatomis who resided in
Canada were never paid their share of the tribal funds.
Since that time, the Pottawatomi Nation in Canada has diligently and
continuously sought to enforce their treaty rights, although until this
congressional reference, they had never been provided their day in
court. In 1910, the United States and Great Britian entered into an
agreement for the purpose of dealing with claims between both
countries, including claims of Indian tribes within their respective
jurisdictions, by creating the Pecuniary Claims Tribunal. From 1910 to
1938, the Pottawatomi Nation in Canada diligently sought to have their
claim heard in this international forum. Overlooked for more pressing
international matters of the period, including the intervention of
World War I, the Pottawatomis then came to the U.S. Congress for
redress of their claim.
In 1946, the Congress waived its sovereign immunity and established
the Indian Claims Commission for the purpose of granting tribes their
long-delayed day in court. The Indian Claims Commission Act (ICCA)
granted the Commission jurisdiction over claims such as the type
involved here. In 1948, the Wisconsin Band Pottawatomis from both sides
of the border--brought suit together in the Indian Claims Commission
for recovery of damages. Hannahville Indian Community v. U.S., No. 28
(Ind. C1. Comm. Filed May 4, 1948). Unfortunately, the Indian Claims
Commission dismissed Pottawatomi Nation in Canada's part of the claim
ruling that the Commission had no jurisdiction to consider claims of
Indians living outside territorial limits of the United States.
Hannahville Indian Community v. U.S., 115 Ct. C1. 823 (1950). The claim
of the Wisconsin band residing in the United States that was filed in
the Indian Claims Commission was finally decided in favor of the
Wisconsin Band by the U.S. Claims court in 1983. Hannahville Indian
Community v. United States, 4 Ct. C1. 445 (1983). The Court of Claims
concluded that the Wisconsin Band was owed a member's proportionate
share of unpaid annuities from 1838 through 1907 due under various
treaties, including the Treaty of Chicago and entered judgment for the
American Wisconsin band Pottawatomis for any monies not paid. Still the
Pottawatomi Nation in Canada was excluded because of the jurisdictional
limits of the ICCA.
Undaunted, the Pottawatomi Nation in Canada came to the Senate and
after careful consideration, we finally gave them their long-awaited
day in court through the congressional reference process. The court has
now reported back to us that their claim is meritorious and that the
payment that this bill would make constitutes a ``fair, just and
equitable'' resolution to this claim.
The Pottawatomi Nation in Canada has sought justice for over 150
years. They have done all that we asked in order to establish their
claim. Now it is time for us to finally live up to the promise our
government made so many years ago. It will not correct all the wrongs
of the past, but it is a demonstration that this government is willing
to admit when it has left unfulfilled an obligation and that the United
States is willing to do what we can to see that justice--so long
delayed--is not now denied.
Finally, I would just note that the claim of the Pottawatomi Nation
in Canada is supported through specific resolutions by the National
Congress of American Indians, the oldest, largest and most-
representative tribal organization here in the United States, the
Assembly of First Nations, which includes all recognized tribal
entities in Canada, and each and every one of the Pottawatomi tribal
groups that remain in the United States today.
I ask unanimous consent that the text of the legislation be printed
in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 663
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SETTLEMENT OF CERTAIN CLAIMS.
(a) Authorization for Payment.--Notwithstanding any other
provision of law, subject to subsection (b), the Secretary of
the Treasury shall pay to the Pottawatomi Nation in Canada
$1,830,000 from amounts appropriated under section 1304 of
title 31, United States Code.
(b) Payment in Accordance With Stipulation for
Recommendation of Settlement.--The payment under subsection
(a) shall--
(1) be made in accordance with the terms and conditions of
the Stipulation for Recommendation of Settlement dated May
22, 2000, entered into between the Pottawatomi Nation in
Canada and the United States (referred to in this Act as the
``Stipulation for Recommendation of Settlement''); and
(2) be included in the report of the Chief Judge of the
United States Court of Federal Claims regarding Congressional
Reference No. 94-1037X submitted to the Senate on January 4,
2001, in accordance with sections 1492 and 2509 of title 28,
United States Code.
(c) Full Satisfaction of Claims.--The payment under
subsection (a) shall be in full satisfaction of all claims of
the Pottawatomi Nation in Canada against the United States
that are referred to or described in the Stipulation for
Recommendation of Settlement.
(d) Nonapplicability.--Notwithstanding any other provision
of law, the Indian Tribal Judgment Funds Use or Distribution
Act (25 U.S.C. 1401 et seq.) shall not apply to the payment
under subsection (a).
______
By Mr. HATCH (for himself, Mr. Baucus, Mr. Grassley, Mr.
Rockefeller, Mr. Smith, Mr. Daschle, Mr. Kyl, Mrs. Lincoln, Mr.
Thomas, Mr. Kerry, Mr. Bunning, Mrs. Feinstein, Mr. Allen, Mrs.
Boxer, Mr. Cochran, Mr. Lieberman, Mrs. Hutchison, Ms.
Stabenow, Mr. Ensign, Mr. Bayh, Mr. Allard, Mr. Miller, and Ms.
Cantwell):
S. 664. A bill to amend the Internal Revenue Code of 1986 to
permanently extend the research credit, to increase the rates of the
alternative incremental credit, and to provide an alternative
simplified credit for qualified research expenses; to the Committee on
Finance.
Mr. HATCH. Mr. President, I am very pleased to join with my friend
and colleague Senator Baucus and a majority of our Finance Committee
colleagues from both sides of the aisle today in introducing
legislation that would permanently extend and improve the research tax
credit.
The 1990s were a great period in American economic history because
American workers became more productive. This increase in productivity
allowed the economy to continue to grow faster than almost anyone
thought possible. Throughout the 1990s, doomsayers said that we had
reached the economy's speed limit, but we just kept growing. How did
this happen?
The Congressional Budget Office, Federal Reserve Chairman Alan
Greenspan, and dozens of leading economists have all heralded the
increase in our
[[Page S4003]]
productivity as a key to those economic good times. A major reason for
this increase in productivity, is the flowering of new ideas through
research and development. Restoring and increasing that growth is what
our bill today is all about.
But why do we need a research tax credit? Are not profitable new
ideas their own reward? Is not the promise of future profits from new
drug discoveries and new manufacturing techniques its own incentive?
Will not companies do large amounts of R&D on their own, without any
special tax incentives?
Yes, of course, they will. But they clearly will not do enough. This
is because cutting-edge research and development has spillover effects
that reach far beyond the company that makes the investment. When
companies invent new ideas and new production techniques, those
inventions last forever, and help people in the United States and
throughout the world. But the company that invests in R&D will only be
able to make a sizable profit on its invention for a few years at most.
That is because either the patent will expire, or other companies will
imitate the new technique and cut the inventor's hoped-for profits.
Now, I am all in favor of vigorous competition--it keeps our
companies strong and efficient. But we have to recognize that
competition means that innovators will receive only a fraction of the
benefits of their innovation. Once the imitators pop up and competition
increases, we know that profits will fall, prices will fall, and the
benefits of innovation, thankfully, will get passed on to consumers. We
need innovation, and fortunately, we have a strong, proven tax
incentive that can encourage that innovation. The benefits of
innovation reach far beyond the company that invents them. That is why
we need to give companies incentives to do more innovation.
I believe the best way to ensure that private-sector investment in
research and development continues at the healthy rate needed to fuel
productivity gains in the future is to improve and permanently extend
the research credit. This tax provision is a proven and a cost-
effective incentive to increase private-sector R&D spending.
Studies have shown that the research tax credit significantly
increases research and development expenditures. The marginal effect of
one dollar of the research credit creates approximately one dollar of
additional private research and development spending over the short-run
and as much as two dollars of extra R&D spending over the long-run.
That, is a good deal for the American taxpayer.
One of the greatest strengths of the research credit has always been
that it gave good incentives for more innovation. This year's proposal
to extend the credit is no exception. This year, we have added a third
way to qualify for the credit, an elective ``alternative simplified
credit.'' We propose to base this new alternative credit on how much a
company has increased its R&D spending compared to the last three
years. Companies will average their R&D spending over the previous
three years, and cut that number in half. For every dollar they spend
over that amount, they get a 12 percent tax credit. If they spend less
than that amount, they get no credit at all. This is why this credit is
so effective--it gives benefits to companies that do more, and gives no
benefits to companies that do less. That is good tax policy, and good
growth policy.
Once again, I want to ask my colleagues to make this credit
permanent. I think we all know that this credit is going to be
extended, again and again, every few years. It takes time and energy
for my colleagues to revisit this issue every few years. Can we not
just, once and for all, make this provision permanent? We know this is
good policy, and it is one of the most effective tax incentives in the
code. As I stated earlier, even under today's permanently temporary
credit, every dollar of tax credit is estimated to increase R&D
spending by one dollar in the short run and by up to two dollars in the
long run. And if we make this permanent, those incentives will only
improve.
As it stands, companies have to take account of the fact that
Congress could allow the credit lapse for a few months, as it did a
number of years ago. So companies hedge their bets, they spend a little
less on R&D, and our economy suffers as a result. By contrast,
permanence helps planning. The sooner we make this permanent, the
sooner companies can begin to enlarge and expand their research and
development units, and the sooner their innovations will strengthen
economic growth.
A permanent extension of this credit may seem costly in terms of lost
revenue. However, when you consider the value that this investment will
create for our economy, it is a bargain. In fact, one study estimates
that a permanent research credit would result in our Gross Domestic
Product increasing by $10 billion after five years and by $31 billion
after 20 years.
By making our workers more productive, this credit will also increase
wages. That is because study after study shows an iron-clad link
between worker productivity and worker wages. Findings from a study
conducted by Coopers & Lybrand show that workers in every state will
benefit from higher wages if the research tax credit is made permanent.
Payroll increases as a result of gains in productivity stemming from
the credit have been estimated to exceed $60 billion over the next 12
years.
My home State of Utah is a good example of how State economies
benefit from the research tax credit. Utah is home to a large number of
firms that invest a high percentage of their revenue on research and
development.
In Utah, five percent of the workers--51,000 people--work in the
research-intensive high technology sector. That includes over 10,000
people working just to design computer systems, and over 6,000
producing medical equipment. And there is a lot of R&D taking place
outside of Utah's high tech sector.
Just to give one example, more than 7,000 people work in Utah's
chemical industry, and workers in that industry benefit from research
and development taking place in Utah and throughout the country.
Aerospace and the drug and pharmaceutical industries are two more
examples of big Utah employer groups that reap the benefits of R&D. And
even in the midst of my state's currently weak job market, two
industries that increased employment in 2002 were the medical equipment
and the scientific research and development services industries.
So, the point I want to make is not that Utah needs to do all of the
research in order to reap the benefits of that research. Instead, the
point I want to make is that workers in my state will become more
productive and earn higher wages both when they invent new ideas, and
when they use new ideas, wherever those new ideas come from.
I want Utah companies to be able to buy better manufacturing
equipment, more reliable electronics, and have access to more efficient
quality control techniques. The workers who use new inventions will get
just as many benefits as workers who create those new inventions. And
the evidence clearly shows, that the research credit will increase
creation.
In short, there are tens of thousands of employees working in Utah's
thousands of technology based companies, with tens of thousands more
working in other sectors that engage in R&D. Beyond that, practically
all of Utah's hundreds of thousands of workers benefit from higher
productivity coming from the innovations that researchers both inside
and outside of Utah produce. Research and development is clearly the
lifeblood of our economy.
During the ten times in the past 20 years that Congress has extended
the research credit for a short time, the ostensible reason has been a
lack of revenue. The excuse we give to constituents is that we didn't
have the money to extend the bill permanently. Ironically, it costs at
least as much in terms of lost revenue, in the long run, to enact
short-term extensions as it does to extend it permanently.
A permanent research credit has wide support in both the Senate and
the House. A few years ago, this body passed by a vote of 98-1 an
amendment that would have permanently extended the credit.
Unfortunately, all amendments were ultimately stripped from the
underlying bill. Moreover, the permanent extension of the credit is a
major provision in President Bush's tax plan, and was supported by both
former President Clinton and by Al
[[Page S4004]]
Gore. Again in 2001, this body voted to include a permanent research
credit in the President's tax plan.
In conclusion, making the research tax credit permanent will increase
the growth rate of our economy. It will mean more and better jobs for
American workers. Making the tax credit permanent will speed economic
growth. And new technology resulting from American research and
development will continue to improve the standard of living for every
person in the U.S. and around the world. I look forward to working with
my colleagues on the Finance Committee and in the Senate as a whole to
create a permanent, improved research and development tax credit.
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. 664
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 ``Investment in America Act of
2003''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) Research and development performed in the United States
results in quality jobs, better and safer products, increased
ownership of technology-based intellectual property, and
higher productivity in the United States.
(2) The extent to which companies perform and increase
research and development activities in the United States is
in part dependent on Federal tax policy.
(3) Congress should make permanent a research and
development credit that provides a meaningful incentive to
all types of taxpayers.
SEC. 3. PERMANENT EXTENSION OF RESEARCH CREDIT.
(a) In General.--Section 41 of the Internal Revenue Code of
1986 (relating to credit for increasing research activities)
is amended by striking subsection (h).
(b) Conforming Amendment.--Paragraph (1) of section 45C(b)
of such Code is amended by striking subparagraph (D).
(c) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred after the date of the
enactment of this Act.
SEC. 4. INCREASE IN RATES OF ALTERNATIVE INCREMENTAL CREDIT.
(a) In General.--Subparagraph (A) of section 41(c)(4) of
the Internal Revenue Code of 1986 (relating to election of
alternative incremental credit) is amended--
(1) by striking ``2.65 percent'' and inserting ``3
percent'',
(2) by striking ``3.2 percent'' and inserting ``4
percent'', and
(3) by striking ``3.75 percent'' and inserting ``5
percent''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.
SEC. 5. ALTERNATIVE SIMPLIFIED CREDIT FOR QUALIFIED RESEARCH
EXPENSES.
(a) In General.--Subsection (c) of section 41 of the
Internal Revenue Code of 1986 (relating to base amount) is
amended by redesignating paragraphs (5) and (6) as paragraphs
(6) and (7), respectively, and by inserting after paragraph
(4) the following new paragraph:
``(5) Election of alternative simplified credit.--
``(A) In general.--At the election of the taxpayer, the
credit determined under subsection (a)(1) shall be equal to
12 percent of so much of the qualified research expenses for
the taxable year as exceeds 50 percent of the average
qualified research expenses for the 3 taxable years preceding
the taxable year for which the credit is being determined.
``(B) Special rule in case of no qualified research
expenses in any of 3 preceding taxable years.--
``(i) Taxpayers to which subparagraph applies.--The credit
under this paragraph shall be determined under this
subparagraph if the taxpayer has no qualified research
expenses in any 1 of the 3 taxable years preceding the
taxable year for which the credit is being determined.
``(ii) Credit rate.--The credit determined under this
subparagraph shall be equal to 6 percent of the qualified
research expenses for the taxable year.
``(C) Election.--An election under this paragraph shall
apply to the taxable year for which made and all succeeding
taxable years unless revoked with the consent of the
Secretary. An election under this paragraph may not be made
for any taxable year to which an election under paragraph (4)
applies.''
(b) Coordination With Election of Alternative Incremental
Credit.--
(1) In general.--Section 41(c)(4)(B) of the Internal
Revenue Code of 1986 (relating to election) is amended by
adding at the end the following: ``An election under this
paragraph may not be made for any taxable year to which an
election under paragraph (5) applies.''
(2) Transition rule.--In the case of an election under
section 41(c)(4) of the Internal Revenue Code of 1986 which
applies to the taxable year which includes the date of the
enactment of this Act, such election shall be treated as
revoked with the consent of the Secretary of the Treasury if
the taxpayer makes an election under section 41(c)(5) of such
Code (as added by subsection (a)) for such year.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.
Mr. BAUCUS. Mr. President, I am pleased to again join with my friend,
Senator Hatch, and my other colleagues, in introducing legislation to
make a permanent commitment to research-intensive businesses in the
United States. This legislation is bipartisan and bicameral. A
companion bill was introduced in January in the House of
Representatives by Congresswoman Nancy Johnson and Congressman Robert
Matsui.
Every morning we here news of some new product or discovery that
promises to make our jobs easier or our lives better. Many of these
innovations started with a business decision to hire needed researchers
and finance the expensive and long process of research and
experimentation. Since 1981, when the R&D tax credit was first enacted,
the federal government was a partner in that business endeavor because
of the potential spillover benefits to society overall from additional
research spending.
Research has shown that a tax credit is a cost-effective way to
promote R&D. The General Accounting Office, the Bureau of Labor
Statistics, the National Bureau of Economic Research, and others have
all found significant evidence that a tax credit stimulates additional
domestic R&D spending by U.S. companies. A reported by the
Congressional Research Service, CRS, indicates that economists
generally agree that, without government support, firm investment in
R&D would fall short of the socially optimal amount and thus CRS
advocates government policies to boost private sector R&D.
R&D is linked to broader economic and labor benefits. R&D lays the
foundation for technological innovation, which, in turn, is an
important driving force in long-term economic growth--mainly through
its impact on the productivity of capital and labor. We have many times
heard testimony from economists, including Federal Research Board Alan
Greenspan, that the reason our economy grew at such breakneck speed
during the 1990s stemmed from the productivity growth we realized
thanks to technological innovations.
There has been a belief that companies would continue to increase
their research spending and that the benefits of these investments on
the economy and labor markets would continue without end.
Unfortunately, that is not the case. New data compiled by Battelle
Memorial Institute and R&D Magazine project that for 2003, U.S. company
spending on research will be mostly flat for the second year in a row.
According to this report, companies plan a 0.1 percent increase in R&D
spending in 2003. Spending in 2002 rose a mere 0.3 percent over 2001
levels. This compares to 2001 when R&D spending grew by 5 percent over
the previous year. Those numbers should be a wake up call for all of
us. As research spending falls, so too will the level of future
economic growth.
It is also important to recognize that many of our foreign
competitors are offering permanent and generous incentives to firms
that attract research dollars to those countries. A 2001 study by the
Organization of Economic Cooperation and Development, OECD, ranked the
U.S. ninth behind other nations in terms of its incentives for business
R&D spending. Countries that provide more generous R&D incentives
include Spain, Canada, Portugal, Austria, Australia, Netherlands,
France, and Korea. The United Kingdom was added to this list in 2002
when it further expanded its existing R&D incentives program. The
continued absence of a long-term U.S. government R&D policy that
encourages U.S.-based R&D will undermine the ability of American
companies to remain competitive in U.S. and foreign markets. This
disparity could limit U.S. competitiveness relative to its trading
partners in the long-run.
Also, U.S. workers who are engaged in R&D activities currently
benefit
[[Page S4005]]
from some of the most intellectually stimulating, high-paying, high-
skilled jobs in the economy. My own State of Montana is an excellent
example of this economic activity. During the 1990s, about 400
establishments provided high-technology services, at an average wage of
about $35,000 per year. These jobs paid nearly 80 percent more than the
average private sector wage of less than $20,000 per year during the
same year. Many of these jobs would never have been created without the
assistance of the R&D credit. While there may not be an immediate rush
to move all projects and jobs offshore, there has been movement at the
margins on those projects that are most cost-sensitive. Once those
projects and jobs are gone, it will be many years before companies will
have any incentive to bring them back to the United States.
We continue to grapple with the need to stimulate economic growth and
advance policies that represent solid long-term investments that will
reap benefits for many years to come. Senator Hatch and I repeatedly
have pointed to the R&E tax credit as a measure that gives us a good
``bang for our buck.'' I hope this year we can enact a permanent tax
credit that is effective and more widely available. I encourage my
colleagues to join us in this effort.
As we have in years past, our proposal would make the current
research and experimentation tax credit permanent and increase the
Alternative Incremental Research Credit, AIRC, rates. This year we take
one additional but necessary step.
We propose a new alternative simplified credit that will allow
taxpayers to elect to calculate the R&D credit under new computational
rules that will eliminate the present-law distortions caused by gross
receipts.
There is no good policy reason to make research more expensive for
some industries than for others. While the regular R&E tax credit works
very well for many companies, as the credit's base period recedes and
business cycles change, the current credit is out of reach for some
other firms that still incur significant research expenditures. To help
solve part of this problem Congress enacted the AIRC in 1996 and now we
propose a way to address the rest of that problem.
Under current law, both the regular credit and the AIRC are
calculated by reference to a taxpayer's gross receipts, a benchmark
that can produce inequities and anomalous results. For example, many
taxpayers are no longer able to qualify for the regular credit, despite
substantial R&D investments, because their R&D spending relative to
gross receipts has not kept pace with the ratio set in the 1984-88 base
period, which governs calculation of the regular credit. This can
happen, for example, simply where a company's sales increase
significantly in the intervening years, where a company enters into an
additional line of business that generates additional gross receipts
but involves little R&D, or where a company becomes more efficient in
its R&D processes.
Our proposal would correct this by allowing taxpayers a
straightforward alternative research credit election. Taxpayers could
elect, in lieu of the regular credit or the AIRC, a credit that would
equal 12 percent of the excess of the taxpayer's current year qualified
research expenditures, ``QREs'', over 50 percent of the taxpayer's
average QREs for the 3 preceding years. Unlike the regular credit and
the AIRC, this credit calculation does not involve gross receipts.
The R&D tax credit has proven it can be an effective incentive. We
need to act to make it a permanent part of the tax code that U.S.
businesses can rely on. The best thing we can do for our long-term
economic well-being is to stoke the engine of growth--technology, high-
wage jobs and productivity. I look forward to working with Sen. Hatch
and all my colleagues on this important issue.
I urge my colleagues to support this important piece of legislation.
______
By Mr. GRASSLEY (for himself, Mr. Baucus, Mr. Roberts, Mr.
Brownback, Mrs. Lincoln, Mr. Burns, Mr. Craig, Mr. Crapo, Mr.
Fitzgerald, Mr. Johnson, Mr. Hagel, Mr. Miller, Mr. Dorgan, and
Mr. Daschle):
S. 665. A bill to amend the Internal Revenue Code of 1986 to provide
tax relief for farmers and fishermen, and for other purposes; to the
Committee on Finance.
Mr. GRASSLEY. Mr. President, I rise today to introduce, along with my
good friend, Senator Baucus, to introduce the Tax Empowerment and
Relief for Farmers and Fishermen Act, which I will refer to as the
``TERFF Act.'' I am pleased that Senators Roberts, Brownback, Lincoln,
Burns, Craig, Crapo, Fitzgerald, Hagel, and Dorgan are joining Senator
Baucus and me as cosponsors of this important legislation.
I am a farmer, like my father was before me. I understand farming and
how policy decisions from Washington impact hardworking farmers, like
my son Robin. Before I ran for elected office and after I leave, God
willing, I'll still be farming. There is little that I feel more
strongly about than providing the agriculture community with the
potential to survive and to thrive. As far as I'm concerned,
agriculture is my ``turf'' and as long as I'm in this town, I'll do all
I can to serve my friends and neighbors in the agriculture community.
This legislation has already been adopted by the Senate multiple
times. In the midst of a serious downturn in the agriculture economy,
it seems to me we ought to be doing everything we can to help farmers,
and this would provide significant assistance.
First, this legislation includes Farm, Fish, and Ranch Risk
Management Accounts. These farmer saving accounts would allow farmers
to contribute up to 20 percent of their income in an account, and
deduct it in the same year. Farm accounts would be a very important
risk management tool that will help farmers put away money when there's
actual income, so that, in the bad times, there will be a safety net.
This measure has strong bipartisan support and was actually sent to
President Clinton, who vetoed it.
In addition, this legislation would exempt Conservation Reserve
Program payments from self-employment tax. Under current law, farmers
who participate in the CRP are unnecessarily struggling during tax
season because of a case pushed by the IRS. The latest 6th Circuit
court's ruling treats CRP payments as farm income subject to the
additional self-employment tax rate of 15 percent.
Senator Brownback has taken the lead on fixing this problem. This
unfair tax not only ignores the intent of Congress in creating the CRP,
it discourages farmers from using environmentally pro-active measures.
At a time when farmers are struggling to regain their footing
economically and do the right thing environmentally, it's important
that Congress support them by upholding its promise on CRP.
In addition, Senator Lugar has led the effort to expand the current
program that allows companies to donate to food banks, so that farmers
and restaurants can also donate surplus food directly to needy food
banks. This will be a win for the farmers and a big win for people who
depend on food bank assistance.
In addition, when we passed income averaging for farmers a few years
ago, we neglected to take into account the problem of running into the
alternative minimum tax, which many farmers are facing now. My bill
will fix this growing problem.
My bill also expands opportunities for beginning farmers who are in
need of low interest rate loans for capital purchases of farmland and
equipment.
Current law permits State authorities to issue tax exempt bonds and
to lend the proceeds from the sale of the bonds to beginning farmers
and ranchers to finance the cost of acquiring land, buildings and
equipment used in a farm or ranch operation.
Unfortunately, aggie bonds are subject to a volume cap and must
compete with big industrial projects for bond allocation. Aggie bonds
share few similarities to industrial revenue bonds and should not be
subject to the volume cap established for industrial revenue bonds.
Insufficient allocation of funding due to the volume cap limits the
effectiveness of this program. We can't stand by and allow the next
generation of farmers to lose an opportunity to participate in farming
because of competition with industry for reduced interest loan rates.
[[Page S4006]]
In addition, the IRS recently determined that some cooperatives
should be exposed to a regular corporate tax due to the fact that they
are using organic value-added practices rather than manufactured value-
added practices. This is unfair, and needs to be fixed.
It is also imperative that we not neglect the difficulties many
producers are facing in light of persistent drought conditions. Under
current law, a producer who loses livestock, or is forced to sell
livestock, or is forced to sell livestock, is required to replace that
livestock within two years. However, some parts of the country have
already experienced two years of drought with no end in sight.
It goes against common sense for these producers to replace livestock
until conditions improve. My legislation would extend the 2-year
deadline to 4 years.
And of course my package wouldn't be complete without a provision
leveling the playing field for ethanol producers.
The Small Ethanol Producer Credit will allow small cooperative
producers of ethanol to be able to receive the same tax benefits as
large companies. This provision provides cooperatives the ability to
elect to pass through small ethanol producer credits to its patron.
The ``TERFF'' package will do more to reform taxes for the American
farmer than any other measure in recent memory. I urge my colleagues to
strongly support this measure.
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. 665
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Tax
Empowerment and Relief for Farmers and Fishermen (TERFF)
Act''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--
Sec. 1. Short title; etc.
Sec. 2. Farm, fishing, and ranch risk management accounts.
Sec. 3. Exclusion of rental income from self-employment tax.
Sec. 4. Exclusion of conservation reserve program payments from self-
employment tax.
Sec. 5. Exemption of agricultural bonds from private activity bond
volume limits.
Sec. 6. Modifications to section 512(b)(13).
Sec. 7. Charitable deduction for contributions of food inventory.
Sec. 8. Coordinate farmers and fishermen income averaging and the
alternative minimum tax.
Sec. 9. Modification to cooperative marketing rules to include value
added processing involving animals.
Sec. 10. Extension of declaratory judgment procedures to farmers'
cooperative organizations.
Sec. 11. Small ethanol producer credit.
Sec. 12. Payment of dividends on stock of cooperatives without reducing
patronage dividends.
Sec. 13. Special rules for livestock sold on account of weather-related
conditions.
SEC. 2. FARM, FISHING, AND RANCH RISK MANAGEMENT ACCOUNTS.
(a) In General.--Subpart C of part II of subchapter E of
chapter 1 (relating to taxable year for which deductions
taken) is amended by inserting after section 468B the
following new section:
``SEC. 468C. FARM, FISHING, AND RANCH RISK MANAGEMENT
ACCOUNTS.
``(a) Deduction Allowed.--In the case of an individual
engaged in an eligible farming business or commercial
fishing, there shall be allowed as a deduction for any
taxable year the amount paid in cash by the taxpayer during
the taxable year to a Farm, Fishing, and Ranch Risk
Management Account (hereinafter referred to as the `FFARRM
Account').
``(b) Limitation.--
``(1) Contributions.--The amount which a taxpayer may pay
into the FFARRM Account for any taxable year shall not exceed
20 percent of so much of the taxable income of the taxpayer
(determined without regard to this section) which is
attributable (determined in the manner applicable under
section 1301) to any eligible farming business or commercial
fishing.
``(2) Distributions.--Distributions from a FFARRM Account
may not be used to purchase, lease, or finance any new
fishing vessel, add capacity to any fishery, or otherwise
contribute to the overcapitalization of any fishery. The
Secretary of Commerce shall implement regulations to enforce
this paragraph.
``(c) Eligible Businesses.--For purposes of this section--
``(1) Eligible farming business.--The term `eligible
farming business' means any farming business (as defined in
section 263A(e)(4)) which is not a passive activity (within
the meaning of section 469(c)) of the taxpayer.
``(2) Commercial fishing.--The term `commercial fishing'
has the meaning given such term by section (3) of the
Magnuson-Stevens Fishery Conservation and Management Act (16
U.S.C. 1802) but only if such fishing is not a passive
activity (within the meaning of section 469(c)) of the
taxpayer.
``(d) FFARRM Account.--For purposes of this section--
``(1) In general.--The term `FFARRM Account' means a trust
created or organized in the United States for the exclusive
benefit of the taxpayer, but only if the written governing
instrument creating the trust meets the following
requirements:
``(A) No contribution will be accepted for any taxable year
in excess of the amount allowed as a deduction under
subsection (a) for such year.
``(B) The trustee is a bank (as defined in section 408(n))
or another person who demonstrates to the satisfaction of the
Secretary that the manner in which such person will
administer the trust will be consistent with the requirements
of this section.
``(C) The assets of the trust consist entirely of cash or
of obligations which have adequate stated interest (as
defined in section 1274(c)(2)) and which pay such interest
not less often than annually.
``(D) All income of the trust is distributed currently to
the grantor.
``(E) The assets of the trust will not be commingled with
other property except in a common trust fund or common
investment fund.
``(2) Account taxed as grantor trust.--The grantor of a
FFARRM Account shall be treated for purposes of this title as
the owner of such Account and shall be subject to tax thereon
in accordance with subpart E of part I of subchapter J of
this chapter (relating to grantors and others treated as
substantial owners).
``(e) Inclusion of Amounts Distributed.--
``(1) In general.--Except as provided in paragraph (2),
there shall be includible in the gross income of the taxpayer
for any taxable year--
``(A) any amount distributed from a FFARRM Account of the
taxpayer during such taxable year, and
``(B) any deemed distribution under--
``(i) subsection (f )(1) (relating to deposits not
distributed within 5 years),
``(ii) subsection (f )(2) (relating to cessation in
eligible farming business), and
``(iii) subparagraph (B) or (C) of subsection (f )(3)
(relating to prohibited transactions and pledging account as
security).
``(2) Exceptions.--Paragraph (1)(A) shall not apply to--
``(A) any distribution to the extent attributable to income
of the Account, and
``(B) the distribution of any contribution paid during a
taxable year to a FFARRM Account to the extent that such
contribution exceeds the limitation applicable under
subsection (b) if requirements similar to the requirements of
section 408(d)(4) are met.
For purposes of subparagraph (A), distributions shall be
treated as first attributable to income and then to other
amounts.
``(f ) Special Rules.--
``(1) Tax on deposits in account which are not distributed
within 5 years.--
``(A) In general.--If, at the close of any taxable year,
there is a nonqualified balance in any FFARRM Account--
``(i) there shall be deemed distributed from such Account
during such taxable year an amount equal to such balance, and
``(ii) the taxpayer's tax imposed by this chapter for such
taxable year shall be increased by 10 percent of such deemed
distribution.
The preceding sentence shall not apply if an amount equal to
such nonqualified balance is distributed from such Account to
the taxpayer before the due date (including extensions) for
filing the return of tax imposed by this chapter for such
year (or, if earlier, the date the taxpayer files such return
for such year).
``(B) Nonqualified balance.--For purposes of subparagraph
(A), the term `nonqualified balance' means any balance in the
Account on the last day of the taxable year which is
attributable to amounts deposited in such Account before the
4th preceding taxable year.
``(C) Ordering rule.--For purposes of this paragraph,
distributions from a FFARRM Account (other than distributions
of current income) shall be treated as made from deposits in
the order in which such deposits were made, beginning with
the earliest deposits.
``(2) Cessation in eligible business.--At the close of the
first disqualification period after a period for which the
taxpayer was engaged in an eligible farming business or
commercial fishing, there shall be deemed distributed from
the FFARRM Account of the taxpayer an amount equal to the
balance in such Account (if any) at the close of such
disqualification period. For purposes of the
[[Page S4007]]
preceding sentence, the term `disqualification period' means
any period of 2 consecutive taxable years for which the
taxpayer is not engaged in an eligible farming business or
commercial fishing.
``(3) Certain rules to apply.--Rules similar to the
following rules shall apply for purposes of this section:
``(A) Section 220(f )(8) (relating to treatment after death
of account holder).
``(B) Section 408(e)(2) (relating to loss of exemption of
account where individual engages in prohibited transaction).
``(C) Section 408(e)(4) (relating to effect of pledging
account as security).
``(D) Section 408(g) (relating to community property laws).
``(E) Section 408(h) (relating to custodial accounts).
``(4) Time when payments deemed made.--For purposes of this
section, a taxpayer shall be deemed to have made a payment to
a FFARRM Account on the last day of a taxable year if such
payment is made on account of such taxable year and is made
on or before the due date (without regard to extensions) for
filing the return of tax for such taxable year.
``(5) Individual.--For purposes of this section, the term
`individual' shall not include an estate or trust.
``(6) Deduction not allowed for self-employment tax.--The
deduction allowable by reason of subsection (a) shall not be
taken into account in determining an individual's net
earnings from self-employment (within the meaning of section
1402(a)) for purposes of chapter 2.
``(g) Reports.--The trustee of a FFARRM Account shall make
such reports regarding such Account to the Secretary and to
the person for whose benefit the Account is maintained with
respect to contributions, distributions, and such other
matters as the Secretary may require under regulations. The
reports required by this subsection shall be filed at such
time and in such manner and furnished to such persons at such
time and in such manner as may be required by such
regulations.''.
(b) Tax on Excess Contributions.--
(1) Subsection (a) of section 4973 (relating to tax on
excess contributions to certain tax-favored accounts and
annuities) is amended by striking ``or'' at the end of
paragraph (3), by redesignating paragraph (4) as paragraph
(5), and by inserting after paragraph (3) the following new
paragraph:
``(4) a FFARRM Account (within the meaning of section
468C(d)), or''.
(2) Section 4973 is amended by adding at the end the
following new subsection:
``(g) Excess Contributions to FFARRM Accounts.--For
purposes of this section, in the case of a FFARRM Account
(within the meaning of section 468C(d)), the term `excess
contributions' means the amount by which the amount
contributed for the taxable year to the Account exceeds the
amount which may be contributed to the Account under section
468C(b) for such taxable year. For purposes of this
subsection, any contribution which is distributed out of the
FFARRM Account in a distribution to which section
468C(e)(2)(B) applies shall be treated as an amount not
contributed.''.
(3) The section heading for section 4973 is amended to read
as follows:
``SEC. 4973. EXCESS CONTRIBUTIONS TO CERTAIN ACCOUNTS,
ANNUITIES, ETC.''.
(4) The table of sections for chapter 43 is amended by
striking the item relating to section 4973 and inserting the
following new item:
``Sec. 4973. Excess contributions to certain accounts, annuities,
etc.''.
(c) Tax on Prohibited Transactions.--
(1) Subsection (c) of section 4975 (relating to tax on
prohibited transactions) is amended by adding at the end the
following new paragraph:
``(6) Special rule for ffarrm accounts.--A person for whose
benefit a FFARRM Account (within the meaning of section
468C(d)) is established shall be exempt from the tax imposed
by this section with respect to any transaction concerning
such account (which would otherwise be taxable under this
section) if, with respect to such transaction, the account
ceases to be a FFARRM Account by reason of the application of
section 468C(f )(3)(A) to such account.''.
(2) Paragraph (1) of section 4975(e) is amended by
redesignating subparagraphs (E) and (F) as subparagraphs (F)
and (G), respectively, and by inserting after subparagraph
(D) the following new subparagraph:
``(E) a FFARRM Account described in section 468C(d),''.
(d) Failure To Provide Reports on FFARRM Accounts.--
Paragraph (2) of section 6693(a) (relating to failure to
provide reports on certain tax-favored accounts or annuities)
is amended by redesignating subparagraphs (C) and (D) as
subparagraphs (D) and (E), respectively, and by inserting
after subparagraph (B) the following new subparagraph:
``(C) section 468C(g) (relating to FFARRM Accounts),''.
(e) Clerical Amendment.--The table of sections for subpart
C of part II of subchapter E of chapter 1 is amended by
inserting after the item relating to section 468B the
following new item:
``Sec. 468C. Farm, Fishing and Ranch Risk Management Accounts.''.
(f ) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 3. EXCLUSION OF RENTAL INCOME FROM SELF-EMPLOYMENT TAX.
(a) Internal Revenue Code.--Section 1402(a)(1)(A) (relating
to net earnings from self-employment) is amended by striking
``an arrangement'' and inserting ``a written lease
agreement''.
(b) Social Security Act.--Section 211(a)(1)(A) of the
Social Security Act is amended by striking ``an arrangement''
and inserting ``a written lease agreement''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 4. EXCLUSION OF CONSERVATION RESERVE PROGRAM PAYMENTS
FROM SELF-EMPLOYMENT TAX.
(a) Internal Revenue Code.--Section 1402(a)(1) (relating to
net earnings from self-employment) is amended by inserting
``and including payments under section 1233(2) of the Food
Security Act of 1985 (16 U.S.C. 3833(2))'' after ``crop
shares''.
(b) Social Security Act.--Section 211(a)(1) of the Social
Security Act is amended by inserting ``and including payments
under section 1233(2) of the Food Security Act of 1985 (16
U.S.C. 3833(2))'' after ``crop shares''.
(c) Effective Date.--The amendments made by this section
shall apply to payments made after the date of the enactment
of this Act.
SEC. 5. EXEMPTION OF AGRICULTURAL BONDS FROM PRIVATE ACTIVITY
BOND VOLUME LIMITS.
(a) In General.--Section 146(g) (relating to exception for
certain bonds) is amended by striking ``and'' at the end of
paragraph (3), by striking the period at the end of paragraph
(4) and inserting ``, and'', and by inserting after paragraph
(4) the following new paragraph:
``(5) any qualified small issue bond described in section
144(a)(12)(B)(ii).''.
(b) Effective Date.--The amendments made by this section
shall apply to bonds issued after the date of the enactment
of this Act.
SEC. 6. MODIFICATIONS TO SECTION 512(B)(13).
(a) In General.--Paragraph (13) of section 512(b) (relating
to special rules for certain amounts received from controlled
entities) is amended by redesignating subparagraph (E) as
subparagraph (F) and by inserting after subparagraph (D) the
following new subparagraph:
``(E) Paragraph to apply only to excess payments.--
``(i) In general.--Subparagraph (A) shall apply only to the
portion of a specified payment received or accrued by the
controlling organization that exceeds the amount which would
have been paid or accrued if such payment met the
requirements prescribed under section 482.
``(ii) Addition to tax for valuation misstatements.--The
tax imposed by this chapter on the controlling organization
shall be increased by an amount equal to 20 percent of the
larger of--
``(I) such excess determined without regard to any
amendment or supplement to a return of tax, or
``(II) such excess determined with regard to all such
amendments and supplements.''.
(b) Effective Date.--
(1) In general.--The amendment made by this section shall
apply to payments received or accrued after December 31,
2000.
(2) Payments subject to binding contract transition rule.--
If the amendments made by section 1041 of the Taxpayer Relief
Act of 1997 did not apply to any amount received or accrued
in the first 2 taxable years beginning on or after the date
of the enactment of the Taxpayer Relief Act of 1997 under any
contract described in subsection (b)(2) of such section, such
amendments also shall not apply to amounts received or
accrued under such contract before January 1, 2001.
SEC. 7. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD
INVENTORY.
(a) In General.--Subsection (e) of section 170 (relating to
certain contributions of ordinary income and capital gain
property) is amended by adding at the end the following new
paragraph:
``(7) Application of paragraph (3) to certain contributions
of food inventory.--For purposes of this section--
``(A) Extension to individuals.--In the case of a
charitable contribution of apparently wholesome food--
``(i) paragraph (3)(A) shall be applied without regard to
whether the contribution is made by a C corporation, and
``(ii) in the case of a taxpayer other than a C
corporation, the aggregate amount of such contributions from
any trade or business (or interest therein) of the taxpayer
for any taxable year which may be taken into account under
this section shall not exceed 10 percent of the taxpayer's
net income from any such trade or business, computed without
regard to this section, for such taxable year.
``(B) Limitation on reduction.--In the case of a charitable
contribution of apparently wholesome food, notwithstanding
paragraph (3)(B), the amount of the reduction determined
under paragraph (1)(A) shall not exceed the amount by which
the fair market value of such property exceeds twice the
basis of such property.
``(C) Determination of basis.--If a taxpayer--
``(i) does not account for inventories under section 471,
and
``(ii) is not required to capitalize indirect costs under
section 263A,
[[Page S4008]]
the taxpayer may elect, solely for purposes of paragraph
(3)(B), to treat the basis of any apparently wholesome food
as being equal to 25 percent of the fair market value of such
food.
``(D) Determination of fair market value.--In the case of a
charitable contribution of apparently wholesome food which is
a qualified contribution (within the meaning of paragraph
(3), as modified by subparagraph (A) of this paragraph) and
which, solely by reason of internal standards of the taxpayer
or lack of market, cannot or will not be sold, the fair
market value of such contribution shall be determined--
``(i) without regard to such internal standards or such
lack of market and
``(ii) by taking into account the price at which the same
or substantially the same food items (as to both type and
quality) are sold by the taxpayer at the time of the
contribution (or, if not so sold at such time, in the recent
past).
``(E) Apparently wholesome food.--For purposes of this
paragraph, the term `apparently wholesome food' has the
meaning given such term by section 22(b)(2) of the Bill
Emerson Good Samaritan Food Donation Act (42 U.S.C.
1791(b)(2)), as in effect on the date of the enactment of
this paragraph.''.
(b) Effective Date.--The amendment made by this section
shall apply to contributions made after the date of the
enactment of this Act.
SEC. 8. COORDINATE FARMERS AND FISHERMEN INCOME AVERAGING AND
THE ALTERNATIVE MINIMUM TAX.
(a) In General.--Section 55(c) (defining regular tax) is
amended by redesignating paragraph (2) as paragraph (3) and
by inserting after paragraph (1) the following new paragraph:
``(2) Coordination with income averaging for farmers and
fishermen.--Solely for purposes of this section, section 1301
(relating to averaging of farm and fishing income) shall not
apply in computing the regular tax.''.
(b) Allowing Income Averaging for Fishermen.--
(1) In general.--Section 1301(a) is amended by striking
``farming business'' and inserting ``farming business or
fishing business''.
(2) Definition of elected farm income.--
(A) In general.--Clause (i) of section 1301(b)(1)(A) is
amended by inserting ``or fishing business'' before the
semicolon.
(B) Conforming amendment.--Subparagraph (B) of section
1301(b)(1) is amended by inserting ``or fishing business''
after ``farming business'' both places it occurs.
(3) Definition of fishing business.--Section 1301(b) is
amended by adding at the end the following new paragraph:
``(4) Fishing business.--The term `fishing business' means
the conduct of commercial fishing as defined in section 3 of
the Magnuson-Stevens Fishery Conservation and Management Act
(16 U.S.C. 1802).''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 9. MODIFICATION TO COOPERATIVE MARKETING RULES TO
INCLUDE VALUE ADDED PROCESSING INVOLVING
ANIMALS.
(a) In General.--Section 1388 (relating to definitions and
special rules) is amended by adding at the end the following
new subsection:
``(k) Cooperative Marketing Includes Value-Added Processing
Involving Animals.--For purposes of section 521 and this
subchapter, the term `marketing the products of members or
other producers' includes feeding the products of members or
other producers to cattle, hogs, fish, chickens, or other
animals and selling the resulting animals or animal
products.''.
(b) Conforming Amendment.--Section 521(b) is amended by
adding at the end the following new paragraph:
``(7) Cross Reference.--
``For treatment of value-added processing involving animals, see
section 1388(k).''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 10. EXTENSION OF DECLARATORY JUDGMENT PROCEDURES TO
FARMERS' COOPERATIVE ORGANIZATIONS.
(a) In General.--Section 7428(a)(1) (relating to
declaratory judgments of tax exempt organizations) is amended
by striking ``or'' at the end of subparagraph (B) and by
adding at the end the following new subparagraph:
``(D) with respect to the initial classification or
continuing classification of a cooperative as described in
section 521(b) which is exempt from tax under section 521(a),
or''.
(b) Effective Date.--The amendments made by this section
shall apply with respect to pleadings filed after the date of
the enactment of this Act.
SEC. 11. SMALL ETHANOL PRODUCER CREDIT.
(a) Allocation of Alcohol Fuels Credit to Patrons of a
Cooperative.--Section 40(g) (relating to alcohol used as
fuel) is amended by adding at the end the following new
paragraph:
``(6) Allocation of small ethanol producer credit to
patrons of cooperative.--
``(A) Election to allocate.--
``(i) In general.--In the case of a cooperative
organization described in section 1381(a), any portion of the
credit determined under subsection (a)(3) for the taxable
year may, at the election of the organization, be apportioned
pro rata among patrons of the organization on the basis of
the quantity or value of business done with or for such
patrons for the taxable year.
``(ii) Form and effect of election.--An election under
clause (i) for any taxable year shall be made on a timely
filed return for such year. Such election, once made, shall
be irrevocable for such taxable year.
``(B) Treatment of organizations and patrons.--The amount
of the credit apportioned to patrons under subparagraph (A)--
``(i) shall not be included in the amount determined under
subsection (a) with respect to the organization for the
taxable year,
``(ii) shall be included in the amount determined under
subsection (a) for the taxable year of each patron for which
the patronage dividends for the taxable year described in
subparagraph (A) are included in gross income, and
``(iii) shall be included in gross income of such patrons
for the taxable year in the manner and to the extent provided
in section 87.
``(C) Special rules for decrease in credits for taxable
year.--If the amount of the credit of a cooperative
organization determined under subsection (a)(3) for a taxable
year is less than the amount of such credit shown on the
return of the cooperative organization for such year, an
amount equal to the excess of--
``(i) such reduction, over
``(ii) the amount not apportioned to such patrons under
subparagraph (A) for the taxable year,
shall be treated as an increase in tax imposed by this
chapter on the organization. Such increase shall not be
treated as tax imposed by this chapter for purposes of
determining the amount of any credit under this chapter or
for purposes of section 55.''.
(b) Improvements to Small Ethanol Producer Credit.--
(1) Definition of small ethanol producer.--Section 40(g)
(relating to definitions and special rules for eligible small
ethanol producer credit) is amended by striking
``30,000,000'' each place it appears and inserting
``60,000,000''.
(2) Small ethanol producer credit not a passive activity
credit.--Clause (i) of section 469(d)(2)(A) is amended by
striking ``subpart D'' and inserting ``subpart D, other than
section 40(a)(3),''.
(3) Allowing credit against entire regular tax and minimum
tax.--
(A) In general.--Subsection (c) of section 38 (relating to
limitation based on amount of tax), as amended by section
301(b) of the Job Creation and Worker Assistance Act of 2002,
is amended by redesignating paragraph (4) as paragraph (5)
and by inserting after paragraph (3) the following new
paragraph:
``(4) Special rules for small ethanol producer credit.--
``(A) In general.--In the case of the small ethanol
producer credit--
``(i) this section and section 39 shall be applied
separately with respect to the credit, and
``(ii) in applying paragraph (1) to the credit--
``(I) the amounts in subparagraphs (A) and (B) thereof
shall be treated as being zero, and
``(II) the limitation under paragraph (1) (as modified by
subclause (I)) shall be reduced by the credit allowed under
subsection (a) for the taxable year (other than the small
ethanol producer credit).
``(B) Small ethanol producer credit.--For purposes of this
subsection, the term `small ethanol producer credit' means
the credit allowable under subsection (a) by reason of
section 40(a)(3).''.
(B) Conforming amendments.--Subclause (II) of section
38(c)(2)(A)(ii), as amended by section 301(b)(2) of the Job
Creation and Worker Assistance Act of 2002, and subclause
(II) of section 38(c)(3)(A)(ii), as added by section
301(b)(1) of such Act, are each amended by inserting ``or the
small ethanol producer credit'' after ``employee credit''.
(4) Small ethanol producer credit not added back to income
under section 87.--Section 87 (relating to income inclusion
of alcohol fuel credit) is amended to read as follows:
``SEC. 87. ALCOHOL FUEL CREDIT.
``Gross income includes an amount equal to the sum of--
``(1) the amount of the alcohol mixture credit determined
with respect to the taxpayer for the taxable year under
section 40(a)(1), and
``(2) the alcohol credit determined with respect to the
taxpayer for the taxable year under section 40(a)(2).''.
(c) Conforming Amendment.--Section 1388 (relating to
definitions and special rules for cooperative organizations)
is amended by adding at the end the following new subsection:
``(k) Cross Reference.--For provisions relating to the
apportionment of the alcohol fuels credit between cooperative
organizations and their patrons, see section 40(g)(6).''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 12. PAYMENT OF DIVIDENDS ON STOCK OF COOPERATIVES
WITHOUT REDUCING PATRONAGE DIVIDENDS.
(a) In General.--Subsection (a) of section 1388 (relating
to patronage dividend defined) is amended by adding at the
end the following new sentence: ``For purposes of paragraph
(3), net earnings shall not be reduced by amounts paid during
the year as dividends on capital stock or other proprietary
[[Page S4009]]
capital interests of the organization to the extent that the
articles of incorporation or bylaws of such organization or
other contract with patrons provide that such dividends are
in addition to amounts otherwise payable to patrons which are
derived from business done with or for patrons during the
taxable year.''.
(b) Effective Date.--The amendment made by this section
shall apply to distributions in taxable years beginning after
the date of the enactment of this Act.
SEC. 13. SPECIAL RULES FOR LIVESTOCK SOLD ON ACCOUNT OF
WEATHER-RELATED CONDITIONS.
(a) Rules for Replacement of Involuntarily Converted
Livestock.--Subsection (e) of section 1033 (relating to
involuntary conversions) is amended--
(1) by striking ``Conditions.--For purposes'' and inserting
``Conditions.--
``(1) In general.--For purposes'', and
(2) by adding at the end the following new paragraph:
``(2) Extension of replacement period.--
``(A) In general.--In the case of drought, flood, or other
weather-related conditions described in paragraph (1) which
result in the area being designated as eligible for
assistance by the Federal Government, subsection (a)(2)(B)
shall be applied with respect to any converted property by
substituting `4 years' for `2 years'.
``(B) Further extension by secretary.--The Secretary may
extend on a regional basis the period for replacement under
this section (after the application of subparagraph (A)) for
such additional time as the Secretary determines appropriate
if the weather-related conditions which resulted in such
application continue for more than 3 years.''.
(b) Income Inclusion Rules.--Section 451(e) (relating to
special rule for proceeds from livestock sold on account of
drought, flood, or other weather-related conditions) is
amended by adding at the end the following new paragraph:
``(3) Special election rules.--If section 1033(e)(2)
applies to a sale or exchange of livestock described in
paragraph (1), the election under paragraph (1) shall be
deemed valid if made during the replacement period described
in such section.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
Mr. BAUCUS. Mr. President, I am pleased to join Chairman Grassley in
introducing the Tax Empowerment and Relief for Farmers and Fishermen
Act.
Rural America has been experiencing some hard times. Drought, low
prices, and an economic downturn have left agricultural producers in
dire straits and have left rural economies reeling. Farmers and
ranchers are the life blood to rural economies, and when agriculture is
hurting, rural America hurts. Small towns are dying, stores on Main
Street are closing and farmers are leaving their land.
Congress has worked hard to help our nation's agricultural producers,
but with this bill, we are giving them the tools to help themselves.
This package includes Farm, Fish, and Ranch Risk Management Accounts,
otherwise known as FFARRM Accounts. These farmer savings accounts would
allow farmers to contribute up to 20 percent of their income to a
savings account, and deduct it in the same year. FFARRM accounts would
be a very important risk management tool to help farmers put away money
when there's actual income, so that in the really bad times there would
be a safety net.
This legislation also reverses unfair IRS decisions on self-
employment tax for farmers. Farmers who participate in the Conservation
Reserve Program are unnecessarily struggling during tax season because
of a case pursued by the IRS. The latest 6th-Circuit Court ruling
treats CRP as farm income subject to the additional self-employment tax
rate of 15 percent. This unfair tax not only ignores the intent of
Congress in creating the CRP, but it also discourages farmers from
using environmentally pro-active measures. The bill also includes a
provision to reverse an IRS attempt to apply the self-employment tax on
farmers' cash rental income.
Also included in the package is a provision to hold farmers harmless
from the Alternative Minimum Tax when they use income averaging. When
Congress passed income averaging for farmers a few years ago, it
neglected to take into account the problem of running into the
alternative minimum tax, which many farmers are facing now. This
legislation will fix this growing problem.
It also contains an expansion of first-time farmer loans, or Aggie
Bonds. This expands opportunities for beginning farmers who need low-
interest rate loans for purchases of farmland and equipment. Current
law permits state authorities to issue tax-exempt bonds and to lend the
proceeds from the sale of the bonds to beginning farmers and ranchers
to finance the cost of acquiring land, buildings and equipment used in
a farm or ranch operation. Unfortunately, Aggie Bonds are subjected to
a volume cap and must compete with big industrial projects for bond
allocation. Aggie Bonds share few similarities to Industrial Revenue
Bonds and should not be subjected to the volume cap established for
IRBs. Insufficient allocation of funding due to the volume cap limits
the effectiveness of this program.
Farmer co-op initiatives are also included. Recently the IRS
determined that some cooperatives should be exposed to a regular
corporate tax due to the fact that they are using organic value-added
practices rather than manufactured value-added practices. The bill also
would permit small cooperative producers of ethanol to receive the same
tax benefits as large companies.
Another important provision provides tax relief for ranchers that are
forced to sell their livestock on account of drought. The bill gives
producers the time they need to reinvest proceeds tax-free when drought
makes it impossible to feed their herds.
I look forward to working with my colleagues to enact this crucial
piece of legislation.
______
By Mr. LIEBERMAN (for himself and Mr. Hatch):
S. 666. A bill to provide incentives to increase research by private
sector entities to develop antivirals, antibiotics and other drugs,
vaccines, microbicides, detection, and diagnostic technologies to
prevent and treat illnesses associated with a biological, chemical, or
radiological weapons attack; to the Committee on Finance.
Mr. LIEBERMAN. Mr. President, America has a major flaw in its
defenses against bioterrorism. Hearings I chaired in the Government
Affairs Committee on bioterrorism demonstrated that America has not
made a national commitment to research and development of treatments
and cures for those who might be exposed to or infected by a biological
agent, chemical toxin, or radiological material. Correcting this
critical gap is the purpose of legislation we are introducing today.
This legislation is a refined and upgraded version of legislation I
introduced last year, S. 1764, December 4, 2001, and S. 3148, October
17, 2002, and I am delighted that Senator Hatch has joined me as the
lead cosponsor of the new bill.
Obviously, our first priority must be to attempt to prevent the use
of these agents and toxins by terrorists, quickly assess when an attack
has occurred, take appropriate public health steps to contain the
exposure, stop the spread of contagion, and then detoxify the site.
These are all critical functions, but in the end we must recognize that
some individuals may be exposed or infected. Then the critical issue is
whether we can treat and cure them and prevent death and disability.
In short, we need a diversified portfolio of medicines. In cases
where we have ample advance warning of an attack and specific
information about the agent, toxin, or material, we may be able to
vaccinate the vulnerable population in advance. In other cases, even if
we have a vaccine, we might well prefer to use medicines that would
quickly stop the progression of the disease or the toxic effects. We
also need a powerful capacity quickly to develop new countermeasures
where we face a new agent, toxin, or material.
Unfortunately, we are woefully short of vaccines and medicines to
treat individuals who are exposed or infected. We have antibiotics that
seem to work for most of those infected in the current anthrax attack,
but these have not prevented five deaths. We have no effective vaccines
or medicines for most other biological agents and chemical toxins we
might confront. We have very limited capacity to respond medically to a
radiological attack. In some cases we have vaccines to prevent, but no
medicines to treat, an agent. We have limited capacity to speed the
development of vaccines and medicines to prevent or treat novel agents
and toxins not currently known to us.
We have provided, and should continue to provide, direct Federal
funding for research and development of new
[[Page S4010]]
medicines, however, this funding is unlikely to be sufficient. Even
with ample Federal funding, many private companies will be reluctant to
enter into agreements with government agencies to conduct this
research. Other companies would be willing to conduct the research with
their own capital and at their own risk but are not able to secure the
funding from investors.
The legislation we introduce today would provide incentives for
private biotechnology companies to form capital to develop
countermeasures--medicines--to prevent, treat and cure victims of
bioterror, chemical and radiological attacks. This will enable this
industry to become a vital part of the national defense infrastructure
and do so for business reasons that make sense for their investors on
the bottom line.
Enactment of these incentives is necessary because most biotech
companies have no approved products or revenue from product sales to
fund research. They rely on investors and equity capital markets to
fund the research. They must necessarily focus on research that will
lead to product sales and revenue and, thus, to an end to their
dependence on investor capital. There is no established or predictable
market for countermeasures. These concerns are shared by pharmaceutical
firms. Investors are justifiably reluctant to fund this research, which
will present challenges similar in complexity to AIDS. Investors need
assurances that research on countermeasures has the potential to
provide a rate of return commensurate with the risk, complexity and
cost of the research, a rate of return comparable to that which may
arise from a treatment for cancer, MS, Cystic Fibrosis and other major
diseases.
It is in our national interest to enlist these companies in the
development of countermeasures as biotech companies tend to be
innovative and nimble and intently focused on the intractable diseases
for which no effective medical treatments are available.
The incentives we have proposed are innovative and some may be
controversial. We invite everyone who has an interest and a stake in
this research to enter into a dialogue about the issue and about the
nature and terms of the appropriate incentives. We have attempted to
anticipate the many complicated technical and policy issues that this
legislation raises. The key focus of our debate should be how, not
whether, we address this critical gap in our public health
infrastructure and the role that the private sector should play.
Millions of Americans will be at risk if we fail to enact legislation
to meet this need.
On November 26 of 2001, the Centers for Disease Control issued its
interim working draft plan for responding to an outbreak of smallpox.
The plan does not call for mass vaccination in advance of a smallpox
outbreak because the risk of side effects from the vaccine outweighs
the risks of someone actually being exposed to the smallpox virus. At
the heart of the plan is a strategy sometimes called ``search and
containment.''
This strategy involves identifying infected individual or individuals
with confirmed smallpox, identifying and locating those people who come
in contact with that person, and vaccinating those people in outward
rings of contact. The goal is to produce a buffer of immune individuals
and was shown to prevent smallpox and to ultimately eradicate the
outbreak. Priorities would be set on who is vaccinated, perhaps
focusing on the outward rings before those at the center of the
outbreak. The plan assumes that the smallpox vaccination is effective
for persons who have been exposed to the disease as long as the disease
has not taken hold.
In practice it may be necessary to set a wide perimeter for these
areas because smallpox is highly contagious before it might be
diagnosed. There may be many areas subject to search and containment
because people in our society travel frequently and widely. Terrorists
might trigger attacks in a wide range of locations to multiply the
confusion and panic. The most common form of smallpox has a 30 percent
mortality rate, but terrorists might be able to obtain supplies of
``flat-type'' smallpox with a mortality rate of 96 percent and
hemorrhagic-type smallpox, which is almost always fatal. For these
reasons, the CDC plan accepts the possibility that whole cities or
other geographic areas could be cordoned off, letting no one in or
out--a quarantine enforced by police or troops.
The plan focuses on enforcement authority through police or National
Guard, isolation and quarantine, mandatory medical examinations, and
rationing of medicines. It includes a discussion of ``population-wide
quarantine measures which restrict activities or limit movement of
individuals [including] suspension of large public gatherings, closing
of public places, restriction on travel [air, rail, water, motor
vehicle, and pedestrian], and/or `cordon sanitaire' [literally a
`sanitary cord' or line around a quarantined area guarded to prevent
spread of disease by restricting passage into or out of the area].''
The CDC recommends that states update their laws to provide authority
for ``enforcing quarantine measures'' and it recommends that States in
``pre-event planning'' identify ``personnel who can enforce these
isolation and quarantine measures, if necessary.'' Guide C--Isolation
and Quarantine, page 17.
On October 23, 2001, the CDC published a ``Model State Emergency
Health Powers Act.'' It was prepared by the Center for Law and the
Public's Health at Georgetown and Johns Hopkins Universities, in
conjunction with the National Governors Association, National
Conference of State Legislatures, Association of State and Territorial
Health Officials, National Association of City and County Health
Officers, and National Association of Attorneys General. A copy of the
model law is printed at www.publichealthlaw.net. The law would provide
powers to enforce the ``compulsory physical separation (including the
restriction of movement or confinement) of individuals and/or groups
believed to have been exposed to or known to have been infected with a
contagious disease from individuals who are believed not to have been
exposed or infected, in order to prevent or limit the transmission of
the disease to others.'' Federal law on this subject is very strong and
the Administration can always rely on the President's Constitution
authority as Commander in Chief.
Let us try to imagine, however, what it would be like if a quarantine
is imposed. Let us assume that there is not enough smallpox vaccine
available for use in a large outbreak, that the priority is to
vaccinate those in the outward rings of the containment area first,
that the available vaccines cannot be quickly deployed inside the
quarantined area, that it is not possible to quickly trace and identify
all of the individuals who might have been exposed, and/or that public
health workers themselves might be infected. We know that there is no
medicine to treat those who do become infected. We know the mortality
rates. It is not hard to imagine how much force might be necessary to
enforce the quarantine. It would be quite unacceptable to permit
individuals to leave the quarantined area no matter how much panic had
taken hold.
Think about how different this scenario would be if we had medicines
that could effectively treat and cure those who become infected by
smallpox. We still might implement the CDC plan but a major element of
the strategy would be to persuade people to visit their local clinic or
hospital to be dispenses their supply of medicine. We could trust that
there would be a very high degree of voluntary compliance. This would
give us more time, give us options if the containment is not
successful, give us options to treat those in the containment area who
are infected, and enable us to quell the public panic.
Because we have no medicine to treat those infected by smallpox, we
have to be prepared to implement a plan like the one CDC has proposed.
Theirs is the only option because our options are so limited. We need
to expand our range of options.
We should not be lulled by the apparent successes with Cipro and the
strains of anthrax we have seen in the recent attacks. We have not been
able to prevent death in some of the patients with late-stage
inhalation anthrax and Robert Stevens, Thomas Morris Jr., Joseph
Curseen, Kathy Nguyen, and Ottilie Lundgren died. This legislation is
named in honor of
[[Page S4011]]
them. What we needed for them, and did not have, is a drug or vaccine
that would treat late stage inhalation anthrax.
As I have said, we need an effective treatment for those who become
infected with smallpox. We have a vaccine that effectively prevents
smallpox infection, and administering this vaccine within four days of
first exposure has been shown to offer some protections against
acquiring infection and significant protection against a fatal outcome.
The problem is that administering the vaccine in this time frame to all
those who might have been exposed may be exceedingly difficult. And
once infection has occurred, we have no effective treatment options.
In the last century 500 million people have died of smallpox--more
than have from any other infectious diseases--as compared to 320
million deaths in all the wars of the twentieth century. Smallpox was
one of the diseases that nearly wiped out the entire Native American
population in this hemisphere. The last naturally acquired case of
smallpox occurred in Somalia in 1977 and the last case from laboratory
exposure was in 1978.
Smallpox is a nasty pathogen, carried in microscopic airborne
droplets inhaled by its victims. The first signs are headache, fever,
nausea and backache, sometimes convulsions and delirium. Soon, the skin
turns scarlet. When the fever lets up, the telltale rash appears--flat
red spots that turn into pimples, then big yellow pustules, then scabs.
Smallpox also affects the throat and eyes, and inflames the heart,
lungs, liver, intestines and other internal organs. Death often came
from internal bleeding, or from the organs simply being overwhelmed by
the virus. Survivors were left covered with pockmarks--if they were
lucky. The unlucky ones were left blind, their eyes permanently clouded
over. Nearly one in four victims died. The infection rate is estimated
to be 25-40 percent for those who are unvaccinated and a single case
can cause 20 or more additional infections.
During the 16th Century, 3.5 million Aztecs--more than half the
population died of smallpox during a two-year span after the Spanish
army brought the disease to Mexico. Two centuries later, the virus
ravaged George Washington's troops at Valley Forge. And it cut a deadly
path through the Crow, Dakota, Sioux, Blackfoot, Apache, Comanche and
other American Indian tribes, helping to clear the way for white
settlers to lay claim to the western plains. The epidemics began to
subside with one of medicine's most famous discoveries: the finding by
British physician Edward Jenner in 1796 that English milkmaids who were
exposed to cowpox, a mild second cousin to smallpox that afflicts
cattle, seemed to be protected against the more deadly disease.
Jenner's work led to the development of the first vaccine in Western
medicine. While later vaccines used either a killed or inactivated form
of the virus they were intended to combat, the smallpox vaccine worked
in a different way. It relied on a separate, albeit related virus:
first cowpox and the vaccinia, a virus of mysterious origins that is
believed to be a cowpox derivative. The last American was vaccinated
back in the 1970s and half of the US population has never been
vaccinated. It is not known how long these vaccines provide protection,
but it is estimated that the term is 3 to 5 years.
In an elaborate smallpox biowarfare scenario enacted in February 1999
by the Johns Hopkins Center for Civilian Biodefense Studies, it was
projected that within two months 15,000 people had died, epidemics were
out of control in fourteen countries, all supplies of smallpox vaccine
were depleted, the global economy was on the verge of collapse, and
military control and quarantines were in place. Within twelve months it
was projected that eighty million people worldwide had died.
A single case of smallpox today would become a global public health
threat and it has been estimated that a single smallpox bioterror
attack on a single American city would necessitate the vaccination of
30 to 40 million people.
The US government is now in the process of purchasing substantial
stocks of the smallpox vaccine. We then face a very difficult decision
on deploying the vaccine. We know that some individuals will have an
adverse reaction to this vaccine. No one in the United States has been
vaccinated against smallpox in twenty-five years. Those that were
vaccinated back then may not be protected against the disease today. If
we had an effective treatment for those who might become infected by
smallpox, we would face much less pressure regarding deploying the
vaccine. If we face a smallpox epidemic from a bioterrorism attack, we
will have no Cipro to reassure the public and we will be facing a
highly contagious disease and epidemic. To be blunt, it will make the
current anthrax attack look benign by comparison.
Smallpox is not the only threat. We have seen other epidemics in this
century. The 1918 influenza epidemic provides a sobering admonition
about the need for research to develop medicines. In two years, a fifth
of the world's population was infected. In the United States the 1918
epidemic killed more than 650,000 people in a short period of time and
left 20 million seriously ill, one fourth of the entire population. The
average lifespan in the US was depressed by ten years. In just one
year, the epidemic killed 21 million human beings worldwide--well over
twice the number of combat deaths in the whole of World War I. The flu
was exceptionally virulent to begin with and it then underwent several
sudden and dramatic mutations in its structure. Such mutations can turn
flu into a killer because its victims' immune systems have no
antibodies to fight off the altered virus. Fatal pneumonia can rapidly
develop.
Another deadly toxin, ricin toxin, was of interest to the al-Qaeda
terrorist network. At an al-Qaeda safehouse in Saraq Panza, Kabul
reporters found instructions for making ricin. The instructions make
chilling reading. ``A certain amount, equal to a strong dose, will be
able to kill an adult, and a dose equal to seven seeds will kill a
child,'' one page reads. Another page says: ``Gloves and face mask are
essential for the preparation of ricin. Period of death varies from 3
to 5 days minimum, 4 to 14 days maximum.'' The instructions listed the
symptoms of ricin as vomiting, stomach cramps, extreme thirst, bloody
diarrhea, throat irritation, respiratory collapse and death.
No specific treatment or vaccine for ricin toxin exists. Ricin is
produced easily and inexpensively, highly toxic, and stable in
aerosolized form. A large amount of ricin is necessary to infect whole
populations--the amount of ricin necessary to cover a 100-km\2\ area
and cause 50 percent lethality, assuming aerosol toxicity of 3 mcg/kg
and optimum dispersal conditions, is approximately 4 metric tons,
whereas only 1 kg of Bacillus anthracis is required. But it can be used
to terrorize a large population with great effect because it is so
lethal.
Use of ricin as a terror weapon is not theoretical. In 1991 in
Minnesota, 4 members of the Patriots Council, an extremist group that
held antigovernment and antitax ideals and advocated the overthrow of
the US government, were arrested for plotting to kill a US marshal with
ricin. The ricin was produced in a home laboratory. They planned to mix
the ricin with the solvent dimethyl sulfoxide, DMSO, and then smear it
on the door handles of the marshal's vehicle. The plan was discovered,
and the 4 men were convicted. In 1995, a man entered Canada from Alaska
on his way to North Carolina. Canadian custom officials stopped the man
and found him in possession of several guns, $98,000, and a container
of white powder, which was identified as ricin. In 1997, a man shot his
stepson in the face. Investigators discovered a makeshift laboratory in
his basement and found agents such as ricin and nicotine sulfate. And,
ricin was used by the Bulgarian secret police when they killed Georgi
Markov by stabbing him with a poison umbrella as he crossed Waterloo
Bridge in 1978.
Going beyond smallpox, influenza, and ricin, we do not have an
effective vaccine or treatment for dozens of other deadly and disabling
agents and toxins. Here is a partial list of some of the other
biological agents and chemical toxins for which we have no effective
treatments: clostridium botulinum toxin, botulism, francisella
tularensis, tularaemia, Ebola hemorrhagic fever, Marbug hemorrhagic
fever, Lassa fever, Julin, Argentine
[[Page S4012]]
hemorrhagic fever, Coxiella burnetti, Q fever, brucella species,
brucellosis, burkholderia mallei, glanders, Venezuelan
encephalomyelitis, eastern and western equine encephalomyelitis,
epsilon toxin of clostridium perfringens, staphylococcus entretoxin B,
salmonella species, shigella dysenteriae, escherichia coli O157:H7,
vibrio cholerae, cryptosporidium parvum, nipah virus, hantaviruses,
tickborne hemorrhagic fever viruses, tickborne encephalitis virus,
yellow fever, nerve agents, tabun, sarin, soman, GF, and VX, blood
agents, hydrogen cyanide and cyanogens chloride, blister agents,
lewisite, nitrogenadn sulfur mustards, and phosgene oxime, heavy
metals, arsenic, lead, and mercury, and volatile toxins, benzene,
chloroform, trihalomethanes, pulmonary agents, Phosgene, chlorine,
vinly chloride, and incapacitating agents, BZ.
The naturally occurring forms of these agents and toxins are enough
to cause concern, but we also know that during the 1980s and 1990s the
Soviet Union conducted bioweapons research at forty-seven laboratories
and testing sites, employed nearly fifty thousand scientists in the
work, and that they developed genetically modified versions of some of
these agents and toxins. The goal was to develop an agent or toxin that
was particularly virulent or not vulnerable to available antibiotics.
The United States has publicly stated that five countries are
developing biological weapons in violation of the Biological Weapons
convention, North Korea, Iraq, Iran, Syria, and Libya, and stated that
additional countries not yet named, possibly including Russia, China,
Israel, Sudan and Egypt, are also doing so as well.
What is so insidious about biological weapons is that in many cases
the symptoms resulting from a biological weapons attack would likely
take time to develop, so an act of bioterrorism may go undetected for
days or weeks. Affected individuals would seek medical attention not
from special emergency response teams but in a variety of civilian
settings at scattered locations. This means we will need medicines that
can treat a late stage of the disease, long after the infection has
taken hold.
We must recognize that the distinctive characteristic of biological
weapons is that they are living micro-organisms and are thus the only
weapons that can continue to proliferate without further assistance
once released in a suitable environment.
The lethality of these agents and toxins, and the panic they can
cause, is quite frightening. The capacity for terror is nearly beyond
comprehension. We do not believe it is necessary to describe the facts
here. Our point is simple: we need more than military intelligence,
surveillance, and public health capacity. We also need effective
medicines. We also need more powerful research tools that will enable
us to quickly develop treatments for agents and toxins not on this or
any other list.
We need to do whatever it takes to be able to reassure the American
people that hospitals and doctors have powerful medicines to treat them
if they are exposed to biological agents or toxins, that we can contain
an outbreak of an infectious agent, and that there is little to fear.
To achieve this objective, we need to rely on the entrepreneurship of
the biotechnology industry.
In the summer of 200_, the Defense Science Board completed a study of
the countermeasures we have available. It focused on countermeasures--
diagnostics, vaccines, and drugs--for the top nineteen bioterror
threats, and estimated what we have available today, what we might have
available in five years and what we might have available in ten years.
If one assumes that we need diagnostics, vaccines, and drugs for all
nineteen of these bioterror threats, we need fifty-seven
countermeasures (19 times 3). It found that today we have only one of
these fifty-seven countermeasures, a drug for Chlamydia psittaci. It
found that in five years we might have twenty of the fifty-seven
countermeasures and in ten years we might have thirty-four of the
fifty-seven. These are optimistic assessments.
It set reasonable criteria for what constitutes an effective
countermeasure. For diagnostics, it said that we are unprepared if our
diagnostic takes more than 24 hours, requires confirmatory testing and
the patient must be symptomatic. If said we are somewhat prepared if
the diagnostic takes 12 to 24 hours, requires confirmatory testing, and
works in some cases where the patient is asymptomatic. It said we are
only truly prepared if the test takes less than 12 hours, requires no
confirmatory testing, and detects the disease when the patient is
asymptomatic. It found that we have no diagnostics today that meet the
top standard and might have diagnostics for seventeen of the nineteen
terror threats in five years and eighteen of the nineteen in ten years.
For vaccines it found that we are unprepared if we have no vaccine.
We are partially prepared if we have a vaccine but have production or
use limitations. And we are fully prepared if we have a vaccine
generally available. It found that we have no vaccines today that meet
the top standard and might have vaccines for two of the terror threats
in five years and nine in ten years.
For therapeutics it found that we are unprepared if we have no
approved treatment. We are partially prepared if we have a treatment
available but have production or use limitations. And we are fully
prepared if we have a treatment available. It found that we have one
treatment that meets the top standard and might have treatments for the
same agent in five years and seven treatments in ten years.
Obviously, we are woefully unprepared. The Defense Science Board only
focused on the top nineteen threats, and there are many others for
which we are also unprepared.
My proposal would supplement direct Federal Government funding of
research with incentives that make it possible for private companies to
form the capital to conduct this research on their own initiative,
utilizing their own capital, and at their own risk--all for good
business reasons going to their bottom line.
The U.S. biotechnology industry, approximately 1,300 companies, spent
$13.8 billion on research last year. Only 350 of these companies have
managed to go public. The industry employs 124,000, Ernest & Young
data, people. The top five companies spent an average of $89,000 per
employee on research, making it the most research-intensive industry in
the world. The industry has 350 products in human clinical trials
targeting more than 200 diseases. Losses for the industry were $5.8
billion in 2001, $5.6 billion in 2000, $4.4 billion in 1999, $4.1
billion in 1998, $4.5 billion in 1997, $4.6 billion in 1996, and
similar amounts before that. In 2000 fully 38 percent of the public
biotech companies had less than 2 years of funding for their research.
Only one quarter of the biotech companies in the United States are
publicly traded and they tend to be the best funded.
There is a broad range of research that could be undertaken under
this legislation. Vaccines could be developed to prevent infection or
treat an infection from a bioterror attack. Broad-spectrum antibiotics
are needed. Also, promising research has been undertaken on antitoxins
that could neutralize the toxins that are released, for example, by
anthrax. With anthrax it is the toxins, not the bacteria itself, that
cause death. An antitoxin could act like a decoy, attaching itself to
sites on cells where active anthrax toxin binds and then combining with
normal active forms of the toxin and inactivating them. An antitoxin
could block the production of the toxin.
We can rely on the innovativeness of the biotech industry, working in
collaboration with academic medical centers, to explore a broad range
of innovative approaches. This mobilizes the entire biotechnology
industry as a vital component of our national defense against bioterror
weapons.
The legislation takes a comprehensive approach to the challenges the
biotechnology industry faces in forming capital to conduct research on
countermeasures. It includes capital formation tax incentives,
guaranteed purchase funds, patent protections, and liability
protections. We believe we will have to include each of these types of
incentives to ensure that we mobilize the biotechnology industry for
this urgent national defense research.
Some of the tax incentives in this legislation, and both of the two
patent incentives I have proposed, may be controversial. In our view,
we can debate tax or patent policy as long as you
[[Page S4013]]
want, but let's not lose track of the issue here--development of
countermeasures to treat people infected or exposed to lethal and
disabling bioterror weapons.
We know that incentives can spur research. In 1983 we enacted the
Orphan Drug Act to provide incentives for companies to develop
treatments for rare diseases with small potential markets deemed to be
unprofitable by the industry. In the decade before this legislation was
enacted, fewer than 10 drugs for orphan diseases were developed and
these were mostly chance discoveries. Since the Act became law, 218
orphan drugs have been approved and 800 more are in the pipeline. The
Act provides 7 years of market exclusivity and a tax credit covering
some research costs. The effectiveness of the incentives we have
enacted for orphan disease research show us how much we can accomplish
when we set a national priority for certain types of research.
The incentives we have proposed differ from those set by the Orphan
Drug Act. We need to maintain the effectiveness of the Orphan Drug Act
and not undermine it by adding many other disease research targets. In
addition, the tax credits for research for orphan drug research have no
value for most biotechnology companies because few of them have tax
liability with respect to which to claim the credit. This explains why
we have not proposed to utilize tax credits to spur countermeasures
research. It is also clear that the market for countermeasures is even
more speculative than the market for orphan drugs and we need to enact
a broader and deeper package of incentives.
The government determines which research is covered by the
legislation and which companies qualify for the incentives for this
research. No company is entitled to utilize the incentives until the
government certifies its eligibility.
These decisions are vested in the Secretary, Department of Homeland
Security. In S. 1764, the decisions were vested in the White House
Office of Homeland Security, but it is now likely that a Department
will be created. I have strongly endorsed that concept and led the
effort to enact the legislation forming the new Department.
The legislation confers on the Secretary, in consultation with the
Secretary of Defense and Secretary of Health and Human Services,
authority to set the list of agents and toxins with respect to which
the legislation and incentives applies.
The Secretary determines which agents and toxins present a threat and
whether the countermeasures are ``more likely'' to be developed with
the application of the incentives in the legislation. The Secretary may
determine that an agent or toxin does not present a threat or that
countermeasures are not more likely to be developed with the
incentives. It may determine that the government itself should fund the
research and development effort and not rely on private companies. The
Department is required to consider the status of existing research, the
availability of non-countermeasure markets for the research, and the
most effective strategy for ensuring that the research goes forward.
The legislation includes an illustrative, non-binding list of fifty-
four agents and toxins that might be included on the Secretary's list.
The decisions of the Secretary are final and are not subject to
judicial review.
The Department then must provide information to potential
manufacturers of these countermeasures in sufficient detail to permit
them to conduct the research and determine when they have developed the
needed countermeasure. It may exempt from publication such information
as it deems to be sensitive.
The Department also must specify the government market that will be
available when a countermeasure is successfully developed, including
the minimum number of dosages that will be purchased, the minimum price
per dose, and the timing and number of years projected for such
purchases. Authority is provided for the Department to make advance,
partial, progress, milestone, or other payments to the manufacturers.
The Department is responsible for determining when a manufacturer
has, in fact, successfully developed the needed countermeasure. It must
provide information in sufficient detail so that manufacturers and the
government may determine when the manufacturer has successfully
developed the countermeasure the government needs. If and when the
manufacturer has successfully developed the countermeasure, it becomes
entitled to the procurement, patent, and liability incentives in the
legislation.
Once the list of agents and toxins is set, companies may register
with the Department their intent to undertake research and development
of a countermeasure to prevent or treat the agent or toxin. This
registration is required only for companies that seek to be eligible
for the tax, purchase, patent, and liability provisions of the
legislation. The registration requirement gives the Department vital
information about the research effort and the personnel involved with
the research, authorizes inspections and other review of the research
effort, and the filing of reports by the company.
The Secretary then may certify that the company is eligible for the
tax, purchase, patent, and liability incentives in the legislation. It
bases this certification on the qualifications of the company to
conduct the countermeasure research. Eligibility for the purchase fund,
patent and liability incentives is contingent on successful development
of a countermeasure according to the standards set in the legislation,
as determined by the Secretary.
The legislation contemplates that a company might well register and
seek certification with respect to more than one research project and
become eligible for the tax, purchase, patent, and liability incentives
for each. There is no policy rationale for limiting a company to one
registration and one certification.
This process is similar to the current registration process for
research on orphan, rare, diseases. In that case, companies that are
certified by the FDA become eligible for both tax and market
exclusivity incentives. This process gives the government complete
control on the number of registrations and certifications. This gives
the government control over the cost and impact of the legislation on
private sector research.
The registration and certification process applies to research to
develop diagnostics and research tools, not just drugs and vaccines.
Diagnostics are vital because healthcare professionals need to know
which agent or toxin has been used in an attack. This enables them to
determine which treatment strategy is likely to be most effective. We
need quickly to determine which individuals have been exposed or
infected, and to separate them from the ``worried well.'' It is likely
in an attack that large numbers of individuals who have not been
exposed or infected will flood into healthcare facilities seeking
treatment. We need to be able to focus on those individuals who are at
risk and reassure those who are not at risk.
In terms of research tools, it is possible that we will face
biological agents and chemical agents we have never seen before. As
I've mentioned, the Soviet Union bioterror research focused in part on
use of genetic modification technology to develop agents and toxins
that currently-available antibiotics can not treat. Australian
researchers accidentally created a modified mousepox virus, which does
not affect humans, but it was 100 percent lethal to the mice. Their
research focused on trying to make a mouse contraceptive vaccine for
pest control. The surprise was that it totally suppressed the ``cell-
mediated response''--the arm of the immune system that combats viral
infection. To make matters worse, the engineered virus also appears
unnaturally resistant to attempts to vaccinate the mice. A vaccine that
would normally protect mouse strains that are susceptible to the virus
only worked in half the mice exposed to the killer version. If
bioterrorists created a human version of the virus, vaccination
programs would be of limited use. This highlights the drawback of
working on vaccines against bioweapons rather than treatments.
With the advances in gene sequencing--genomics--we will know the
exact genetic structure of a biological agent. This information in the
wrong hands could easily be manipulated to design and possibly grow a
lethal new bacterial and viral strains not found in nature. A scientist
might be able to mix
[[Page S4014]]
and match traits from different microorganisms--called recombinant
technology--to take a gene that makes a deadly toxin from one strain of
bacteria and introduce it into other bacterial strains. Dangerous
pathogens or infectious agents could be made more deadly, and
relatively benign agents could be designed as major public health
problems. Bacteria that cause diseases such as anthrax could be altered
in such a way that would make current vaccines or antibiotics against
them ineffective. It is even possible that a scientist could develop an
organism that develops resistance to antibiotics at an accelerated
rate.
This means we need to develop technology--research tools--that will
enable us to quickly develop a tailor-made, specific countermeasure to
a previously unknown organism or agent. These research tools will
enable us to develop a tailor-made vaccine or drug to deploy as a
countermeasure against a new threat. The legislation authorizes
companies to register and receive a certification making them eligible
for the incentives in the bill for this vital research.
The legislation includes four tax incentives to enable biotechnology
and pharmaceutical companies to form capital to fund research and
development of countermeasures. Companies must irrevocably elect only
one of the incentives with regard to the countermeasure research.
Four different tax incentives are available so that companies have
flexibility in forming capital to fund the research. Each of the
options comes with advantages and limitations that may make it
appropriate or inappropriate for a given company or research project.
We do not now know fully how investors and capital markets will respond
to the different options, but we assume that companies will consult
with the investor community about which option will work best for a
given research project. Capital markets are diverse and investors have
different needs and expectations. Over time these markets and investor
expectations evolve. If companies register for more than one research
project, they may well utilize different tax incentives for the
different projects.
Companies are permitted to undertake a series of discrete and
separate research projects and make this election with respect to each
project. They may only utilize one of the options with respect to each
of these research projects.
The first option is for the company to establish an R&D Limited
Partnership to conduct the research. The partnership passes through all
business deductions and credits to the partners. For example, under
this arrangement, the research and development tax credits and
depreciation deductions for the company may be passed by the
corporation through to its partners to be used to offset their
individual tax liability. These deductions and credits are then lost to
the corporation. This alternative is available only to companies with
less than $750,000,000 in paid-in capital.
The second option is for the company to issue a special class of
stock for the entity to conduct the research. The investors would be
entitled to a zero capital gains tax rate on any gains realized on the
stock held for at least three years. This is a modification of the
current Section 1202 where only 50 percent of the gains are not taxed.
This provision is adapted from legislation I have introduced, S. 1134,
and introduced in the House by Representatives Dunn and Matsui, H.R.
2383. A similar bill has been introduced by Senator Collins, S. 455.
This option also is available to small companies.
The third and fourth options grant special tax credits to the company
for the research. The first credit is for research conducted by the
company and the other for research conducted at a teaching hospital or
similar institution. Tax credits are available to any company, but they
only are useful to a company with tax liability against which to claim
the credit. Very few biotechnology companies receive revenue from
product sales and therefore have no tax liability. Companies with
revenue may be able to fund the research from retained earnings rather
than secure funding from investors.
A company that elects to utilize one of these incentives is not
eligible to receive benefits of the Orphan Drug Tax Credit. Companies
that can utilize tax credits--companies with taxable income and tax
liability--might find the Orphan Credit more valuable. The legislation
includes an amendment to the Orphan Credit to correct a defect in the
current credit. The amendment has been introduced in the Senate as S.
1341 by Senators Hatch, Kennedy and Jeffords. The amendment simply
states that the Credit is available starting the day an application for
orphan drug status is filed, not the date the FDA finally acts on it.
The amendment was one of many initiatives championed by Lisa J. Raines,
who died on September 11 in the plane that hit the Pentagon, and the
amendment is named in her honor. As we go forward in the legislative
process, I hope we will have an opportunity to speak in more detail
about the service of Ms. Raines on behalf of medical research,
particularly on rare diseases.
The guaranteed purchase fund, and the patent protections, and
liability provisions described below provide an additional incentive
for investors and companies to fund the research.
The market for countermeasures is speculative and small. This means
that if a company successfully develops a countermeasure, it may not
receive sufficient revenue on sales to justify the risk and expense of
the research. This is why the legislation establishes a countermeasures
purchase fund that will define the market for the products with some
specificity before the research begins.
The Secretary will set standards for which countermeasures it will
purchase and define the financial terms of the purchase commitment.
This will enable companies to evaluate the market potential of its
research before it launches into the project. The specifications will
need to be set with sufficient specificity so that the company--and its
investors--can evaluate the market and with enough flexibility so that
it does not inhibit the innovativeness of the researchers. This
approach is akin to setting a performance standard for a new military
aircraft.
The legislation provides that the Secretary will determine whether
the government will purchase more than one product per class. It might
make sense--as an incentive--for the government to commit to purchasing
more than one product so that many more than one company conducts the
research. A winner-take-all system may well intimidate some companies
and we may end up without a countermeasure to be purchased. It is also
possible that we will find that we need more than one countermeasure
because different products are useful for different patients. We may
also find that the first product developed is not the most effective.
The purchase commitment for countermeasures is available to any
company irrespective of its paid-in capital.
Intellectual property protection of research is essential to
biotechnology and pharmaceutical companies for one simple reason: they
need to know that if they successfully develop a medical product
another company cannot expropriate it. It's a simple matter of
incentives.
The patent system has its basis in the U.S. Constitution where the
federal government is given the mandate to ``promote the Progress of
Science and the Useful Arts by securing for a limited time to Authors
and Inventors the exclusive right to their respective Writings and
Discoveries.'' In exchange for full disclosure of the terms of their
inventions, inventors are granted the right to exclude others from
making, using, or selling their inventions for a limited period of
time. This quid pro quo provides investors with the incentive to
invent. In the absence of the patent law, discoverable inventions would
be freely available to anyone who wanted to use them and inventors
would not be able to capture the value of their inventions or secure a
return on their investments.
The patent system strikes a balance. Companies receive limited
protection of their inventions if they are willing to publish the terms
of their invention for all to see. At the end of the term of the
patent, anyone can practice the invention without any threat of an
infringement action. During the term of the patent, competitors can
learn from the published description of the invention and may well find
a new and distinct patentable invention.
The legislation provides two types of intellectual property
protection. The
[[Page S4015]]
first simply provides that the term of the patent on the countermeasure
will be the term of the patent granted by the Patent and Trademark
Office without any erosion due to delays in approval of the product by
the Food and Drug Administration. The second provides that a company
that successfully develops a countermeasure will receive a bonus of two
years on the term of any patent held by that company. Companies must
elect one of these two protections, but only small biotechnology
companies may elect the second protection. Large, profitable
pharmaceutical companies may elect only the first of the two options.
The first protection against erosion of the term of the patent is an
issue that is partially addressed in current law, the Hatch-Waxman
Patent Term Restoration Act. That act provides partial protection
against erosion of the term, length, of a patent when there are delays
at the FDA in approving a product. The erosion occurs when the PTO
issues a patent before the product is approved by the FDA. In these
cases, the term of the patent is running but the company cannot market
the product. The Hatch-Waxman Act provides some protections against
erosion of the term of the patent, but the protections are incomplete.
As a result, many companies end up with a patent with a reduced term,
sometimes substantially reduced.
The issue of patent term erosion has become more serious due to
changes at the PTO in the patent system. The term of a patent used to
be fixed at 17 years from the date the patent was granted by the PTO.
It made no difference how long it took for the PTO to process the
patent application and sometimes the processing took years, even
decades. Under this system, there were cases where the patent would
issue before final action at the FDA, but there were other cases where
the FDA acted to approve a product before the patent was issued.
Erosion was an issue, but it did not occur in many cases.
Since 1995 the term of a patent has been set at 20 years from the
date of application for the patent. This means that the processing time
by the PTO of the application all came while the term of the patent is
running. This gives companies a profound incentive to rush the patent
through the PTO. Under the old system, companies had the opposite
incentive. With patents being issued earlier by the PTO, the issue of
erosion of patent term due to delays at the FDA is becoming more
serious and more common.
The provision in the legislation simply states that in the case of
bioterrorism countermeasures, no erosion in the term of the patent will
occur. The term of the patent at the date of FDA approval will be the
same as the term of the patent when it was issued by the PTO. There is
no extension of the patent, simply protections against erosion. Under
the new 20 year term, patents might be more or less than 17 years
depending on the processing time at the PTO, and all this legislation
says is that whatever term is set by the PTO will govern irrespective
of the delays at the FDA. This option is available to any company that
successfully develops a countermeasure eligible to be purchased by the
fund.
The second option, the bonus patent term, is only available to small
companies with less than $750,000,000 in paid-in capital. It provides
that a company that successfully develops a countermeasure is entitled
to a two-year extension of any patent in its portfolio. This does not
apply to any patent of another company bought or transferred in to the
countermeasure research company.
I am well aware that this bonus patent term provision will be
controversial with some. A company would tend to utilize this option if
it owned the patent on a product that still had, or might have, market
value at the end of the term of the patent. Because this option is only
available to small biotechnology companies, most of whom have no
product on the market, in most cases they would be speculating about
the value of a product at the end of its patent. The company might
apply this provision to a patent that otherwise would be eroded due to
FDA delays or it might apply it to a patent that was not eroded. The
result might be a patent term that is no longer than the patent term
issued by the PTO. It all depends on which companies elect this option
and which patent they select. In some cases, the effect of this
provision might be to delay the entry onto the market of lower priced
generics. This would tend to shift some of the cost of the incentive to
develop a countermeasure to insurance companies and patients with an
unrelated disease.
My rationale for including the patent bonus in the legislation is
simple: I want this legislation to say emphatically that we mean
business, we are serious, and we want biotechnology companies to
reconfigure their research portfolios to focus in part on development
of countermeasures. The other provisions in the legislation are
powerful, but they may not be sufficient.
This proposal protects companies willing to take the risks of
producing anti-terrorism products for the American public from
potential losses incurred from lawsuits alleging adverse reactions to
these products. It also preserves the right for plaintiffs to seek
recourse for alleged adverse reactions in Federal District Court, with
procedural and monetary limitations.
Under the plan, the Secretary of HHS is required to indemnify and
defend entities engaged in qualified countermeasure research through
execution of ``indemnification and defense agreements.'' This
protection is only available for countermeasures purchased under the
legislation or to use of such countermeasures as recommended by the
Surgeon General in the event of a public health emergency.
The legislation contains a series of provisions designed to enhance
countermeasure research.
The legislation provides for accelerated approval by the FDA of
countermeasures developed under the legislation. In most cases, the
products would clearly qualify for accelerated approval, but the
legislation ensures that they will be reviewed under this process.
It provides a statutory basis for the FDA approving countermeasures
where human clinical trials are not appropriate or ethical. Rules
regarding such products have been promulgated by the FDA.
It grants a limited antitrust exemption for certain cooperative
research and development of countermeasures.
It provides incentives for the construction of biologics
manufacturing facilities and research to increase the efficiency of
current biologics manufacturing facilities.
It enhances the synergy between our for-profit and not for profit
biomedical research entities. The Bayh-Dole Act and Stevenson-Wydler
Act form the legal framework for mutually beneficially partnerships
between academia and industry. My legislation strengthens this synergy
and these relationships with two provisions, one to upgrade the basic
research infrastructure available to conduct research on
countermeasures and the other to increase cooperation between the
National Institutes of Health and private companies.
Research on countermeasures necessitates the use of special
facilities where biological agents can be handled safely without
exposing researchers and the public to danger. Very few academic
institutions or private companies can justify or capitalize the
construction of these special facilities. The Federal government can
facilitate research and development of countermeasures by financing the
construction of these facilities for use on a fee-for-service basis.
The legislation authorizes appropriations for grants to non-profit and
for-profit institutions to construct, maintain, and manage up to ten
Biosafety Level 3-4 facilities, or their equivalent, in different
regions of the country for use in research to develop countermeasures.
BSL 3-4 facilities are ones used for research on indigenous, exotic or
dangerous agents with potential for aerosol transmission of disease
that may have serious or lethal consequences or where the agents pose
high risk of life-threatening disease, aerosol-transmitted lab
infections, or related agents with unknown risk of transmission. The
Director of the Office and NIH shall issue regulations regarding the
qualifications of the researchers who may utilize the facilities.
Companies that have registered with and been certified by the
Director--to develop countermeasures under Section 5 (d) of the
legislation--shall
[[Page S4016]]
be given priority in the use of the facilities.
The legislation also reauthorizes a very successful NIH-industry
partnership program launched in FY 2000 in Public Law 106-113. The
funding is for partnership challenge grants to promote joint ventures
between NIH and its grantees and for-profit biotechnology,
pharmaceutical and medical device industries with regard to the
development of countermeasures, as defined in Section 3 of the bill,
and research tools, as defined in Section 4(d)(3) of the bill. Such
grants shall be awarded on a one-for-one matching basis. So far the
matching grants have focused on development of medicines to treat
malaria, tuberculosis, emerging and resistant infections, and
therapeutics for emerging threats. My proposal should be matched by
reauthorization of the challenge grant program for these deadly
diseases.
The legislation also sets incentives for the development of adjuvents
to enhance the potency, and efficacy of antigens in responding to a
biological agent.
It requires the new Department to issue annual reports on the
effectiveness of this legislation and these incentives, and directs it
to host an international conference each year on countermeasure
research.
This legislation is carefully calibrated to provide incentives only
where they are needed. This accounts for the choices in the legislation
about which provisions are available to small biotechnology companies
and large pharmaceutical companies.
The legislation makes choices. It sets the priorities. It provides a
dose of incentives and seeks a response in the private sector. We are
attempting here to do something that has not been done before. This is
uncharted territory. And it also an urgent mission.
There may be cases where a countermeasure developed to treat a
biological toxin or chemical agent will have applications beyond this
use. A broad-spectrum antibiotic capable of treating many different
biological agents may well have the capacity to treat naturally
occurring diseases.
This same issue arises with the Orphan Drug Act, which provides both
tax and FDA approval incentives for companies that develop medicines to
treat rare diseases. In some cases these treatments can also be used
for larger disease populations. There are few who object to this
situation. We have come to the judgment that the urgency of this
research is worth the possible additional benefits that might accrue to
a company.
In the context of research to develop countermeasures, I do not
consider it a problem that a company might find a broader commercial
market for a countermeasure. Indeed, it may well be the combination of
the incentives in this legislation and these broader markets that
drives the successful development of a countermeasure. If our intense
focus on developing countermeasures, and research tools, provides
benefits for mankind going well beyond terror weapons, we should
rejoice. If this research helps us to develop an effective vaccine or
treatment for AIDS, we should give the company the Nobel Prize for
Medicine. If we do not develop a vaccine or treatment for AIDS, we may
see 100 million people die of AIDS. We also have 400 million people
infected with malaria and more than a million annual deaths. Millions
of children die of diarrhea, cholera and other deadly and disabling
diseases. Countermeasures research may deepen our understanding of the
immune system and speed development of treatments for cancer and
autoimmune diseases. That is not the central purpose of this
legislation, but it is an additional rationale for it.
The issue raised by my legislation is very simple: do we want the
Federal government to fund and supervise much of the research to
develop countermeasures or should we also provide incentives that make
it possible for the private sector, at its own expense, and at its own
risk, to undertake this research for good business reasons. The Frist-
Kennedy law focuses effectively on direct Federal funding and
coordination issues, but it does not include sufficient incentives for
the private sector to undertake this research on its own initiative.
That law and my legislation are perfectly complimentary. We need to
enact both to ensure that we are prepared for bioterror attacks.
Mr. President, I ask unanimous consent that a summary of the bill be
printed in the Record.
There being no objection, the summary was ordered to be printed in
the Record, as follows:
Biological, Chemical and Radiological Weapons Countermeasures Research
Act of 2003
senators Lieberman and Hatch, Congressmen Tom Davis, Cal Dooley, Curt
Weldon, and Norm Dicks
The legislation proposes incentives that will enable
biotechnology and pharmaceutical companies to take the
initiative--for good business reasons--to conduct research to
develop countermeasures, including diagnostics, therapeutics,
and vaccines, to treat those who might be exposed to or
infected by biological, chemical or radiological agents and
materials in a terror attack.
The premise of this legislation is that direct government
funding of this research is likely to be much more expensive
and risky to the government and less likely to produce the
countermeasures we need to defend America. Shifting some of
the expense and risk of this research to entrepreneurial
private sector firms is likely to be less expensive and much
more likely to produce the countermeasures we need to protect
ourselves in the event of an attack.
For biotechnology companies, incentives for capital
formation are needed because most such companies have no
approved products or revenue from product sales to fund
research. They rely on investors and equity capital markets
to fund the research. These companies must focus on research
that will lead to product sales and revenue and end their
dependence on investor capital. When they are able to form
the capital to fund research, biotech companies tend to be
innovative and nimble and focused on the intractable diseases
for which no effective medical treatments are available.
Special research credits for pharmaceutical companies are
also needed.
For both biotech and pharmaceutical companies, there is no
established or predictable market for these countermeasures.
Investors and companies are justifiably reluctant to fund
this research, which will present technical challenges
similar in complexity to development of effective treatments
for AIDS. Investors and companies need assurances that
research on countermeasures has the potential to provide a
rate of return commensurate with the risk complexity and cost
of the research, a rate of return comparable to that which
may arise from a treatment for cancer, MS, Cystic Fibrosis
and other major diseases or from other investments.
President Bush's BioShield initiative is designed to
establish and predictable market for these countermeasures.
This legislation provides a template for implementation of
BioShield and supplements it with additional incentives to
ensure that the industry is enthusiastically engaged in this
vital research.
The legislation provides tax incentives to enable companies
to form capital to conduct the research and tax credits
usable by larger companies with tax liability with respect to
which to claim the credits. It provides a guaranteed and pre-
determined market for the countermeasures and special
intellectual property protections to serve as a substitute
for a market. Finally, it establishes liability protections
for the countermeasures that are developed.
Section 3 of the legislation is drafted as an amendment to
the Homeland Security Act of 2002 (HSA)(P.L. 107-296).
Section 2 sets forth findings and sections 4-9 are drafted as
amendments to other statutes.
1. Setting Research Priorities (Section 1811 of HSA): The
Department of Homeland Security sets the countermeasure
research priorities in advance. It focuses the priorities on
threats for which countermeasures are needed, and with regard
to which the incentives make it ``more likely'' that the
private sector will conduct the research to develop
countermeasures. It is required to consider the status of
existing research, the availability of non-countermeasure
markets for the research, and the most effective strategy for
ensuring that the research goes forward. The Department then
provides information to potential manufacturers of these
countermeasures in sufficient detail to permit them to
conduct the research and determine when they have developed
the needed countermeasure. The Department is responsible for
determining when a manufacturer has, in fact, successfully
developed the needed countermeasure.
2. Registration of Companies (Section 1812 of HSA):
Biotechnology and pharmaceutical companies register with the
Department to become eligible for the incentives in the
legislation. They are obligated to provide reports to the
Department as requested and be open to inspections. The
Department certifies which companies are eligible for the
incentives.
Once a company is certified as eligible for the incentives,
it becomes eligible for the tax incentives for capital
formation, and if it successfully develops a countermeasure
that meets the specifications of the Department, it becomes
eligible for the procurement, patent, and liability
provisions.
3. Diagnostics (Sections 1813 and 1814 of HSA): The
incentives apply to development of detection systems and
diagnostics, as well as drugs, vaccines and other needed
countermeasures.
[[Page S4017]]
4. Research Tools (Section 1815 of HSA): A company is also
eligible for certification for the tax and patent provisions
if it seeks to develop a research tool that will make it
possible to quickly develop a countermeasure to a previously
unknown agent or toxin, or an agent or toxin not targeted by
the Department for research.
5. Capital Formation for Countermeasures Research (Section
1821 of HSA; also section 4 of the legislation): The
legislation provides that a company seeking to fund research
is eligible to elect from among four tax incentives. The
companies are eligible to:
(a). Establish an R&D Limited Partnership to conduct the
research. The partnership passes through all business
deductions and credits to the partners.
(b). Issue a special class of stock for the entity to
conduct the research. The investors would be entitled to a
zero capital gains tax rate on any gains realized on the
stock.
(c). Receive a special tax credit to help fund the
research.
(d). Receive a special tax credit for research conducted at
a non-profit and academic research institution.
A company must elect only one of these incentives and, if
it elects one of these incentives, it is then not eligible to
receive benefits under the Orphan Drug Act. The legislation
includes amendments (Section 9 of this legislation) to the
Orphan Drug Act championed by Senators Hatch, Kennedy and
Jeffords (S. 1341). The amendments make the Credit available
from the date of the application for Orphan Drug status, not
the date the application is approved as provided under
current law.
6. Countermeasure Purchase Fund (Section 1822 of HSA): The
legislation provides that a company that successfully
develops a countermeasure--through FDA approval--is eligible
to sell the product to the Federal government at a pre-
established price and in a pre-determined amount. The company
is given notice of the terms of the sale before it commences
the research.
7. Intellectual Property Incentives (Section 1823 of HSA;
also section 5 of this legislation): The legislation provides
that a company that successfully develops a countermeasure is
eligible to elect one of two patent incentives. The two
alternatives are as follows:
(a). The company is eligible to receive a patent for its
invention with a term as long as the term of the patent when
it was issued by the Patent and Trademark Office, without any
erosion due to delays in the FDA approval process. This
alternative is available to any company that successfully
develops a countermeasure irrespective of its paid-in
capital.
(b). The company is eligible to extend the term of any
patent owned by the company for two years. The patent may not
be one that is acquired by the company from a third party.
This is included as a capital formation incentive for small
biotechnology companies with less than $750 million in paid-
in capital, or, at the discretion of the Department of
Homeland Security, to any firm that successfully develops a
countermeasure.
In addition, a company that successfully develops a
countermeasure is eligible for a 10-year period of market
exclusivity on the countermeasure.
8. Indemnification Protections (Section 1824 of HAS; also
Section 10 of the legislation): The legislation provides for
indemnifications for liability for the company that
successfully develops a countermeasure.
9. Accelerated Approval of Countermeasure (Section 1831 of
HSA): The countermeasures are considered for approval by the
FDA on a ``fast track'' basis.
10. Special Approval Standards (Section 6 of this
legislation: The countermeasures may be approved in the
absence of human clinical trails if such trails are
impractical or unethical.
11. Limited Antitrust Exemption (Section 7 of this
legislation): Companies are granted a limited exemption from
the antitrust laws as they seek to expedite research on
countermeasures.
12. Biologics Manufacturing Capacity and Efficiency
(Section 1832 and 1833 of HSA; and section 8 of this
legislation): Special incentives are incorporated to ensure
that manufacturing capacity is available for countermeasures.
13. Strengthening of Biomedical Research Infrastructure
(Section 1834 and 1835 of HSA): Authorizes appropriations for
grants to construct specialized biosafety containment
facilities where biological agents can be handled safely
without exposing researchers and the public to danger
(Section 216). Also reauthorizes a successful NIH-industry
partnership challenge grants to promote joint ventures
between NIH and its grantees and for-profit biotechnology,
pharmaceutical and medical device industries with regard to
the development of countermeasures and research tools
(Section 217).
14. Annual Report (Section 1841 of HSA): The Department is
required to prepare for the Congress an annual report on the
implementation of these incentives.
15. International Conference (Section 1842 of HSA): The
Department is required to organize an annual international
conference on countermeasure research.
______
By Mr. GRASSLEY (for himself, Mr. Hagel, Mr. Dorgan, Mr. Johnson,
and Mr. Daschle):
S. 667. A bill to amend the Food Security Act of 1985 to strengthen
payment limitations for commodity payments and benefits; to the
Committee on Agriculture, Nutrition, and Forestry.
Mr. GRASSLEY. Mr. President, the American people recognize the
importance of the family farmer to our Nation, and the need to provide
an adequate safety net for family farmers. In recent years, however,
assistance to farmers has come under increasing scrutiny.
Critics of farm payments have argued that the largest corporate farms
reap most of the benefits of these payments. The reality is, over 60
percent of the payments have gone to only 10 percent of our Nation's
farmers.
What's more, farm payments that were originally designed to benefit
small and medium-sized family farmers have contributed to their own
demise. Unlimited farm payments have placed upward pressure on land
prices and have contributed to overproduction and lower commodity
prices, driving many family farmers off the farm.
The Senate agreed, by an overwhelming vote of 66 to 31, to a
bipartisan amendment sponsored by Senators Dorgan and myself to target
federal assistance to small and medium-sized family farmers. The
amendment would have limited direct and counter-cyclical payments to
$75,000. It would have limited gains from marketing loans and LDPs to
$150,000, and generic certificates would have been included in this
limit. That would have limited farm payments to a combined total of
$275,000.
That amendment was critical to family farmers in Iowa. I feel
strongly the farm bill failed Iowa when it failed to effectively
address the issue of payment limitations. This is our chance to remedy
the problem.
This bi-partisan legislation provides a limit of $40,000 for direct
payments, $60,000 for counter-cyclical pavement, and $175,000 for LDPs
and marketing loan gains. The combined limit is $275,000.
I urge my colleagues to support this bi-partisan legislation and to
encourage the development of reasonable, legitimate payment limits.
I ask unanimous consent 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. 667
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. PAYMENT LIMITATIONS.
Section 1001 of the Food Security of 1985 (7 U.S.C. 1308)
is amended--
(1) in subsection (b)(1), by striking ``$40,000'' and
inserting ``$20,000'';
(2) in subsection (c)(1), by striking ``$65,000'' and
inserting ``$30,000'';
(3) by striking ``(d)'' and all that follows through the
end of paragraph (1) and inserting the following:
``(d) Limitations on Marketing Loan Gains, Loan Deficiency
Payments, and Commodity Certificate Transactions.--
``(1) Loan commodities.--The total amount of the following
gains and payments that a person may receive during any crop
year may not exceed $87,500:
``(A)(i) Any gain realized by a producer from repaying a
marketing assistance loan for 1 or more loan commodities
under subtitle B of title I of the Farm Security and Rural
Investment Act of 2002 (7 U.S.C. 7931 et seq.) at a lower
level than the original loan rate established for the loan
commodity under that subtitle.
``(ii) In the case of settlement of a marketing assistance
loan for 1 or more loan commodities under that subtitle by
forfeiture, the amount by which the loan amount exceeds the
repayment amount for the loan if the loan had been settled by
repayment instead of forfeiture.
``(B) Any loan deficiency payments received for 1 or more
loan commodities under that subtitle.
``(C) Any gain realized from the use of a commodity
certificate issued by the Commodity Credit Corporation for 1
or more loan commodities, as determined by the Secretary,
including the use of a certificate for the settlement of a
marketing assistance loan made under that subtitle.''; and
(4) by adding at the end the following:
``(h) Single Farming Operation.--
``(1) In general.--Notwithstanding subsections (b) through
(d), subject to paragraph (2), if a person participates only
in a single farming operation and receives, directly or
indirectly, any payment or gain covered by this section
through the operation, the total amount of payments or gains
(as applicable) covered by this section that the person may
receive during any crop year may not exceed twice the
applicable dollar amounts specified in subsections (b), (c),
and (d).
``(2) Individuals.--The total amount of payments or gains
(as applicable) covered by this section that an individual
person may receive during any crop year may not exceed
$275,000.
[[Page S4018]]
``(i) Spouse Equity.--Notwithstanding subsections (b)
through (d), except as provided in subsection (e)(2)(C)(i),
if an individual and spouse are covered by subsection
(e)(2)(C) and receive, directly or indirectly, any payment or
gain covered by this section, the total amount of payments or
gains (as applicable) covered by this section that the
individual and spouse may jointly receive during any crop
year may not exceed twice the applicable dollar amounts
specified in subsections (b), (c), and (d).
``(j) Regulations.--
``(1) In general.--Not later than July 1, 2003, the
Secretary shall promulgate regulations--
``(A) to ensure that total payments and gains described in
this section made to or through joint operations or multiple
entities under the primary control of a person, in
combination with the payments and gains received directly by
the person, shall not exceed twice the applicable dollar
amounts specified in subsections (b), (c), and (d);
``(B) in the case of a person that in the aggregate owns,
conducts farming operations, or provides custom farming
services on land with respect to which the aggregate payments
received by the person exceed the applicable dollar amounts
specified in subsections (b), (c), and (d), to attribute all
payments and gains made to the person on crops produced on
the land to--
``(i) a person that rents land for a share of the crop that
is less than the usual and customary rate, as determined by
the Secretary;
``(ii) a person that provides custom farming services
through arrangements under which--
``(I) all or part of the compensation for the services is
at risk;
``(II) farm management services are provided by--
``(aa) the same person;
``(bb) an immediate family member; or
``(cc) an entity or individual that has a business
relationship that is not an arm's length relationship, as
determined by the Secretary; or
``(III) more than \2/3\ of all payments received for custom
farming services are received by--
``(aa) the same person;
``(bb) an immediate family member; or
``(cc) an entity or individual that has a business
relationship that is not an arm's length relationship, as
determined by the Secretary; or
``(iii) a person under such other arrangements as the
Secretary determines are established to transfer payments
from persons that would otherwise exceed the applicable
dollar amounts specified in subsections (b), (c), and (d);
and
``(C) to ensure that payments attributed under this section
to a person other than the direct recipient shall also count
toward the limit of the direct recipient.
``(2) Primary control.--The regulations under paragraph (1)
shall define `primary control' to include a joint operation
or multiple entity in which a person owns an interest that is
greater than the total interests held by other persons that
materially participate on a regular, substantial, and
continuous basis in the management of the operation or
entity.''.
SEC. 2. REGULATIONS.
(a) In General.--The Secretary of Agriculture may
promulgate such regulations as are necessary to implement
this Act and the amendments made by this Act.
(b) Procedure.--The promulgation of the regulations and
administration of this Act and the amendments made by this
Act shall be made without regard to--
(1) the notice and comment provisions of section 553 of
title 5, United States Code;
(2) the Statement of Policy of the Secretary of Agriculture
effective July 24, 1971 (36 Fed. Reg. 13804), relating to
notices of proposed rulemaking and public participation in
rulemaking; and
(3) chapter 35 of title 44, United States Code (commonly
known as the ``Paperwork Reduction Act'').
(c) Congressional Review of Agency Rulemaking.--In carrying
out this section, the Secretary shall use the authority
provided under section 808 of title 5, United States Code.
Mr. DORGAN. Mr. President, I rise today to co-sponsor a bill that
imposes meaningful farm payment limitations.
A gentleman from Arkansas is the principal landlord of a 61,000-acre
farm. Although he serves as president of a tractor dealership with
sales over $30 million, this ``farmer'' received $38 million in farm
subsidies over 5 years. Stories like these about corporate farmers who
received millions of dollars in Federal agriculture payments undermine
support for the real purpose of our farm program: to help family
farmers.
What do I mean by family farmers? I am talking about people out there
living in a rural community, trying to raise a family and trying to
operate a family farm and trying to raise enough food to support
themselves. They go to town and buy their supplies, keeping small town
life not only viable, but also vibrant. I am talking about a network of
food producers scattered across this country that represents, in my
judgment, food security for our country.
And this goal of helping family farmers with a safety net in the form
of farm program payments during tough times is something that has
become much different over a long period of time. It is not the case
that we are fighting over farm program payments for family farmers.
But regrettably, millions of dollars of farm payments are not going
to small towns and family farms. They are going to big cities and
corporate America. They are going to that millionaire farmer in
Arkansas, to Ted Turner, and city dwellers who visit their farm twice a
year. The biggest operations keep getting the bulk of the farm benefits
while the small farmers are getting squeezed out of the rural areas.
When this happens, the family farm operation can't compete with the
larger enterprises because of the financial disadvantages.
My fear is that if we do not do something about this problem, the
American people are going to push back on this issue and say, ``This is
not why we are paying taxes. We really support family farms. We believe
family farms are important for America. But we don't believe we are
paying taxes so you can transfer money to the tune of millions, even
hundreds of millions, to those who need it least and ought not be
getting farm payments.''
So I am co-sponsoring this legislation. This bill would impose modest
limits on the amount of farm payments that any farm operation can
receive in one year. These limits would have virtually no impact on
family farms and would strengthen our agriculture program by targeting
the payments to these smaller operations.
Here are the limitations that my bill would impose: the bill would
limit direct payments to producers to $40,000. Limits on counter-
cyclical payments would be $60,000. The bill limits Marketing Loan
Gains and Loan Deficiency Payments to $175,000. The overall limit for a
farm is $275,000. The limits would save the Federal Government more
than $1 billion over 10 years.
In times of budget deficits, government expenditures need to be
targeted to those who need it most. Fortune 500 companies aren't the
intended targets of farm legislation, family farmers are. Limiting farm
payments to those who provide the food security of this country ought
to be the farm policy of this country and this legislation is a step in
that direction.
______
By Mr. REED (for himself, Mr. Dodd, Mr. Kennedy, and Mrs.
Murray):
S. 668. A bill to amend the Child Care and Development Block Grant
Act of 1990 to provide incentive grants to improve the quality of child
care; to the Committee on Health, Education, Labor, and Pensions.
Mr. REED. Mr. President, I rise today to introduce the Child Care
Quality Incentive Act of 2003.
This legislation seeks to address low child care payment or
reimbursement rates. Payment rates determine the level at which States
will reimburse child care providers who care for those low-income
children who receive a subsidy.
Low payment rates directly affect the kind of care children get and
whether families can find quality child care in their communities. Low
payment rates mean limited parental access to quality child care.
Child care providers are also affected when rates are set below the
market rate. Low payment rates force child care providers serving low-
income children to cut corners in ways that lower the quality of child
care such as reducing staff or decreasing salaries and benefits,
eliminating professional development opportunities, and forgoing books
and other literacy materials. Providers who avoid this route may simply
not accept low-income children with subsidies or may even go out of
business.
These dilemmas can be avoided if we help states set payment rates
that keep pace with the marketplace.
Currently, the Child Care and Development Block Grant, CCDBG,
requires States to ensure that their rates are sufficient to ``ensure
equal access'' for eligible families to child care services comparable
to those available to non-eligible families in the private market.
CCDBG regulations require states to conduct market rate surveys every
[[Page S4019]]
other year, but there is no requirement for states to actually use the
market rate surveys to set payment rates.
Unfortunately, more than half of the States do not make payment rates
based on the 75th percentile, by which families could access care from
75 out of 100 local providers, of a current market survey.
The need for quality child care has never been greater, as our
welfare reform policy directs more of our low-income families to find
work and our educational policy demands more of our students and
schools. Yet, States, due to severe budget crunches, are cutting back
on rates and other quality initiatives and restricting eligibility for
subsidies.
I am pleased to be joined by Senators Dodd, Kennedy, and Murray in
once again introducing the Child Care Quality Incentive Act, which
seeks to redouble our child care efforts and renew the child care
partnership with the States by providing incentive funding to increase
payment rates.
Our legislation establishes a new, mandatory pool of funding under
the Child Care and Development Block Grant, CCDBG. This new funding,
coupled with mandatory, current market rate surveys, will form the
foundation for significant increases in state payment rates for the
provision of quality child care.
We have received overwhelming support for this bill from the child
care community, including endorsements from USA Child Care, Children's
Defense Fund, Catholic Charities of USA, YMCA of USA, the National
Child Care Association, and a host of organizations and agencies across
the country.
Children are the hope of America, and they need the best of America.
We cannot ask working families to choose between paying the rent,
buying food, and being able to afford the quality care their children
need. We've made a lot of progress in improving the health, safety, and
well-being of children in this country. If we are serious about putting
parents to work and protecting children, we must invest more in child
care help for families.
This year, Congress is slated to reauthorize the Child Care and
Development Block Grant. The time for action on rates is now. I urge my
colleagues to join Senators Dodd, Kennedy, Murray, and me in this
endeavor to improve the quality of child care by cosponsoring the Child
Care Quality Incentive Act and working to include its provisions in the
CCDBG reauthorization.
I ask unanimous consent that the text of this legislation be printed
in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 668
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 ``Child Care Quality Incentive
Act of 2003''.
SEC. 2. FINDINGS AND PURPOSES.
(a) Findings.--Congress makes the following findings:
(1) Recent research on early brain development reveals that
much of a child's growth is determined by early learning and
nurturing care. Research also shows that quality early care
and education leads to increased cognitive abilities,
positive classroom learning behavior, increased likelihood of
long-term school success, and greater likelihood of long-term
economic and social self-sufficiency.
(2) Each day an estimated 13,000,000 children, including
6,000,000 infants and toddlers, spend some part of their day
in child care. However, a study in 4 States found that only 1
in 7 child care centers provide care that promotes healthy
development, while 1 in 8 child care centers provide care
that threatens the safety and health of children.
(3) Full-day child care can cost $4,000 to $12,000 per
year.
(4) Although Federal assistance is available for child
care, funding is severely limited. Even with Federal
subsidies, many families cannot afford child care. For
families with young children and a monthly income under
$1,200, the cost of child care typically consumes 25 percent
of their income.
(5) Payment (or reimbursement) rates, which determine the
maximum the State will reimburse a child care provider for
the care of a child who receives a subsidy, are too low to
ensure that quality care is accessible to all families.
(6) Low payment rates directly affect the kind of care
children get and whether families can find quality child care
in their communities. In many instances, low payment rates
force child care providers serving low-income children to cut
corners in ways that impact the quality of care for the
children, including reducing the number of staff, eliminating
professional development opportunities, and cutting enriching
educational activities and services.
(7) Children in low-quality child care are more likely to
have delayed reading and language skills, and display more
aggression toward other children and adults.
(8) Increased payment rates lead to higher quality child
care as child care providers are able to attract and retain
qualified staff, provide salary increases and professional
training, maintain a safe and healthy environment, and
purchase basic supplies, children's literature, and
developmentally appropriate educational materials.
(b) Purpose.--The purpose of this Act is to improve the
quality of, and access to, child care by increasing child
care payment rates.
SEC. 3. PAYMENT RATES.
Section 658E(c)(4) of the Child Care and Development Block
Grant Act of 1990 (42 U.S.C. 9858c(c)(4)) is amended--
(1) by redesignating subparagraph (B) as subparagraph (C);
(2) in subparagraph (A), by striking ``to comparable child
care services'' and inserting ``to child care services that
are comparable (in terms of quality and types of services
provided) to child care services''; and
(3) by inserting after subparagraph (A) the following:
``(B) Payment rates.--
``(i) Surveys.--In order to provide the certification
described in subparagraph (A), the State shall conduct
statistically valid and reliable market rate surveys (that
reflect variations in the cost of child care services by
locality), in accordance with such methodology standards as
the Secretary shall issue. The State shall conduct the
surveys not less often than at 2-year intervals, and use the
results of such surveys to implement, not later than 1 year
after conducting each survey, payment rates described in
subparagraph (A) that ensure equal access to comparable
services as required by subparagraph (A).
``(ii) Cost of living adjustments.--The State shall adjust
the payment rates at intervals between such surveys to
reflect increases in the cost of living, in such manner as
the Secretary may specify.
``(iii) Rates for different ages and types of care.--The
State shall ensure that the payment rates reflect variations
in the cost of providing child care services for children of
different ages and providing different types of care.
``(iv) Public dissemination.--The State shall, not later
than 30 days after the completion of each survey described in
clause (i), make the results of the survey widely available
through public means, including posting the results on the
Internet.''.
SEC. 4. INCENTIVE GRANTS TO IMPROVE THE QUALITY OF CHILD
CARE.
(a) Funding.--Section 658B of the Child Care and
Development Block Grant Act of 1990 (42 U.S.C. 9858) is
amended--
(1) by striking ``There'' and inserting the following:
``(a) Authorization of Appropriations.--There'';
(2) in subsection (a), by inserting ``(other than section
658H)'' after ``this subchapter''; and
(3) by adding at the end the following:
``(b) Appropriation of Funds for Grants To Improve the
Quality of Child Care.--Out of any funds in the Treasury that
are not otherwise appropriated, there is authorized to be
appropriated and there is appropriated $500,000,000 for each
of fiscal years 2004 through 2008, for the purpose of making
grants under section 658H.''.
(b) Use of Block Grant Funds.--Section 658E(c)(3) of the
Child Care and Development Block Grant Act of 1990 (42 U.S.C.
9858c(c)(3)) is amended--
(1) in subparagraph (B), by striking ``under this
subchapter'' and inserting ``under this subchapter (other
than section 658B(b))''; and
(2) in subparagraph (D), by inserting ``(other than section
658H)'' after ``under this subchapter''.
(c) Establishment of Program.--Section 658G of the Child
Care and Development Block Grant Act of 1990 (42 U.S.C.
9858e) is amended by inserting ``(other than section 658H)''
after ``this subchapter''.
(d) Grants To Improve the Quality of Child Care.--The Child
Care and Development Block Grant Act of 1990 (42 U.S.C. 9858
et seq.) is amended by inserting after section 658G the
following:
``SEC. 658H. GRANTS TO IMPROVE THE QUALITY OF CHILD CARE.
``(a) Authority.--
``(1) In general.--The Secretary shall use the amount
appropriated under section 658B(b) for a fiscal year to make
grants to eligible States, and Indian tribes and tribal
organizations, in accordance with this section.
``(2) Annual payments.--The Secretary shall make an annual
payment for such a grant to each eligible State, and for
Indian tribes and tribal organizations, out of the
corresponding payment or allotment made under subsections
(a), (b), and (e) of section 658O from the amount
appropriated under section 658B(b).
``(b) Eligible States.--
``(1) In general.--In this section, the term `eligible
State' means a State that--
``(A) has conducted a statistically valid survey of the
market rates for child care services in the State within the
2 years preceding the date of the submission of an
application under paragraph (2); and
[[Page S4020]]
``(B) submits an application in accordance with paragraph
(2).
``(2) Application.--
``(A) In general.--To be eligible to receive a grant under
this section, a State shall submit an application to the
Secretary at such time, in such manner, and accompanied by
such information, in addition to the information required
under subparagraph (B), as the Secretary may require.
``(B) Information required.--Each application submitted for
a grant under this section shall--
``(i) detail the methodology and results of the State
market rates survey conducted pursuant to paragraph (1)(A);
``(ii) describe the State's plan to increase payment rates
from the initial baseline determined under clause (i);
``(iii) describe how the State will increase payment rates
in accordance with the market survey results, for all types
of child care providers who provide services for which
assistance is made available under this subchapter;
``(iv) describe how payment rates will be set to reflect
the variations in the cost of providing care for children of
different ages and different types of care;
``(v) describe how the State will prioritize increasing
payment rates for--
``(I) care of higher-than-average quality, such as care by
accredited providers or care that includes the provision of
comprehensive services;
``(II) care for children with disabilities and children
served by child protective services; or
``(III) care for children in communities served by local
educational agencies that have been identified for
improvement under section 1116(c)(3) of the Elementary and
Secondary Education Act of 1965 (20 U.S.C. 6316(c)(3));
``(vi) describe the State's plan to assure that the State
will make the payments on a timely basis and follow the usual
and customary market practices with regard to payment for
child absentee days; and
``(vii) describe the State's plans for making the results
of the survey widely available through public means.
``(3) Continuing eligibility requirement.--
``(A) Second and subsequent payments.--A State shall be
eligible to receive a second or subsequent annual payment
under this section only if the Secretary determines that the
State has made progress, through the activities assisted
under this subchapter, in maintaining increased payment
rates.
``(B) Third and subsequent payments.--A State shall be
eligible to receive a third or subsequent annual payment
under this section only if the State has conducted, at least
once every 2 years, an update of the survey described in
paragraph (1)(A).
``(4) Requirement of matching funds.--
``(A) In general.--To be eligible to receive a grant under
this section, the State shall agree to make available State
contributions from State sources toward the costs of the
activities to be carried out by the State pursuant to
subsection (c) in an amount that is not less than 20 percent
of such costs.
``(B) Determination of state contributions.--Such State
contributions shall be in cash. Amounts provided by the
Federal Government may not be included in determining the
amount of such State contributions.
``(c) Use of Funds.--
``(1) Priority use.--An eligible State that receives a
grant under this section shall use the funds received to
significantly increase the payment rate for the provision of
child care assistance in accordance with this subchapter up
to the 100th percentile of the market rate determined under
the market rate survey described in subsection (b)(1)(A).
``(2) Additional uses.--An eligible State that demonstrates
to the Secretary that the State has achieved a payment rate
of the 100th percentile of the market rate determined under
the market rate survey described in subsection (b)(1)(A) may
use funds received under a grant made under this section for
any other activity that the State demonstrates to the
Secretary will enhance the quality of child care services
provided in the State.
``(3) Supplement not supplant.--Amounts paid to a State
under this section shall be used to supplement and not
supplant other Federal, State, or local funds provided to the
State under this subchapter or any other provision of law.
``(d) Evaluations and Reports.--
``(1) State evaluations.--Each eligible State shall submit
to the Secretary, at such time and in such form and manner as
the Secretary may require, information regarding the State's
efforts to increase payment rates and the impact increased
payment rates are having on the quality of child care in the
State and the access of parents to high-quality child care in
the State.
``(2) Reports to congress.--The Secretary shall submit
biennial reports to Congress on the information described in
paragraph (1). Such reports shall include data from the
applications submitted under subsection (b)(2) as a baseline
for determining the progress of each eligible State in
maintaining increased payment rates.
``(e) Indian Tribes and Tribal Organizations.--The
Secretary shall determine the manner in which and the extent
to which the provisions of this section apply to Indian
tribes and tribal organizations.
``(f) Payment Rate.--In this section, the term `payment
rate' means the rate of reimbursement to providers for
subsidized child care.''.
(e) Payments.--Section 658J(a) of the Child Care and
Development Block Grant Act of 1990 (42 U.S.C. 9858h(a)) is
amended by inserting ``from funds appropriated under section
658B(a)'' after ``section 658O''.
(f) Allotment.--Section 658O of the Child Care and
Development Block Grant Act of 1990 (42 U.S.C. 9858m) is
amended--
(1) in subsection (b)(1), in the matter preceding
subparagraph (A)--
(A) by striking ``section 658B'' and inserting ``section
658B(a)''; and
(B) by inserting ``and from the amounts appropriated under
section 658B(b) for each fiscal year remaining after
reservations under subsection (a),'' before ``the Secretary
shall allot''; and
(2) in subsection (e)--
(A) in paragraph (1), by striking ``the allotment under
subsection (b)'' and inserting ``an allotment made under
subsection (b)''; and
(B) in paragraph (3), by inserting ``corresponding'' before
``allotment''.
____________________