[Congressional Record Volume 149, Number 58 (Thursday, April 10, 2003)]
[Senate]
[Pages S5175-S5248]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. ENSIGN (for himself, Mr. Brownback, Mr. Inhofe, Mr. 
        Talent, Mr. Santorum, Mr. Grassley, Mr. Enzi, Mr. Sessions, Mr. 
        Allen, Mr. Bunning, Mr. Fitzgerald, Mr. Chambliss, Mr. DeWine, 
        Mr. McConnell, Mr. Coleman, Mr. Kyl, Mr. Nickles, Mr. Graham of 
        South Carolina, Mr. Bond, Mr. Hagel, Mr. Craig, Mr. McCain, and 
        Mr. Hatch):
  S. 851. A bill to amend title 18, United States Code, to prohibit 
taking minors across State lines in circumvention of laws requiring the 
involvement of parents in abortion decisions; to the Committee on the 
Judiciary.
  Mr. ENSIGN. Mr. President, I rise to introduce the Child Custody 
Protection Act. This legislation makes it a Federal offense to 
knowingly transport a minor across a State line, with the intent that 
she obtain an abortion, in circumvention of a State's parental consent 
or parental notification law.
  I have three young children in school, including a daughter, so I 
know something about parental consent. My wife and I, like most 
parents, have to give our written consent for school activities all the 
time.
  In most schools, an underage child can't go on a school field trip 
without a signed permission slip. An underage child also can't receive 
mild medication at school, such as aspirin, for the alleviation of pain 
or discomfort unless a parent signs a release form permitting the 
school nurse to administer it. In some schools, a child may not take 
sex education class without parental consent. Nothing, however, 
prevents this same child from being taken across State lines, in direct 
disobedience of State laws, for the purpose of undergoing a life-
altering abortion.
  The Child Custody Protection Act simply attempts to strengthen the 
effectiveness of State laws designed to protect children from the 
health and safety risks associated with abortion. In many cases, only a 
girl's parents know of her prior psychological and medical history, 
including allergies to medication and anesthesia. Also, parents are 
usually the only people who can provide authorization for post-abortion 
medical procedures or the release of pertinent data from family 
physicians. When a pregnant girl is taken to have an abortion without 
her parents' knowledge, none of these precautions can be taken. The 
harsh reality is that leaving parents uniformed about their underage 
daughter's abortion may not only be detrimental to the physical and 
mental health of the child but may, in some instances, be fatal.
  This legislation does not supercede, override, or in any way alter 
existing State parental involvement laws. It does not impose any 
parental notice or consent requirement on any State. The Child Custody 
Protection Act addresses the interstate transportation of minors in 
order to circumvent valid, existing state laws and uses the authority 
of Congress to regulate interstate activity to protect those laws from 
evasion.

[[Page S5176]]

  Currently, forty-three States have laws requiring a minor to get the 
consent of or notify one or both parents prior to an abortion, but only 
thirty-three are enforcing those measures. Most of the statutes apply 
to a child under the age of 18 and provide for a court bypass procedure 
should she be unable to involve her parents.
  This legislation is a common sense solution to a dire problem. A 
minor who is forbidden to drink alcohol, to stay out past a certain 
hour, or to drive a car in some states is certainly not prepared to 
make a life-altering, hazardous decision, such as an abortion, without 
the consultation or consent of at least one parent.

  In fact, a poll found that 85 percent of voters, including 75 percent 
of ``pro-choice'' voters, said ``No'' when asked, ``Should a person be 
able to take a minor girl across State lines to obtain an abortion 
without her parents' knowledge?''
  I would like to thank the original cosponsors of this bill for their 
support, Senators Brownback, Inhofe, Talent, Santorum, Grassley, Enzi, 
Sessions, Allen, Bunning, Fitzgerald, Chambliss, DeWine, McConnell, 
Coleman, Kyl, Nickles, Lindsey Graham, Bond, Hagel, Craig, McCain and 
Hatch. I look forward to working with them, and other members of the 
Senate, to ensure that underage girls are protected from unscrupulous 
individuals who want them to make a life-altering decision without 
parental involvement.
  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. 851

       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 Custody Protection 
     Act''.

     SEC. 2. TRANSPORTATION OF MINORS IN CIRCUMVENTION OF CERTAIN 
                   LAWS RELATING TO ABORTION.

       (a) In General.--Title 18, United States Code, is amended 
     by inserting after chapter 117 the following:

 ``CHAPTER 117A--TRANSPORTATION OF MINORS IN CIRCUMVENTION OF CERTAIN 
                       LAWS RELATING TO ABORTION

``Sec.
``2431. Transportation of minors in circumvention of certain laws 
              relating to abortion.

     ``Sec. 2431. Transportation of minors in circumvention of 
       certain laws relating to abortion

       ``(a) Offense.--
       ``(1) Generally.--Except as provided in subsection (b), 
     whoever knowingly transports a minor across a State line, 
     with the intent that such minor obtain an abortion, and 
     thereby in fact abridges the right of a parent under a law 
     requiring parental involvement in a minor's abortion 
     decision, in force in the State where the minor resides, 
     shall be fined under this title or imprisoned not more than 
     one year, or both.
       ``(2) Definition.--For the purposes of this subsection, an 
     abridgement of the right of a parent occurs if an abortion is 
     performed on the minor, in a State other than the State where 
     the minor resides, without the parental consent or 
     notification, or the judicial authorization, that would have 
     been required by that law had the abortion been performed in 
     the State where the minor resides.
       ``(b) Exceptions.--
       ``(1) The prohibition of subsection (a) does not apply if 
     the abortion was necessary to save the life of the minor 
     because her life was endangered by a physical disorder, 
     physical injury, or physical illness, including a life 
     endangering physical condition caused by or arising from the 
     pregnancy itself.
       ``(2) A minor transported in violation of this section, and 
     any parent of that minor, may not be prosecuted or sued for a 
     violation of this section, a conspiracy to violate this 
     section, or an offense under section 2 or 3 based on a 
     violation of this section.
       ``(c) Affirmative Defense.--It is an affirmative defense to 
     a prosecution for an offense, or to a civil action, based on 
     a violation of this section that the defendant reasonably 
     believed, based on information the defendant obtained 
     directly from a parent of the minor or other compelling 
     facts, that before the minor obtained the abortion, the 
     parental consent or notification, or judicial authorization 
     took place that would have been required by the law requiring 
     parental involvement in a minor's abortion decision, had the 
     abortion been performed in the State where the minor resides.
       ``(d) Civil Action.--Any parent who suffers harm from a 
     violation of subsection (a) may obtain appropriate relief in 
     a civil action.
       ``(e) Definitions.--For the purposes of this section--
       ``(1) a `law requiring parental involvement in a minor's 
     abortion decision' means a law--
       ``(A) requiring, before an abortion is performed on a 
     minor, either--
       ``(i) the notification to, or consent of, a parent of that 
     minor; or
       ``(ii) proceedings in a State court; and
       ``(B) that does not provide as an alternative to the 
     requirements described in subparagraph (A) notification to or 
     consent of any person or entity who is not described in that 
     subparagraph;
       ``(2) the term `parent' means--
       ``(A) a parent or guardian;
       ``(B) a legal custodian; or
       ``(C) a person standing in loco parentis who has care and 
     control of the minor, and with whom the minor regularly 
     resides,

     who is designated by the law requiring parental involvement 
     in the minor's abortion decision as a person to whom 
     notification, or from whom consent, is required;
       ``(3) the term `minor' means an individual who is not older 
     than the maximum age requiring parental notification or 
     consent, or proceedings in a State court, under the law 
     requiring parental involvement in a minor's abortion 
     decision; and
       ``(4) the term `State' includes the District of Columbia 
     and any commonwealth, possession, or other territory of the 
     United States.''.
       (b) Clerical Amendment.--The table of chapters for part I 
     of title 18, United States Code, is amended by inserting 
     after the item relating to chapter 117 the following new 
     item:

``117A. Transportation of minors in circumvention of certain laws 
  relating to abortion..........................................2431''.

  Mr. HATCH. Mr. President, I rise today to join with my colleagues in 
introducing the Child Custody Protection Act and express my strong 
support for this important piece of legislation. Similar legislation 
was previously introduced in past sessions of Congress but, and I am 
sad to say, never was signed into law. However, I hope that today is 
the beginning of a new day to help protect the health and safety of 
children while safeguarding the rights and responsibilities of parents.
  This bill is a reasonable effort to build upon two basic points with 
which many agree--despite other longstanding differences. The first is 
the desirability of parental involvement in a minor's abortion 
decision, and the other is the need to protect a pregnant minor's 
physical health.
  This bill does not supersede, override, or in any way alter existing 
State parental consent or notification laws. Nor does this bill require 
States to implement their own parental involvement laws. The Child 
Custody Protection Act simply makes it a Federal offense to knowingly 
transport a female minor across a state line, with the intent that she 
obtain an abortion, in circumvention of State laws requiring parental 
consent or notification.
  This bill, I would emphasize, is not a Federal parental involvement 
law; it merely ensures that State laws are not evaded through 
interstate activity. The Federal Government is not trying to tell the 
States how they must act and when, and this bill is not forcing parents 
to be good parents. This legislation strengthens the effectiveness of 
State laws, which is where the issue is best addressed and enforced. If 
we fail to pass this bill, we would be choosing to ignore the 
legitimacy and constitutionality of States to create and pass laws that 
specifically address the needs and desires of its citizens, especially 
when it comes to the health and safety of children.
  The Child Custody Protection Act is a reasonable and rational 
approach to fixing a serious problem. In most places, a school nurse 
cannot provide an aspirin to a student for a headache without 
permission from the parent. Students cannot go on field trips without 
parental approval. Some report cards need a parent's signature to 
verify the parent knows how their child is performing academically.
  This bill is not addressing something relatively trivial; it is 
drawing attention to a very serious medical procedure and protecting 
the health and safety of young girls. States that choose to implement 
parental notification laws because of their concerns with the well-
being and safety of children should have every tool necessary to 
enforce their own laws.
  An abortion is a risky medical procedure, especially for young 
teenagers. This bill is designed to protect children from the health 
and safety risks associated with abortion. In many cases, only a young 
girl's parents know of her prior psychological and medical history, 
including allergies to medication and anesthesia. Many other medical 
procedures in this country require the

[[Page S5177]]

consent of parents before they are performed. Also, parents are usually 
the only people who can provide authorization for post-abortion medical 
procedures or even release important information from family 
physicians. Given all of these other important medical situations that 
require parental consent, it is only reasonable and logical to 
recognize and enforce a States law asking for parental consent or 
notification for certain abortions.
  We all know how contentious the issue of abortion can get around 
here, and across the country. But this matter is not really even about 
abortion. This bill is simply about protecting the health and safety of 
minor children and the rights that their own States have concluded 
their parents should have.
  I would urge all of my colleagues to support this legislation and 
prevent circumvention of State laws, especially when the health and 
safety of children is involved.
                                 ______
                                 
      By Mr. DeWINE (for himself, Mr. Daschle, Mr. Smith, and Mr. 
        Leahy):
  S. 852. A bill to amend title 10, United States Code, to provide 
limited TRICARE program eligibility for members of the Ready Reserve of 
the Armed Forces, to provide financial support for continuation of 
health insurance for mobilized members of reserve components of the 
Armed Forces, and for other purposes; to the Committee on Armed 
Services.
  Mr. DASCHLE. Mr. President, today I join with a bipartisan group of 
colleagues from the Senate Guard Caucus to introduce the National Guard 
and Reserve Comprehensive Health Benefits Act of 2003. This bill will 
allow reservists and their families to receive health coverage through 
Tricare by paying a modest premium.
  These dedicated men and women deserve a better benefit package, given 
the dramatic expansion of their role within our military. Indeed, there 
is concern that the high rate of mobilizations--which no one expects to 
abate--will erode this force's ability to recruit and retain top-notch 
personnel. South Dakota Guard leaders tell me this bill would be 
perhaps the most powerful tool we could give them for recruiting and 
retention. By providing access to quality affordable health care for 
reservists and their families, this bill will also ensure that when 
they are mobilized, they are healthy and ready to go.
  As I stand before you today, nearly 2,000 members of South Dakota's 
Guard and Reserves are deployed throughout the world--from force-
protection missions at home to assignments in Europe and the Persian 
Gulf. Most of these reservists will be mobilized for 6 months, and some 
will stay activated for up to 2 years. And while South Dakota has one 
of the highest per-capita mobilization rates in the country, it is not 
unique. As the U.S. role as an international leader evolves, the 
National Guard and Reserves are being called upon at unprecedented 
rates to bolster our Nation's defense.
  Indeed, since the 1991 gulf war, and particularly since the 
terrorists attacks of September 11, the demands on Reserve and Guard 
units have increased steadily. Not only are more reservists deployed 
more often, they are also activated for increasingly diverse tasks. 
Historically, this force has helped address a wide variety of social 
needs--from enforcing civil rights laws to fighting forest fires--and 
homeland defense is shaping us a major new duty that will require its 
sustained engagement.
  While the demands we place on reservists have grown markedly in the 
last decade, the Federal Government's commitment to this dedicated 
group of men and women has not kept pace. In fact, the basic pay and 
benefit structure that was established during the cold war--when 
reservists could see their entire career pass by without being 
activated--remains in place today. As a result, leaders of the National 
Guard and Reserves are increasingly worried about their ability to 
recruit and retain new members.
  The legislation we are introducing today takes a major step toward 
providing the men and women of our Reserve components with the support 
they need to carry out their new, vital role in the total force 
structure. It will offer Reserve and National Guard members the 
opportunity to participate for themselves and their family members in 
the same Tricare program available to active-duty service members and 
their families. Reservists and their families will share the cost of 
premium payments with the Department of Defense, with the same cost 
distribution as used in the Federal Employees Health Benefit Plan. This 
program will help the National Guard and Reserves attract and keep the 
best and brightest men and women in the Nation.
  The National Guard Association of the United States reports that the 
average cost of a family health care plan through a civilian HMO is 
$7,541 per year. In contrast, it estimates that the Tricare cost per 
family is only $5,173 per year, even without the Government sharing any 
of the cost. With Government cost-sharing, this will be an attractively 
priced option for securing health coverage.
  Beyond recruitment and retention, this program will improve 
readiness. More than 20 percent of the Ready Reserve--and as much as 40 
percent of young enlisted personnel--do not currently have health 
insurance. Providing access to quality health care during all phases of 
service can drastically reduce the occurrence of situations in which 
large portions of a unit are unable to deploy because of medical 
reasons. Maintaining a healthy force is absolutely essential to 
maintaining a prepared force.
  Our legislation will also reduce the incidence of problems that 
invariably occur during mobilization, when families leave their 
private-sector health plan and enter a wholly new plan, Tricare. Last 
month, I worked with Secretary of Defense Donald Rumsfeld to end a 
nationwide problem among families of mobilized reservists. Simply put, 
they were being forced, unfairly and improperly, to join a more 
expensive Tricare plan. We did solve that problem, but many families 
had to wait weeks without knowing whether they should try to extend 
their private coverage or whether they could afford Tricare. That is 
simply unacceptable. It is the last thing a reservist should have to 
worry about when preparing, possibly, for deployment to a war zone.
  Another challenge for families going through mobilization is learning 
the Tricare benefit structure and understanding its system for helping 
those with problems or questions. Again, all this would be eliminated 
if families could enroll in Tricare before mobilization. If a family 
believes its employer's civilian plan is superior, they would be free 
to remain, and, during periods of mobilization, those premiums would be 
partially subsidized.
  We have developed this bill in consultation with leaders of the 
National Guard and Reserves at the State and National levels. I 
appreciate their concern for this problem and their work to help 
develop a solution. In this regard, I would particularly like to 
acknowledge the efforts and strong support of the South Dakota National 
Guard, as well as the Military Officers Association of America, the 
Enlisted Association of the National Guard, the National Guard 
Association of the United States, the Reserve Officers Association, the 
Marine Corps Reserve Officers Association, the National Military Family 
Association, the National Association for Uniformed Services, and the 
National Military/Veterans Association.
  I would like also to thank my cosponsors, Senator Leahy, Senator 
DeWine, and Senator Gordon Smith, for helping advance this project.
  Guaranteeing that all reservists have access to health care--either 
through civilian employers or Tricare--will ensure that this force is 
ready to fight at a moment's notice. The bill we are introducing today 
will not only improve the readiness of the current Reserve Force, but 
will pay dividends in the future by improving our ability to recruit 
and retain the best and brightest men and women for the National Guard 
and Reserves.
  The Senate has set aside time each day for the last 3 weeks to honor 
and support the dedicated service of our troops in Iraq. Surely we can 
agree that one of our high priorities should be to ensure that, as long 
as they continue their service to our country, they will always have 
access to high-quality affordable health care.
  Mr. LEAHY. Mr. President, today I am joined by Senator DeWine, by our 
minority leader, Senator Daschle, and

[[Page S5178]]

by Senator Smith in introducing legislation that will boost the 
readiness of our Nation's military Reserve.
  Never has our Nation relied more heavily on the Selected Reserve--
more than 875,000 men and women, who stand ready for deployments at 
home or abroad, at a moment's notice. More than 54 percent of the U.S. 
Army's and 34 percent of the U.S. Air Force's end strength resides in 
the Selected Reserve. Both the Army and the Marine Corps rely on these 
Reserve forces for almost 20 percent of their manpower strength. The 
skill, experience and professionalism of these dedicated citizens often 
meet and exceed those of their brave counterparts in the active force.
  It is no wonder that more than 200,000 reservists have been called to 
duty for service that is related to the war in Iraq. Many States have 
thousands of their citizens who have temporarily dropped their civilian 
jobs and left their families for deployments halfway across the globe. 
More than 300 citizen-soldiers, sailors, airmen, and marines in my home 
State of Vermont are serving proudly at the moment, here and abroad. 
When you include the call-ups since the September 11 attacks, the 
number of activated reservists across the country far exceeds those in 
the first gulf war.
  These deployments have spotlighted some specific and solvable 
problems that have affected the readiness of the reserves and, in turn, 
our entire military. Some of the troops who have been called up have 
not been as healthy as possible. Others have faced the stress of 
leaving their families behind while looking back in concern as their 
families try to navigate the sometimes arcane military health care 
system. While often experiencing a loss of income, reserve family 
members also have had to leave their civilian doctors and join the 
military's TRICARE program.
  More troubling, many of the members of the Guard and Reserve who 
might be activated any day do not currently have access to affordable 
health insurance. A recent General Accounting Office report underscores 
the fact that most of these uninsured Guard and Reservists reside in 
the lower enlisted ranks, where the reserve soldiers, sailors, airmen, 
and marines oftentimes are unemployed or switch jobs frequently. It is 
unfair to them and their families, and it is unwise for the 
preparedness of our military, to expect someone to deploy anywhere at 
the drop of a hat, but then to disregard whether they will be as 
healthy as possible when we need to call them to active duty.
  These men and women are ready to make the ultimate sacrifice for 
their country, and so are their families. But they are performing as 
full-time soldiers with part-time benefits.
  This situation is preventing the National Guard and the Reserve from 
being as ready as possible for action. At the same time, the stress and 
strain that activations place on families has hurt recruiting and 
retention. To ensure the strongest and most effective reserve and the 
strongest and most effective military capability, it is critical that 
we address these issues and provide comprehensive health insurance 
coverage.

  The National Guard and Reserve Comprehensive Health Benefits Act of 
2003 will provide seamless health coverage to our reserve forces at all 
phases of their service. Under our plan, if one of 876,000 members of 
the Selected is in a drill status, that reservist and his or her family 
will become eligible to join the TRICARE military health insurance 
program. The reservist will pay an annual premium, around 30 percent of 
the annual cost of providing care. For a single reservist, the premium 
would be about $420 per year, while for a family the annual payment 
would be about $1,450. This is not rock-bottom-cheap health care, but 
our aim is to ensure affordable health insurance for hard-working 
families that may not otherwise have access to coverage.
  If a reservist is activated, he or she will continue to have free 
health care through the military health system. But under our 
legislation, the reservist's family will be able to avoid the 
considerable difficulties of switching doctors and health insurance. 
They also can apply to have their civilian health insurance reimbursed. 
The program will not cost any more to the Federal Government than the 
current arrangement because the per capita costs are capped to ensure 
that they are no more than the cost of TRICARE. And when a reservist 
comes off active duty, he or she will be able to enter the new premium-
based TRICARE program, just as before deployment.
  Because reservists will be able to have access to affordable 
insurance whatever their deployment status, this legislation is being 
supported by several leading organizations, including the National 
Guard Association of the United States, NGAUS, the Enlisted National 
Guard Association of the United States, EANGUS, the Reserve Officers 
Association, ROA, the Naval Reserve Association, NRA, the National 
Military Family Association, NMFA, Marine Corps Reserve Officers 
Association, the National Association for Uniformed Services, the 
National Military/Veterans Association, and the Military Officers 
Association, MOA. This legislation is the top priority of The Military 
Coalition's Guard/Reserve Committee.
  We have worked hard to fully understand the existing problems and to 
construct this efficient and effective solution. I would particularly 
like to thank former Undersecretary of Defense Fred Pang and former 
House Armed Services Committee Professional Staff Member Karen Heath 
for their sage counsel and guidance in developing this legislation. We 
are part of a strong, bipartisan coalition that will push for enactment 
of this long-overdue legislation. In the coming weeks we plan to 
welcome additional cosponsors for this comprehensive bill as we begin 
the process of moving it without delay through the legislative process 
and to the President's desk.
                                 ______
                                 
      By Ms. SNOWE (for herself and Mr. Kerry):
  S. 853. A bill to amend title XVIII of the Social Security Act to 
eliminate discriminatory copayment rates for outpatient psychiatric 
services under the medicare program; to the Committee on Finance.
  Ms. SNOWE. Mr. President, I rise today to introduce the Medicare 
Mental Health Copayment Equity Act with my colleague on the Finance 
Committee, Senator John Kerry.
  In brief, my bill would a correct a serious disparity in payment for 
treatment of mental disorders under Medicare law. Medicare 
beneficiaries typically pay 20 percent copayment for outpatient 
services, including doctor's visits and Medicare pays the remaining 80 
percent. But for treatment of mental disorders, Medicare law requires 
patients pay a 50-percent copayment. Under my bill, this copayment will 
be reduced over a six year period, starting in 2004, from the current 
50 percent to 20 percent. This means that in 2010, patients seeking 
outpatient treatment for mental illness will pay the same 20 percent 
copayment required of Medicare patients that receive treatment for any 
other illness.
  Let's look at this issue in another way. If a Medicare patient has an 
office visit for treatment for cancer or heart disease, the patient is 
responsible for 20 percent of the doctor's fee. But if a Medicare 
patient has an office visit with a psychiatrist, psychologist, social 
worker, or other professional for treatment for depression, 
schizophrenia, or any other condition diagnosed as a mental illness, 
the copayment for the outpatient visit for treatment of the mental 
illness is 50 percent. What sense does this make?
  Indeed, my bill has a larger purpose, to help end an outdated 
distinction between physical and mental disorders, and ensure that 
Medicare beneficiaries have equal access to treatment for all health 
conditions. Perhaps this disparity would matter less if mental 
disorders were not so prevalent. But the Surgeon General has told us 
otherwise.
  The importance of access to treatment for mental disorders is 
emphasized in a landmark report on mental health released by the 
Surgeon General in 1999. The Surgeon General reported mental illness 
was second only to cardiovascular diseases in years of healthy life 
lost to either premature death or disability. And the occurrence of 
mental illness among older adults is widespread with a substantial 
proportion of the population 55 and older--almost 20 percent of this 
age group--experiencing specific mental disorders that are not part of 
``normal'' aging.
  Further, older Americans have the highest rate of suicide in the 
country,

[[Page S5179]]

and the risk of suicide increases with age. In fact, in the State of 
Maine, the suicide rate for seniors is three times as high as the rate 
for adolescents. Untreated depression among the elderly substantially 
increases the risk of death by suicide.
  There is another sad irony. While Medicare often is viewed as health 
insurance for people over age 65, Medicare also provides health 
insurance coverage for people with severe disabilities. The single most 
frequent cause of disability for Social Security and Medicare benefits 
is mental disorders--affecting almost 1.4 million of 6 million 
Americans who receive Social Security disability benefits. Yet, at the 
same time, Medicare pays less for critical mental health services 
needed by these beneficiaries than if they had a non-mental disability.
  But there also is very good news that there are increasingly 
effective treatments for mental illnesses. With proper treatment, the 
majority of people with a mental illness can lead productive lives. By 
removing financial barriers that inhibit access to treatment services, 
we will be able to eliminate stigmas and overcome a lack of 
understanding of mental disorders.
  I urge my colleagues to join with me to bring Medicare payment policy 
for mental disorders into the 21st century.
  Mr. KERRY. Mr. President, I am pleased to join my colleague Senator 
Snowe in introducing the Medicare Mental Health Copayment Equity Act. 
This legislation will establish mental health care parity in the 
Medicare program.
  Medicare currently requires patients to pay a 20 percent co-payment 
for all Part B services except mental health care services, for which 
patients are assessed a 50 percent co-payment. Thus, under the current 
system, if a Medicare patient sees an endocrinologist for diabetes 
treatment, an oncologist for cancer treatment, a cardiologist for heart 
disease treatment or an internist for treatment of the flu, the co-
payment is 20 percent of the cost of the visit. If, however, a Medicare 
patient visits a psychiatrist for treatment of mental illness, the co-
payment is 50 percent of the cost of the visit. This disparity in 
outpatient co-payments represents blatant discrimination against 
Medicare beneficiaries with mental illness.
  The prevalence of mental illness in older adults is considerable. 
According to the U.S. Surgeon General, 20 percent of older adults in 
the community and 40 percent of older adults in primary care settings 
experience symptoms of depression, while as many as one out of every 
two residents in nursing homes are at risk of depression. The elderly 
have the highest rate of suicide in the United States, and there is a 
clear correlation between major depression and suicide: 60 to 70 
percent of suicides among patients 75 and older have diagnosable 
depression. In addition to our seniors, 400,000 non-elderly disabled 
Medicare beneficiaries become Medicare-eligible by virtue of severe and 
persistent mental disorders. To subject the mentally disabled to 
discriminatory costs in coverage for the very conditions for which they 
became Medicare eligible is illogical and unfair.
  There is ample evidence that mental illness can be treated. 
Unfortunately, those in need of treatment often do not seek it because 
they are ashamed of their condition. Among our Medicare population, the 
mentally ill face a double burden: not only must they overcome the 
stigma about their illness, but once they seek treatment they must pay 
one-half of the cost of care out of their own pocket. The Medicare 
Mental Health Copayment Equity Act will phase-down the 50 percent co-
payment for mental health care services to 20 percent over six years. 
By applying the same co-payment rate to mental health services to which 
all other outpatient services are subjected, the Medicare Mental Health 
Copayment Equity Act will bring parity to the Medicare program and 
improve access to care for our senior and disabled beneficiaries who 
are living with mental illness. I urge my colleagues to join with us to 
pass this critical legislation.
  I ask unanimous consent that several letters of support be printed in 
the Record.
  There being no objection, the letters were ordered to be printed in 
the Record, as follows:


                                Maine Osteopathic Association,

                                    Manchester, ME, April 9, 2003.
     Hon. Olympia Snowe,
     U.S. Senate, Washington, DC.
       Dear Senator Snowe: On behalf of the osteopathic physicians 
     (D.O.'s) in Maine, I want to applaud your leadership efforts 
     in sponsoring the Medicare Mental Health Co-payment Equity 
     Act of 2003. This bill would end Medicare's unfortunate 
     discrimination against patients with mental illness.
       We support this legislation that would end this 
     discrimination because it requires that Medicare patients pay 
     only the same 20 percent co-payment for mental illness 
     treatment that they pay when seeking other medical treatment, 
     such as treatment for diabetes, asthma or influenza.
       The Maine Osteopathic Association appreciates your 
     thoughtfulness, commitment and compassion in equitably 
     treating persons with mental illness.
       Your sponsorship of this most important bill is a major 
     step to end Medicare's discrimination coverage of mental 
     illness treatment.
           Sincerely,
                                            Daniel M. Pierce, D.O.
     President.
                                  ____

                                                    April 9, 2003.
     Hon. John Kerry,
     U.S. Senate, Washington, DC.
       Dear Senator Kerry: On behalf of the American Association 
     for Geriatric Psychiatry (AAGP), I am writing to add AAGP's 
     endorsement to legislation which you are planning to 
     introduce with Senator Snowe to end the discriminatory 
     copayment required by Medicare for treatment of mental 
     illness.
       Medicare coverage of mental health services is fragmented 
     and subject to arbitrary and discriminatory limitations. 
     Although coinsurance for most services covered by Medicare is 
     20 percent, current law requires a 50 percent co-payment for 
     mental health services furnished by psychiatrists and other 
     health care professionals who specialize in the treatment of 
     mental illness. This limit, which dates back to the inception 
     of the Medicare program in 1965, is based on the outmoded 
     assumption that all mental illness is chronic and requires 
     unlimited therapeutic services. Advances in treatment have 
     made this assumption highly inaccurate. Your bill would 
     establish copayment parity between mental health benefits and 
     other medical benefits under the Medicare program.
       Your legislation stands to dramatically improve the lives 
     of Medicare beneficiaries by providing them with the access 
     to mental health care that they deserve.
       AAGP commends you for your dedication to ensuring that all 
     Americans have adequate access to effective mental health 
     treatments, and we look forward to working with you to 
     achieve the enactment of this legislation.
           Sincerely,
                                             Joel E. Streim, M.D.,
     President.
                                  ____



                             American Psychiatric Association,

                                     Arlington, VA, April 9, 2003.
     Hon. Olympia Snowe,
     U.S. Senate, Washington, DC.
       Dear Senator Snowe: On behalf of the 38,000 physician 
     members of the American Psychiatric Association (APA), and 
     most particularly on behalf of the patients they treat, 
     please accept my thanks for your House sponsorship of the 
     Medicare Mental Health Copayment Equity Act of 2003.
       As you know, Medicare Part B requires by statute that 
     beneficiaries pay a copayment of 20 percent, except for the 
     discriminatory 50 percent copayment charged for outpatient 
     mental health treatment. It is time for Congress to end what 
     amounts to cost-sharing discrimination by diagnosis. The bill 
     you are introducing with Representative Richard Neal would 
     ultimately require Medicare beneficiaries to pay the same 20 
     percent copayment amount for outpatient mental health 
     treatment as they would otherwise pay for other Part B 
     services. Asking our Medicare beneficiaries to pay half the 
     cost of their mental health care out of pocket is simply 
     unjust, and is a significant barrier to necessary treatment.
       Thank you for your foresight and leadership in your lead 
     sponsorship of the Medicare Mental Health Copayment Equity 
     Act of 2003. Thanks are also due to the outstanding work by 
     Catherine Finely, who ably represents you. The APA looks 
     forward to working with you to make your bill a reality this 
     year.
           Sincerely,
                                          Paul S. Appelbaum, M.D.,
     President.
                                  ____

                                                             NAMI,


                                         The Nation's Voice on

                                                Mental Health,

                                     Arlington, VA, April 9, 2003.
     Hon. Olympia Snowe,
     U.S. Senate, Washington, DC.
       Dear Senator Snowe: On behalf of NAMI's 210,000 members and 
     1,200 affiliates I am writing to offer our strong support for 
     the Medicare Mental Illness Nondiscrimination Act. Thank you 
     for bringing forward this important legislation to bring a 
     discrimination in outpatient treatment services in the 
     Medicare program. As the nation's largest organization 
     representing persons with severe mental illness and their 
     families, we are extremely grateful for your leadership on 
     this important issue.
       Perhaps the most glaring shortcoming in the Medicare 
     program is the discriminatory

[[Page S5180]]

     co-payment for most outpatient mental illness treatment 
     services. As you know, outpatient psychotherapy services are 
     covered at 50 percent under Medicare, with a 50 percent 
     beneficiary co-payment requirement. This is stark contrast to 
     the 80 percent payment, and 20 percent co-payment for all 
     other outpatient services. In NAMI's view, this is a clear 
     form of discrimination in one of the federal government's 
     most important health care programs--providing coverage to 
     more than 39 million Americans--both seniors and non-elderly 
     people with severe disabilities such as serious mental 
     illnesses. We know that treatment makes a tremendous 
     difference in the lives of persons with mental illness. Your 
     legislation removes a significant financial barrier to such 
     necessary care for the Medicare population.
       Thank you for once again leading the way in the Congress in 
     bringing an end to discrimination against persons living with 
     severe mental illness.
           Sincerely,
                                                Richard C. Birkel,
     Executive Director.
                                  ____

                                          American Association for


                                         Geriatric Psychiatry,

                                      Bethesda, MD, April 9, 2003.
     Hon. Olympia Snowe,
     U.S. Senate, Washington, DC.
       Dear Senator Snowe: On behalf of the American Association 
     for Geriatric Psychiatry (AAGP), I writing to add AAGP's 
     endorsement to legislation which you are planning to 
     introduce with Senator Kerry to end the discriminatory 
     copayment required by Medicare for treatment of mental 
     illness.
       Medicare coverage of mental health services is fragmented 
     and subject to arbitrary and discriminatory limitations. 
     Although coinsurance for most services by Medicare is 20 
     percent, current law requires a 50 percent co-payment for 
     mental health services furnished by psychiatrists and other 
     health care professionals who specialize in the treatment of 
     mental illness. This limit, which dates back to the inception 
     of the Medicare program in 1965, is based on the outmoded 
     assumption that all mental illness is chronic and requires 
     unlimited therapeutic services. Advances in treatment have 
     made this assumption highly inaccurate. Your bill would 
     establish copayment parity between mental health benefits and 
     other medical benefits under the Medicare program.
       Your legislation stands to dramatically improve the lives 
     of Medicare beneficiaries by providing them with the access 
     to mental health care that they deserve.
       AAGP commends you for your dedication to ensuring that all 
     Americans have adequate access to effective mental health 
     treatments, and we look forward to working with you to 
     achieve the enactment of this legislation.
           Sincerely,
                                             Joel E. Streim, M.D.,
     President.
                                  ____

                                    Maine Psychiatric Association,
                                   Manchester, ME, March 19, 2003.
     Hon.  Olympia Snowe,
     U.S. Senate, Washington, DC.
       Dear Senator Snowe, on behalf of the psychiatric physicians 
     of the Maine Psychiatric Society, I want to offer you my 
     sincere appreciation for your leadership in sponsoring the 
     Medicare Mental Health Copayment Equity Act of 2003, working 
     to end Medicare's historic discrimination against patients 
     with mental illness.
       Your legislation would end this discrimination by requiring 
     that discriminatory copayments required of Medicare patients 
     for mental illness treatment would eventually be reduced from 
     the current 50 percent level to the 20 percent level patients 
     pay for other medical treatment, such as treatment for 
     diabetes, heart disease, or the flu. This legislation 
     promotes parity for mental health benefits and improves 
     access to mental health care for all Medicare beneficiaries 
     in Maine and across the country.
       The Maine Psychiatric Association appreciates your ongoing 
     commitment to persons with mental illness, and your 
     sponsorship of this most important bill to end Medicare's 
     discriminatory coverage of mental illness treatment.
           Sincerely,

                                         Edward Pontius, M.D.,

                             Chair, Legislative Affairs Committee,
     Maine Psychiatric Association.
                                  ____



                                    Maine Medical Association,

                                                    April 9, 2003.
     Hon. Olympia Snowe,
     U.S. Senate, Washington, DC.
       Dear Senator Snowe: I am writing to you on behalf of the 
     Maine Medical Association and the Maine Psychiatric 
     Association, representing over 2500 Maine-licensed 
     physicians, to thank you sincerely for assuming the 
     leadership in sponsoring the Medicare Mental Health Co-
     payment Equity Act of 2003, that would end Medicare's 
     historic discrimination against patients with mental illness.
       As you know, mental health illness and treatment are very 
     often complicated by concurrent major physical illnesses, 
     like cancer, heart disease, and diabetes. Unfortunately, co-
     payment for treatment of mental illnesses are two and a half 
     times higher than that for physical illnesses. Your 
     legislation would end this discrimination by requiring that 
     Medicare patients pay only the same 20 percent co-payment for 
     mental illness treatment that they would pay when seeking 
     other medical treatment.
       The Maine Medical Association and the Maine Psychiatric 
     Association appreciate your ongoing commitment to persons 
     with mental illness and your sponsorship of this most 
     important bill to end Medicare's discriminatory coverage of 
     mental illness treatment.
           Sincerely,
                                             Krishna Bhatta, M.D.,
     President.
                                  ____



                             American Psychiatric Association,

                                     Arlington, VA, April 9, 2003.
     Hon. John Kerry,
     U.S. Senate, Washington, DC.
       Dear Senator Kerry: On behalf of the 38,000 physician 
     members of the American Psychiatric Association (APA), and 
     most particularly on behalf of the patients they treat, 
     please accept my thanks for your House sponsorship of the 
     Medicare Mental Health Copayment Equity Act of 2003.
       As you know, Medicare Part B requires by statute that 
     beneficiaries pay a copayment of 20 percent, except for the 
     discriminatory 50 percent copayment charged for outpatient 
     mental health treatment. It is time for Congress to end what 
     amounts to cost-sharing discrimination by diagnosis. The bill 
     you are introducing with Representative Richard Neal would 
     ultimately require Medicare beneficiaries to pay the same 20 
     percent copayment amount for outpatient mental health 
     treatment as they would otherwise pay for other Part B 
     services. Asking our Medicare beneficiaries to pay half the 
     cost of their mental health care out of pocket is simply 
     unjust, and is a significant barrier to necessary treatment.
       Thank you for your foresight and leadership in your lead 
     sponsorship of the Medicare Mental Health Copayment Equity 
     Act of 2003. Thanks are also due to the outstanding work by 
     Kelly Bovio, who ably represented you. The APA looks forward 
     to working with you to make your bill a reality this year.
           Sincerely,
                                          Paul S. Applebaum, M.D.,
                                                        President.
                                 ______
                                 
      By Mr. COLEMAN (for himself and Mr. Dayton):
  S. 854. A bill to authorize a comprehensive program of support for 
victims of torture, and for other purposes; to the Committee on Foreign 
Relations.
  Mr. COLEMAN. Mr. President, I ask unanimous consent that the bill I 
introduce today to authorize a comprehensive program of support for 
victims of torture be printed in the Record.
  There being on objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 854

       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 ``Torture Victims Relief 
     Reauthorization Act of 2003''.

     SEC. 2. AUTHORIZATION OF APPROPRIATIONS FOR FOREIGN TREATMENT 
                   CENTERS FOR VICTIMS OF TORTURE.

       (a) Authorization of Appropriations.--Section 4(b)(1) of 
     the Torture Victims Relief Act of 1998 (22 U.S.C. 2152 note) 
     is amended to read as follows:
       ``(1) Authorization of appropriations.--Of the amounts 
     authorized to be appropriated for fiscal years 2004, 2005, 
     and 2006 pursuant to chapter 1 of part I of the Foreign 
     Assistance Act of 1961 (22 U.S.C. 2151 et seq.) there are 
     authorized to be appropriated to the President to carry out 
     section 130 of such Act $11,000,000 for fiscal year 2004, 
     $12,000,000 for fiscal year 2005, and $13,000,000 for fiscal 
     year 2006.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect October 1, 2003.

     SEC. 3. AUTHORIZATION OF APPROPRIATIONS FOR THE UNITED STATES 
                   CONTRIBUTION TO THE UNITED NATIONS VOLUNTARY 
                   FUND FOR VICTIMS OF TORTURE.

       Of the amounts authorized to be appropriated for fiscal 
     years 2004, 2005, and 2006 pursuant to chapter 3 of part I of 
     the Foreign Assistance Act of 1961 (22 U.S.C. 2221 et seq.), 
     there are authorized to be appropriated to the President for 
     a voluntary contribution to the United Nations Voluntary Fund 
     for Victims of Torture $6,000,000 for fiscal year 2004, 
     $7,000,000 for fiscal year 2005, and $8,000,000 for fiscal 
     year 2006.

     SEC. 4. AUTHORIZATION OF APPROPRIATIONS FOR DOMESTIC 
                   TREATMENT CENTERS FOR VICTIMS OF TORTURE.

       (a) Authorization of Appropriations.--Section 5(b)(1) of 
     the Torture Victims Relief Act of 1998 (22 U.S.C. 2152 note) 
     is amended to read as follows:
       ``(1) Authorization of appropriations.--Of the amounts 
     authorized to be appropriated for the Department of Health 
     and Human Services for fiscal years 2004, 2005, and 2006, 
     there are authorized to be appropriated to carry out 
     subsection (a) $20,000,000 for fiscal year 2004, $25,000,000 
     for fiscal year 2005, and $30,000,000 for fiscal year 
     2006.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect October 1, 2003.

[[Page S5181]]

                                 ______
                                 
      By Ms. SNOWE (for herself, Mr. Bond, and Mr. Grassley):
  S. 855. A bill to amend the Internal Revenue Code of 1986 to modify 
the unrelated business income limitation on investment in certain debt-
financed properties; to the Committee on Finance.
  Ms. SNOWE. Mr. President, I rise today to introduce the Small 
Business Investment Company Capital Access Act of 2003 whose purpose is 
to increase the amount of venture capital available to small 
businesses. As the chair of the Committee on Small Business and 
Entrepreneurship, I am pleased that my good friend and former chairman 
of the Committee, Senator Bond, and the chairman of the Senate Finance 
Committee, Senator Grassley, have agreed to be the principal cosponsors 
of this important bill.
  During the past 2 years, there has been a significant contraction of 
the private equity market. During this same period, the Small Business 
Administration's Small Business Investment Company program has taken on 
a significant role in providing venture capital to small businesses 
seeking investments in the range of $500,000 to $3 million.
  Small Business Investment Companies are government-licensed, 
government-regulated, privately managed venture capital firms created 
to invest only in original issue debt or equity securities of U.S. 
small businesses that meet size standards set by law. In the current 
economic environment, the SBIC program represents an increasingly 
important source of capital for small enterprises.
  While debenture SBICs qualify for SBA-guaranteed borrowed capital, 
the Government guarantee forces a number of potential investors, namely 
pension funds and university endowment funds, to avoid investing in 
SBICs because they would be subject to tax liability for unrelated 
business taxable income. More often than not, tax-exempt investors opt 
to invest in venture capital funds that do not create UBTI. As a result 
an estimated 60 percent of the private capital potentially available to 
these SBICs is effectively off limits.
  The Small Business Investment Company Capital Access Act of 2003 
would correct this problem by excluding government-guaranteed capital 
of debenture SBICs from debt for purposes of the UBTI rules. This 
change would permit tax-exempt organizations to invest in SBICs without 
the burdens of UBTI recordkeeping or tax liability.
  In 1958, Congress created the SBIC program to assist small business 
owners in obtaining investment capital. More than 40 years later, small 
businesses continue to experience difficulty in obtaining investment 
capital from banks and traditional investment sources. Although 
investment capital is readily available to large businesses from 
traditional Wall Street investment firms, small businesses seeking 
investments in the range of $500,000 to $3 million have to look 
elsewhere. SBICs are frequently the only sources of investment capital 
for growing small businesses.
  Often we are reminded that the SBIC program has helped some of our 
Nation's best known companies. It has provided a financial boost at 
critical points in the early growth period for many companies that are 
familiar to all of us. For example, when Federal Express needed help 
from reluctant credit markets, it received a needed infusion of capital 
from two SBA-licensed SBICs at a critical juncture in its development 
stage. The SBIC program also helped other well-known companies, when 
they were not so well known, such as Intel, Outback Steakhouse, America 
Online, and Callaway Golf.
  What is not well known is the extraordinary help the SBIC program 
provides to main street America small businesses. These are companies 
we know from hometowns all over the United States. Main street 
companies provide both stability and growth in our local business 
communities.
  In 1991, the SBIC program was experiencing major losses, and the 
future of the program was in doubt. Consequently, in 1992 and 1996, the 
Committee on Small Business worked closely with the Small Business 
Administration to correct deficiencies in the law in order to ensure 
the future of the program.
  Today, the SBIC program is expanding rapidly in an effort to meet the 
growing demands of small business owners for debt and equity investment 
capital. And it is important to focus on the significant role that is 
played by the SBIC program in support of growing small businesses. When 
Fortune Small Business compiled its list of 100 fastest growing small 
companies in 2000, six of the top 12 businesses on the list received 
SBIC financing during their critical growth year.
  The Small Business Investment Company Capital Access Act of 2003 is 
important for one simple reason: once enacted it paves the way for more 
investment capital to be available for more small businesses that are 
seeking to grow and hire new employees. According to the National 
Association of Small Business Investment Companies, a conservative 
estimate of the effect of this bill would be to increase investments in 
debenture SBICs by $200 million per year from tax-exempt investors. 
Together with SBA-guaranteed leverage, that will mean as much as $500 
million per year in new capital assets for debenture SBICs to invest in 
U.S. small businesses.
  According to the SBA, one job is created for every $36,000 invested 
in a small company. At that rate, this bill could be responsible for 
the creation or support of as many as 16,600 jobs--within companies 
receiving investments directly as well as within those firms 
benefitting indirectly through increased sales of goods and services to 
the former companies. In short, this bill is a jobs creator.
  And the cost? The Joint Committee on Taxation estimated in the last 
Congress that this bill would result in tax revenue loss of only $1 
million per year for the next 10 years.
  Mr. President, the cost is low and the potential for economic gain is 
great. Passage of the bill will make the Government's existing SBIC 
program more effective in providing growth capital for America's small 
business entrepreneurs.
  And most importantly, it will provide sorely needed capital for the 
sector of our economy that provides a majority of the net new jobs in 
this country--small businesses. That is a real stimulus that would 
cause new investments to be made and the creation of critically needed 
new jobs. Our economy is primed for this kind of support, and I urge my 
colleagues to support this important bill.
  I ask unanimous consent that the text of the bill and a summary of 
its provisions be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

    ``Small Business Investment Company Capital Access Act of 2003''


                       description of provisions

       The bill amends section 514 of the Internal Revenue Code to 
     exclude government-guaranteed capital borrowed by Debenture 
     Small Business Investment Companies (SBICs) from debt for 
     purposes of the Unrelated Business Taxable Income (UBTI) 
     rules. This change would permit tax-exempt organizations to 
     invest in SBICs without the burdens of UBTI record keeping or 
     tax liability.
       Currently, while Debenture SBICs qualify for borrowed 
     capital guaranteed by the Small Business Administration, the 
     government guarantee forces a number of potential investors, 
     namely pension funds and university endowment funds, to avoid 
     investing in SBICs because they would be subject to tax 
     lability for UBTI. Frequently, tax-exempt investors generally 
     opt to invest in venture capital funds that do not create 
     UBTI. As a result, an estimated 60% of the private-capital 
     potentially available to these SBICs is effectively ``off 
     limits.''

                                 S. 855

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Small Business Investment 
     Company Capital Access Act of 2003''.

     SEC. 2. MODIFICATION OF UNRELATED BUSINESS INCOME LIMITATION 
                   ON INVESTMENT IN CERTAIN DEBT-FINANCED 
                   PROPERTIES.

       (a) In General.--Section 514(c)(6) of the Internal Revenue 
     Code of 1986 (relating to acquisition indebtedness) is 
     amended--
       (1) by striking ``include an obligation'' and inserting 
     ``include--
       ``(A) an obligation'',
       (2) by striking the period at the end and inserting ``, 
     or'', and
       (3) by adding at the end the following:
       ``(B) indebtedness incurred by a small business investment 
     company licensed under the Small Business Investment Act of 
     1958 which is evidenced by a debenture--
       ``(i) issued by such company under section 303(a) of such 
     Act, or

[[Page S5182]]

       ``(ii) held or guaranteed by the Small Business 
     Administration.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to acquisitions made on or after the date of the 
     enactment of this Act.
                                 ______
                                 
      By Mr. ROCKEFELLER (for himself, Mr. Harkin, Mr. Daschle, and Mr. 
        Johnson):
  S. 856. A bill to amend the Internal Revenue Code of 1986 to expand 
the incentives for the construction and renovation of public schools; 
to the Committee on Finance.
                                 ______
                                 
      By Mr. ROCKEFELLER (for himself, Mr. DeWine, Ms. Landrieu, and 
        Mr. Cochran):
  S. 857. A bill to amend the Internal Revenue Code of 1986 to provide 
a tax incentive to individuals teaching in elementary and secondary 
schools located in rural or high unemployment areas and to individuals 
who achieve certification from the National Board for Professional 
Teaching Standards, and for other purposes; to the Committee on 
Finance.
  Mr. ROCKEFELLER. Mr. President, today I am introducing two key 
education initiatives designed to promote quality education across our 
country and respond to the compelling needs in our schools. When I meet 
with teachers and parents, and even business leaders in West Virginia, 
everyone is concerned about the condition of our school buildings and 
the importance of qualified committed teachers working in those 
classrooms.
  To address these clear and compelling needs, I am introducing two 
education bills. The first initiative, America's Better Classroom Act 
of 2003, is a school construction initiative to respond to the 
overwhelming needs for school construction. The Department of Education 
reports that the average public school building is 42 years old. In 
1995, GAO estimated that we needed $112 billion for school construction 
and renovations. A more recent survey in 2001 in the Journal of 
Education Finance indicates that the need is increasing, and the unmet 
need for school infrastructure over the next decade is over $200 
billion. My State of West Virginia will need as much as $2 billion for 
school construction and renovations.
  America's Better Classroom Act provides the financial tools to help 
build and renovate our schools. It will continue the Qualified Zone 
Academy Bonding, QZAB, Program that has helped economically 
disadvantaged communities. This provision would provide $2.8 billion to 
continue and expand the successful QZAB Program. In recent years, this 
program has provided $4.2 million for support school construction and 
renovations in disadvantaged communities. Effective programs have 
earned continued support.
  But the truth is that many schools districts need help with school 
construction and renovations, which is why the America's Better 
Classroom Act creates a $22 billion Qualified School Bonding Program. 
Funding will be allocated to the states based on the Title 1 formula so 
it is targeted, but the states will have flexibility in allocating 
support among school districts.
  Last summer, I toured two schools in Berkeley County, WV--Martinsburg 
High School and South Middle School. The high school was built in 1928, 
but it had been renovated. The middle school was built in 1954, and 
needed serious work. The cafeteria had to serve as a part-time 
classroom, and they used portable trailers. These schools are in our 
eastern panhandle which is the region of the greatest population 
growth, so Berkeley County predicts that it will need to build or 
renovate nine schools over the next 10 years. Given the current state 
fiscal crisis, states and communities need the America's Better 
Classroom Act so that we can make needed investments. Also school 
construction can play a positive role in helping to stimulate our 
economy and create needed jobs. School construction is a more reliable 
economic stimulus, and an important investment in our children's 
education. I am proud to have Senators Tom Harkin, Tom Daschle, and Tim 
Johnson as cosponsors of this important initiative. Senator Harkin has 
been a true leader on education issues throughout this career, 
including school construction and renovations.
  The next initiative to improve education is a bipartisan bill, known 
as Incentives to Educate American Children Act, or I TEACH. I am proud 
to have Senators DeWine, Landrieu, and Cochran as cosponsors.
  Under No Child Left Behind, every classroom should have a qualified 
teacher. Studies suggest that an estimated 2 million new teachers will 
be needed in our classrooms over the next decade. It will be important 
to ensure that we recruit and retain good teachers in every classroom, 
including our most disadvantaged schools and our rural schools, which 
often have more trouble recruiting and keeping teachers.
  Unfortunately, without our help, America's disadvantaged and rural 
schools may not be able to attract the qualified teachers required by 
the No Child Left Behind Act. Isolated and impoverished, competing 
against higher paying and well-funded school districts for scarce 
classroom talent, they are already facing a desperate shortage of 
qualified teachers. As pressure to hire increases, that shortage could 
become a crisis, and children already at a disadvantage in relation to 
their more affluent and less isolated peers will be the ones who suffer 
most. Principals in West Virginia already are reporting shortages of 
trained teachers.
  To help bring dedicated and qualified teaching professionals into our 
schools, the I TEACH Act will provide teachers a $1000 refundable tax 
credit every year they practice their profession in the public schools 
where they are needed most. In addition to this incentive for 
disadvantage and rural schools, every public school teacher has the 
ability to earn a $1000 refundable tax credit if a teacher achieves the 
National Board for Professional Teaching Standards certification. Under 
the bill, every teacher willing to work in underserved schools will 
earn a tax credit. Every teacher who gets Board certification will earn 
a tax credit. Teachers who work in rural or poor schools and get 
certified will have both credits, worth $2000. Schools who desperately 
need help attracting teachers will get a boost. And children educated 
in poor and rural schools will benefit most.
  One-fourth of America's children attend public schools in rural 
areas, and of the 250 poorest counties in the United States, 244 are 
rural. West Virginia has rural schools scattered throughout 36 of its 
55 counties, and these schools face real challenges in recruiting and 
retaining teachers, as well as dealing with other issues related to 
their rural location. Attracting teachers to these schools is difficult 
in large part due to the vast gap between what rural districts are able 
to offer and the salaries paid by more affluent school districts--as 
wide as $20,000 a year, according to one study. Poor urban schools must 
overcome similar difficulties. It is often a challenge for these 
schools to attract and keep qualified teachers. Yet, according to the 
2001 No Child Left Behind Act, every school must have qualified 
teachers by the end of the 2005-2006 school year.
  In my State of West Virginia, as in over 30 other States, there is 
already a state fiscal incentive for teachers who earn National Board 
certification. My legislation builds upon the West Virginia program; 
together, they add up to a powerful tax incentive for teachers to 
remain in the classroom and to use their skills where they are most 
needed.
  Education should be among our top national priorities, essential for 
every family with a child and vital for our economic and national 
security. I supported the bold goals and higher standards of the 2001 
No Child Left Behind Act, but they won't be met unless we invest in 
quality schools and good teachers. I am committed to working closely 
with my Senate colleagues this fall to secure as much funding as 
possible for our children's education.
                                 ______
                                 
      By Mr. CORZINE (for himself, Ms. Snowe, Ms. Cantwell, Mr. Smith, 
        Mr. Dodd, Mr. Leahy, Mrs. Murray, Mr. Durbin, Mr. Lautenberg, 
        and Mr. Bingaman):
  S. 859. A bill to amend the Public Health Service Act with respect to 
facilitating the development of microbicides for preventing 
transmission of HIV and other diseases; to the Committee on Health, 
Education, Labor, and Pensions.
  Mr. CORZINE. Mr. President, I rise today to introduce legislation, 
the

[[Page S5183]]

Microbicides Development Act of 2003. I am very pleased to be 
introducing this bipartisan bill along with my colleagues, Senators 
Snowe, Cantwell, Gordon Smith, Dodd, Leahy, Murray, Durbin, and 
Lautenberg. I thank my colleagues for their support of this important 
legislation, which we believe is vital to the pursuit of combating the 
global HIV/AIDS crisis.
  As you know, recently released UN reports paint the most horrendous 
picture yet of the HIV epidemic, with AIDS continuing to kill more 
people worldwide than any other infectious disease, and sparing no 
corner of the world. According to the UN, China could have more than 10 
million HIV-infected people by 2010. Infection rates in Russia and 
Eastern Europe are rising faster than anywhere else. India may soon 
have the largest number of people living with HIV/AIDS in the world. 
And Sub-Saharan Africa remains devastated by an epidemic that has 
lowered life expectancy from 62 years on average to just 47. In hard-
hit countries like Botswana, where 45 percent of women attending 
prenatal clinics are HIV-positive, a 15-year old youth has an 80 
percent chance of dying of AIDS.
  The UN reports come on the heels of CIA assessments that the AIDS 
pandemic is entering a ``stage of substantial increases in size and 
scope.''
  Despite alarm bells ringing from the organizations as diverse in 
mandate as the UN and the CIA, little attention is paid to the reality 
that the face of the HIV epidemic both at home and abroad is 
increasingly female. As of the end of 2002, according to the Joint 
United Nations/World Health Organization Programme on HIV/AIDS, half of 
the world's HIV/AIDS-infected people were women. In Sub-Saharan Africa, 
58 percent of all adult HIV/AIDS cases were found in women, and in 
hard-hit nations such as Zambia, girls are five times more likely than 
boys to be HIV positive.
  Here in the United States, 30 percent of new HIV infections each year 
occur among women, most of whom, 64 percent, are African-American. The 
majority of U.S. women, 75 percent, acquire the disease through 
heterosexual transmission. My own State of New Jersey has the Nation's 
highest HIV/AIDS infection rate among women and the sixth highest 
infection rate among all adults. And here in our Nation's capital, one 
in three people with HIV now is a woman.
  Biologically, women are four times more vulnerable to HIV infection. 
Their vulnerability increases due to their lack of economic and social 
power in many societies, where women often cannot control sexual 
encounters or insist on protective measures such as abstinence or 
mutual monogamy. The typical woman who gets infected with HIV has only 
one partner--her husband. This trend devastates families and puts 
children at risk.
  This astounding reality bears restating: The single greatest risk 
factor for a woman in the developing world of contracting the HIV virus 
is being married.
  Women need HIV-prevention tools that they can control to safeguard 
their health and that of their families and communities. Unfortunately, 
there exists absolutely no HIV or STD prevention method that is within 
a woman's personal control. Condom use must be negotiated with a 
partner. We are all aware that for too many women, particularly low-
income women in the developing world and many in our own country who 
rely upon a male partner for economic support, there is no power of 
negotiation. We know these women are at risk--yet, we expect them to 
protect themselves without any tools.
  Today we have the opportunity to invest in groundbreaking research 
that can produce these tools, and ultimately, empower women. 
Microbicides are self-administered products that women could use to 
prevent transmission of STDs, including HIV/AIDS. I say ``could'' 
because due to insufficient research investments, no microbicides have 
been brought to market. This legislation would expand federal 
investments for microbicide research at the National Institutes for 
Health, NIH, the Centers for Disease Control and Prevention, CDC, and 
the United States Agency for International Development, USAID.
  In addition to encouraging new investments in microbicide research, 
the Microbicides Development Act will expedite the implementation of 
the NIH's five-year strategic plan for microbicide research, as well as 
expand coordination among Federal agencies already involved in this 
research, including NIH, CDC, and the United States Agency on 
International Development, USAID.
  Perhaps most importantly, the legislation calls for the establishment 
of a Microbicide Research and Development Branch within the National 
Institute of Allergy and Infectious Diseases.
  The National Institutes of Health, principally through the National 
Institute of Allergy and Infectious Diseases, NIAID, spends the 
majority of Federal dollars in this area. However, microbicide research 
at NIH is currently conducted with no single line of administrative 
accountability or specific funding coordination. In addition, other 
federal agencies such as CDC and USAID undertake microbicides research 
and development activities. Because there is no federal coordination, 
however, there is the risk that inefficiencies and duplication of 
effort could result. Through a variety of committees Congress has 
requested that NIH and its Office of AIDS Research provide Congress 
with a ``federal coordination plan'' for research and development in 
this area, but formal submission of this plan has been repeatedly 
delayed.
  A branch dedicated to microbicide research and development at the NIH 
is essential to providing the appropriate staff and funding for the 
coordination of these activities at the NIH and across agencies.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 859

       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 ``Microbicide Development Act 
     of 2003''.

     SEC. 2. FINDINGS.

       Congress makes the following findings:
       (1) During 2002, AIDS caused the deaths of an estimated 
     3,100,000 people, including 1,200,000 women and 610,000 
     children under 15 years of age. An estimated 14,000,000 
     children living today have lost one or both parents due to 
     AIDS.
       (2) Worldwide, heterosexual transmission is accounting for 
     an increasing share of new HIV infections, with adolescents, 
     women, and disadvantaged people at particular risk.
       (3) In the United States, for example, African American and 
     Latina women account for 64 percent and 17 percent of all 
     reported HIV cases, respectively, even though they represent 
     only 25 percent of the total United States female population.
       (4) Half of the 38,600,000 adults living today with HIV/
     AIDS are women.
       (5) Biological, cultural, economic, and social factors 
     combine to make women and girls particularly vulnerable to 
     HIV and other sexually transmitted diseases (referred to in 
     this section as ``STDs''). In the hardest hit areas of 
     Africa, almost one-quarter of 15 to 19 year-old girls are 
     already infected with HIV, compared to 4 percent of their 
     male peers.
       (6) In addition to HIV, other STDs can cause serious, 
     costly, even deadly conditions for women and their children, 
     including infertility, pregnancy complications, cervical 
     cancer, infant mortality, and higher risk of contracting HIV. 
     When women become infected with HIV, they risk passing along 
     the infection to their infants, either through pregnancy, 
     childbirth, or breastfeeding.
       (7) Regrettably, today's HIV prevention methods do not meet 
     the needs of the millions of women worldwide who, for 
     cultural, economic, and social reasons, cannot insist on 
     protective measures such as abstinence, condom use, or mutual 
     monogamy.
       (8) A large majority of women become infected with HIV with 
     only one partner--their husbands. Women need prevention 
     options that they can use consistently within ongoing, long-
     term relationships.
       (9) Microbicides are a promising new technology, 
     complementary to vaccines, that could put the power of 
     prevention into women's hands. Formulated as gels, creams, or 
     films, microbicides inactivate, block, or otherwise interfere 
     with the pathogens that cause HIV/AIDS and other STDs.
       (10) Even a moderately effective microbicide could have a 
     substantial impact on the HIV epidemic. The London School of 
     Hygiene and Tropical Medicine estimates that a 60 percent 
     efficacious microbicide introduced into the 73 poorest 
     countries could avert 2,500,000 HIV infections in men, women, 
     and children over 3 years.
       (11) Microbicides would also benefit men, because their 
     protective effect is likely to be bidirectional.
       (12) Numerous potential microbicides are poised for 
     successful development. Thirteen

[[Page S5184]]

     products are in clinical trials and approximately 50 
     compounds exist that could be investigated further. There is 
     a backlog in the research and development pipeline, however, 
     so that innovative and promising product concepts are 
     languishing, while infection rates are growing.
       (13) At present, there is insufficient economic incentive 
     for large pharmaceutical companies to become actively engaged 
     in microbicide research and development, thus, Federal 
     support is crucial. Three Federal agencies--the National 
     Institutes of Health, the Centers for Disease Control and 
     Prevention, and the United States Agency for International 
     Development--have played important roles in progress to date, 
     but strong, effective, well-coordinated, and visible public 
     sector leadership will be essential for the promise of 
     microbicides to be realized.
       (14) A microbicide could be available within 5 to 7 years 
     if sufficient public sector funding were made available to 
     accelerate research and support the necessary clinical 
     trials.
       (15) Microbicide research and development currently receive 
     only 2 percent of the AIDS research budget of the National 
     Institutes of Health, not nearly enough to keep pace with 
     public health need and scientific opportunity.
       (16) The United States Agency for International Development 
     sustains strong partnerships with public and private 
     organizations working on microbicide research, importantly 
     including clinical trials in developing countries where its 
     experience is extensive. The long experience of such Agency 
     in logistics management, service delivery, provider training, 
     and social marketing position it well to prepare for and 
     implement the introduction of microbicides once they are 
     available.
       (17) The Centers for Disease Control and Prevention also 
     engages in critical microbicide research and clinical 
     testing, and has a long history of conducting field trials in 
     developing countries.
       (18) For the microbicide pipeline to advance significantly 
     and the essential clinical trials to be fielded soon, the 
     current amount of Federal investment needs to increase to 
     $130,000,000 in fiscal year 2004 and to $160,000,000 in 
     fiscal year 2005.

   TITLE I--MICROBICIDE RESEARCH AT THE NATIONAL INSTITUTES OF HEALTH

     SEC. 101. OFFICE OF AIDS RESEARCH; PROGRAM REGARDING 
                   MICROBICIDES FOR PREVENTING TRANSMISSION OF HIV 
                   AND OTHER DISEASES.

       Subpart I of part D of title XXIII of the Public Health 
     Service Act (42 U.S.C. 300cc-40 et seq.) is amended by 
     inserting after section 2351 the following:

     ``SEC. 2351A. MICROBICIDES FOR PREVENTING TRANSMISSION OF HIV 
                   AND OTHER DISEASES.

       ``(a) Federal Strategic Plan.--
       ``(1) in general.--The Director of the Office of AIDS 
     Research shall expedite the development and implementation of 
     a Federal strategic plan for the conduct and support of 
     microbicide research and shall biannually review and as 
     appropriate revise the plan.
       ``(2) Coordination.--In developing, implementing, and 
     reviewing the plan, the Director of the Office of AIDS 
     Research shall coordinate with--
       ``(A) other Federal agencies, including the Director of the 
     Centers for Disease Control and Prevention and the 
     Administrator of the United States Agency for International 
     Development, involved in microbicide research;
       ``(B) the microbicide research community; and
       ``(C) health advocates.
       ``(b) Expansion and Coordination of Activities.--The 
     Director of the Office of AIDS Research, acting in 
     coordination with other relevant institutes and offices, 
     shall expand, intensify, and coordinate the activities of all 
     appropriate institutes and components of the National 
     Institutes of Health with respect to research on the 
     development of microbicides to prevent the transmission of 
     HIV and other sexually transmitted diseases.
       ``(c) Microbicide Development Branch.--In carrying out 
     subsection (b), the Director of the National Institute of 
     Allergy and Infectious Diseases shall establish within the 
     Vaccine and Prevention Research Program of the Division of 
     AIDS in the Institute, a branch charged with carrying out 
     microbicide research and development. In establishing such 
     branch, the Director shall ensure that there are a sufficient 
     number of employees dedicated to carry out the mission of the 
     branch.
       ``(d) Report to Congress.--
       ``(1) In general.--Not later than 1 year after the date on 
     which the initial Federal strategic plan is developed under 
     subsection (a), and biannually thereafter, the Director of 
     the Office of AIDS Research shall submit to the appropriate 
     committees of Congress a report that describes the strategies 
     being implemented by the Federal Government regarding 
     microbicide research and development. Each such report shall 
     include--
       ``(A) a description of activities with respect to 
     microbicides conducted and supported by the Federal 
     Government;
       ``(B) a summary and analysis of expenditures, during the 
     period for which the report is prepared, for activities with 
     respect to microbicide-specific research and development, 
     including the number of employees involved in these 
     activities within each agency;
       ``(C) a description and evaluation of the progress made, 
     during the period for which such report is prepared, towards 
     the development of effective, reliable, and acceptable 
     microbicides;
       ``(D) a review of the remaining scientific and programmatic 
     obstacles with respect to microbicides; and
       ``(E) an updated Federal Strategic Plan, including 
     professional judgment funding projections.
       ``(2) Appropriate congressional committees definition.--For 
     the purposes of this subsection, the term `appropriate 
     committees of Congress' means the Committee on Energy and 
     Commerce and the Committee on Appropriations of the House of 
     Representatives and the Committee on Health, Education, 
     Labor, and Pensions and the Committee on Appropriations of 
     the Senate.
       ``(e) HIV Definition.--For purposes of this section, the 
     term `HIV' means the human immunodeficiency virus. Such term 
     includes acquired immune deficiency syndrome (AIDS).
       ``(f) Authorization of Appropriations.--For the purposes of 
     carrying out this section, there are authorized to be 
     appropriated such sums as may be necessary for each of fiscal 
     years 2004 and 2005, and such sums as may be necessary in 
     subsequent fiscal years to sustain multiyear funding at a 
     productive level.''.

 TITLE II--MICROBICIDE RESEARCH AT THE CENTERS FOR DISEASE CONTROL AND 
                               PREVENTION

     SEC. 201. MICROBICIDES FOR PREVENTING TRANSMISSION OF HIV AND 
                   OTHER DISEASES.

       Part B of title III of the Public Health Service Act (42 
     U.S.C. 243 et seq.) is amended--
       (1) by transferring section 317R so as to appear after 
     section 317Q; and
       (2) by inserting after section 317R (as so transferred) the 
     following:

     ``SEC. 317S. MICROBICIDES FOR PREVENTING TRANSMISSION OF HIV 
                   AND OTHER DISEASES.

       ``(a) Development and Implementation of the Microbicide 
     Agenda Supported by the Centers for Disease Control and 
     Prevention.--The Director of the Centers for Disease Control 
     and Prevention shall fully implement the Center's 5-year 
     topical microbicide agenda to support microbicide research 
     and development. Such an agenda shall include--
       ``(1) conducting laboratory research in preparation for, 
     and support of, clinical microbicide trials;
       ``(2) conducting behavioral research in preparation for, 
     and support of, clinical microbicide trials;
       ``(3) developing and characterizing domestic populations 
     and international cohorts appropriate for Phase I, II, and 
     III clinical trials of candidate topical microbicides;
       ``(4) conducting Phase I and II clinical trials to assess 
     the safety and acceptability of candidate microbicides;
       ``(5) conducting Phase III clinical trials to assess the 
     efficacy of candidate microbicides;
       ``(6) providing technical assistance to, and consulting 
     with, a wide variety of domestic and international entities 
     involved in developing and evaluating topical microbicides, 
     including health agencies, extramural researchers, industry, 
     health advocates, and nonprofit organizations; and
       ``(7) developing and evaluating the diffusion and effects 
     of implementation strategies for use of effective topical 
     microbicides.
       ``(b) Staffing.--In carrying out the microbicide agenda, 
     the Centers for Disease Control and Prevention shall ensure 
     that there are sufficient numbers of dedicated employees for 
     carrying out the agenda under subsection (a).
       ``(c) Report to Congress.--
       ``(1) In general.--Not later than 1 year after the date of 
     enactment of this section, and biannually thereafter, the 
     Director of the Centers for Disease Control and Prevention 
     shall submit to the appropriate committees of Congress, a 
     report on the strategies being implemented by the Centers for 
     Disease Control and Prevention with respect to microbicide 
     research and development. Such report shall be submitted 
     alone or as part of the overall Federal strategic plan on 
     microbicides compiled annually by the National Institutes of 
     Health Office of AIDS Research as required under section 
     2351A. Such report shall include--
       ``(A) a description of activities with respect to 
     microbicides conducted and supported by the Centers for 
     Disease Control and Prevention;
       ``(B) a summary and analysis of expenditures, during the 
     period for which the report is prepared, for activities with 
     respect to microbicide-specific research and development, 
     including the number of employees involved in these 
     activities;
       ``(C) a description and evaluation of the progress made, 
     during the period for which such report is prepared, towards 
     the development of effective, reliable, and acceptable 
     microbicides; and
       ``(D) a review of the remaining scientific and programmatic 
     obstacles with respect to microbicides.
       ``(2) Appropriate congressional committees definition.--For 
     the purposes of this subsection, the term `appropriate 
     committees of Congress' means the Committee on Energy and 
     Commerce and the Committee on Appropriations of the House of 
     Representatives and the Committee on Health, Education, 
     Labor, and Pensions and the Committee on Appropriations of 
     the Senate.
       ``(d) Definition.--For the purposes of this section, the 
     term `HIV' means the human

[[Page S5185]]

     immunodeficiency virus. Such term includes acquired immune 
     deficiency syndrome (AIDS).
       ``(e) Authorization of Appropriations.--For the purposes of 
     carrying out this section, there are authorized to be 
     appropriated such sums as may be necessary for each of fiscal 
     years 2004 and 2005, and such sums as may be necessary in 
     subsequent fiscal years to sustain multiyear funding at a 
     productive level.''.

    TITLE III--MICROBICIDE RESEARCH AT THE UNITED STATES AGENCY FOR 
                       INTERNATIONAL DEVELOPMENT

     SEC. 301. MICROBICIDES FOR PREVENTING TRANSMISSION OF HIV AND 
                   OTHER DISEASES.

       Chapter 1 of part I of the Foreign Assistance Act of 1961 
     (22 U.S.C. 2151 et seq.) is amended by inserting after 
     section 104 the following:

     ``SEC. 104A. MICROBICIDES FOR PREVENTING TRANSMISSION OF HIV 
                   AND OTHER DISEASES.

       ``(a) Development and Implementation of the Microbicide 
     Agenda Supported by the Agency for International 
     Development.--The Office of HIV/AIDS of the Agency for 
     International Development, in conjunction with other offices 
     within the Agency for International Development, shall fully 
     implement the Agency's microbicide agenda to support the 
     development of microbicides, and facilitate wide-scale 
     introduction once microbicide products are available. Such an 
     agenda shall include--
       ``(1) support for the discovery, development, and 
     preclinical evaluation of topical microbicides;
       ``(2) support for the conduct of clinical studies of 
     candidate microbicides to assess safety, acceptability, and 
     effectiveness in reducing HIV and other sexually transmitted 
     diseases;
       ``(3) support for behavioral and social science research 
     relevant to microbicide development, testing, acceptability, 
     and use;
       ``(4) support for preintroductory and introductory studies 
     of safe and effective microbicides in developing countries; 
     and
       ``(5) facilitation of access to microbicides as they become 
     available to women at highest risk of HIV and other sexually 
     transmitted diseases as soon as possible.
       ``(b) Staffing.--The Office of HIV/AIDS of the Agency for 
     International Development shall ensure that there are 
     sufficient numbers of dedicated employees for purposes of 
     carrying out the agenda under subsection (a).
       ``(c) Report to Congress.--
       ``(1) In general.--Not later than 1 year after the date of 
     enactment of this section, and biannually thereafter, the 
     Administrator of the Agency for International Development 
     shall submit to the appropriate committees of Congress a 
     report on the strategies being implemented by the Agency for 
     International Development with respect to microbicide 
     research and development. Such report shall be submitted 
     alone or as part of the overall Federal strategic plan on 
     microbicides compiled annually by the National Institutes of 
     Health Office of AIDS Research as required under section 
     2351A. Such report shall include--
       ``(1) a description of activities with respect to 
     microbicides conducted and supported by the Agency for 
     International Development;
       ``(2) a summary and analysis of expenditures, during the 
     period for which the report is prepared, for activities with 
     respect to microbicide-specific research and development, 
     including the number of employees involved in these 
     activities;
       ``(3) a description and evaluation of the progress made, 
     during the period for which such report is prepared, towards 
     the development of effective, reliable, and acceptable 
     microbicides;
       ``(4) a review of the remaining scientific and programmatic 
     obstacles with respect to microbicides; and
       ``(5) a description of the steps being taken to increase 
     access and availability of approved microbicides to prevent 
     HIV and other sexually transmitted diseases.
       ``(2) Appropriate congressional committees definition.--For 
     the purposes of this subsection, the term `appropriate 
     committees of Congress' means the Committee on International 
     Relations and the Committee on Appropriations of the House of 
     Representatives and the Committee on Foreign Relations and 
     the Committee on Appropriations of the Senate.
       ``(d) Definition.--For the purposes of this section, the 
     term `HIV' means the human immunodeficiency virus. Such term 
     includes acquired immune deficiency syndrome (AIDS).
       ``(e) Authorization of Appropriations.--For the purposes of 
     carrying out this section, there are authorized to be 
     appropriated such sums as may be necessary for each of fiscal 
     years 2004 and 2005, and such sums as may be necessary in 
     subsequent fiscal years to sustain multiyear funding at a 
     productive level.''.
  Mr. DURBIN. Mr. President, I am honored to be a cosponsor of the 
Microbicides Development Act of 2003. The legislation calls for a 
redoubling of the effort at the National Institutes of Health and the 
Centers for Disease Control to develop microbicides, a class of 
products that can prevent transmission of HIV and other sexually 
transmitted diseases in women and their partners.
  As this Congress continues to fight AIDS, taking tiny steps in 
pursuit of a challenge racing away from us, I see the development of 
microbicides as another ``tiny'' step forward. I believe microbicides 
are an important addition to the arsenal to fighting AIDS, and indeed 
the Global AIDS bill I introduced, The Global CARE Act of 2003, S. 250, 
includes microbicides among the preventative measures the U.S. should 
support.
  I, and the other cosponsors of this important legislation, see a real 
need and urgency to expand the range of preventive interventions for 
HIV transmission. The ABC options for preventing HIV infection, which 
remain a key part of our response and contribute to the world's ability 
to slow the spread of HIV/AIDS, have not changed since the 1980s: A, 
abstinence when it comes to sexual activity; B, be faithful to one 
partner; C, if you are going to ignore the other two, use a condom. 
Despite the effectiveness of the ABCs in many areas, HIV/AIDS continues 
to spread. We urgently need more prevention options.
  Microbicides, defined as antimicrobial products that can be applied 
topically for the prevention of sexually transmitted diseases, STDs, 
including HIV, may offer one of the most promising preventive 
interventions. They could prove to be safe, effective, inexpensive, 
readily available, and widely acceptable. Microbicides will add to the 
range of options available. Most importantly, microbicides offer an 
additional method of prevention that can be controlled by women.
  Notwithstanding the knowledge of successful HIV prevention 
strategies--condom use, reduction in the number of sexual partners, 
diagnosis and treatment of sexually transmitted infections--HIV 
continues to spread at an alarming rate especially among women in 
developing countries.
  In sub-Saharan Africa, the area hardest hit by the pandemic, women 
and girls account for 58 percent of those living with AIDS. Worldwide, 
women represent 50 percent of those infected, an increase of 9 percent 
in five years. In some of the hardest hit countries in southern Saharan 
Africa, HIV prevalence among girls aged 15 to 19 is four to seven times 
higher than among boys their age. Attitudes, beliefs, and taboos 
surrounding sex, the status of women and children, and the source and 
causes of AIDS also complicate attempts to control transmission and 
provide appropriate prevention and treatment.
  In the United States, more than 30 percent of newly reported HIV 
cases diagnosed are occurring in women, according to the most recent 
data collected by the Centers of Disease Control. As in the rest of the 
world, the majority of these reported HIV infections among U.S. women 
result from heterosexual transmission, and the data suggest that 
younger women are disproportionately at risk for acquiring HIV.
  Microbicides will be particularly attractive to those who do not wish 
to draw attention to the fact that they are using a prevention method. 
Unlike male or female condoms, microbicides are a potential preventive 
option that women can easily control and that does not require the 
cooperation, consent or even knowledge of the partner. Microbicides are 
likely to be cheaper than condoms and, in the future, microbicides 
could be used to prevent mother-to-child transmission of HIV.
  Microbicides have been under development for more than a decade. Yet, 
it is unlikely that they will be available before 2007, which leads to 
the general perception that there has been insufficient progress in 
this area. Three versions are currently in the final stages of clinical 
trials to determine whether they are safe and effective. Many factors 
contribute to this slow progress. The National Institutes of Health, 
NIH, reports that microbicide research requires huge and complex 
efficacy and effectiveness studies that must be conducted in areas with 
high HIV incidence rates. Such rates occur predominantly in developing 
countries where the research infrastructure is underdeveloped. Given 
this dependency on poorer, developing nations, it is not surprising 
that no large pharmaceutical company is interested in funding 
microbicide development. A second obstacle lies in the ethical 
obligation to provide counseling and make condoms available to the 
study subjects, which adds to the complexity and

[[Page S5186]]

size of the trials. As a result, NIH explains, few Phase III efficacy 
trials have been completed. Of those completed, few have yielded 
promising results.
  Reflecting on the reality of the global epidemic, United Nations 
Secretary General Kofi Annan stated that the face of the HIV epidemic 
is that of a woman. ``If you want to save Africa,'' Annan says, ``you 
must save the African woman first. It is they who care for the young, 
the old, the sick and the dying. It is they who nurture social networks 
that help societies share burdens.''
  Lack of access to treatment and care means that for the majority of 
HIV-positive women throughout the world, HIV infection is a death 
sentence. In Haiti, for example, AIDS is now the leading cause of death 
for women of childbearing age.
  Microbicides will never become a viable option for prevention unless 
a serious amount of money is invested in their development. Senator 
Corzine's legislation will make microbicide research a priority, 
calling for the expansion and coordination of microbicide activities at 
the National Institutes of Health and other agencies working in this 
field. The bill requires the Centers for Disease Control to implement a 
5-year topical research plan and requires the U.S. Agency for 
International Development to develop and implement a microbicide 
agenda.
  I am proud to join Senator Corzine as a cosponsor of this legislation 
and hope that my colleagues will join us as we determine the next steps 
in our battle against AIDS, including the development of prevention 
efforts that may help women take control of their lives and their 
survival.
                                 ______
                                 
      By Mr. HOLLINGS (for himself, Mr. Gregg, Mr. Kerry, Ms. Snowe, 
        Mr. Inouye, Mr. Reed, Mr. Breaux, Mr. DeWine, Mr. Sarbanes, Mr. 
        Biden, Mr. Kennedy, Ms. Mikulski, Mr. Cochran, Mrs. Murray, Mr. 
        Corzine, Ms. Collins, Mr. Dodd, Mr. Levin, Mr. Nelson of 
        Florida, Mr. Wyden, Mr. Lieberman, Mrs. Feinstein, Mr. 
        Lautenberg, Ms. Cantwell, and Mr. Chafee):
  S. 861. A bill to authorize the acquisition of interests in 
undeveloped coastal areas in order to better ensure their protection 
from development; to the Committee on Commerce, Science, and 
Transportation.
  Mr. HOLLINGS. Mr. President, I rise today with my colleague Senator 
Gregg to introduce the Coastal and Estuarine Land Protection Act of 
2003. Senator Gregg and I introduced this bill last session, and it was 
reported favorably by the Commerce Committee, but time did not permit 
action to be completed on the bill before the end of the Congress. My 
colleagues and I will work hard to pass this important piece of 
legislation during the 108th Congress.
  I would like to thank our cosponsors, 24 in all, Senators Kerry, 
Snowe, Inouye, Jack Reed, Breaux, DeWine, Sarbanes, Biden, Kennedy, 
Mikulski, Cochran, Murray, Corzine, Collins, Dodd, Levin, Bill Nelson, 
Wyden, Lieberman, Feinstein, Lautenberg, Cantwell, and Chafee for their 
strong support of this bill, which marks another important chapter of 
our thirty year effort to put coastal and ocean issues at the forefront 
of environmental policy.
  I am also proud to say that the bill is strongly supported by The 
Trust for Public Land, Coastal States Organization, The Nature 
Conservancy, Land Trust Alliance, International Association of Fish and 
Wildlife Agencies, American Sportfishing Association, and the South 
Carolina Wildlife Federation. I understand that the U.S. Commission on 
Ocean Policy will also endorse this approach.
  When I was Governor of South Carolina over 30 years ago, I 
experienced first hand the need for Federal direction and assistance to 
the States to enable them to effectively and sustainably manage coastal 
development. My experiences during a series of coastal hearings and 
continued research in the Senate led me to write the Coastal Zone 
Management Act of 1972, which provided clear policy objectives for 
states to establish coordinated coastal zone management programs to 
help balance coastal development with protection.
  But we appear to need more tools to help States continue the job we 
started in 1972. In the year 2003, as our population grows, more and 
more people are moving to the coast to enjoy its beauty and 
recreational opportunities. In fact, by 2010, an estimated 60 percent 
of Americans will live along our coasts, which represent less than 17 
percent of our land area. More than 3,000 people move to coastal areas 
everyday, and 14 of the Nation's 20 largest cities are on the coast, 
and are five times more densely populated than the interior of the 
country. As these good folks move to take advantage of coastal living, 
we have to be careful that we don't destroy the natural resources and 
quality of life that draw them to our shores. Big changes are coming to 
all of our coastal counties, and we must make some careful and smart 
decisions if we want to keep the very resources we depend on.
  In particular, estuaries and wetlands have many unique attributes 
that make them important to both our natural resources and our economy. 
Estuaries, and the watersheds that flow into them, support fisheries 
and wildlife and contribute immensely to the coastal area economies. 
But these ecologically and economically important watersheds are also 
under the most threat from land development and conversion away from 
their natural state. Coastal urbanization trends are particularly 
strong in the southeastern areas. In my State alone, the Forest Service 
has estimated natural forests of the coastal plain will decrease by 1.9 
million acres in the next 40 years--a 35 percent loss of South 
Carolina's forests. These findings and future trends tell me that for 
the good of our coastal communities we need some fast, targeted action 
to protect ecologically important coastal areas most threatened with 
development or conversion.
  Now more than ever, the pressures of urbanization and pollution along 
our nation's coasts threaten to impair watersheds, impact wildlife 
habitat and cause irreparable damage to the fragile coastal ecology. 
The Environmental Protection Agency has reported that some areas of the 
country are seeing some improvement from the heavily polluted status of 
the past, but predicts that the more pristine areas like the Southeast, 
which has some of the best water quality in the Nation, will experience 
degradation of water quality due primarily to runoff of pollutants from 
rapid development in our coastal watersheds. This is very bad news for 
the shrimpers, oystermen, and recreational users who depend on these 
waters for their livelihood and quality of life.
  We see strong signals of what continuing down this path will bring 
us: beach and shellfish closings, fish kills, and human health impacts. 
The National Research Council reports that over the next 20 years over 
70 percent of our estuaries will experience more low oxygen--or 
``eutrophic''--conditions, such as the Gulf ``Dead Zone.'' If this 
trend continues, our coastal economies will suffer and perhaps never 
recover. I know in my state the economy would falter greatly from the 
lack of fishing, shrimping and tourism opportunities, and this is true 
up and down the Atlantic coast, which contains 37 percent of the 
Nation's estuarine areas.
  The good news is that there are ways we can make a difference, and we 
have some good models we can turn to. I am proud to say my home State 
of South Carolina is a leader in this area. The past decade I have led 
an extensive cooperative conservation effort, bringing together the 
State of South Carolina, private landowners, groups like the Nature 
Conservancy, Ducks Unlimited and federal partners like NOAA and the 
Fish and Wildlife Service to protect the ACE Basin. It is now the 
largest pristine estuarine reserve on the East Coast, a 350,000-acre 
area at the convergence of the Edisto, Ashepoo and Combahee Rivers, 
which comprises many ecologically important habitats that are home to 
many fish and bird species, including a number of endangered species. 
An outcome of these efforts is that the ACE Basin, already home to a 
National Wildlife Refuge, was declared a National Estuarine Research 
Reserve in 1992, and has been growing in size ever since. In building 
the ACE Basin, the partners worked creatively and in a coordinated 
manner, and we successfully obtained land acquisition funds through a 
variety of

[[Page S5187]]

federal sources, including the Forest Legacy Program.
  What became clear, however, is that there is no Federal program 
explicitly setting aside funding for conservation of coastal lands, 
where the needs are clearly the greatest. That is exactly what the 
Coastal and Estuarine Land Protection Act of 2003 will do. It 
authorizes a competitive matching grant program in NOAA to enable 
states to permanently protect important coastal areas.
  Under this NOAA program, coastal states can compete for matching 
funds of up to 75 percent to acquire land or easements for the 
protection of endangered coastal areas that have considerable 
conservation, recreation, ecological, historical or aesthetic values 
threatened by development or conversion. The bill also provides funding 
for a regional watershed demonstration project that can be used as a 
model for future watershed-scale programs. The program is authorized at 
$60 million for fiscal year 2004 and beyond, with an additional $5 
million for the regional watershed demonstration project.
  By establishing a plan for the preservation of our coastal areas, the 
Coastal and Estuarine Land Protection Act will build on the foundation 
laid down by the CZMA, all in stride with the changing times, growing 
number of people, and limited resources available today. When it comes 
to the environment, rules and regulations sometimes can't do it all. 
Sometimes cooperative actions work better and we can turn to models 
that encourage joint conservation projects among folks who all want the 
same thing--sustainable coasts.
  Partnership programs among federal government, state agencies, local 
governments, private landowners and non-profits, like the ACE Basin 
Project, work and we need to encourage these partnerships in all our 
coastal areas if we are to prevent degradation of our coastal 
resources. The good news is that we can make a difference today by 
providing the funding for land conservation partnerships provided for 
by the Coastal and Estuarine Land Protection Act. I am proud to be a 
sponsor of this bill, which will not only improve the quality of the 
coastal areas and marine life it supports, but also sustain surrounding 
communities and their way of life.
  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. 861

       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 ``Coastal and Estuarine Land 
     Protection Act''.

     SEC. 2. FINDINGS.

       The Congress finds the following:
       (1) Coastal and estuarine areas provide important nursery 
     habitat for two-thirds of the nation's commercial fish and 
     shellfish, provide nesting and foraging habitat for coastal 
     birds, harbor significant natural plant communities, and 
     serve to facilitate coastal flood control and pollutant 
     filtration.
       (2) The Coastal Zone Management Act of 1972 (16 U.S.C. 1451 
     et seq.) recognizes the national importance of these areas 
     and their ecological vulnerability to anthropogenic 
     activities by establishing a comprehensive Federal-State 
     partnership for protecting natural reserves and managing 
     growth in these areas.
       (3) The National Estuarine Research Reserve system 
     established under that Act relies on the protection of 
     pristine designated areas for long-term protection and for 
     the conduct of education and research critical to the 
     protection and conservation of coastal and estuarine 
     resources.
       (4) Intense development pressures within the coastal zone 
     are driving the need to provide coastal managers with a wider 
     range of tools to protect and conserve important coastal and 
     estuarine areas.
       (5) Protection of undeveloped coastal lands through the 
     acquisition of interests in property from a willing seller 
     are a cost-effective means of providing these areas with 
     permanent protection from development.
       (6) Permanent protection of lands in the coastal zone is a 
     necessary component of any program to maintain and enhance 
     coastal and estuarine areas for the benefit of the Nation, 
     including protection of water quality, access to public 
     beachfront, conserving wildlife habitat, and sustaining sport 
     and commercial fisheries.
       (7) Federal-State-nongovernmental organization pilot land 
     acquisition projects have already substantially contributed 
     to the long-term health and viability of coastal and 
     estuarine systems.
       (8) Enhanced protection of estuarine and coastal areas can 
     be attained through watershed-based acquisition strategies 
     coordinated through Federal, State, regional, and local 
     efforts.

     SEC. 3. ESTABLISHMENT OF COASTAL AND ESTUARINE LAND 
                   PROTECTION PROGRAM.

       (a) In General.--The Secretary of Commerce shall establish 
     a Coastal and Estuarine Land Protection Program, in 
     cooperation with appropriate State, regional, and other units 
     of government for the purposes of protecting the 
     environmental integrity of important coastal and estuarine 
     areas, including wetlands and forests, that have significant 
     conservation, recreation, ecological, historical, or 
     aesthetic values, and that are threatened by conversion from 
     their natural, undeveloped, or recreational state to other 
     uses. The program shall be administered by the National Ocean 
     Service of the National Oceanic and Atmospheric 
     Administration through the Office of Ocean and Coastal 
     Resource Management.
       (b) Property Acquisition Grants.--The Secretary shall make 
     grants under the program to coastal States, except coastal 
     States that have lost less than 1 percent of their wetlands 
     to development or conversion to other land uses by the date 
     of enactment of this Act, with approved coastal zone 
     management plans or National Estuarine Research Reserve units 
     for the purpose of acquiring property or interests in 
     property described in subsection (a) that will further the 
     goals of--
       (1) a Coastal Zone Management Plan or Program approved 
     under the Coastal Zone Management Act of 1972 (16 U.S.C. 1451 
     et seq.); or
       (2) a National Estuarine Research Reserve management plan; 
     or
       (3) a regional or State watershed protection plan involving 
     coastal States with approved coastal zone management plans.
       (c) Grant Process.--The Secretary shall allocate funds to 
     coastal States or National Estuarine Research Reserves under 
     this section through a competitive grant process in 
     accordance with guidelines that meet the following 
     requirements:
       (1) The Secretary shall consult with the State's coastal 
     zone management program, any National Estuarine Research 
     Reserve in that State, and the lead agency designated by the 
     Governor for coordinating the establishment and 
     implementation of this Act (if different from the coastal 
     zone management program).
       (2) Each participating State shall identify priority 
     conservation needs within the State, the values to be 
     protected by inclusion of lands of the program, and the 
     threats to those values that should be avoided.
       (3) Each participating State shall evaluate how the 
     acquisition of property or easements might impact working 
     waterfront needs.
       (4) The applicant shall identify the values to be protected 
     by inclusion of the lands in the programs, management 
     activities that are planned and the manner in which they may 
     affect the values identified, and any other information from 
     the landowner relevant to administration and management of 
     the land.
       (5) Awards shall be based on demonstrated need for 
     protection and ability to successfully leverage funds among 
     participating entities, including Federal programs, regional 
     organizations, State and other governmental units, 
     landowners, corporations, or private organizations.
       (6) Applications must be determined to be consistent with 
     the State's or territory's approved coastal zone plan, 
     program and policies prior to submittal to the Secretary.
       (7) Priority shall be given to lands described in 
     subsection (a) that can be effectively managed and protected 
     and that have significant ecological or watershed protection 
     value.
       (8) In developing guidelines under this section, the 
     Secretary shall consult with other Federal agencies and non-
     governmental entities expert in land acquisition and 
     conservation procedures.
       (9) Eligible States or National Estuarine Research Reserves 
     may allocate grants to local governments or agencies eligible 
     for assistance under section 306A(e) of the Coastal Zone 
     Management Act of 1972 (16 U.S.C. 1455a) and may acquire 
     lands in cooperation with nongovernmental entities and 
     Federal agencies.
       (10) The Secretary shall develop performance measures that 
     will allow periodic evaluation of the program's effectiveness 
     in meeting the purposes of this section and such evaluation 
     shall be reported to Congress.
       (d) Matching Requirements.--
       (1) In general.--The Secretary may not make a grant under 
     the program unless the Federal funds are matched by non-
     Federal funds in accordance with this subsection.
       (2) Maximum federal share.--
       (A) 75 percent federal funds.--No more than 75 percent of 
     the funding for any grant under this section shall be derived 
     from Federal sources, unless such requirement is specifically 
     waived by the Secretary.
       (B) Waiver of requirement.--The Secretary may grant a 
     waiver of the limitation in subparagraph (A) for underserved 
     communities, communities that have an inability to draw on 
     other sources of funding because of the small population or 
     low income of the community, or for other reasons the 
     Secretary deems appropriate.
       (3) Other federal funds.--Where financial assistance 
     awarded under this section represents only a portion of the 
     total cost of a project, funding from other Federal sources

[[Page S5188]]

     may be applied to the cost of the project. Each portion shall 
     be subject to match requirements under the applicable 
     provision of law.
       (4) Source of matching cost share.--For purposes of 
     paragraph (2)(A), the non-Federal cost share for a project 
     may be determined by taking into account the following:
       (A) Land value may be used as non-Federal match if the 
     lands are identified in project plans and acquired within 
     three years prior to the submission of the project 
     application or after the submission of a project application 
     until the project grant is closed (not to exceed 3 years). 
     The appraised value of the land at the time of project 
     closing will be considered the non-Federal cost share.
       (B) Costs associated with land acquisition, land management 
     planning, remediation, restoration, and enhancement may be 
     used as non-Federal match if the activities are identified in 
     the plan and expenses are incurred within the period of 
     the grant award. These costs may include either case or 
     in-kind contributions.
       (e) Regional Watershed Demonstration Project.--The 
     Secretary may provide up to $5,000,000 for a regional 
     watershed protection demonstration project that will meet the 
     requirements of this section, and--
       (1) leverages land acquisition funding from other Federal 
     land conservation or acquisition programs such that other 
     Federal contributions, at a minimum, equal the amounts 
     provided by the Secretary;
       (2) involves partnerships from a broad spectrum of Federal, 
     State, and non-governmental entities;
       (3) provides for the creation of conservation corridors and 
     preservation of unique coastal habitat;
       (4) protects largely unfragmented habitat under imminent 
     threat of development or conversion;
       (5) provides water quality protection for areas set aside 
     for research under the National Estuarine Research Reserve 
     program; and
       (6) provides a model for future regional watershed 
     protection projects.
       (f) Reservation of Funds for National Estuarine Research 
     Reserve Sites.--No less than 15 percent of funds made 
     available under this section shall be available for 
     acquisitions benefiting National Estuarine Research Reserve 
     acquisitions.
       (g) Limit on Administrative Costs.--No more than 5 percent 
     of the funds made available to the Secretary under this 
     section shall be used by the Secretary for planning or 
     administration of the program. The Secretary shall provide a 
     report to Congress with an account of all expenditures under 
     this section for fiscal year 2004, fiscal year 2005, and 
     triennially thereafter.
       (h) Title and Management of Acquired Property.--
       (1) In general.--If any property is acquired in whole or in 
     part with funds made available through a grant under this 
     section, the grant recipient shall provide such assurances as 
     the Secretary may require that--
       (A) the title to the property will be held by the grant 
     recipient or other appropriate public agency designated by 
     the recipient in perpetuity;
       (B) the property will be managed in a manner that is 
     consistent with the purposes for which the land entered into 
     the program and shall not convert such property to other 
     uses; and
       (C) if the property or interest in land is sold, exchanged, 
     or divested, funds equal to the correct value will be 
     returned to the Secretary, for re-distribution in the grant 
     process.
       (2) Conservation easement.--In this subsection, the term 
     ``conservation easement'' includes an easement, recorded 
     deed, or interest deed where the grantee acquires all rights, 
     title, and interest in a property, that do not conflict with 
     the goals of this Act except those rights, title, and 
     interests that may run with the land that are expressly 
     reserved by a grantor and are agreed to at the time of 
     purchase.
       (d) Definitions.--In this section, the term ``coastal 
     State'' has the meaning given that term by section 304(4) of 
     the Coastal Zone Management Act of 1972 (16 U.S.C. 1453(4)), 
     and any other term used in this section that is defined in 
     section 304 of that Act has the meaning given that term in 
     that section.
       (j) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary--
       (1) $60,000,000 for each of fiscal years 2004 through 2007 
     to carry out this section (other than subsection (e)); and
       (2) $5,000,000 for fiscal year 2004 to carry out subsection 
     (e), such sum to remain available without fiscal year 
     limitation.

     SEC. 4. ASSISTANCE FROM OTHER AGENCIES.

       Section 310(a) of the Coastal Zone Management Act of 1972 
     (16 U.S.C. 1456c(a)) is amended by striking ``any qualified 
     person for the purposes of carrying out this subsection.'' 
     and inserting ``any other Federal agencies (including 
     interagency financing of Coastal America activities) and any 
     other qualified person for the purposes of carrying out this 
     section.''.

  Mr. GREGG. Mr. President, I rise today along with Senator Hollings to 
introduce the Coastal and Estuarine Land Protection Act. We are 
introducing this much needed coastal protection act along with Senators 
Kerry, Snowe, Inouye, Reed, Breaux, DeWine, Sarbanes, Biden, Kennedy, 
Mikulski, Cochran, Murray, Corzine, Collins, Dodd, Levin, Nelson, 
Wyden, Lieberman, Feinstein, Lautenberg, Cantwell, and Chafee. In 
addition, this legislation is supported by the Trust for Public Land, 
the Coastal States Organization, the Nature Conservancy, International 
Association of Fish and Wildlife Agencies, American Sportfishing 
Association, and the Land Trust Alliance.
  The Coastal and Estuarine Land Protection Act promotes coordinated 
land acquisition and protection efforts in coastal and estuarine areas 
by fostering partnerships between non-governmental organizations and 
Federal, State, and local governments. With Americans rapidly moving to 
the coast, pressures to develop critical coastal ecosystems are 
increasing. There are fewer and fewer undeveloped and pristine areas 
left in the Nation's coastal and estuarine watersheds. These areas 
provide important nursery habitat for two-thirds of the Nation's 
commercial fish and shellfish, provide nesting and foraging habitat for 
coastal birds, harbor significant natural plant communities, and serve 
to facilitate coastal flood control and pollutant filtration.
  The Coastal and Estuarine Land Protection Act pairs willing sellers 
through community-based initiatives with sources of Federal funds to 
enhance environmental protection. Lands can be acquired in full or 
through easements, and none of the lands purchased through this program 
would be held by the Federal Government. This bill puts land 
conservation initiatives in the hands of state and local communities. 
This new program, authorized through the National Oceanic and 
Atmospheric Administration at $60,000,000 per year, would provide 
Federal matching funds to States with approved coastal management 
programs or to National Estuarine Research Reserves through a 
competitive grant process. Federal matching funds may not exceed 75 
percent of the cost of a project under this program, and non-Federal 
sources may count in-kind support toward their portion of the cost 
share.
  This coastal land protection program provides much needed support for 
local coastal conservation initiatives throughout the country. In my 
role on the Commerce, Justice, State Appropriations Subcommittee, I 
have been able to secure significant funds for the Great Bay estuary in 
New Hampshire. This estuary is the jewel of the seacoast region, and is 
home to a wide variety of plants and animal species that are 
particularly threatened by encroaching development and environmental 
pollutants. By working with local communities to purchase lands or 
easements on these valuable parcels of land, New Hampshire has been 
able to successfully conserve the natural and scenic heritage of this 
vital estuary.
  Programs like the Coastal and Estuarine Land Protection Program will 
now enable other States to participate in these community-based 
conservation efforts in coastal areas. This program was modeled after 
the U.S. Department of Agriculture's successful Forest Legacy Program, 
which has conserved millions of acres of productive and ecologically 
significant forest land around the country.
  I welcome the opportunity to offer this important legislation, with 
my close friend, Senator Hollings. I am thankful for his strong 
leadership on this issue, and look forward to working with him to make 
the vision for this legislation a reality, and to successfully conserve 
our coastal lands for their ecological, historical, recreational, and 
aesthetic values.
                                 ______
                                 
      By Mr. ROCKEFELLER (for himself, Mr. DeWine, Ms. Landrieu, Ms. 
        Collins, Mr. Levin, and Mr. Johnson):
  S. 862. A bill to promote the adoption of children with special 
needs; to the Committee on Finance.
  Mr. ROCKEFELLER. Mr. President, I rise today to introduce the 
Adoption Equality Act of 2003. I am proud to have a bipartisan group of 
cosponsors including Senators DeWine, Landrieu, Collins, Levin and 
Johnson. Work on this legislation is based on the bipartisan work of 
the Senate coalition that supported the 1997 Adoption and Safe Families 
Act, an historic effort to ensure that a child's safety and health are 
paramount, and that every child should have a permanent home.

[[Page S5189]]

  The Adoption and Safe Families Act was the most sweeping and 
comprehensive piece of child welfare legislation passed in over a 
decade, and since its enactment, adoptions from our foster care system 
have nearly doubled. In my State of West Virginia, adoptions have 
nearly tripled. Those adopted children now have a permanent home. But 
there are still 131,000 in foster care nationwide who have the goal of 
adoption but are still waiting. In West Virginia, we have 520 children 
in foster care waiting for adoption, but only 343 children might 
qualify for support. I believe each child with special needs who is 
waiting for adoption deserves help but under current law only some do. 
They are the innocent ones who were victims of abuse and neglect. 
Clearly we must do more for those children.
  Throughout the process of developing the Adoption Act we heard about 
the challenging circumstances facing children described as having 
``special needs''. These include children who are the most difficult to 
place into permanent homes, often due to their age, disability or 
status as part of a group of siblings needing to be placed together.
  One of the most significant provisions of ASFA was the assurance of 
ongoing health care coverage for all children with special needs who 
move from foster care to adoption. Parents willing to adopt such 
children were promised health care coverage in 1997 which is essential.
  While all special needs children that are adopted maintain health 
care coverage, only half are eligible for adoption assistance payments. 
Current law provides for the payment of federal adoption subsidies to 
families who adopt only those special needs children whose biological 
family would have qualified for welfare benefits under the old 1996 
AFDC standards. Federal adoption subsidy payments provide essential 
income support to help families finance the daily basic costs of 
raising these special children, as well as support for special services 
like therapy, tutoring, or special equipment for disabled children. 
Federal adoption subsidies are a vital link in securing adoptive homes 
for special needs children who by definition would not be adopted 
without support.
  Under current law, a child's eligibility for these important benefits 
is dependent on the income of his or her biological parents even though 
these parents' legal rights to the child have been terminated, and 
these are the parents who either abused or neglected the child. This 
is, simply, wrong. The Adoption Equality Act will eliminate this 
anomaly in Federal law by making all special needs children eligible 
for Federal adoption subsidies.
  The Adoption Equality Act is the next logical step to streamline and 
promote adoptions from foster care. The bill is designed to ``level the 
playing field'' by ensuring that all children with special needs, and 
the loving families who adopt them, have the support they need to grow 
and develop.
  First, the bill removes the requirement that an income eligibility 
determination be made in regard to the child's biological parents, whom 
the child is leaving, thereby allowing Federal adoption subsidy to be 
paid to all families who adopt children who meet the definition of 
special needs.
  Second, the bill continues to give states flexibility to determine 
the definition of a child with special needs, but it is clear that 
adoption subsidies should only be provided if the child could not be 
adopted without such assistance.
  Third, the bill requires that States reinvest the monies they save as 
a result of this bill back into their state child abuse and neglect 
programs which should help promote prevention and family support.
  When we talk about how to help abused and neglected children in this 
country, many complex questions are raised about what constitutes best 
policy, and how Federal tax dollars should be spent. Yet, at the heart 
of all the questions are vulnerable children who desperately want a 
safe, permanent home. The lack of modest financial resources to support 
these adoptions is often the only barrier that stands between an abused 
child and a safe, loving and permanent home.
  Federal adoption subsidies are designed to encourage adoption of 
children with special needs--those children who have the hardest time 
finding permanent, adoptive families. It is an absurd policy to 
discriminate against thousands of children with special needs based 
upon the income of their biological, and often abusive, parents. It is 
time to create a Federal policy that levels the playing field and gives 
all children with special needs an equal and fair chance at being 
adopted.
  The Adoption Equality Act will treat every special needs child the 
same. It is designed to encourage adoption and support those admirable 
parents willing to help a child with special needs and a history of 
abuse or neglect. Such children may have physical disabilities, or 
other may have emotional challenges due to past abuse and neglect. Such 
children and families often need special counseling or support 
services, and that is why the adoption assistance payments are key. If 
we want to truly help our most vulnerable children find a permanent 
home, this is a wise investment.
                                 ______
                                 
      By Mr. EDWARDS (for himself, Mr. Miller, Mr. Bingaman, Ms. 
        Mikulski, and Mrs. Murray):
  S. 863. A bill to amend the Higher Education Act of 1965 to allow 
soldiers to serve their country without being disadvantaged financially 
by Federal student aid programs; to the Committee on Health, Education, 
Labor, and Pensions.
                                 ______
                                 
      By Mr. EDWARDS (for himself, Mr. Bingaman, Ms. Mikulski, and Mrs. 
        Murray):
  S. 864. A bill to amend the Child Care and Development Block Grant 
Act of 1990 to provide for grants to parents and guardians of certain 
military dependents, in order to assist the parent and guardians in 
paying for the cost of child care services provided to the dependents, 
and for other purposes; to the Committee on Health, Education, Labor, 
and Pensions.
  Mr. EDWARDS. Mr. President, I rise today to introduce two important 
pieces of legislation that offer a helping hand to the members and 
families of the National Guard, the Reserves, and the regular active-
duty military.
  The National Guard and Reserves used to be called ``forces of last 
resort,'' but they have become much more. Between 1945 and 1989, the 
Guard and Reserves were activated four times. Only four times in 45 
years. Between 1990 and the present, in less than 15 years, the Guard 
and Reserves were activated six times. They have become a central 
element of our national defense.
  We've come to rely on them to fight side-by-side with full-time 
active duty soldiers. Each time our Nation has needed them, the Guard 
and Reserves members have left their jobs, their homes, and their 
families to serve this nation with pride and distinction. They view 
activation as an opportunity for service, but the truth is that 
activation does cause challenges at home. We should do right by them.
  Over the past few weeks, this body has considered a number of 
important measures for the Guard, the Reserves, and our entire 
military. I was pleased to support Senator Landrieu's amendment to 
raise combat and family separation pay and to modernize equipment. I 
also supported Senator Lincoln's effort to make sure that all members 
of the National Guard and Reserves can participate in the same health 
program that's available to full-time soldiers and their families. It's 
hard to believe, but 20 percent of the men and women in the Guard and 
Reserves don't even have health insurance.
  Today, I am introducing two new pieces of legislation to address 
unique difficulties facing Guard and Reserve members and, in fact, 
members of the regular military as well. I've traveled around the bases 
in my State and, time and time again, soldiers and their families have 
told me they need help.
  My first proposal is for child care. A few weeks ago, I outlined my 
ideas for addressing the growing challenges facing working families. 
Parents are working longer hours, earning less, and spending less time 
with their kids. One idea I offered was expanding afterschool programs 
for kids of working parents.
  The child care crunch is enormously exacerbated for military 
families. When one parent is called away, the other must take on all 
the responsibilities around the home. And at the same time, many 
members of the Guard and

[[Page S5190]]

Reserves take a pay cut, making it more difficult to hire help.
  Families can get child care on a military base, which is great for 
some families. But members of the Guard in North Wilkesboro, for 
example, live 173 miles away from the nearest military installation. 
Those families are totally left out.
  My National Guard and Reserves Child Care Relief Act would give 
families financial help for child care in their hometown. We would help 
families with a mom or dad called away on active duty. This is a 
concrete, practical way to make a difference in people's lives.
  I also have a bill to provide some help paying for education for the 
men and women who serve our country in the military. Nearly a quarter 
of Guardsmen and Reservists are college students, and many more are 
graduates with student loans.
  While these patriots are fighting for their country overseas, we 
charge them interest on their student loans here at home. This happens 
even if they're serving on the frontlines in Iraq; even if they took a 
huge pay cut because they're in the Guard or Reserves; even if they 
have a very low income to begin with.
  For somebody with an average size loan of $17,000, this can add up to 
as much as $1,400 in interest a year. That's not right. No one should 
return to civilian life deeper in debt because they took time off to 
serve their country. We should waive the interest on these Federal 
loans.
  The Secretary of Education has the authority to waive interest under 
the HEROES Act of 2001, but he has chosen not to exercise it. My 
Fairness for America's Soldiers in Higher Education Act would require 
him to do just that.
  It would also permanently end an Education Department policy-
suspended during the current conflict--that makes many guardsmen and 
reservists who have to drop college courses when they are activated pay 
back student aid.
  As we consider trillion-dollar budgets, these are modest ideas, but 
they would make a real difference in the lives of Americans serving 
their country and signal our appreciation for their sacrifice.
  I urge my colleagues to support these important bills. I ask 
unanimous consent that the text of the bills be printed in the Record.
  There being no objection, the texts of the bills were ordered to be 
printed in the Record, as follows:

                                 S. 863

       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 ``Fairness for America's 
     Soldiers in Higher Education Act of 2003''.

     SEC. 2. REFUND POLICY.

       Section 484B(b)(2) of the Higher Education Act of 1965 (20 
     U.S.C. 1091b(b)(2)) is amended by adding at the end the 
     following:
       ``(D) Students on active duty during a war or national 
     emergency.--Notwithstanding subparagraphs (A), (B), and (C), 
     a student who withdraws from an institution of higher 
     education to serve on active duty during a war or national 
     emergency shall not be required to repay any grant assistance 
     that is otherwise required to be repayed under this 
     section.''.

     SEC. 3. DEFERMENT DURING ACTIVE DUTY.

       (a) FFEL and Direct Subsidized Loans.--Section 428(b)(1)(M) 
     of the Higher Education Act of 1965 (20 U.S.C. 1078(b)(1)(M)) 
     is amended--
       (1) in clause (ii), by striking ``or'' after the semicolon;
       (2) in clause (iii), by inserting ``or'' after the 
     semicolon; and
       (3) by inserting after clause (iii) the following:
       ``(iv) during which the borrower--

       ``(I) is a member of a regular component on active duty 
     during a war or during a national emergency declared by the 
     President or Congress, and receives compensation described in 
     section 112(a) of the Internal Revenue Code of 1986;
       ``(II) is on active duty under section 688, 12301(a), 
     12301(d), 12301(g), 12302, 12304, 12306, 12307, or 12406, or 
     chapter 15 of title 10, United States Code, or any other 
     provision of law, during a war or during a national emergency 
     declared by the President or Congress, regardless of the 
     location at which such active duty service is performed; or
       ``(III) in the case of a member of the National Guard, is 
     on full-time National Guard duty (as defined in section 
     101(d)(5) of title 10, United States Code) under a call to 
     active service authorized by the President or the Secretary 
     of Defense for a period of more than 30 consecutive days 
     under section 12402 of title 10, United States Code, or 
     section 502(f) of title 32, United States Code, for purposes 
     of responding to a national emergency declared by the 
     President and supported by Federal funds.''.

       (b) Consolidation Loans.--Section 428C(b)(4)(C)(ii) of the 
     Higher Education Act of 1965 (20 U.S.C. 1078-3(b)(4)(C)(ii)) 
     is amended--
       (1) in subclause (II), by striking ``or'' after the 
     semicolon;
       (2) in subclause (III), by striking ``or (II)'' and 
     inserting ``, (II) or (III)'';
       (3) by redesignating subclause (III) (as so amended) as 
     subclause (IV); and
       (4) by inserting after subclause (II) the following:
       ``(III) by the Secretary, in the case of a consolidation 
     loan of a student who is on an active duty deferment under 
     section 428(b)(1)(M)(iv); or''.
       (c) FFEL and Direct Unsubsidized Loans.--Section 428H(e) of 
     the Higher Education Act of 1965 (20 U.S.C. 1078-8(e)) is 
     amended by adding at the end the following:
       ``(C) Notwithstanding subparagraph (A), interest on loans 
     made under this section for which payments of principal are 
     deferred because the student is on an active duty deferment 
     under section 428(b)(1)(M)(iv) shall be paid by the 
     Secretary.''.
       (d) Perkins Loans.--Section 464(c)(2)(A) of the Higher 
     Education Act of 1965 (20 U.S.C. 1087dd(c)(2)(A)) is 
     amended--
       (1) in clause (iii), by striking ``or'' after the 
     semicolon;
       (2) in clause (iv), by inserting ``or'' after the 
     semicolon; and
       (3) by inserting after clause (iv) the following:
       ``(v) during which the borrower--

       ``(I) is a member of a regular component on active duty 
     during a war or during a national emergency declared by the 
     President or Congress, and receives compensation described in 
     section 112(a) of the Internal Revenue Code of 1986;
       ``(II) is on active duty under section 688, 12301(a), 
     12301(d), 12301(g), 12302, 12304, 12306, 12307, or 12406, or 
     chapter 15 of title 10, United States Code, or any other 
     provision of law, during a war or during a national emergency 
     declared by the President or Congress, regardless of the 
     location at which such active duty service is performed; or
       ``(III) in the case of a member of the National Guard, is 
     on full-time National Guard duty (as defined in section 
     101(d)(5) of title 10, United States Code) under a call to 
     active service authorized by the President or the Secretary 
     of Defense for a period of more than 30 consecutive days 
     under section 12402 of title 10, United States Code, or 
     section 502(f) of title 32, United States Code, for purposes 
     of responding to a national emergency declared by the 
     President and supported by Federal funds.''.

       (e) Effective Date.--The amendments made by this section 
     shall apply with respect to loans for which the first 
     disbursement is made on or after July 1, 1993, to an 
     individual who is a new borrower (within the meaning of 
     section 103 of the Higher Education Act of 1965 (20 U.S.C. 
     1003)) on or after such date.
                                  ____


                                 S. 864

       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 ``National Guard and Reserves 
     Child Care Relief Act''.

     SEC. 2. AUTHORIZATION OF APPROPRIATIONS.

       Section 658B of the Child Care and Development Block Grant 
     Act of 1990 (42 U.S.C. 9858) is amended--
       (1) by striking ``There is'' and inserting ``(a) In 
     General.--There is'';
       (2) in subsection (a), as so designated, by inserting 
     ``(except section 658T)'' after ``this subchapter''; and
       (3) by adding at the end the following:
       ``(b) Child Care for Certain Military Dependents.--There is 
     authorized to be appropriated to carry out section 658T 
     $10,000,000 for each of fiscal years 2004 through 2008.''.

     SEC. 3. CHILD CARE ASSISTANCE FOR MILITARY DEPENDENTS.

       The Child Care and Development Block Grant Act of 1990 (42 
     U.S.C. 9858 et seq.) is amended by adding at the end the 
     following:

     ``SEC. 658T. CHILD CARE ASSISTANCE FOR MILITARY DEPENDENTS.

       ``(a) In General.--The Secretary shall make grants to 
     eligible persons to assist the persons in paying for the cost 
     of child care services provided to dependents by eligible 
     child care providers.
       ``(b) Eligible Person and Dependent.--In this section:
       ``(1) Dependent.--The term `dependent' means an individual 
     who is--
       ``(A) a dependent, as defined in section 401 of title 37, 
     United States Code, except that such term does not include a 
     person described in paragraph (1) or (3) of subsection (a) of 
     such section; and
       ``(B) an individual described in subparagraphs (A) and (B) 
     of section 658P(4).
       ``(2) Eligible person.--The term `eligible person' means a 
     person who--
       ``(A) is a parent of one or more dependents of--
       ``(i) a member of a reserve component of the Armed Forces 
     serving on active duty for a period of more than 30 days in 
     support of a military operation pursuant to a call or order 
     to active duty under a provision of law referred to in 
     section 101(a)(13)(B) of title 10, United States Code; or
       ``(ii) any other member of the Armed Forces on active duty 
     who, as determined by

[[Page S5191]]

     the Secretary of the military department concerned, is 
     involved in a military operation;
       ``(B) has the primary responsibility for the care of one or 
     more such dependents; and
       ``(C) resides permanently at a location at least 50 miles 
     from--
       ``(i) the nearest military installation of the Department 
     of Defense where child care facilities and programs are 
     available for use by dependents of the member; and
       ``(ii) the nearest child development center or family child 
     care home that is funded in whole or in part with 
     appropriations available to the Department of Defense and is 
     available for use by dependents of the member.
       ``(3) Military operation.--The term `military operation' 
     means--
       ``(A) Operation Enduring Freedom;
       ``(B) Operation Iraqi Freedom;
       ``(C) Operation Noble Eagle; or
       ``(D) any successor operation of the United States Armed 
     Forces to an operation named in subparagraph (A), (B), or 
     (C).
       ``(c) Applications.--To be eligible to receive a grant 
     under this section, a person shall submit an application to 
     the Secretary, at such time, in such manner, and containing 
     such information as the Secretary may require, including a 
     description of the eligible child care provider who provides 
     the child care services assisted through the grant.
       ``(d) Rule.--The provisions of this subchapter, other than 
     section 658P and provisions referenced in section 658P, that 
     apply to assistance provided under this subchapter shall not 
     apply to assistance provided under this section.''.

     SEC. 4. CONFORMING AMENDMENTS.

       Section 658O of the Child Care and Development Block Grant 
     Act of 1990 (42 U.S.C. 9858m) is amended--
       (1) in subsection (a)--
       (A) in paragraph (1), by striking ``appropriated under this 
     subchapter'' and inserting ``appropriated under section 
     658B(a)''; and
       (B) in paragraph (2), by striking ``appropriated under 
     section 658B'' and inserting ``appropriated under section 
     658(a)''; and
       (2) in subsection (b)(1), by striking ``appropriated under 
     section 658B'' and inserting ``appropriated under section 
     658(a)''.
                                 ______
                                 
      By Mr. McCAIN (for himself, Mr. Dorgan, Mr. Brownback, and Mr. 
        Ensign):
  S. 865. A bill to amend the National Telecommunications and 
Information Administration Organization Act to facilitate the 
reallocation of spectrum from governmental to commercial users; to the 
Committee on Commerce, Science, and Transportation.
  Mr. McCAIN. Mr. President, today I am joined by Senators Dorgan, 
Brownback, and Ensign in introducing the Commercial Spectrum 
Enhancement Act. This bill is designed to streamline the process of 
relocating government users from spectrum reallocated for commercial 
use.
  The bill would establish a separate fund on the books of the United 
States Treasury called the Spectrum Relocation Fund. When spectrum 
occupied by a Federal agency is auctioned, the proceeds from the 
auction would be deposited into the fund. Federal agencies would be 
able to withdraw from the fund the estimated expenses associated with 
the relocation, with additional expenses being approved by the Office 
of Management and Budget, with notice provided to Congress and the 
General Accounting Office, GAO, as necessary.
  Currently, when spectrum assigned to a Government agency is 
auctioned, the law requires the agency to negotiate with the winning 
bidder to determine the cost of purchasing or returning new equipment 
necessary for the agency to transfer out of the spectrum band. These 
negotiations would be time-consuming and difficult for both parties. 
This bill would eliminate the need for lengthy negotiations between 
these parties. Thus it would accelerate the pace of introduction of new 
services using the spectrum.
  Spectrum is a critical resource of our armed services. It is 
important that any relocation process consider the needs of our 
military operations. I believe that this bill would allow our military 
to have confidence that its relocation costs will be fully and timely 
reimbursed, while providing commercial bidders with certainty regarding 
the full cost of the right to use the spectrum and the ability to use 
it in a timely fashion.
  Finally, the bill provides important oversight functions for Congress 
and the GAO to ensure that the fund is used in a manner that is fair 
and justified. In this way, American taxpayers are assured that their 
resources are used most efficiently.
  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:
  (The bill will be printed in a future edition of the Record.)
                                 ______
                                 
      By Mr. KOHL (for himself, Mr. Durbin, Mr. Schumer, Mr. Corzine, 
        Mrs. Feinstein, Mr. Reed, and Mr. Lautenberg):
  S. 866. A bill to amend chapter 44 of title 18, United States Code, 
to require the provision of a child safety lock in connection with the 
transfer of a handgun and provide safety standards for child safety 
locks; to the Committee on the Judiciary.
  Mr. KOHL. Mr. President, I rise today to introduce the Child Safety 
Lock Act of 2003, on behalf of myself, Senator Durbin, Senator Schumer, 
Senator Corzine, and Senator Feinstein. Our measure will save 
children's lives by reducing the senseless tragedies that result when 
children get their hands on improperly stored and unlocked handguns.
  Each year, children and teenagers are involved in more than 10,000 
accidental shootings in which close to 800 of them die. In addition, 
each year more than 1,000 young people killed themselves with a 
firearm--that is almost three per day. Safety locks can be effective in 
deterring or preventing many of these incidents.
  The sad truth is that we are inviting disaster every time an unlocked 
gun is stored in a place that is still accessible to children. Parents 
take a number of precautions to ensure their children's safety, from 
equipping them with bike helmets, to securing them in automobiles, to 
changing smoke detector batteries. Unfortunately, not all parents are 
as safety conscious about child proofing their firearms.
  Guns are kept in 43 percent of American households with children. In 
23 percent of these households, the guns are kept loaded. And 
alarmingly, in one out of every eight of those homes the loaded guns 
are left unlocked.
  This is wrong and unacceptable.
  Such startlingly cold statistics cannot even begin to describe in 
human terms the daily tragedies that could be prevented by the use of a 
safety lock.
  For example, in January a 21-month-old little boy was fatally shot 
when he tipped over a laundry hamper containing a loaded handgun. The 
handgun did not have a lock. The boy had no supervision. The result was 
tragic. A lock would have also saved the life of a four-year-old in 
Florida who shot himself playing with his grandfather's gun while the 
rest of his family was sleeping. Last September, a Detroit mother lost 
her son because he accidentally shot himself with a gun she had 
borrowed to protect herself. And, of course, no one will ever forget 
the Santana High School shooting two years ago, when a high school 
freshman opened fire on his classmates, killing two and injuring 13 
others with a handgun and multiple rounds of ammunition he found at 
home.
  Our legislation will help prevent tragedies like these. It is simple, 
effective, and straightforward. It requires that a child safety 
device--or trigger lock--be sold with every handgun. These devices vary 
in form, but the most common resemble a padlock that wraps around the 
gun trigger and immobilizes it. Trigger locks can be purchased in 
virtually any gun store for less than ten dollars. They are already 
used by tens of thousands of responsible gun owners to protect their 
firearms from unauthorized use and have surely saved many lives.
  Protection is only as good as the safety lock itself, therefore the 
Child Safety Lock Act of 2003 includes standards for the safety locks. 
Studies by the Consumer Product Safety Commission and recalls by safety 
lock manufacturers conclusively demonstrate the child safety locks are 
often not made well enough. A lock that is easily picked or one that 
breaks apart with little force defeats the purpose of this bill. We 
would not use a lock that is less than foolproof to guard our most 
valuable possessions. We should not use defective locks to protect what 
is most valuable to us--our children.
  Support for this simple, common sense proposal is widespread. In 
1999, a child safety lock provision passed the Senate by an 
overwhelming vote of 78 to 20 as an amendment during the juvenile 
justice debate. This proposal is as popular with the rest of the 
country

[[Page S5192]]

and the law enforcement community as it was with the 106th Senate. 
Polls show that between 75 and 80 percent of the American public, 
including gun owners, favor the mandatory sale of child safety locks 
with guns. When I surveyed almost 500 of Wisconsin's police chiefs and 
sheriffs last summer, 90 percent of respondents agreed that child 
safety locks should be sold with each gun.
  During his campaign, President Bush indicated that if Congress passes 
a bill making child safety locks mandatory he would sign it into law. 
Two years ago, Attorney General Ashcroft affirmed the Administration's 
support of the mandatory sale of child safety locks during his 
confirmation hearings before the Senate Judiciary Committee.
  Mr. President, this legislation is necessary to ensure that safety 
locks are provided with all handguns so that numerous lives are not 
lost in easily preventable accidents. We already protect children by 
requiring that seat belts be installed in all automobiles and that 
childproof safety caps be provided on medicine bottles. We should be no 
less vigilant when it comes to gun safety. I hope that the Senate will 
move to pass the Child Safety Lock Act of 2003 so that further 
unnecessary death and injury can be avoided.
  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. 866

       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 Safety Lock Act of 
     2003''.

     SEC. 2. REQUIREMENT OF CHILD HANDGUN SAFETY LOCKS.

       (a) Definitions.--Section 921(a) of title 18, United States 
     Code, is amended by adding at the end the following:
       ``(36) The term `locking device' means a device or locking 
     mechanism that is approved by a licensed firearms 
     manufacturer for use on the handgun with which the device or 
     locking mechanism is sold, delivered, or transferred and 
     that--
       ``(A) if installed on a firearm and secured by means of a 
     key or a mechanically, electronically, or electromechanically 
     operated combination lock, is designed to prevent the firearm 
     from being discharged without first deactivating or removing 
     the device by means of a key or mechanically, electronically, 
     or electromechanically operated combination lock;
       ``(B) if incorporated into the design of a firearm, is 
     designed to prevent discharge of the firearm by any person 
     who does not have access to the key or other device designed 
     to unlock the mechanism and thereby allow discharge of the 
     firearm; or
       ``(C) is a safe, gun safe, gun case, lock box, or other 
     device that is designed to store a firearm and that is 
     designed to be unlocked only by means of a key, a 
     combination, or other similar means.''.
       (b) Unlawful Acts.--
       (1) In general.--Section 922 of title 18, United States 
     Code, is amended by inserting at the end the following:
       ``(z) Locking Devices.--
       ``(1) In general.--Except as provided under paragraph (2), 
     it shall be unlawful for any licensed manufacturer, licensed 
     importer, or licensed dealer to sell, deliver, or transfer 
     any handgun to any person other than a licensed manufacturer, 
     licensed importer, or licensed dealer, unless the transferee 
     is provided with a locking device for that handgun.
       ``(2) Exceptions.--Paragraph (1) shall not apply to--
       ``(A) the manufacture for, transfer to, or possession by, 
     the United States or a State or a department or agency of the 
     United States, or a State or a department, agency, or 
     political subdivision of a State, of a firearm;
       ``(B) transfer to, or possession by, a law enforcement 
     officer employed by an entity referred to in subparagraph (A) 
     of a firearm for law enforcement purposes (whether on or off 
     duty); or
       ``(C) the transfer to, or possession by, a rail police 
     officer employed by a rail carrier and certified or 
     commissioned as a police officer under State law of a firearm 
     for purposes of law enforcement (whether on or off duty).''.
       (2) Effective date.--Section 922(z) of title 18, United 
     States Code, as added by this subsection, shall take effect 
     180 days after the date of enactment of this Act.
       (c) Liability; Evidence.--
       (1) Liability.--Nothing in this section shall be construed 
     to--
       (A) create a cause of action against any firearms dealer or 
     any other person for any civil liability; or
       (B) establish any standard of care.
       (2) Evidence.--Notwithstanding any other provision of law, 
     evidence regarding compliance or noncompliance with the 
     amendments made by this section shall not be admissible as 
     evidence in any proceeding of any court, agency, board, or 
     other entity, except with respect to an action to enforce 
     this section.
       (3) Rule of construction.--Nothing in this subsection shall 
     be construed to bar a governmental action to impose a penalty 
     under section 924(p) of title 18, United States Code, for a 
     failure to comply with section 922(z) of that title.
       (d) Civil Penalties.--Section 924 of title 18, United 
     States Code, is amended--
       (1) in subsection (a)(1), by striking ``or (f)'' and 
     inserting ``(f), or (p)''; and
       (2) by adding at the end the following:
       ``(p) Penalties Relating to Locking Devices.--
       ``(1) In general.--
       ``(A) Suspension or revocation of license; civil 
     penalties.--With respect to each violation of section 
     922(z)(1) by a licensee, the Attorney General may, after 
     notice and opportunity for hearing--
       ``(i) suspend or revoke any license issued to the licensee 
     under this chapter; or
       ``(ii) subject the licensee to a civil penalty in an amount 
     equal to not more than $10,000.
       ``(B) Review.--An action by the Attorney General under this 
     paragraph may be reviewed only as provided under section 
     923(f).
       ``(2) Administrative remedies.--The suspension or 
     revocation of a license or the imposition of a civil penalty 
     under paragraph (1) does not preclude any administrative 
     remedy that is otherwise available to the Attorney 
     General.''.

     SEC. 3. AMENDMENT TO CONSUMER PRODUCT SAFETY ACT.

       (a) In General.--The Consumer Product Safety Act (15 U.S.C. 
     2051 et seq.) is amended by adding at the end the following:

     ``SEC. 39. CHILD HANDGUN SAFETY LOCKS.

       ``(a) Establishment of Standard.--
       ``(1) Rulemaking required.--
       ``(A) Initiation of rulemaking.--Notwithstanding section 
     3(a)(1)(E), the Commission shall initiate a rulemaking 
     proceeding under section 553 of title 5, United States Code, 
     not later than 90 days after the date of enactment of the 
     Child Safety Lock Act of 2003 to establish a consumer product 
     safety standard for locking devices. The Commission may 
     extend the 90-day period for good cause.
       ``(B) Final rule.--Notwithstanding any other provision of 
     law, including chapter 5 of title 5, United States Code, the 
     Commission shall promulgate a final consumer product safety 
     standard under this paragraph not later than 12 months after 
     the date on which it initiated the rulemaking. The Commission 
     may extend that 12-month period for good cause.
       ``(C) Effective date.--The consumer product safety standard 
     promulgated under this paragraph shall take effect 6 months 
     after the date on which the final standard is promulgated.
       ``(D) Standard requirements.--The standard promulgated 
     under this paragraph shall require locking devices that--
       ``(i) are sufficiently difficult for children to de-
     activate or remove; and
       ``(ii) prevent the discharge of the handgun unless the 
     locking device has been de-activated or removed.
       ``(2) Inapplicable provisions.--
       ``(A) Provisions of this act.--Sections 7, 9, and 30(d) 
     shall not apply to the rulemaking proceeding described under 
     paragraph (1). Section 11 shall not apply to any consumer 
     product safety standard promulgated under paragraph (1).
       ``(B) Chapter 5 of title 5.--Except for section 553, 
     chapter 5 of title 5, United States Code, shall not apply to 
     this section.
       ``(C) Chapter 6 of title 5.--Chapter 6 of title 5, United 
     States Code, shall not apply to this section.
       ``(D) National environmental policy act.--The National 
     Environmental Policy Act of 1969 (42 U.S.C. 4321) shall not 
     apply to this section.
       ``(b) No Effect on State Law.--
       ``(1) In general.--Notwithstanding section 26, this section 
     shall not annul, alter, impair, affect, or exempt any person 
     subject to the provisions of this section from complying with 
     any provision of law of any State or any political 
     subdivision thereof, except to the extent that such 
     provisions of State law are inconsistent with any provision 
     of this section, and then only to the extent of such 
     inconsistency.
       ``(2) Clarification.--A provision of State law is not 
     inconsistent with this section if such provision affords 
     greater protection to children from handguns than is afforded 
     by this section.
       ``(c) Enforcement.--Notwithstanding subsection (a)(2)(A), 
     the consumer product safety standard promulgated by the 
     Commission pursuant to subsection (a) shall be enforced under 
     this Act as if it were a consumer product safety standard 
     described under section 7(a).
       ``(d) Definitions.--In this section, the following 
     definitions shall apply:
       ``(1) Child.--The term `child' means an individual who has 
     not attained the age of 13 years.
       ``(2) Locking device.--The term `locking device' has the 
     meaning given that term in clauses (i) and (iii) of section 
     921(a)(36) of title 18, United States Code.''.
       (b) Conforming Amendment.--Section 1 of the Consumer 
     Product Safety Act is amended by adding at the end of the 
     table of contents the following:

  ``Sec. 39. Child handgun safety locks.''.

       (c) Authorization of Appropriations.--
       (1) In general.--There are authorized to be appropriated to 
     the Consumer Product Safety Commission $2,000,000 to carry 
     out the

[[Page S5193]]

     provisions of section 39 of the Consumer Product Safety Act, 
     as added by this Act.
       (2) Availability.--Any amounts appropriated pursuant to 
     paragraph (1) shall remain available until expended.
                                 ______
                                 
      By Mr. BURNS:
  S. 867. A bill to designate the facility of the United States Postal 
Service located at 710 Wick Lane in Billings, Montana, as the ``Ronald 
Reagan Post Office Building''; to the Committee on Governmental 
Affairs.
  Mr. BURNS. Mr. President, I would like to introduce a bill which 
names one of our post offices in Billings, Montana, after one of this 
Nation's greatest leaders and true patriot: former President Ronald 
Reagan. His legacy extends far beyond his Presidency. I think it's only 
fitting that I introduce this legislation today, since President Reagan 
worked tirelessly to end the Cold War and liberate millions of people, 
and we see the same dedication today to free the people of Iraq. 
President Reagan spoke about the threat of Saddam Hussein, and asked, 
``will we be ready to respond?'' He went on to answer this question by 
saying, ``In the end, it all comes down to leadership. This is what 
this country is looking for now. It was leadership here at home that 
gave us strong American influence abroad and the collapse of imperial 
communism. Great nations have responsibilities to lead and we should 
always be cautious of those who would lower our profile because they 
might just wind up lowering our flag.'' He made these comments not two 
weeks ago, and not even two months ago. President Reagan, already 
sensitive to the threat posed by Saddam Hussein, asked this rhetorical 
question in 1994. This foresight was evident during President Reagan's 
tenure in the White House. President Reagan played a significant role 
in framing the modern political landscape, and I am proud to do what I 
can to commemorate his contribution to America and the world. I can 
clearly remember President Reagan's visit to Big Sky Country in 1982 
for the Centennial celebration for Billings and Yellowstone County. He 
arrived in the Billings Metra Arena, one of the largest venues in the 
State, riding in a stagecoach. He embraced the ideals that Montana 
stood for, and said he was trying to bring a little of it to 
Washington. I feel much the same way as President Reagan did when he 
said, ``What we're trying to do in Washington is reawaken the 
government to the very values that you here in Billings represent--
determination, responsibility, confidence, and common sense--the kind 
of common sense that says if it ain't broke, don't fix it. We are 
reintroducing the idea that progress is still an American word and that 
optimism is still an American trait. I believe if we cling to our hopes 
and dreams, I believe the future will flower just as it did for the 
founders of Billings, Montana.'' Now more than ever, we need to 
remember that ``progress'' and ``optimism'' are part of the American 
vocabulary. The wisdom of President Reagan helped guide us in the right 
direction, and I am pleased and honored to introduce this legislation 
today so that we may dedicate a piece of Montana to a great visionary 
and statesman.
                                 ______
                                 
      By Mr. SMITH:
  S. 868. A bill to amend the Coos, Lower Umpqua, and Siuslaw 
Restoration Act to provide for the cultural restoration and economic 
self-sufficiency of the Confederation Tribes of Coos, Lower Umpqua, and 
Siuslaw Indians of Oregon, and for other purposes; to the Committee on 
Indian Affairs.
  Mr. SMITH. Mr. President, I rise today to introduce legislation that 
will restore to the members of the Confederated Tribes of the Coos, 
Lower Umpqua and Siuslaw Indians a small portion of their ancestral 
homelands.
  The story of these Tribes' experience is well worth hearing. For many 
of my colleagues, parts of it will sound familiar, as it reflects the 
history of the early west. In 1850, gold was discovered at a place 
known as Eight Dollar Bar, near what we now call Cave Junction, OR. 
Within months thousands of miners with gold fever moved into the area. 
Indians struggled to protect their land while miners aggressively 
pursued their vision of the American dream.
  In 1855, Joel Palmer, an Indian Agent for the Oregon Territory was 
sent in by the Federal Government to negotiate treaties with Oregon 
tribes. Treaties with the tribes of the Rogue River, Umpqua/Cow Creek, 
and Calapooyas were established, but not the tribes of the central and 
southern Oregon coast. Much of this land is now in the Siuslaw National 
Forest.
  The Coos, Lower Umpqua and Siuslaw Indians were not a warring people. 
They were prepared to share their ancestral homelands, which 
approximated about 1.6 million acres in the coast mountain range, 
living on a small portion of the land and receiving compensation for 
the balance. In 1855 and in good faith the tribes signed the Empire 
Treaty with the Federal Government. But, somewhere between Empire, 
Oregon and the floor of the U.S. Senate the treaty was lost. No land 
was allotted for their reservation and no compensation given.
  In 1856 the Rogue River War began and the Coos, Lower Umpqua and 
Siuslaw Indians were marched north and held prisoner in what was called 
the Coast Reservation. They were held against their will until the mid-
1870s. It was during this dark period in their history that over half 
their population died.
  With their release, tribal members returned to their homelands, only 
to find they had neither land nor resources left. At this point, the 
three tribes formed a Confederation. In 1954, by Presidential order the 
Confederation's tribal status was terminated. These decades were 
difficult ones for members of this Tribe. Lack of education and 
economic opportunities in the area, and racism by some of their white 
neighbors took a heavy toll.
  In 1984, the Oregon congressional delegation sought and achieved 
federal recognition for the Confederated Tribes of the Coos, Lower 
Umpqua and Siuslaw Indians. At the same time, no reservation lands were 
granted to the tribe and no compensation offered. The Tribe received a 
donation of approximately 6 acres in Empire, Oregon. This is now the 
site of their tribal hall where services are provided to their members 
and tribal council meetings and tribal events are held. Small, 
additional tracts have been purchased over time.
  The Indian Self-Determination Act encourages tribes to develop plans 
to achieve the goals of cultural restoration, economic self-sufficiency 
and attain the standard of living enjoyed by other citizens of the 
United States. The Confederated Tribes have been working diligently 
since 1954 to attain those goals.
  An essential component in this effort is the Reservation Plan and 
Forest Land Restoration Proposal. It will provide a long-term source of 
revenue and lessen dependence on federal funding to operate Tribal 
government programs and to provide economic benefits to local 
communities. The Plan will revitalize Tribal culture by reconnecting 
Tribal people to their ancestral homelands and it will provide a net 
benefit to the environment by improving the health of ancestral 
watersheds.
  My staff and I began meeting with Tribal members soon after I was 
first elected to the Senate. Years of work with local citizens, 
communities and governments to gain understanding and support for the 
land restoration proposal have been successful. Hundreds of individual 
meetings, workshops and open forums have been held by the Tribes. 
Development of the Reservation Plan and Forest Land Restoration 
Proposal has led to a clear understanding of what activities can occur 
on these lands which is reflected in the legislation that I have 
introduced today.
  I am proud to introduce legislation today that will return 
approximately 63,000 acres of their ancestral homeland to the 
Confederated Tribes of the Coos, Lower Umpqua and Siuslaw Indians. 
These U.S. Forest Service lands encompass a portion of the Siuslaw 
National Forest. Under the legislation, management of the restored 
lands would be transferred to the Bureau of Indian Affairs with title 
held in trust by the Secretary of the Interior for the Confederated 
Tribes.
  These lands contain significant cultural sites: encampments, 
spiritual and burial sites. My proposal will allow these people to meet 
their cultural goals, and provide economic and environmental benefits 
to all of the citizens of the region. The legislation ensures continued 
public access to these lands for hunting and fishing, recreation and 
transportation. Applicable

[[Page S5194]]

State and Federal laws will be followed. Payments to county governments 
will not be impacted under this proposal. Timber harvested from this 
land will be processed domestically by local mills. Twenty percent of 
the revenues from the land will be reinvested in watershed management 
activities to restore habitat. These lands contain some significant 
environmental sites. They will be preserved. These lands are not 
suitable for nor will the laws allow gaming to occur on them.
  Revenue gained from activities on these lands will help meet the 
self-sufficiency goals of the Confederated Tribes. It will be used to 
assist seniors through elder housing programs, youth through 
scholarships, low income housing for those in need and provide health 
care benefits for all of the Tribal members.
  The Confederated Tribes of the Coos, Lower Umpqua and Siuslaw are the 
only federally recognized tribe in Oregon that has never received any 
land or compensation for the loss of their homeland from the United 
States Government. This legislation works to right that wrong, to 
restore a Tribe, to restore a forest, and to restore a very special 
relationship between the two.
                                 ______
                                 
      By Mr. HARKIN (for himself, Ms. Snowe, Mr. Inouye, Mr. Graham of 
        South Carolina, Mrs. Murray, Mr. Corzine, Mr. Biden, Mr. 
        Specter, Ms. Landrieu, Mr. Johnson, Mrs. Lincoln, Mr. Hollings, 
        Ms. Mikulski, Mrs. Clinton, and Ms. Collins):
  S. 869. A bill to amend title XVIII of the Social Security Act to 
provide for enhanced reimbursement under the medicare program for 
screening and diagnostic mammography services, and for other purposes; 
to the Committee on Finance.
  Mr. HARKIN. Mr. President. Today I am introducing legislation, the 
Assure Access to Mammography Act of 2003, on behalf of myself and my 
colleagues, Senators Snowe, Inouye, Graham of South Carolina, Murray, 
Corzine, Biden, Specter, Landrieu, Johnson, Lincoln, Hollings, 
Mikulski, Clinton, and Ms. Collins to ensure women have full and timely 
access to preventive breast cancer screenings. As you know, the earlier 
a woman is diagnosed with breast cancer, the earlier she can begin to 
receive treatment and the more likely she will survive.
  Unfortunately, due to inadequate reimbursement rates for mammograms, 
women increasingly are having problems getting the mammograms they 
need. Across the nation, there have been reports of women waiting up to 
six months for an appointment for this simple procedure. While 
mammograms often cost up to $150 to administer, Medicare's 
reimbursement rate is currently set at about $82, barely over half the 
actual cost of the procedure. This disparity increasingly makes access 
a real problem, forcing many private centers to shut down and creating 
a shortage of providers willing to provide services significantly below 
cost.
  The Assure Access to Mammography Act would reverse this growing and 
alarming trend by correcting the two primary causes of the problem. 
First, it would increase Medicare reimbursement to radiologists to a 
reasonable level to ensure health care providers are reimbursed fairly 
for mammography services. Second, the bill would increase the number of 
radiologists by increasing the Graduate Medical Education payments to 
provide for three additional radiologists in each teaching hospital. 
Finally, the Assure Access to Mammography Act would provide a MEDPAC 
study on the Medicare reimbursement structure for gender specific 
medical procedures so that Congress and CMS have the tools we need to 
make appropriate health policy decisions.
  This is an issue that hits close to home for me. Both of my sisters 
died of breast cancer, at a time when mammograms were not readily 
available. While imperfect, mammograms are the best-known way to 
diagnose breast cancer at an early stage in order to reduce mortality. 
As our society ages, one million additional women each year are needing 
regular mammograms. The Assure Access to Mammography Act will provide 
the resources our health care system needs to guarantee all women 
access to the mammograms they need to ensure that breast cancer is 
detected early enough to apply appropriate treatments effectively. I 
look forward to working with my colleagues to pass this needed 
bipartisan legislation.
                                 ______
                                 
      By Mr. BIDEN (for himself, Mr. Lugar, Mr. Kennedy, Mr. Hagel, Mr. 
        Domenici, and Mr. Feingold):
  S. 871. A bill to provide for global pathogen surveillance and 
response, to the Committee on Foreign Relations.
  Mr. President, I am pleased to re-introduce today the ``Global 
Pathogen Surveillance Act''.
  Last year, this bill passed the Senate by unanimous consent on August 
1st, but died when the House of Representatives failed to take timely 
action.
  The Global Pathogen Surveillance Act authorizes $150 million over the 
next two years to help developing nations improve global disease 
surveillance.
  That will go a long way to prevent and contain both biological 
weapons attacks, if, God forbid, it happens, and naturally occurring 
infectious disease outbreaks around the world.
  I'm happy to announce that Senators Lugar, Kennedy, Hagel, Domenici, 
and Feingold are joining me in co-sponsoring this bill.
  The mysterious global outbreak of severe acute respiratory syndrome, 
or SARS, is an unfortunate reminder of why this bill is so important. 
We've heard a lot about it. We don't know much about it yet.
  We know it's a contagious respiratory illness which apparently 
originated in the Guangdong province of China last November, has 
stricken more than 2600 individuals in 17 countries, taking the lives 
of at least 100 individuals.
  The World Health Organization is concerned. They've issued a rare 
global health alert and discouraged travel to certain nations as 
authorities struggle to determine the cause of this flu-like illness 
and what viral or infectious agent is involved.
  The WHO has not ruled out bioterrorism as a potential cause for the 
epidemic, although it is unlikely that a disease with only a 4 to 5 
percent mortality would be used.
  What's so scary about this outbreak is that doctors and nurses taking 
care of sick patients have fallen ill themselves; initial tests have 
not revealed evidence of infection with any previously known virus or 
bacterial agent; and patients are not being cured by standard 
treatments, although the vast majority do recover.
  How would better disease surveillance have helped in dealing with 
this kind of crisis?
  Experts suspect this epidemic first originated in the Guangdong 
province in southern China in November, but peaked in early February.
  A comprehensive surveillance network might have picked up the unique 
symptoms of this epidemic earlier . . . might have led to quicker 
diagnosis and better containment measures.
  We would have had a better chance to keep this epidemic contained 
within China, before the pathogen spread to neighboring nations, and 
now to Canada and the United States.
  Over the last eighteen months, Americans have become all too familiar 
with the threat of bioterrorism and the army of deadly agents capable 
of spreading death and disease--anthrax, Ebola, and smallpox are only 
the most sensational examples.
  We've had to strengthen our homeland defenses--not just against 
terrorists armed with bombs and explosives--but against shadowy figures 
carrying vials of deadly pathogens.
  But all in all, this country is making important advances on the 
domestic front in bioterrorism defense.
  Last year, the President signed into law the Bioterrorism Prevention 
Act of 2002, a comprehensive domestic initiative co-sponsored by 
Senators Kennedy and Frist.
  In January, the Centers for Disease Control announced an initiative 
to establish electronic surveillance systems in eight American cities 
as the cornerstone of an eventual national network.
  In Delaware, we're developing the very first, comprehensive, state-
wide electronic reporting system for infectious diseases.
  It'll serve as a prototype for other states by enabling much earlier 
detection of infectious disease outbreaks.
  But a domestic defense against biological weapons isn't sufficient 
alone.

[[Page S5195]]

  Biological weapons are a global threat with no respect for borders. A 
dangerous pathogen released on another continent can quickly spread to 
the United States in a matter of days, if not hours.
  A terrorist group could launch a biological weapons attacks in Mexico 
in the expectation that the epidemic would quickly spread to the United 
States.
  A rogue state might experiment with new disease strains in another 
country, intending later to release them here.
  And international trade, travel, and migration patterns offer 
unlimited opportunities for pathogens to spread across national borders 
and to move from one continent to another.
  We should make no mistake: in today's world, all infectious disease 
epidemics, wherever they occur and whether they are deliberately 
engineered or are naturally occurring, are a potential threat to all 
nations, including the United States. Such a threat need not begin in 
the United States to reach our shores.
  For that reason, our response cannot be limited to the United States 
alone.
  Global disease surveillance, a systematic approach to tracking 
disease outbreaks as they occur and evolve around the world, is 
essential to any real international response.
  Why is disease surveillance so important? A biological weapons attack 
succeeds partly through the element of surprise.
  As Dr. Alan P. Zelicoff of the Sandia National Laboratory testified 
before the Senate Foreign Relations Committee last spring, early 
warning of a biological weapons attack can prevent illness and death in 
all but a small fraction of those infected.
  A cluster of flu-like symptoms in a city or region may be dismissed 
by doctors as just the flu when in fact it may be anthrax, plague, or 
another biological weapon.
  But armed with the knowledge that a suspicious epidemic has emerged, 
doctors and nurses can examine their patients in a different light and, 
in many cases, effectively treat them.
  Disease surveillance is a fancy phrase for a comprehensive reporting 
system to quickly identify and communicate abnormal patterns of 
symptoms and illnesses that can quickly alert doctors across a region 
that a suspicious disease outbreak has occurred.
  Epidemiological specialists can then investigate and combat the 
outbreak.
  And if it's a new disease or strain, we can begin to develop 
treatments that much earlier.
  An effective disease surveillance system helps even in the absence of 
biological weapons attacks. Bubonic plague is bubonic plague, whether 
it is deliberately engineered or naturally occurring.
  Just as disease surveillance can help contain a biological weapons 
attack, it can also help contain a naturally occurring outbreak of 
infectious disease.
  According to the World Health Organization, thirty new infectious 
diseases have emerged over the past thirty years; between 1996 and 2001 
alone, more than 800 infectious disease outbreaks occurred around the 
world, on every continent.
  The SARS epidemic is only the most recent such outbreak. With better 
surveillance, we can do a better job of mitigating the consequences of 
these disease outbreaks.
  A good surveillance system requires trained epidemiological 
personnel, adequate laboratory tools for quick diagnosis, and working 
communications equipment to circulate information.
  Even here, in the most advanced Nation in the world, many States and 
cities rely on old-fashioned pencil and paper methods of tracking 
disease patterns.
  Thankfully, the comprehensive bioterrorism legislation enacted into 
law last year is beginning to correct that.
  Now, it is vitally important that we extend these initiatives into 
the international arena.
  In 2000, the World Health Organization established the first truly 
global disease surveillance system, the Global Alert and Response 
Network, to monitor and track infectious disease outbreaks everywhere.
  The WHO has done an impressive job so far with this initiative, 
working on a shoestring budget. But this global network is only as good 
as its components--individual nations.
  Unfortunately, developing nations--those nations most likely to 
experience rapid disease outbreaks--simply don't have the trained 
personnel, the laboratory equipment, or the public health 
infrastructure to do the job. . . to track evolving disease patterns or 
detect emerging pathogens.
  According to a January 2000 report by the National Intelligence 
Council, developing nations in Africa and Asia have established only 
rudimentary systems, if any at all, for disease surveillance, response, 
and prevention.
  The World Health Organization reports that more than 60 percent of 
laboratory equipment in developing countries is either outdated or non-
functioning.
  This lack of preparedness can lead to tragic results. In August 1994 
in Surat, a city in western India, a surge of complaints about flea 
infestation and a growing rat population was followed by a cluster of 
reports about patients exhibiting the symptoms of pneumonic plague.
  But authorities were unable to connect the dots and warn people until 
the plague had spread to seven states across India, ultimately killing 
56 people and costing the Indian economy $600 million.
  Had the Indian authorities possessed better surveillance tools, they 
may well have contained the epidemic, limited the loss of life, and 
avoided the panic that led to economically disastrous embargoes on 
trade and travel.
  Thanks to improved surveillance, an outbreak of pneumonic plague in 
India last year was detected more quickly and contained with only few 
deaths--with no costly panic.
  In short, developing nations are the weak links in any comprehensive 
global disease surveillance network.
  Unless we take action to shore up their capabilities to detect and 
contain disease outbreaks, we leave the entire world vulnerable to a 
deliberate biological weapons attack or a virulent natural epidemic.
  It's for these reasons that I'm reintroducing the Global Pathogen 
Surveillance Act. This bill will authorize $150 million in FY 2004 and 
FY 2005 to strengthen the disease surveillance capabilities of 
developing nations.
  First, the bill seeks to ensure in developing nations a greater 
number of personnel trained in basic epidemiological techniques.
  It offers enhances in-country training for medical and laboratory 
personnel and the opportunity for select personnel to come to the 
United States to receive training in our Centers for Disease Control 
laboratories and Master of Public Health programs in American 
universities.
  Second, it provides assistance to developing nations to acquire basic 
laboratory equipment, including items as basic as microscopes, so they 
can quickly diagnose pathogens.
  Third, it enables developing nations to obtain communications 
equipment to quickly transmit data on disease patterns and pathogen 
diagnoses, both inside a nation and to regional organizations and the 
WHO.
  Again, we're not talking about fancy high-tech equipment, but basics 
like fax machines and internet-equipped computers.
  Finally--to create a real incentive for nations to promptly report 
suspicious disease outbreaks and offer international health authorities 
prompt access--the bill gives preference to those countries that agree 
to let international health experts investigate any suspicious disease 
outbreaks.
  If passed, the Global Pathogen Surveillance Act will go a long way in 
ensuring that developing nations acquire the basic disease surveillance 
capabilities to link up effectively with the WHO's global network.
  It's an inexpensive and common sense solution to a problem of global 
proportions--the dual threat of biological weapons and naturally 
occurring infectious diseases.
  Make no mistake--this bill will contribute to our homeland security. 
The funding authorized is only a tiny fraction of what we will spend 
domestically on bioterrorism defenses, but this investment will pay 
enormous dividends in terms of our national security.
  In a report released only last month on global infectious disease, 
the National Academies' Institute of Medicine said, ``The United States 
should

[[Page S5196]]

take a leadership role in promoting the implementation of a 
comprehensive system of surveillance for global infectious diseases 
that builds on the current global capacity of infectious disease 
monitoring.'' By introducing this bill, I hope that our nation can 
begin to assume that mantle of leadership in this critical area.
  Let me close with an excerpt of testimony from a Foreign Relations 
Committee hearing held on September 5, 2001. Dr. D.A. Henderson, the 
man who spearheaded the successful international campaign to eradicate 
smallpox in the 1970's, most recently served as the principal advisor 
to Secretary of Health and Human Services Tommy Thompson in organizing 
the nation's defenses against bioterrorism.
  Dr. Henderson, who at the time of the hearing was a private citizen, 
was very clear on the value of global disease surveillance: ``In 
cooperation with the WHO and other countries, we need to strengthen 
greatly our intelligence gathering capability.
  A focus on international surveillance and on scientist-to-scientist 
communication will be necessary if we are to have an early warning 
about the possible development and production of biological weapons by 
rogue nations or groups.''
  Dr. Henderson is exactly right. We cannot leave the rest of the world 
to fend for itself in combating biological weapons and infectious 
diseases if we are to ensure America's security.
  I ask unanimous consent that the text of the ``Global Pathogen 
Surveillance Act'' be printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 871

       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 ``Global Pathogen Surveillance 
     Act of 2003''.

     SEC. 2. FINDINGS; PURPOSE.

       (a) Findings.--Congress makes the following findings:
       (1) Bioterrorism poses a grave national security threat to 
     the United States. The insidious nature of the threat, the 
     likely delayed recognition in the event of an attack, and the 
     underpreparedness of the domestic public health 
     infrastructure may produce catastrophic consequences 
     following a biological weapons attack upon the United States.
       (2) A contagious pathogen engineered as a biological weapon 
     and developed, tested, produced, or released in another 
     country can quickly spread to the United States. Given the 
     realities of international travel, trade, and migration 
     patterns, a dangerous pathogen released anywhere in the world 
     can spread to United States territory in a matter of days, 
     before any effective quarantine or isolation measures can be 
     implemented.
       (3) To effectively combat bioterrorism and ensure that the 
     United States is fully prepared to prevent, diagnose, and 
     contain a biological weapons attack, measures to strengthen 
     the domestic public health infrastructure and improve 
     domestic surveillance and monitoring, while absolutely 
     essential, are not sufficient.
       (4) The United States should enhance cooperation with the 
     World Health Organization, regional health organizations, and 
     individual countries, including data sharing with appropriate 
     United States departments and agencies, to help detect and 
     quickly contain infectious disease outbreaks or bioterrorism 
     agents before they can spread.
       (5) The World Health Organization (WHO) has done an 
     impressive job in monitoring infectious disease outbreaks 
     around the world, including the recent emergence of the 
     Severe Acute Respiratory Syndrome (SARS) epidemic, 
     particularly with the establishment in April 2000 of the 
     Global Outbreak Alert and Response network.
       (6) The capabilities of the World Health Organization are 
     inherently limited by the quality of the data and information 
     it receives from member countries, the narrow range of 
     diseases (plague, cholera, and yellow fever) upon which its 
     disease surveillance and monitoring is based, and the 
     consensus process it uses to add new diseases to the list. 
     Developing countries in particular often cannot devote the 
     necessary resources to build and maintain public health 
     infrastructures.
       (7) In particular, developing countries could benefit 
     from--
       (A) better trained public health professionals and 
     epidemiologists to recognize disease patterns;
       (B) appropriate laboratory equipment for diagnosis of 
     pathogens;
       (C) disease reporting is based on symptoms and signs (known 
     as ``syndrome surveillance''), enabling the earliest possible 
     opportunity to conduct an effective response;
       (D) a narrowing of the existing technology gap in syndrome 
     surveillance capabilities and real-time information 
     dissemination to public health officials; and
       (E) appropriate communications equipment and information 
     technology to efficiently transmit information and data 
     within national and regional health networks, including 
     inexpensive, Internet-based Geographic Information Systems 
     (GIS) and relevant telephone-based systems for early 
     recognition and diagnosis of diseases.
       (8) An effective international capability to monitor and 
     quickly diagnose infectious disease outbreaks will offer 
     dividends not only in the event of biological weapons 
     development, testing, production, and attack, but also in the 
     more likely cases of naturally occurring infectious disease 
     outbreaks that could threaten the United States. Furthermore, 
     a robust surveillance system will serve to deter terrorist 
     use of biological weapons, as early detection will help 
     mitigate the intended effects of such malevolent uses.
       (b) Purpose.--The purposes of this Act are as follows:
       (1) To enhance the capability and cooperation of the 
     international community, including the World Health 
     Organization and individual countries, through enhanced 
     pathogen surveillance and appropriate data sharing, to 
     detect, identify, and contain infectious disease outbreaks, 
     whether the cause of those outbreaks is intentional human 
     action or natural in origin.
       (2) To enhance the training of public health professionals 
     and epidemiologists from eligible developing countries in 
     advanced Internet-based and other electronic syndrome 
     surveillance systems, in addition to traditional epidemiology 
     methods, so that they may better detect, diagnose, and 
     contain infectious disease outbreaks, especially those due to 
     pathogens most likely to be used in a biological weapons 
     attack.
       (3) To provide assistance to developing countries to 
     purchase appropriate public health laboratory equipment 
     necessary for infectious disease surveillance and diagnosis.
       (4) To provide assistance to developing countries to 
     purchase appropriate communications equipment and information 
     technology, including, as appropriate, relevant computer 
     equipment, Internet connectivity mechanisms, and telephone-
     based applications to effectively gather, analyze, and 
     transmit public health information for infectious disease 
     surveillance and diagnosis.
       (5) To make available greater numbers of United States 
     Government public health professionals to international 
     health organizations, regional health networks, and United 
     States diplomatic missions where appropriate.
       (6) To establish ``lab-to-lab'' cooperative relationships 
     between United States public health laboratories and 
     established foreign counterparts.
       (7) To expand the training and outreach activities of 
     overseas United States laboratories, including Centers for 
     Disease Control and Prevention and Department of Defense 
     entities, to enhance the disease surveillance capabilities of 
     developing countries.
       (8) To provide appropriate technical assistance to existing 
     regional health networks and, where appropriate, seed money 
     for new regional networks.

     SEC. 3. DEFINITIONS.

       In this Act:
       (1) Eligible developing country.--The term ``eligible 
     developing country'' means any developing country that--
       (A) has agreed to the objective of fully complying with 
     requirements of the World Health Organization on reporting 
     public health information on outbreaks of infectious 
     diseases;
       (B) has not been determined by the Secretary, for purposes 
     of section 40 of the Arms Export Control Act (22 U.S.C. 
     2780), section 620A of the Foreign Assistance Act of 1961 (22 
     U.S.C. 2371), or section 6(j) of the Export Administration 
     Act of 1979 (50 U.S.C. App. 2405), to have repeatedly 
     provided support for acts of international terrorism, unless 
     the Secretary exercises a waiver certifying that it is in the 
     national interest of the United States to provide assistance 
     under the provisions of this Act; and
       (C) is a state party to the Biological Weapons Convention.
       (2) Eligible national.--The term ``eligible national'' 
     means any citizen or national of an eligible developing 
     country who is eligible to receive a visa under the 
     provisions of the Immigration and Nationality Act (8 U.S.C. 
     1101 et seq.).
       (3) International health organization.--The term 
     ``international health organization'' includes the World 
     Health Organization and the Pan American Health Organization.
       (4) Laboratory.--The term ``laboratory'' means a facility 
     for the biological, microbiological, serological, chemical, 
     immuno-hematological, hematological, biophysical, 
     cytological, pathological, or other examination of materials 
     derived from the human body for the purpose of providing 
     information for the diagnosis, prevention, or treatment of 
     any disease or impairment of, or the assessment of the health 
     of, human beings.
       (5) Secretary.--Unless otherwise provided, the term 
     ``Secretary'' means the Secretary of State.
       (6) Select agent.--The term ``select agent'' has the 
     meaning given such term for purposes of section 72.6 of title 
     42, Code of Federal Regulations.
       (7) Syndrome surveillance.--The term ``syndrome 
     surveillance'' means the recording of symptoms (patient 
     complaints) and signs (derived from physical examination) 
     combined with simple geographic locators to track the 
     emergence of a disease in a population.

[[Page S5197]]

     SEC. 4. PRIORITY FOR CERTAIN COUNTRIES.

       Priority in the provision of United States assistance for 
     eligible developing countries under all the provisions of 
     this Act shall be given to those countries that permit 
     personnel from the World Health Organization and the Centers 
     for Disease Control and Prevention to investigate outbreaks 
     of infectious diseases on their territories, provide early 
     notification of disease outbreaks, and provide pathogen 
     surveillance data to appropriate United States departments 
     and agencies in addition to international health 
     organizations.

     SEC. 5. RESTRICTION.

       Notwithstanding any other provision of this Act, no foreign 
     nationals participating in programs authorized under this Act 
     shall have access, during the course of such participation, 
     to select agents that may be used as, or in, a biological 
     weapon, except in a supervised and controlled setting.

     SEC. 6. FELLOWSHIP PROGRAM.

       (a) Establishment.--There is established a fellowship 
     program (in this section referred to as the ``program'') 
     under which the Secretary, in consultation with the Secretary 
     of Health and Human Services, and, subject to the 
     availability of appropriations, award fellowships to eligible 
     nationals to pursue public health education or training, as 
     follows:
       (1) Master of public health degree.--Graduate courses of 
     study leading to a master of public health degree with a 
     concentration in epidemiology from an institution of higher 
     education in the United States with a Center for Public 
     Health Preparedness, as determined by the Centers for Disease 
     Control and Prevention.
       (2) Advanced public health epidemiology training.--Advanced 
     public health training in epidemiology to be carried out at 
     the Centers for Disease Control and Prevention (or equivalent 
     State facility), or other Federal facility (excluding the 
     Department of Defense or United States National 
     Laboratories), for a period of not less than 6 months or more 
     than 12 months.
       (b) Specialization in Bioterrorism.--In addition to the 
     education or training specified in subsection (a), each 
     recipient of a fellowship under this section (in this section 
     referred to as a ``fellow'') may take courses of study at the 
     Centers for Disease Control and Prevention or at an 
     equivalent facility on diagnosis and containment of likely 
     bioterrorism agents.
       (c) Fellowship Agreement.--
       (1) In general.--In awarding a fellowship under the 
     program, the Secretary, in consultation with the Secretary of 
     Health and Human Services, shall require the recipient to 
     enter into an agreement under which, in exchange for such 
     assistance, the recipient--
       (A) will maintain satisfactory academic progress (as 
     determined in accordance with regulations issued by the 
     Secretary and confirmed in regularly scheduled updates to the 
     Secretary from the institution providing the education or 
     training on the progress of the recipient's education or 
     training);
       (B) will, upon completion of such education or training, 
     return to the recipient's country of nationality or last 
     habitual residence (so long as it is an eligible developing 
     country) and complete at least four years of employment in a 
     public health position in the government or a 
     nongovernmental, not-for-profit entity in that country or, 
     with the approval of the Secretary in an international health 
     organization; and
       (C) agrees that, if the recipient is unable to meet the 
     requirements described in subparagraph (A) or (B), the 
     recipient will reimburse the United States for the value of 
     the assistance provided to the recipient under the 
     fellowship, together with interest at a rate determined in 
     accordance with regulations issued by the Secretary but not 
     higher than the rate generally applied in connection with 
     other Federal loans.
       (2) Waivers.--The Secretary may waive the application of 
     paragraph (1)(B) and (1)(C) if the Secretary determines that 
     it is in the national interest of the United States to do so.
       (d) Implementation.--The Secretary, in consultation with 
     the Secretary of Health and Human Services, is authorized to 
     enter into an agreement with any eligible developing country 
     under which the country agrees--
       (1) to establish a procedure for the nomination of eligible 
     nationals for fellowships under this section;
       (2) to guarantee that a fellow will be offered a 
     professional public health position within the country upon 
     completion of his studies; and
       (3) to certify to the Secretary when a fellow has concluded 
     the minimum period of employment in a public health position 
     required by the fellowship agreement, with an explanation of 
     how the requirement was met.
       (e) Participation of United States Citizens.--On a case-by-
     case basis, the Secretary may provide for the participation 
     of United States citizens under the provisions of this 
     section if the Secretary determines that it is in the 
     national interest of the United States to do so. Upon 
     completion of such education or training, a United States 
     recipient shall complete at least five years of employment in 
     a public health position in an eligible developing country or 
     the World Health Organization.

     SEC. 7. IN-COUNTRY TRAINING IN LABORATORY TECHNIQUES AND 
                   SYNDROME SURVEILLANCE.

       (a) In General.--In conjunction with the Centers for 
     Disease Control and Prevention and the Department of Defense, 
     the Secretary shall, subject to the availability of 
     appropriations, support short training courses in-country 
     (not in the United States) to laboratory technicians and 
     other public health personnel from eligible developing 
     countries in laboratory techniques relating to the 
     identification, diagnosis, and tracking of pathogens 
     responsible for possible infectious disease outbreaks. 
     Training under this section may be conducted in overseas 
     facilities of the Centers for Disease Control and Prevention 
     or in Overseas Medical Research Units of the Department of 
     Defense, as appropriate. The Secretary shall coordinate such 
     training courses, where appropriate, with the existing 
     programs and activities of the World Health Organization.
       (b) Training in Syndrome Surveillance.--In conjunction with 
     the Centers for Disease Control and Prevention and the 
     Department of Defense, the Secretary shall, subject to the 
     availability of appropriations, establish and support short 
     training courses in-country (not in the United States) for 
     public health personnel from eligible developing countries in 
     techniques of syndrome surveillance reporting and rapid 
     analysis of syndrome information using Geographic Information 
     System (GIS) and other Internet-based tools. Training under 
     this subsection may be conducted via the Internet or in 
     appropriate facilities as determined by the Secretary. The 
     Secretary shall coordinate such training courses, where 
     appropriate, with the existing programs and activities of the 
     World Health Organization.

     SEC. 8. ASSISTANCE FOR THE PURCHASE AND MAINTENANCE OF PUBLIC 
                   HEALTH LABORATORY EQUIPMENT.

       (a) Authorization.--The President is authorized, on such 
     terms and conditions as the President may determine, to 
     furnish assistance to eligible developing countries to 
     purchase and maintain public health laboratory equipment 
     described in subsection (b).
       (b) Equipment Covered.--Equipment described in this 
     subsection is equipment that is--
       (1) appropriate, where possible, for use in the intended 
     geographic area;
       (2) necessary to collect, analyze, and identify 
     expeditiously a broad array of pathogens, including mutant 
     strains, which may cause disease outbreaks or may be used as 
     a biological weapon;
       (3) compatible with general standards set forth, as 
     appropriate, by the World Health Organization and the Centers 
     for Disease Control and Prevention, to ensure 
     interoperability with regional and international public 
     health networks; and
       (4) not defense articles or defense services as those terms 
     are defined under section 47 of the Arms Export Control Act.
       (c) Rule of Construction.--Nothing in this section shall be 
     construed to exempt the exporting of goods and technology 
     from compliance with applicable provisions of the Export 
     Administration Act of 1979 (or successor statutes).
       (d) Limitation.--Amounts appropriated to carry out this 
     section shall not be made available for the purchase from a 
     foreign country of equipment that, if made in the United 
     States, would be subject to the Arms Export Control Act or 
     likely be barred or subject to special conditions under the 
     Export Administration Act of 1979 (or successor statutes).
       (e) Host Country's Commitments.--The assistance provided 
     under this section shall be contingent upon the host 
     country's commitment to provide the resources, 
     infrastructure, and other assets required to house, maintain, 
     support, secure, and maximize use of this equipment and 
     appropriate technical personnel.

     SEC. 9. ASSISTANCE FOR IMPROVED COMMUNICATION OF PUBLIC 
                   HEALTH INFORMATION.

       (a) Assistance for Purchase of Communication Equipment and 
     Information Technology.--The President is authorized to 
     provide, on such terms and conditions as the President may 
     determine, assistance to eligible developing countries for 
     the purchase and maintenance of communications equipment and 
     information technology described in subsection (b), and 
     supporting equipment, necessary to effectively collect, 
     analyze, and transmit public health information.
       (b) Covered Equipment.--Equipment (and information 
     technology) described in this subsection is equipment that--
       (1) is suitable for use under the particular conditions of 
     the area of intended use;
       (2) meets appropriate World Health Organization standards 
     to ensure interoperability with like equipment of other 
     countries and international health organizations; and
       (3) is not defense articles or defense services as those 
     terms are defined under section 47 of the Arms Export Control 
     Act.
       (c) Rule of Construction.--Nothing in this section shall be 
     construed to exempt the exporting of goods and technology 
     from compliance with applicable provisions of the Export 
     Administration Act of 1979 (or successor statutes).
       (d) Limitation.--Amounts appropriated to carry out this 
     section shall not be made available for the purchase from a 
     foreign country of equipment that, if made in the United 
     States, would be subject to the Arms Export Control Act or 
     likely be barred or subject to special conditions under the 
     Export Administration Act of 1979 (or successor statutes).
       (e) Assistance for Standardization of Reporting.--The 
     President is authorized to provide, on such terms and 
     conditions as the

[[Page S5198]]

     President may determine, technical assistance and grant 
     assistance to international health organizations to 
     facilitate standardization in the reporting of public health 
     information between and among developing countries and 
     international health organizations.
       (f) Host Country's Commitments.--The assistance provided 
     under this section shall be contingent upon the host 
     country's commitment to provide the resources, 
     infrastructure, and other assets required to house, support, 
     maintain, secure, and maximize use of this equipment and 
     appropriate technical personnel.

     SEC. 10. ASSIGNMENT OF PUBLIC HEALTH PERSONNEL TO UNITED 
                   STATES MISSIONS AND INTERNATIONAL 
                   ORGANIZATIONS.

       (a) In General.--Upon the request of a United States chief 
     of diplomatic mission or an international health 
     organization, and with the concurrence of the Secretary of 
     State, the head of a Federal agency may assign to the 
     respective United States mission or organization any officer 
     or employee of the agency occupying a public health position 
     within the agency for the purpose of enhancing disease and 
     pathogen surveillance efforts in developing countries.
       (b) Reimbursement.--The costs incurred by a Federal agency 
     by reason of the detail of personnel under subsection (a) may 
     be reimbursed to that agency out of the applicable 
     appropriations account of the Department of State if the 
     Secretary determines that the relevant agency may otherwise 
     be unable to assign such personnel on a non-reimbursable 
     basis.

     SEC. 11. EXPANSION OF CERTAIN UNITED STATES GOVERNMENT 
                   LABORATORIES ABROAD.

       (a) In General.--Subject to the availability of 
     appropriations, the Centers for Disease Control and 
     Prevention and the Department of Defense shall each--
       (1) increase the number of personnel assigned to 
     laboratories of the Centers or the Department, as 
     appropriate, located in eligible developing countries that 
     conduct research and other activities with respect to 
     infectious diseases; and
       (2) expand the operations of those laboratories, especially 
     with respect to the implementation of on-site training of 
     foreign nationals and regional outreach efforts involving 
     neighboring countries.
       (b) Cooperation and Coordination between Laboratories.--
     Subsection (a) shall be carried out in such a manner as to 
     foster cooperation and avoid duplication between and among 
     laboratories.
       (c) Relation to Core Missions and Security.--The expansion 
     of the operations of overseas laboratories of the Centers or 
     the Department under this section shall not--
       (1) detract from the established core missions of the 
     laboratories; or
       (2) compromise the security of those laboratories, as well 
     as their research, equipment, expertise, and materials.

     SEC. 12. ASSISTANCE FOR REGIONAL HEALTH NETWORKS AND 
                   EXPANSION OF FOREIGN EPIDEMIOLOGY TRAINING 
                   PROGRAMS.

       (a) Authority.--The President is authorized, on such terms 
     and conditions as the President may determine, to provide 
     assistance for the purposes of--
       (1) enhancing the surveillance and reporting capabilities 
     for the World Health Organization and existing regional 
     health networks; and
       (2) developing new regional health networks.
       (b) Expansion of Foreign Epidemiology Training Programs.--
     The Secretary of Health and Human Services is authorized to 
     establish new country or regional Foreign Epidemiology 
     Training Programs in eligible developing countries.

     SEC. 13. AUTHORIZATION OF APPROPRIATIONS.

       (a) Authorization of Appropriations.--
       (1) In general.--Subject to subsection (c), there are 
     authorized to be appropriated $70,000,000 for the fiscal year 
     2004 and $80,000,000 for fiscal year 2005, to carry out this 
     Act.
       (2) Allocation of funds.--Of the amounts made available 
     under paragraph (1)--
       (A) $50,000,000 for the fiscal year 2004 and $50,000,000 
     for the fiscal year 2005 are authorized to be available to 
     carry out sections 6, 7, 8, and 9;
       (B) $2,000,000 for the fiscal year 2004 and $2,000,000 for 
     the fiscal year 2005 are authorized to be available to carry 
     out section 10;
       (C) $8,000,000 for the fiscal year 2004 and $18,000,000 for 
     the fiscal year 2005 are authorized to be available to carry 
     out section 11; and
       (D) $10,000,000 for the fiscal year 2004 and $10,000,000 
     for the fiscal year 2005 are authorized to be available to 
     carry out section 12.
       (b) Availability of Funds.--The amount appropriated 
     pursuant to subsection (a) is authorized to remain available 
     until expended.
       (c) Reporting Requirement.--
       (1) Report.--Not later than 90 days after the date of 
     enactment of this Act, the Secretary shall submit a report, 
     in conjunction with the Secretary of Health and Human 
     Services and the Secretary of Defense, containing--
       (A) a description of the implementation of programs under 
     this Act; and
       (B) an estimate of the level of funding required to carry 
     out those programs at a sufficient level.
       (2) Limitation on obligation of funds.--Not more than 10 
     percent of the amount appropriated pursuant to subsection (a) 
     may be obligated before the date on which a report is 
     submitted, or required to be submitted, whichever first 
     occurs, under paragraph (1).
                                 ______
                                 
      By Mr. BINGAMAN:
  S. 873. A bill to authorize funding for catalysis science and 
engineering research and development at the Department of Energy for 
fiscal years 2004 through 2009; and for other purposes; to the 
Committee on Energy and Natural Resources.
  Mr. BINGAMAN. Mr. President, I rise today to introduce a bill 
entitled the Department of Energy Catalysis Research and Development 
Act.
  Catalysis is at the heart of fuels production in the petroleum and 
chemical industries. Catalytic converters help reduce emissions of 
cars. Catalysis can help reduce carbon dioxide from industrial plants, 
which can contribute to global warming. The science of catalysis can 
help our pharmaceutical industry by one day mimicking nature's enzymes 
which are nature's catalysts. The industries I just mentioned 
contribute $500 billion to our gross national product; they all rely on 
catalysis to produce new compounds as efficiently as possible.
  The catalysis science program is one of the hidden gems at the 
Department of Energy's Office of Science. The Department supports over 
60 percent of the catalysis research in the Federal Government. I feel 
it is important that our energy bill highlights its basic research, and 
recommends a steady increase in funding levels for it.
  The bill seeks to help the Department meet what it called the ''grand 
challenge'' in catalytic chemistry. The ``grand challenge'' which this 
bill seeks to address is first, the ability to design, at the atom 
level, catalytic structures to control ``catalytic activity'', or the 
rate at which a chemical reaction proceeds. The second part of this 
``grand challenge'' is to control the ``selectivity'' of a catalytic 
reaction, or the ability of a catalytic compound to precisely seek out 
other chemicals through which to start a reaction. To achieve this 
`'grand challenge'', this bill directs the Department to design new 
catalytic compounds using the latest advancements in scientific 
computing. Today's computers are rapidly approaching a point where we 
can model a chemical reaction by simulating its atom level 
constituents. This bill directs the Department to utilize its state-of-
the-art diagnostic equipment at its national laboratories and 
universities to analyze catalytic reactions in real time, and at the 
atomic level. These diagnostics will be used to validate computational 
models being developed in the advanced scientific computing program. 
This bill directs the Department to use the emerging field of 
nanoscience to tailor new catalytic compounds atom by atom, so as to 
accelerate reactions to produce clean fuels at rates that far exceed 
what we know today. In that regard, I expect the Department to utilize 
its nanoscience facilities to help design these new compounds. If we 
are successful in meeting this grand challenge, we will bring fuels to 
market quicker to meet increasing energy demands, while using less 
overall energy to produce them.
  Finally, the bill directs the Secretary fund these efforts in 
multidisciplinary teams including computer scientists, chemists, 
biochemists, materials scientists and physicists. It requires the 
Department to transfer its catalysis research to industry so that they 
can bring to market the full fruits of our Government's advanced energy 
research in the shortest time possible.
  We are currently debating an energy bill in the Energy and Natural 
Resources Committee. We plan to shortly mark up the research and 
development section, and, I think it is vitally important that this 
section address the topic of catalysis to produce future fuels for our 
Nation.
  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. 873

       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 ``Department of Energy 
     Catalysis Research and Development Act''.

[[Page S5199]]

     SEC. 2. FINDINGS.

       The Congress finds that catalysis science is critical to 
     the production of fuels for energy generation, the reduction 
     of toxic waste streams, and the development of compounds to 
     reduce global warming.

     SEC. 3. DEPARTMENT OF ENERGY PROGRAM.

       (a) Establishment.--The Secretary of Energy, through the 
     Director of the Office of Science of the Department of 
     Energy, shall establish a program of research and development 
     in catalysis science consistent with the Secretary's 
     statutory authorities related to research and development.
       (b) Scope of the Program.--The program shall include 
     efforts to--
       (1) enable catalyst design using--
       (i) combined experimental and mechanistic methodologies, 
     and
       (ii) computational modeling of catalytic reactions at the 
     molecular level;
       (2) develop techniques for--
       (i) high throughout synthesis of catalysts and novel assays 
     for rapid throughout catalyst testing of small quantities of 
     catalysts on diverse processes,
       (ii) reducing the analytical cycle time by parallel 
     operation and automation,
       (iii) characterizing catalysts at the 0.1 to 2 nanometer 
     scale, and
       (iv) characterizing catalysts in-situ under actual 
     operating conditions at high temperature and pressure,
       (3) synthesize catalysts with specific site architecture,
       (4) conduct research in the use of precious metals for 
     catalysis (excluding platinum, palladium, and rhodium),
       (5) translate molecular (picoscale) and nanoscale 
     fundamentals to the design of catalytic compounds.
       (c) Duties of the Director of the Office of Science.--In 
     carrying out the program under this Act, the Director of the 
     Office of Science shall--
       (1) support both individual investigators and 
     multidisciplinary teams of investigators that include teams 
     drawing upon the expertise of homogeneous, heterogeneous, and 
     biocatalytic investigators to pioneer new approaches in 
     catalytic design;
       (2) develop, plan, construct, acquire, share, or operate 
     special equipment or facilities for the use of investigators 
     conducting research and development in catalysis science in 
     collaboration with national user facilities such as 
     nanoscience and engineering centers;
       (3) support technology transfer activities to benefit 
     industry and other users of catalysis science and 
     engineering; and
       (4) coordinate research and development activities with 
     industry and other federal agencies.
       (d) Merit Review Required.-- All grants, contracts, 
     cooperative agreements, or other financial assistance awards 
     under this Act shall be made only after independent merit 
     review.
       (e) Triennal Assessment.--The National Academy of Sciences 
     shall review the catalysis program every three years to 
     report on gains made in the fundamental science of catalysis 
     and its progress made towards developing new fuels for energy 
     production, material fabrication processes and methods to 
     reduce global warming.

     SEC. 4. AUTHORIZATION OF APPROPRIATIONS.

       The following sums are authorized to be appropriated to the 
     Secretary of Energy, to remain available until expended, for 
     the purposes of carrying out this Act:
       (1) $33,000,000 for fiscal year 2004.
       (2) $35,000,000 for fiscal year 2005.
       (3) $36,500,000 for fiscal year 2006.
       (4) $38,200,000 for fiscal year 2007.
       (5) $40,100,000 for fiscal year 2008.
       (6) $42,100,000 for fiscal year 2009.
                                 ______
                                 
      By Mr. TALENT (for himself, Mr. Schumer, and Mr. Graham of South 
        Carolina):
  S. 874. A bill to amend title XIX of the Social Security Act to 
include primary and secondary preventative medical strategies for 
children and adults with Sickle Cell Disease as medical assistance 
under the medicaid program, and for other purposes; to the Committee on 
Finance.
  Mr. TALENT. Mr. President, today I rise on behalf of myself and my 
colleagues, Senators Charles Schumer and Lindsey Graham, in support of 
the Sickle Cell Treatment Act of 2003, which will help hundreds of 
thousands of people who suffer from Sickle Cell Disease. SCD, a genetic 
disease that affects red blood cells. This bill has bipartisan and 
bicameral support, as Representatives Danny K. Davis, a Democrat, and 
Richard Burr, a Republican, will introduce the companion bill today.
  Sickle Cell Disease is an inherited blood disorder that is a major 
health problem in the United States, primarily affecting African 
Americans. People with sickle cell disease have red blood cells that 
contain an abnormal type of hemoglobin. Sometimes these red blood cells 
become sickle-shaped--crescent shaped--and have difficulty passing 
through small blood vessels. When sickle-shaped cells block small blood 
vessels, less blood can reach that part of the body. Tissue that does 
not receive a normal blood flow eventually becomes damaged. This is 
what essentially causes the potentially life-threatening complications 
of sickle cell disease. There is currently no cure.
  More than 2,500,000 Americans, mostly African Americans, have the 
sickle cell trait. Among newborn American infants, SCD occurs in 
approximately 1, in 300 African Americans. The most feared complication 
for children with SCD is a stroke, which may affect infants as young as 
18 months of age. While some patients can remain without symptoms for 
years, many others may not survive infancy or early childhood.
  Many adults with SCD have severe physical problems, such as acute 
lung complications that can result in death. Adults with SCD can also 
develop chronic problems, including pulmonary disease, pulmonary 
hypertension, and kidney failure. The average life span for an adult 
with SCD is the mid-40s. Stroke in the adult SCD population commonly 
results in both mental and physical disabilities for life.
  The Sickle Cell Treatment Act of 2003 helps combat SCD by providing 
Federal matching funds for SCD-related services under Medicaid, and by 
allowing States to receive a Federal 50-50 match for nonmedical 
expenses related to SCD treatment such as genetic counseling. This bill 
also authorizes a grant program in the amount of $10 million per year 
for 5 years to fund 40 health centers nationwide. Although I will go 
into detail about the bill, its focus is to encourage States to partner 
with SCD providers, who have historically been on the frontlines of 
this issue, to treat and find a cure for SCD patients.
  With regard to the Federal matching funds, this bill allows states to 
reimburse SCD services beyond current Medicaid law, which only covers 
physician and laboratory services. For example, if a State wanted to 
increase reimbursement rates for SCD blood transfusions, it could do so 
through rate setting for the new SCD benefit without having to increase 
reimbursement for all Medicaid blood transfusions, therefore, making it 
easier for a State to reimburse at a higher rate for SCD-related 
treatment.

  The bill also provides Federal reimbursement for education and other 
services related to the prevention and treatment of SCD. This will 
allow States to get a Federal 50-50 match for nonmedical, 
administrative expenses to include outreach and genetic counseling 
about SCD and its treatment for SCD patients of any age. This is 
critical to helping this historically underserved population, many of 
who may not know about SCD or its symptoms until it is too late.
  This bill also allows hospitals and clinics to do outreach with non-
medical personnel to educate high-risk communities about recognizing 
SCD. It would also allow nonmedical personnel like counselors to spend 
time with SCD families to discuss how to manage the disease. Providing 
this one-stop shop will centralize SCD-related treatment and counseling 
services to better serve those with SCD.
  In addition to the diagnosis and treatment components, this bill 
creates a grant program for 40 health centers nationally. Specifically, 
the U.S. Department of Health and Human Services is authorized to 
distribute grants to up to 40 eligible health centers nationwide for $5 
million for the next 5 fiscal years. Grants may be used for purposes 
including the education, treatment--i.e., genetic counseling and 
testing--and continuity of care for individuals with SCD, for training 
health professionals, and to identify and secure additional Federal 
funds to continue SCD treatment.
  This bill also creates a National Coordinating Center to collect, 
monitor and distribute information on new and innovative practices to 
prevent and treat SCD, establish a model protocol for the grant 
recipients to follow as a quality control mechanism, develop 
educational materials regarding the prevention and treatment of SCD, 
and submit a report to Congress to ensure fiscal accountability and 
provide information of recent developments towards a cure for SCD.
  The Sickle Cell Treatment Act of 2003 provides tremendous benefits to 
States. The approach taken in this bill is to add services related to 
SCD to the list of services covered by Medicaid for those people who 
are eligible for Medicaid under current eligibility rules.

[[Page S5200]]

For example, the bill allows States to use Medicaid funds to work with 
providers to better serve areas with a high prevalence of SCD in fields 
such as education and counseling,which are currently not reimbursed by 
Medicaid. This bill also allows the States to create opportunities to 
partner with providers to determine ``best practices'' to encourage the 
most effective and efficient use of medical resources toward SCD 
treatment and education.
  In introducing the Sickle Cell Treatment Act of 2003, we are trying 
to help thousands of Americans who live with this disease. This 
legislation will provide many of these patients with access to the 
essential treatments that they need. It has the support of many 
important groups representing the SCD, African-American and children's 
health care communities as well as the providers and researchers who 
are working to treat and find a cure for this disease. For example, 
Allan Platt, Program Coordinator, The Georgia Comprehensive Sickle Cell 
Center at Grady Health System in Atlanta, GA has written me the 
following letter, which states in part, ``You did a wonderful thing for 
sickle cell patients and for those who are caring for them. Let us know 
how we can rally support for this.''
  I want to offer my appreciation to the Sickle Cell Disease 
Association of American Inc., SCDAA, for its vigilant efforts to help 
find a cure for SCD, and working with my office to help craft this 
critical piece of legislation. SCDAA President and Chief Operating 
Officer, Lynda K. Anderson, has provided tireless support on behalf of 
this effort. Also I would like to acknowledge the efforts of SCDAA 
Board Member Michael R. DeBaun, M.D., M.P.H, Assistant Professor of 
Pediatrics and Biostatistics at the Washington University School of 
Medicine in St. Louis, MO. Lynda and Michael have brought the issues 
addressed in this bill to my attention and helped to bring the 
introduction of this bill to fruition.
  The SCDAA was founded in 1971 to provide an effective coordinated 
community-based approach to developing and implementing strategies to 
resolve issues surrounding sickle cell disease. Through three decades, 
SCDAA and its member organizations have demonstrated how community-
based organizations and comprehensive health and research centers can 
work with local, State and Federal agencies in furtherance of national 
health care objectives. To this day, SCDAA continues to pursue 
legislative initiatives to secure additional government funding for 
research and community-based services. Moreover, it has demonstrated 
its capacity to provide continued leadership in this area as a 
potential national coordinator center, and I look forward to the 
organization applying for such a designation, once this measure has 
been enacted into law. My colleagues and I on both sides of the aisle 
and in both legislative bodies look forward to working with SCDAA to 
fight this good fight and to secure the resources required to address 
the very unique needs of patients, families and communities affected by 
SCD.
  I ask that my colleagues in the Senate join Senators Schumer and 
Graham, and Representatives Davis and Burr in helping us to find a cure 
to help the approximately 70,000 Americans who have SCD and the 
approximately 1,800 American babies who are born with this disease each 
year in supporting the Sickle Cell Treatment Act of 2003.
  I ask unanimous consent that the text of the bill printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 874

       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 ``Sickle Cell Treatment Act of 
     2003''.

     SEC. 2. FINDINGS.

       Congress makes the following findings:
       (1) Sickle Cell Disease (in this section referred to as 
     ``SCD'') is an inherited disease of red blood cells that is a 
     major health problem in the United States.
       (2) Approximately 70,000 Americans have SCD and 
     approximately 1,800 American babies are born with the disease 
     each year. SCD also is a global problem with close to 300,000 
     babies born annually with the disease.
       (3) In the United States, SCD is most common in African-
     Americans and in those of Hispanic, Mediterranean, and Middle 
     Eastern ancestry. Among newborn American infants, SCD occurs 
     in approximately 1 in 300 African-Americans, 1 in 36,000 
     Hispanics, and 1 in 80,000 Caucasians.
       (4) More than 2,500,000 Americans, mostly African-
     Americans, have the sickle cell trait. These Americans are 
     healthy carriers of the sickle cell gene who have inherited 
     the normal hemoglobin gene from 1 parent and the sickle gene 
     from the other parent. A sickle cell trait is not a disease, 
     but when both parents have the sickle cell trait, there is a 
     1 in 4 chance with each pregnancy that the child will be born 
     with SCD.
       (5) Children with SCD may exhibit frequent pain episodes, 
     entrapment of blood within the spleen, severe anemia, acute 
     lung complications, and priapism. During episodes of severe 
     pain, spleen enlargement, or acute lung complications, life 
     threatening complications can develop rapidly. Children with 
     SCD are also at risk for septicemia, meningitis, and stroke. 
     Children with SCD at highest risk for stroke can be 
     identified and, thus, treated early with regular blood 
     transfusions for stroke prevention.
       (6) The most feared complication for children with SCD is a 
     stroke (either overt or silent) occurring in 30 percent of 
     the children with sickle cell anemia prior to their 18th 
     birthday and occurring in infants as young as 18 months of 
     age. Students with SCD and silent strokes may not have any 
     physical signs of such disease or strokes but may have a 
     lower educational attainment when compared to children with 
     SCD and no strokes. Approximately 60 percent of students with 
     silent strokes have difficulty in school, require special 
     education, or both.
       (7) Many adults with SCD have acute problems, such as 
     frequent pain episodes and acute lung complications that can 
     result in death. Adults with SCD can also develop chronic 
     problems, including pulmonary disease, pulmonary 
     hypertension, degenerative changes in the shoulder and hip 
     joints, poor vision, and kidney failure.
       (8) The average life span for an adult with SCD is the mid-
     40s. While some patients can remain without symptoms for 
     years, many others may not survive infancy or early 
     childhood. Causes of death include bacterial infection, 
     stroke, and lung, kidney, heart, or liver failure. Bacterial 
     infections and lung injuries are leading causes of death in 
     children and adults with SCD.
       (9) As a complex disorder with multisystem manifestations, 
     SCD requires specialized comprehensive and continuous care to 
     achieve the best possible outcome. Newborn screening, genetic 
     counseling, and education of patients and family members are 
     critical preventative measures that decrease morbidity and 
     mortality, delaying or preventing complications, in-patient 
     hospital stays, and increased overall costs of care.
       (10) Stroke in the adult SCD population commonly results in 
     both mental and physical disabilities for life.
       (11) Currently, one of the most effective treatments to 
     prevent or treat an overt stroke or a silent stroke for a 
     child with SCD is at least monthly blood transfusions 
     throughout childhood for many, and throughout life for some, 
     requiring removal of sickle blood and replacement with normal 
     blood.
       (12) With acute lung complications, transfusions are 
     usually required and are often the only therapy demonstrated 
     to prevent premature death.

     SEC. 3. INCLUSION OF PRIMARY AND SECONDARY PREVENTATIVE 
                   MEDICAL STRATEGIES FOR CHILDREN AND ADULTS WITH 
                   SICKLE CELL DISEASE AS MEDICAL ASSISTANCE UNDER 
                   THE MEDICAID PROGRAM.

       (a) In General.--Section 1905 of the Social Security Act 
     (42 U.S.C. 1396d) is amended--
       (1) in subsection (a)--
       (A) by striking ``and'' at the end of paragraph (26);
       (B) by redesignating paragraph (27) as paragraph (28); and
       (C) by inserting after paragraph (26), the following:
       ``(27) subject to subsection (x), primary and secondary 
     preventative medical strategies, including prophylaxes, and 
     treatment and services for individuals who have Sickle Cell 
     Disease; and''; and
       (2) by adding at the end the following:
       ``(x) For purposes of subsection (a)(27), the strategies, 
     treatment, and services described in that subsection include 
     the following:
       ``(1) Chronic blood transfusion (with deferoxamine 
     chelation) to prevent stroke in individuals with Sickle Cell 
     Disease who have been identified as being at high risk for 
     stroke.
       ``(2) Genetic counseling and testing for individuals with 
     Sickle Cell Disease or the sickle cell trait.
       ``(3) Other treatment and services to prevent individuals 
     who have Sickle Cell Disease and who have had a stroke from 
     having another stroke.''.
       (b) Federal Reimbursement for Education and Other Services 
     Related to the Prevention and Treatment of Sickle Cell 
     Disease.--Section 1903(a)(3) of the Social Security Act (42 
     U.S.C. 1396b(a)(3)) is amended--
       (1) in subparagraph (D), by striking ``plus'' at the end 
     and inserting ``and''; and
       (2) by adding at the end the following:
       ``(E) 50 percent of the sums expended with respect to costs 
     incurred during such quarter as are attributable to 
     providing--
       ``(i) services to identify and educate individuals who have 
     Sickle Cell Disease or who

[[Page S5201]]

     are carriers of the sickle cell gene, including education 
     regarding how to identify such individuals; or
       ``(ii) education regarding the risks of stroke and other 
     complications, as well as the prevention of stroke and other 
     complications, in individuals who have Sickle Cell Disease; 
     plus''.
       (c) Effective Date.--The amendments made by this section 
     take effect on the date of enactment of this Act and apply to 
     medical assistance and services provided under title XIX of 
     the Social Security Act (42 U.S.C. 1396 et seq.) on or after 
     that date, without regard to whether final regulations to 
     carry out such amendments have been promulgated by such date.

     SEC. 4. DEMONSTRATION PROGRAM FOR THE DEVELOPMENT AND 
                   ESTABLISHMENT OF SYSTEMIC MECHANISMS FOR THE 
                   PREVENTION AND TREATMENT OF SICKLE CELL 
                   DISEASE.

       (a) Authority To Conduct Demonstration Program.--
       (1) In general.--The Administrator, through the Bureau of 
     Primary Health Care and the Maternal and Child Health Bureau, 
     shall conduct a demonstration program by making grants to up 
     to 40 eligible entities for each fiscal year in which the 
     program is conducted under this section for the purpose of 
     developing and establishing systemic mechanisms to improve 
     the prevention and treatment of Sickle Cell Disease, 
     including through--
       (A) the coordination of service delivery for individuals 
     with Sickle Cell Disease;
       (B) genetic counseling and testing;
       (C) bundling of technical services related to the 
     prevention and treatment of Sickle Cell Disease;
       (D) training of health professionals; and
       (E) identifying and establishing other efforts related to 
     the expansion and coordination of education, treatment, and 
     continuity of care programs for individuals with Sickle Cell 
     Disease.
       (2) Grant award requirements.--
       (A) Geographic diversity.--The Administrator shall, to the 
     extent practicable, award grants under this section to 
     eligible entities located in different regions of the United 
     States.
       (B) Priority.--In awarding grants under this section, the 
     Administrator shall give priority to awarding grants to 
     eligible entities that are--
       (i) Federally-qualified health centers that have a 
     partnership or other arrangement with a comprehensive Sickle 
     Cell Disease treatment center that does not receive funds 
     from the National Institutes of Health; or
       (ii) Federally-qualified health centers that intend to 
     develop a partnership or other arrangement with a 
     comprehensive Sickle Cell Disease treatment center that does 
     not receive funds from the National Institutes of Health.
       (b) Additional Requirements.--An eligible entity awarded a 
     grant under this section shall use funds made available under 
     the grant to carry out, in addition to the activities 
     described in subsection (a)(1), the following activities:
       (1) To facilitate and coordinate the delivery of education, 
     treatment, and continuity of care for individuals with Sickle 
     Cell Disease under--
       (A) the entity's collaborative agreement with a community-
     based Sickle Cell Disease organization or a nonprofit entity 
     that works with individuals who have Sickle Cell Disease;
       (B) the Sickle Cell Disease newborn screening program for 
     the State in which the entity is located; and
       (C) the maternal and child health program under title V of 
     the Social Security Act (42 U.S.C. 701 et seq.) for the State 
     in which the entity is located.
       (2) To train nursing and other health staff who specialize 
     in pediatrics, obstetrics, internal medicine, or family 
     practice to provide health care and genetic counseling for 
     individuals with the sickle cell trait.
       (3) To enter into a partnership with adult or pediatric 
     hematologists in the region and other regional experts in 
     Sickle Cell Disease at tertiary and academic health centers 
     and State and county health offices.
       (4) To identify and secure resources for ensuring 
     reimbursement under the medicaid program, State children's 
     health insurance program, and other health programs for the 
     prevention and treatment of Sickle Cell Disease, including 
     the genetic testing of parents or other appropriate relatives 
     of children with Sickle Cell Disease and of adults with 
     Sickle Cell Disease.
       (c) National Coordinating Center.--
       (1) Establishment.--The Administrator shall enter into a 
     contract with an entity to serve as the National Coordinating 
     Center for the demonstration program conducted under this 
     section.
       (2) Activities described.--The National Coordinating Center 
     shall--
       (A) collect, coordinate, monitor, and distribute data, best 
     practices, and findings regarding the activities funded under 
     grants made to eligible entities under the demonstration 
     program;
       (B) develop a model protocol for eligible entities with 
     respect to the prevention and treatment of Sickle Cell 
     Disease;
       (C) develop educational materials regarding the prevention 
     and treatment of Sickle Cell Disease; and
       (D) prepare and submit to Congress a final report that 
     includes recommendations regarding the effectiveness of the 
     demonstration program conducted under this section and such 
     direct outcome measures as--
       (i) the number and type of health care resources utilized 
     (such as emergency room visits, hospital visits, length of 
     stay, and physician visits for individuals with Sickle Cell 
     Disease); and
       (ii) the number of individuals that were tested and 
     subsequently received genetic counseling for the sickle cell 
     trait.
       (d) Application.--An eligible entity desiring a grant under 
     this section shall submit an application to the Administrator 
     at such time, in such manner, and containing such information 
     as the Administrator may require.
       (e) Definitions.--In this section:
       (1) Administrator.--The term ``Administrator'' means the 
     Administrator of the Health Resources and Services 
     Administration.
       (2) Eligible entity.--The term ``eligible entity'' means a 
     Federally-qualified health center, a nonprofit hospital or 
     clinic, or a university health center that provides primary 
     health care, that--
       (A) has a collaborative agreement with a community-based 
     Sickle Cell Disease organization or a nonprofit entity with 
     experience in working with individuals who have Sickle Cell 
     Disease; and
       (B) demonstrates to the Administrator that either the 
     Federally-qualified health center, the nonprofit hospital or 
     clinic, the university health center, the organization or 
     entity described in subparagraph (A), or the experts 
     described in subsection (b)(3), has at least 5 years of 
     experience in working with individuals who have Sickle Cell 
     Disease.
       (3) Federally-qualified health center.--The term 
     ``Federally-qualified health center'' has the meaning given 
     that term in section 1905(l)(2)(B) of the Social Security Act 
     (42 U.S.C. 1396d(l)(2)(B)).
       (f) Authorization of Appropriations.--There is authorized 
     to be appropriated to carry out this section, $10,000,000 for 
     each of fiscal years 2004 through 2009.
                                 ______
                                 
      By Mr. KERRY (for himself, Mr. Santorum, Mr. Sarbanes, Mr. 
        Allard, Mr. Daschle, Mr. Kennedy, Ms. Stabenow, and Mrs. 
        Clinton):
  S. 875. A bill to amend the Internal Revenue Code of 1986 to allow an 
income tax credit for the provision of homeownership and community 
development, and for other purposes; to the Committee on Finance.
 Mr. KERRY. Mr. President, owning your own home is the 
foundation of the American dream. It encourages personal 
responsibility, improves child development, provides economic security 
and gives families a greater stake in the development of their 
communities. Communities where homeownership rates are highest have 
lower crime rates, better schools and provide a better quality of life 
for families to raise their children.
  However, too many low- and moderate-income families living in urban 
and rural areas across our nation have not been able to share in the 
dream and benefits of homeownership due to the lack of available 
housing or the high cost of what housing is available.
  Today, I am introducing the Community Development Homeownership Tax 
Credit Act, along with Senators Santorum, Sarbanes, Allard, Daschle, 
Kennedy, Stabenow and Clinton to encourage the construction and 
substantial rehabilitation of 500,000 homes over the next ten years for 
low- and moderate-income families in economically distressed areas.
  The bill will increase the supply of affordable homes for sale in 
inner-cities, rural areas and low- and moderate-income neighborhoods 
across the United States. It will bridge the gap that exists today 
between the cost of developing-affordable housing and the price at 
which these homes can be sold in many low-income neighborhoods by 
providing investors with a tax credit of up to 50 percent of the cost 
of home construction or rehabilitation.
  By facing the mounting challenge of producing affordable housing, I 
strongly believe we can help provide critically needed economic 
development low- and moderate-income communities across our country and 
provide an important stimulus in the development of our nation's 
economy. The production of new homes provided in this legislation will 
create both construction and construction-related jobs which will both 
increase economic growth and lower the unemployment rate. New Economic 
activity can revitalize many inner-city neighborhoods and rural areas 
where unemployment and crime have been a fact of life for too long.
  Buying a new home also leads to the purchase of new appliances and 
furnishings. Average new homebuyers spend almost $5,000 on appliances 
and

[[Page S5202]]

furnishings during the first year of living in their new home. This 
will help stimulate the manufacturing section of our economy. It is 
clear that building new homes creates jobs and moves our economy 
forward.
  Over the past decade, we have made substantial progress in increasing 
the homeownership rate in the United States. In 2000, the U.S. 
homeownership rate reached a record high of 67.1 percent with some 71 
million U.S. households owning their own home. However, many working 
families have been struggling to find an affordable home in our 
nation's cities. Over the past two generations, many families have 
moved out of cities and into the suburbs, which has depressed the 
development of housing in the inner-city. In 1999, the homeownership 
rate in the central-city areas was 50.4 percent, this is more than 20 
percent lower than the suburban homeownership rate of 73.6 percent.
  Working families with low- and moderate-income have also had 
difficulties buying a home. Currently, 83.3 percent of households with 
family income higher than the median family income are homeowners, 
while only 52.4 percent of households with family income below the 
median income are homeowners.
  Too many communities face a lack of available homes because 
developers are concerned that the new houses may not be sold for the 
cost of construction. Many properties or sites that could be developed 
into affordable homes now sit vacant, and neighborhoods remain 
undeveloped because the gap between development costs and market prices 
has not been filled. The lack of affordable single-family homes affect 
many urban and rural areas where a majority of residents earn less than 
the median income.

  Today, too many minority families face barriers in their attempts to 
reach the American Dream of homeownership. According to Census data for 
the fourth quarter of 2002, non-Hispanic whites have a 74.8 percent 
homeownership rate, while minority groups have just a 55.4 percent 
homeownership rate. African Americans have only a 47.5 percent 
homeownership rate, and Hispanics have a 49.5 percent homeownership 
rate in the same study. The gap between white and African American 
homeownership rates has been approximately 25 percent to 30 percent for 
most of the last century. These numbers are simply unacceptable.
  Despite our efforts at the federal level to promote homeownership, 
many minorities also face higher than average denial rates for mortgage 
applications. A recent study by the University of Massachusetts shows 
that racial and ethnic lending disparities continue in Boston. For 
example, African Americans were 2.73 times as likely as whites to be 
denied in their mortgage applications. Latinos were 2.25 times as 
likely as whites to be denied in their mortgage applications. Finally, 
Asians were 1.55 times as likely as whites to be denied in their 
mortgage applications.
  Along with a lack of available homes in urban and rural areas, our 
nation is also facing an affordable rental housing crisis. Thousands of 
low-income families with children, the disabled, and the elderly are 
finding it difficult to obtain or afford privately owned affordable 
rental housing units. Recent changes in the housing market have limited 
the availability of affordable housing across the country, while the 
growth in our economy in the last decade has dramatically increased the 
cost of the housing that remains. Constructing new housing will help 
many families move out of rental housing and help increase the number 
of available rental housing units and help ease the affordable housing 
crisis we now face.
  The story of Benjamin and Rita Okafor shows how working families in 
Massachusetts have great difficulty obtaining a decent home of their 
own. For many years, the Okafor's and their two young children were 
forced to live in a one-bedroom apartment. Benjamin Okafor, who worked 
full time as a cab driver in Boston, spent days and months looking for 
a bigger apartment for his family. However, the lack of affordable 
housing in the Boston area made it impossible for him to find anything 
appropriate. When his wife Rita became pregnant with their third child, 
the Okafor's knew something had to change in their living situation. 
Luckily, Ben was accepted into the Habitat for Humanity program and 
worked 300 sweat equity hours constructing a house. In August 2000, the 
Okafor family moved into a new home of their own in Dorchester. Ben 
says that this new home gives them the hope and stability they need. 
Yet, there are still far too many working families living a substandard 
housing and many more families that desperately need assistance to 
become homeowners. A new tax incentive for developers to build 
affordable homes in distressed areas will help working families like 
the Okafor's to afford a home for the first time.
  The benefits of owning a home can bring families financial rewards 
and personal satisfaction with a deep sense of security. Real estate 
values have historically risen over time. Homeowners may deduct 
mortgage interest and property taxes as an expense against income. Real 
estate has generally been seen as marketable, allowing for property to 
be sold at a predictable price to a dependable group of available 
buyers.
  We know that owning a home instead of renting leads to a better 
quality of life for its residents, but we are now learning more and 
more about the impact homeownership has on the cognitive and behavioral 
outcomes for children. A recent study by Ohio State University shows 
that children of families who own their home have fewer behavioral 
problems and are able to learn more effectively. Specifically, a 
child's cognitive abilities are 9 percent higher in math and 7 percent 
higher in reading for children living in their own homes. The study 
also shows that these children also experienced up to 3 percent lower 
behavioral problems than other children. This study proves that the 
national goal of homeownership has an added benefit of helping 
America's children learn and behave better, which helps our schools 
produce better citizens and will help our economy develop in the long 
term.

  The Community Development Tax Credit Act, which I am introducing 
today, bridges the gap between development costs and market value to 
enable the development of new or refurbished homes in urban and rural 
areas to blossom. The tax credit would be available to developers or 
investors that build or substantially rehabilitate homes for sale to 
low- or moderate-income buyers in low-income areas. The credit would 
generate equity investment sufficient to cover the gap between the cost 
of development and the price at which the home can be sold to an 
eligible buyer.
  The tax credit volume would be limited to $1.75 per capita for each 
State and allocated by the States themselves. Credits would be claimed 
over 5 years, starting when homes are sold. I believe this legislation 
will result in approximately 50,000 homes built or refurbished 
annually, assuming about $40,000 per home.
  The maximum tax credit equals 50 percent of the cost of construction, 
substantial rehabilitation, and building acquisition. The eligible cost 
may not exceed the Federal Housing Administration single-family 
mortgage limits. The minimum rehabilitation costs is $25,000. Eligible 
building acquisition costs are limited to one-half of rehabilitation 
costs. States will allocate only the level of tax credits necessary for 
financial feasibility of individual projects. Ten percent of the 
available credit will be set aside for nonprofit organizations.
  The eligible areas for the tax credit are defined as Census Tracts 
with median income below 80 percent of the area or state median. Rural 
areas that are currently eligible for USDA housing programs will be 
eligible for the tax credit. Indian tribal lands will be eligible for 
the tax credit. State-identified areas of chronic economic distress 
will also be eligible for tax credit, subject to disapproval by the 
Department of Housing and Urban Development.
  Those eligible to buy homes built or refurbished using the tax credit 
include: individuals with incomes up to 80 percent of the area or state 
median and up to 100 percent of area median income in low-income/high-
poverty Census Tracts.
  Individual states will write plans to allocate the available tax 
credits using the following selection criteria: contribution of the 
development to community stability and revitalization; community and 
local government support; need for homeownership development in the 
area; sponsor capability; and the long-term sustainability of the

[[Page S5203]]

project as owner-occupied residences. Then individual developers along 
with investors can apply to the state to be awarded a tax credit for 
developing a property in a low- or moderate-income area. If chosen by 
the state, investors can start to claim the tax credit as the homes are 
sold to eligible buyers. They can continue to claim the tax credit for 
five years. Investors are not subject to recapture. If the home owner 
sells the residence within five years, a scale would determine the 
percentage of the gain that would be recaptured by the Federal 
Government. In the first two years, 100 percent of the gain and 80, 70 
and 60 percent in the third, fourth, and fifth years, respectively, 
would be recaptured.
  The Community Development Homeownership Tax Credit Act that I am 
introducing today will positively affect the lives for approximately 
500,000 families over the next 10 years, help resolve the affordable 
rental housing crisis we face, and help create jobs and grow our 
economy. I ask all of my colleagues to help expand the foundation of 
the American Dream by supporting this new tax incentive to encourage 
the construction and rehabilitation of homes for low- and moderate-
income families in economically distressed areas.
  This legislation is supported by the U.S. Conference of Mayors, 
Fannie Mae, Freddie Mac, the Enterprise Foundation, Local Initiatives 
Support Coalition, Mortgage Bankers Association of America, National 
Association of Home Builders, National Low Income Housing Coalition, 
National Association of Local Housing Finance Agencies, National 
Association of Realtors, National Council of La Raza, National Hispanic 
Housing Conference, Habitat for Humanity International and 
others.
                                 ______
                                 
      By Mr. WYDEN (for himself, Ms. Collins, and Mrs. Clinton):
  S. 876. A bill to require public disclosure of noncompetitive 
contracting for the reconstruction of the infrastructure of Iraq, and 
for other purposes; to the Committee on Governmental Affairs.
  Mr. WYDEN. Mr. President, Senators Collins, Clinton, Byrd, Lieberman 
and I want the rebuilding of Iraq to be done in the best way possible--
for the Iraqi people and for the American taxpayers who will foot the 
bill. To ensure that happens, we're introducing bipartisan legislation 
today to ensure accountability in the awarding of U.S. contracts to 
rebuild Iraq.
  Usually in situations like this, open and competitive bidding is used 
to get the best deal for the taxpayers. The same needs to hold true 
here. Contracts to rebuild Iraq should be awarded in the sunshine--not 
behind a smokescreen. If the Federal Government chooses not to use free 
market competition to get the most reasonable price from the most 
qualified contractor, then, at a minimum, they should have to tell the 
American people why.
  The bill we're introducing today is called the Sunshine in Iraq 
Reconstruction Contracting Act. It's intended to shine light into the 
secretive practices the United States Agency for International 
Development, USAID, and other Federal agencies are using to hand out in 
Iraqi work.
  There are dollars-and-cents reasons for doing this. The potential 
cost of rebuilding Iraq has been estimated at around $100 billion. 
That's a lot of taxpayer money. And the U.S. General Accounting Office, 
GAO, reports that sole-source and limited-source contracts aren't 
usually the best buy. Investigator found that Army officials often just 
took whatever level of services the contractor gave, without ever 
asking if it could be done more efficiently or at a lower cost.
  Despite that, sole-source and limited-source contracts look like the 
rule, not the exception, for rebuilding Iraq. And these are costing 
some big cash. Contracts awarded for oil fire fighting and other 
projects are so-called ``cost-plus'' contracts. They pay a company's 
expenses, plus a guaranteed profit of one to eight percent. There are 
no limits on total costs, so the more a firm charges in expenses, the 
more profit it makes. If the Federal Government's going to spend my 
constituents' money that way, without asking for competitive bids, I 
think my constituents deserve to know why.
  Let me give you two concrete examples of the kind of secrecy I'm 
talking about. A lot of the known details come from press reports. In 
February and March, USAID invited a handful of companies to bid on $1.7 
billion in Iraqi projects--rebuilding highways, bridges, schools. 
Competition for one $600 million contract was limited to seven large 
U.S. engineering firms. USAID apparently put out some bid invitations 
before the war even started.
  On March 24, the Army Corps of Engineers announced a sole-source, 
unlimited contract to two American companies to control Iraqi oil 
fires. The no-bid contract is still classified. Information that should 
be available to the public was finalized on March 8 but is still under 
wraps. What we know is that other firms that had experience putting out 
oil well fires in Kuwait in 1991 were left out of the process 
altogether. And we also know that as early as last fall, the parent 
company of these contractors got an exclusive contract to study how to 
supply oil services during an invasion of Iraq.
  Anybody looking to find an explanation for this closed-door 
contracting is likely to come up short. So far the agencies haven't 
said much. Last month, USAID announced that it would limit competition 
to companies with demonstrated technical ability, proven accounting 
mechanisms, ability to field a qualified technical team on short 
notice, and authority to handle classified national security material. 
The USAID Director told The New York Times that to work in Iraq you 
have to have a security clearance, and only these few American 
companies have that clearance.
  I sit on the Intelligence Committee, and don't know of any good 
reason why a contractor bidding to rebuild a school, hospital, sewer 
system or any other part of Iraq's infrastructure would need a security 
clearance. In any case, four of USAID's eight reconstruction projects 
will allow subcontracting to companies that don't have to meet the 
security requirements. So that argument doesn't hold up.
  Our bill has a simple premise to ensure accountability in the 
awarding process. It says that any Federal entity bypassing competitive 
bidding for Iraqi reconstruction projects has to disclose some key 
information. Most importantly, that means revealing the documents used 
to justify a sole-source or limited contract. Agencies are already 
required by law to prepare this rationale for sole source bidding. Our 
bill just makes the information accessible. We've written provisions to 
protect classified information, while still giving Congress full 
oversight over the billions in taxpayer money that Americans are being 
asked to commit in Iraq.
  There are too many questions and the stakes are too high for Congress 
not to demand public disclosure of this information. I am pleased that 
Senators Collins, Clinton, Byrd and Lieberman are joining me in 
introducing this legislation to bring greater accountability and 
openness to the contracting for Iraq reconstruction.
  I ask unanimous consent that a copy of our bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 876

       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 ``Sunshine in Iraq 
     Reconstruction Contracting Act of 2003''.

     SEC. 2. PUBLIC DISCLOSURE OF NONCOMPETITIVE CONTRACTING FOR 
                   THE RECONSTRUCTION OF INFRASTRUCTURE IN IRAQ.

       (a) Disclosure Required.--
       (1) Publication and public availability.--The head of an 
     executive agency of the United States that enters into a 
     contract for the repair, maintenance, rehabilitation, or 
     construction of infrastructure in Iraq without full and open 
     competition shall publish in the Federal Register or Commerce 
     Business Daily and otherwise make available to the public, 
     not later than 30 days after the date on which the contract 
     is entered into, the following information:
       (A) The amount of the contract.
       (B) A brief description of the scope of the contract.
       (C) A discussion of how the executive agency identified, 
     and solicited offers from, potential contractors to perform 
     the contract, together with a list of the potential 
     contractors that were issued solicitations for the offers.
       (D) The justification and approval documents on which was 
     based the determination

[[Page S5204]]

     to use procedures other than procedures that provide for full 
     and open competition.
       (2) Inapplicability to contracts after fiscal year 2013.--
     Paragraph (1) does not apply to a contract entered into after 
     September 30, 2013.
       (b) Classified Information.--
       (1) Authority to withhold.--The head of an executive agency 
     may--
       (A) withhold from publication and disclosure under 
     subsection (a) any document that is classified for restricted 
     access in accordance with an Executive order in the interest 
     of national defense or foreign policy; and
       (B) redact any part so classified that is in a document not 
     so classified before publication and disclosure of the 
     document under subsection (a).
       (2) Availability to congress.--In any case in which the 
     head of an executive agency withholds information under 
     paragraph (1), the head of such executive agency shall make 
     available an unredacted version of the document containing 
     that information to the chairman and ranking member of each 
     of the following committees of Congress:
       (A) The Committee on Governmental Affairs of the Senate and 
     the Committee on Government Reform of the House of 
     Representatives.
       (B) The Committees on Appropriations of the Senate and the 
     House of Representatives.
       (C) Each committee that the head of the executive agency 
     determines has legislative jurisdiction for the operations of 
     such department or agency to which the information relates.
       (c) Fiscal Year 2003 Contracts.--This section shall apply 
     to contracts entered into on or after October 1, 2002, except 
     that, in the case of a contract entered into before the date 
     of the enactment of this Act, subsection (a) shall be applied 
     as if the contract had been entered into on the date of the 
     enactment of this Act.
       (d) Relationship to Other Disclosure Laws.--Nothing in this 
     section shall be construed as affecting obligations to 
     disclose United States Government information under any other 
     provision of law.
       (e) Definitions.--In this section, the terms ``executive 
     agency'' and ``full and open competition'' have the meanings 
     given such terms in section 4 of the Office of Federal 
     Procurement Policy Act (41 U.S.C. 403).
                                 ______
                                 

  By Mr. BURNS (for himself, Mr. Wyden, Mr. Stevens, Mr. Breaux, Mr. 
                Thomas, Ms. Landrieu, and Mr. Schumer):

  S. 877. A bill to regulate interstate commerce by imposing 
limitations and penalties on the transmission of unsolicited commercial 
electronic mail via the Internet; to the Committee on Commerce, 
Science, and Transportation.
  Mr. BURNS. Thank you, Mr. President. I rise today to introduce the 
CAN-SPAM bill along with my good friend and colleague Senator Wyden. 
The CAN-SPAM bill addresses an issue of critical importance to the 
further development of commerce on the Internet: how to control the 
explosion of unsolicited commercial e-mail. I also want to thank the 
additional original cosponsors of the bill, Senator Stevens, Senator 
Breaux, Senator Thomas, Senator Landrieu and Senator Schumer.
  While it is obvious to anyone with an e-mail account that the scourge 
of ``spam'' has continued to worsen, the numbers and the trends they 
represent paint an even more disturbing picture. According to an 
article in the Washington Post less than a month ago, spam currently 
accounts for 40 percent of all e-mail traffic. Spam has become more 
than just an inconvenience that we have learned to live with; it has 
now become a fundamental part of any e-mail inbox with serious economic 
consequences. According to one study done by a consulting group, spam 
will cost U.S. businesses more than $10 billion this year alone.
  Spam also makes working on the Internet less efficient, by clogging 
up servers on one end and inboxes on the other. I want some 
accountability brought to bear on this issue, and feel that by 
introducing this legislation today, we have taken an appropriate and 
meaningful step to tame a horse we can't seem to break just yet. This 
problem continues to escalate, and experts warn that more than half of 
e-mail traffic will be spam by this summer. This point bears repeating: 
within months, you will waste more than half of your time with 
unsolicited e-mail.
  The CAN-SPAM bill would require e-mail marketers to comply with a 
straightforward set of workable, common-sense rules designed to give 
consumers more control over spam. Specifically, the bill would require 
a sender of marketing e-mail to include a clear and conspicuous ``opt-
out'' mechanism so that they could ``unsubscribe'' from further 
unwanted e-mail. Also, the bill would prohibit e-mail marketers from 
using deceptive headers or subject lines, so that consumers will be 
able to tell who initiated the solicitation.
  The bill includes strong enforcement provisions to ensure compliance. 
The Federal Trade Commission would have authority to impose steep civil 
fines of up to $500,000 on spammers. This fine could be tripled if the 
violation is found to be intentional. In short, this bill provides 
broad consumer protection against bad actors, while still allowing 
Internet advertising a justified means of flourishing.
  Spamming is a serious economic problem and I believe it is absolutely 
critical that we address this now, so that the Internet is allowed to 
reach its full potential. Because of the vast distances in Montana, 
many of my constituents are forced to pay long-distance charges for 
their time on the Internet. Spam makes it nearly impossible for these 
people to enjoy the experience, and it makes it even harder for them to 
see how this will help rural America flourish in the 21st century. 
Also, Internet service providers are bombarded with spam that often 
corrupts or shuts down their systems. In today's information age where 
beating the competitor to the next sale is absolutely critical to 
survival, these shutdowns can cause real economic damage. We may be in 
a downturn in the American economy and especially in the high 
technology sector, but the efficiencies created through vast 
information sharing are here to stay and will help propel our economy 
to levels beyond our imagination, but in order to reach this potential 
we must eliminate the bad actors who threaten these efficiencies.
  The fact that this bill is strongly supported by pillars of the 
Internet age such as Yahoo, America Online and eBay is a testament to 
its common-sense approach. I think these companies for their critical 
expertise in perfecting this bill which would help to address this 
scourge of the digital age. I also appreciate the numerous valuable 
suggestions from the many concerned cyber-citizens who want to see this 
Pandora's box of digital dreck closed once and for all.
  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. 877

       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 ``Controlling the Assault of 
     Non-Solicited Pornography and Marketing Act of 2003'', or the 
     ``CAN-SPAM Act of 2003''.

     SEC. 2. CONGRESSIONAL FINDINGS AND POLICY.

       (a) Findings.--The Congress finds the following:
       (1) There is a right of free speech on the Internet.
       (2) The Internet has increasingly become a critical mode of 
     global communication and now presents unprecedented 
     opportunities for the development and growth of global 
     commerce and an integrated worldwide economy.
       (3) In order for global commerce on the Internet to reach 
     its full potential, individuals and entities using the 
     Internet and other online services should be prevented from 
     engaging in activities that prevent other users and Internet 
     service providers from having a reasonably predictable, 
     efficient, and economical online experience.
       (4) Unsolicited commercial electronic mail can be a 
     mechanism through which businesses advertise and attract 
     customers in the online environment.
       (5) The receipt of unsolicited commercial electronic mail 
     may result in costs to recipients who cannot refuse to accept 
     such mail and who incur costs for the storage of such mail, 
     or for the time spent accessing, reviewing, and discarding 
     such mail, or for both.
       (6) Unsolicited commercial electronic mail may impose 
     significant monetary costs on providers of Internet access 
     services, businesses, and educational and nonprofit 
     institutions that carry and receive such mail, as there is a 
     finite volume of mail that such providers, businesses, and 
     institutions can handle without further investment in 
     infrastructure.
       (7) Some unsolicited commercial electronic mail contains 
     material that many recipients may consider vulgar or 
     pornographic in nature.
       (8) While some senders of unsolicited commercial electronic 
     mail messages provide simple and reliable ways for recipients 
     to reject (or ``opt-out'' of) receipt of unsolicited 
     commercial electronic mail from such senders in the future, 
     other senders provide no

[[Page S5205]]

     such ``opt-out'' mechanism, or refuse to honor the requests 
     of recipients not to receive electronic mail from such 
     senders in the future, or both.
       (9) An increasing number of senders of unsolicited 
     commercial electronic mail purposefully disguise the source 
     of such mail so as to prevent recipients from responding to 
     such mail quickly and easily.
       (10) An increasing number of senders of unsolicited 
     commercial electronic mail purposefully include misleading 
     information in the message's subject lines in order to induce 
     the recipients to view the messages.
       (11) In legislating against certain abuses on the Internet, 
     Congress should be very careful to avoid infringing in any 
     way upon constitutionally protected rights, including the 
     rights of assembly, free speech, and privacy.
       (b) Congressional Determination of Public Policy.--On the 
     basis of the findings in subsection (a), the Congress 
     determines that--
       (1) there is a substantial government interest in 
     regulation of unsolicited commercial electronic mail;
       (2) senders of unsolicited commercial electronic mail 
     should not mislead recipients as to the source or content of 
     such mail; and
       (3) recipients of unsolicited commercial electronic mail 
     have a right to decline to receive additional unsolicited 
     commercial electronic mail from the same source.

     SEC. 3. DEFINITIONS.

       In this Act:
       (1) Affirmative consent.--The term ``affirmative consent'', 
     when used with respect to a commercial electronic mail 
     message, means that the recipient has expressly consented to 
     receive the message, either in response to a clear and 
     conspicuous request for such consent or at the recipient's 
     own initiative.
       (2) Commercial electronic mail message.--
       (A) In general.--The term ``commercial electronic mail 
     message'' means any electronic mail message the primary 
     purpose of which is the commercial advertisement or promotion 
     of a commercial product or service (including content on an 
     Internet website operated for a commercial purpose).
       (B) Reference to company or website.--The inclusion of a 
     reference to a commercial entity or a link to the website of 
     a commercial entity in an electronic mail message does not, 
     by itself, cause such message to be treated as a commercial 
     electronic mail message for purposes of this Act if the 
     contents or circumstances of the message indicate a primary 
     purpose other than commercial advertisement or promotion of a 
     commercial product or service.
       (3) Commission.--The term ``Commission'' means the Federal 
     Trade Commission.
       (4) Domain name.--The term ``domain name'' means any 
     alphanumeric designation which is registered with or assigned 
     by any domain name registrar, domain name registry, or other 
     domain name registration authority as part of an electronic 
     address on the Internet.
       (5) Electronic mail address.--The term ``electronic mail 
     address'' means a destination, commonly expressed as a string 
     of characters, consisting of a unique user name or mailbox 
     (commonly referred to as the ``local part'') and a reference 
     to an Internet domain (commonly referred to as the ``domain 
     part''), to which an electronic mail message can be sent or 
     delivered.
       (6) Electronic mail message.--The term ``electronic mail 
     message'' means a message sent to an electronic mail address.
       (7) FTC act.--The term ``FTC Act'' means the Federal Trade 
     Commission Act (15 U.S.C. 41 et seq.).
       (8) Header information.--The term ``header information'' 
     means the source, destination, and routing information 
     attached to an electronic mail message, including the 
     originating domain name and originating electronic mail 
     address.
       (9) Implied consent.--The term ``implied consent'', when 
     used with respect to a commercial electronic mail message, 
     means that--
       (A) within the 3-year period ending upon receipt of such 
     message, there has been a business transaction between the 
     sender and the recipient (including a transaction involving 
     the provision, free of charge, of information, goods, or 
     services requested by the recipient); and
       (B) the recipient was, at the time of such transaction or 
     thereafter in the first electronic mail message received from 
     the sender after the effective date of this Act, provided a 
     clear and conspicuous notice of an opportunity not to receive 
     unsolicited commercial electronic mail messages from the 
     sender and has not exercised such opportunity.

     If a sender operates through separate lines of business or 
     divisions and holds itself out to the recipient, both at the 
     time of the transaction described in subparagraph (A) and at 
     the time the notice under subparagraph (B) was provided to 
     the recipient, as that particular line of business or 
     division rather than as the entity of which such line of 
     business or division is a part, then the line of business or 
     the division shall be treated as the sender for purposes of 
     this paragraph.
       (10) Initiate.--The term ``initiate'', when used with 
     respect to a commercial electronic mail message, means to 
     originate such message or to procure the origination of such 
     message, but shall not include actions that constitute 
     routine conveyance of such message.
       (11) Internet.--The term ``Internet'' has the meaning given 
     that term in the Internet Tax Freedom Act (47 U.S.C. 151 nt).
       (12) Internet access service.--The term ``Internet access 
     service'' has the meaning given that term in section 
     231(e)(4) of the Communications Act of 1934 (47 U.S.C. 
     231(e)(4)).
       (13) Protected computer.--The term ``protected computer'' 
     has the meaning given that term in section 1030(e)(2) of 
     title 18, United States Code.
       (14) Recipient.--The term ``recipient'', when used with 
     respect to a commercial electronic mail message, means an 
     authorized user of the electronic mail address to which the 
     message was sent or delivered. If a recipient of a commercial 
     electronic mail message has 1 or more electronic mail 
     addresses in addition to the address to which the message was 
     sent or delivered, the recipient shall be treated as a 
     separate recipient with respect to each such address. If an 
     electronic mail address is reassigned to a new user, the new 
     user shall not be treated as a recipient of any commercial 
     electronic mail message sent or delivered to that address 
     before it was reassigned.
       (15) Routine conveyance.--The term ``routine conveyance'' 
     means the transmission, routing, relaying, handling, or 
     storing, through an automatic technical process, of an 
     electronic mail message for which another person has provided 
     and selected the recipient addresses.
       (16) Sender.--The term ``sender'', when used with respect 
     to a commercial electronic mail message, means a person who 
     initiates such a message and whose product, service, or 
     Internet web site is advertised or promoted by the message.
       (17) Transactional or relationship messages.--The term 
     ``transactional or relationship message'' means an electronic 
     mail message the primary purpose of which is to facilitate, 
     complete, confirm, provide, or request information 
     concerning--
       (A) a commercial transaction that the recipient has 
     previously agreed to enter into with the sender;
       (B) an existing commercial relationship, formed with or 
     without an exchange of consideration, involving the ongoing 
     purchase or use by the recipient of products or services 
     offered by the sender; or
       (C) an existing employment relationship or related benefit 
     plan.
       (18) Unsolicited commercial electronic mail message.--The 
     term ``unsolicited commercial electronic mail message'' means 
     any commercial electronic mail message that--
       (A) is not a transactional or relationship message; and
       (B) is sent to a recipient without the recipient's prior 
     affirmative or implied consent.

     SEC. 4. CRIMINAL PENALTY FOR UNSOLICITED COMMERCIAL 
                   ELECTRONIC MAIL CONTAINING FRAUDULENT ROUTING 
                   INFORMATION.

       (a) In General.--Chapter 63 of title 18, United States 
     Code, is amended by adding at the end the following:

     ``Sec.  1351. Unsolicited commercial electronic mail 
       containing fraudulent transmission information

       ``(a) In General.--Any person who initiates the 
     transmission, to a protected computer in the United States, 
     of an unsolicited commercial electronic mail message, with 
     knowledge and intent that the message contains or is 
     accompanied by header information that is materially false or 
     materially misleading shall be fined or imprisoned for not 
     more than 1 year, or both, under this title. For purposes of 
     this subsection, header information that is technically 
     accurate but includes an originating electronic mail address 
     the access to which for purposes of initiating the message 
     was obtained by means of false or fraudulent pretenses or 
     representations shall be considered materially misleading.
       ``(b) Definitions.--Any term used in subsection (a) that is 
     defined in section 3 of the CAN-SPAM Act of 2003 has the 
     meaning given it in that section.''.
       (b) Conforming Amendment.--The chapter analysis for chapter 
     63 of title 18, United States Code, is amended by adding at 
     the end the following:

``1351. Unsolicited commercial electronic mail containing fraudulent 
              routing information''.

     SEC. 5. OTHER PROTECTIONS AGAINST UNSOLICITED COMMERCIAL 
                   ELECTRONIC MAIL.

       (a) Requirements for Transmission of Messages.--
       (1) Prohibition of false or misleading transmission 
     information.--It is unlawful for any person to initiate the 
     transmission, to a protected computer, of a commercial 
     electronic mail message that contains, or is accompanied by, 
     header information that is materially or intentionally false 
     or materially or intentionally misleading. For purposes of 
     this paragraph, header information that is technically 
     accurate but includes an originating electronic mail address 
     the access to which for purposes of initiating the message 
     was obtained by means of false or fraudulent pretenses or 
     representations shall be considered materially misleading.
       (2) Prohibition of deceptive subject headings.--It is 
     unlawful for any person to initiate the transmission to a 
     protected computer of a commercial electronic mail message 
     with a subject heading that such person

[[Page S5206]]

     knows would be likely to mislead a recipient, acting 
     reasonably under the circumstances, about a material fact 
     regarding the contents or subject matter of the message.
       (3) Inclusion of return address or comparable mechanism in 
     unsolicited commercial electronic mail.--
       (A) In general.--It is unlawful for any person to initiate 
     the transmission to a protected computer of an unsolicited 
     commercial electronic mail message that does not contain a 
     functioning return electronic mail address or other Internet-
     based mechanism, clearly and conspicuously displayed, that--
       (i) a recipient may use to submit, in a manner specified by 
     the sender, a reply electronic mail message or other form of 
     Internet-based communication requesting not to receive any 
     future unsolicited commercial electronic mail messages from 
     that sender at the electronic mail address where the message 
     was received; and
       (ii) remains capable of receiving such messages or 
     communications for no less than 30 days after the 
     transmission of the original message.
       (B) More detailed options possible.--The sender of an 
     unsolicited commercial electronic mail message may comply 
     with subparagraph (A)(i) by providing the recipient a list or 
     menu from which the recipient may choose the specific types 
     of commercial electronic mail messages the recipient wants to 
     receive or does not want to receive from the sender, if the 
     list or menu includes an option under which the recipient may 
     choose not to receive any unsolicited commercial electronic 
     mail messages from the sender.
       (C) Temporary inability to receive messages or process 
     requests.--A return electronic mail address or other 
     mechanism does not fail to satisfy the requirements of 
     subparagraph (A) if it is unexpectedly and temporarily unable 
     to receive messages or process requests due to technical or 
     capacity problems, if the problem with receiving messages or 
     processing requests is corrected within a reasonable time 
     period.
       (4) Prohibition of transmission of unsolicited commercial 
     electronic mail after objection.--If a recipient makes a 
     request to a sender, using a mechanism provided pursuant to 
     paragraph (3), not to receive some or any unsolicited 
     commercial electronic mail messages from such sender, then it 
     is unlawful--
       (A) for the sender to initiate the transmission to the 
     recipient, more than 10 business days after the receipt of 
     such request, of an unsolicited commercial electronic mail 
     message that falls within the scope of the request;
       (B) for any person acting on behalf of the sender to 
     initiate the transmission to the recipient, more than 10 
     business days after the receipt of such request, of an 
     unsolicited commercial electronic mail message that such 
     person knows or consciously avoids knowing falls within the 
     scope of the request; or
       (C) for any person acting on behalf of the sender to assist 
     in initiating the transmission to the recipient, through the 
     provision or selection of addresses to which the message will 
     be sent, of an unsolicited commercial electronic mail message 
     that the person knows, or consciously avoids knowing, would 
     violate subparagraph (A) or (B).
       (5) Inclusion of identifier, opt-out, and physical address 
     in unsolicited commercial electronic mail.--It is unlawful 
     for any person to initiate the transmission of any 
     unsolicited commercial electronic mail message to a protected 
     computer unless the message provides--
       (A) clear and conspicuous identification that the message 
     is an advertisement or solicitation;
       (B) clear and conspicuous notice of the opportunity under 
     paragraph (3) to decline to receive further unsolicited 
     commercial electronic mail messages from the sender; and
       (C) a valid physical postal address of the sender.
       (b) Prohibition of Transmission of Unlawful Unsolicited 
     Commercial Electronic Mail to Certain Harvested Electronic 
     Mail Addresses.--
       (1) In general.--It is unlawful for any person to initiate 
     the transmission, to a protected computer, of an unsolicited 
     commercial electronic mail message that is unlawful under 
     subsection (a), or to assist in the origination of such a 
     message through the provision or selection of addresses to 
     which the message will be sent, if such person knows that, or 
     acts with reckless disregard as to whether--
       (A) the electronic mail address of the recipient was 
     obtained, using an automated means, from an Internet website 
     or proprietary online service operated by another person; or
       (B) the website or proprietary online service from which 
     the address was obtained included, at the time the address 
     was obtained, a notice stating that the operator of such a 
     website or proprietary online service will not give, sell, or 
     otherwise transfer addresses maintained by such site or 
     service to any other party for the purpose of initiating, or 
     enabling others to initiate, unsolicited electronic mail 
     messages.
       (2) Disclaimer.--Nothing in this subsection creates an 
     ownership or proprietary interest in such electronic mail 
     addresses.
       (c) Compliance Procedures.--An action for violation of 
     paragraph (2), (3), (4), or (5) of subsection (a) may not 
     proceed if the person against whom the action is brought 
     demonstrates that --
       (1) the person has established and implemented, with due 
     care, reasonable practices and procedures to effectively 
     prevent violations of such paragraph; and
       (2) the violation occurred despite good faith efforts to 
     maintain compliance with such practices and procedures.

     SEC. 6. ENFORCEMENT BY FEDERAL TRADE COMMISSION.

       (a) Violation Is Unfair or Deceptive Act or Practice.--
     Except as provided in subsection (b), this Act shall be 
     enforced by the Commission as if the violation of this Act 
     were an unfair or deceptive act or practice proscribed under 
     section 18(a)(1)(B) of the Federal Trade Commission Act (15 
     U.S.C. 57a(a)(1)(B)).
       (b) Enforcement by Certain Other Agencies.--Compliance with 
     this Act shall be enforced--
       (1) under section 8 of the Federal Deposit Insurance Act 
     (12 U.S.C. 1818), in the case of--
       (A) national banks, and Federal branches and Federal 
     agencies of foreign banks, and any subsidiaries of such 
     entities (except brokers, dealers, persons providing 
     insurance, investment companies, and investment advisers), by 
     the Office of the Comptroller of the Currency;
       (B) member banks of the Federal Reserve System (other than 
     national banks), branches and agencies of foreign banks 
     (other than Federal branches, Federal agencies, and insured 
     State branches of foreign banks), commercial lending 
     companies owned or controlled by foreign banks, organizations 
     operating under section 25 or 25A of the Federal Reserve Act 
     (12 U.S.C. 601 and 611), and bank holding companies and their 
     nonbank subsidiaries or affiliates (except brokers, dealers, 
     persons providing insurance, investment companies, and 
     investment advisers), by the Board;
       (C) banks insured by the Federal Deposit Insurance 
     Corporation (other than members of the Federal Reserve 
     System) insured State branches of foreign banks, and any 
     subsidiaries of such entities (except brokers, dealers, 
     persons providing insurance, investment companies, and 
     investment advisers), by the Board of Directors of the 
     Federal Deposit Insurance Corporation; and
       (D) savings associations the deposits of which are insured 
     by the Federal Deposit Insurance Corporation, and any 
     subsidiaries of such savings associations (except brokers, 
     dealers, persons providing insurance, investment companies, 
     and investment advisers), by the Director of the Office of 
     Thrift Supervision;
       (2) under the Federal Credit Union Act (12 U.S.C. 1751 et 
     seq.) by the Board of the National Credit Union 
     Administration with respect to any Federally insured credit 
     union, and any subsidiaries of such a credit union;
       (3) under the Securities Exchange Act of 1934 (15 U.S.C. 
     78a et seq.) by the Securities and Exchange Commission with 
     respect to any broker or dealer;
       (4) under the Investment Company Act of 1940 (15 U.S.C. 
     80a-1 et seq.) by the Securities and Exchange Commission with 
     respect to investment companies;
       (5) under the Investment Advisers Act of 1940 (15 U.S.C. 
     80b-1 et seq.) by the Securities and Exchange Commission with 
     respect to investment advisers registered under that Act;
       (6) under State insurance law in the case of any person 
     engaged in providing insurance, by the applicable State 
     insurance authority of the State in which the person is 
     domiciled, subject to section 104 of the Gramm-Bliley-Leach 
     Act (15 U.S.C. 6701);
       (7) under part A of subtitle VII of title 49, United States 
     Code, by the Secretary of Transportation with respect to any 
     air carrier or foreign air carrier subject to that part;
       (8) under the Packers and Stockyards Act, 1921 (7 U.S.C. 
     181 et seq.) (except as provided in section 406 of that Act 
     (7 U.S.C. 226, 227)), by the Secretary of Agriculture with 
     respect to any activities subject to that Act;
       (9) under the Farm Credit Act of 1971 (12 U.S.C. 2001 et 
     seq.) by the Farm Credit Administration with respect to any 
     Federal land bank, Federal land bank association, Federal 
     intermediate credit bank, or production credit association; 
     and
       (10) under the Communications Act of 1934 (47 U.S.C. 151 et 
     seq.) by the Federal Communications Commission with respect 
     to any person subject to the provisions of that Act.
       (c) Exercise of Certain Powers.--For the purpose of the 
     exercise by any agency referred to in subsection (b) of its 
     powers under any Act referred to in that subsection, a 
     violation of this Act is deemed to be a violation of a 
     requirement imposed under that Act. In addition to its powers 
     under any provision of law specifically referred to in 
     subsection (b), each of the agencies referred to in that 
     subsection may exercise, for the purpose of enforcing 
     compliance with any requirement imposed under this Act, any 
     other authority conferred on it by law.
       (d) Actions by the Commission.--The Commission shall 
     prevent any person from violating this Act in the same 
     manner, by the same means, and with the same jurisdiction, 
     powers, and duties as though all applicable terms and 
     provisions of the Federal Trade Commission Act (15 U.S.C. 41 
     et seq.) were incorporated into and made a part of this Act. 
     Any entity that violates any provision of that subtitle is 
     subject to the penalties

[[Page S5207]]

     and entitled to the privileges and immunities provided in the 
     Federal Trade Commission Act in the same manner, by the same 
     means, and with the same jurisdiction, power, and duties as 
     though all applicable terms and provisions of the Federal 
     Trade Commission Act were incorporated into and made a part 
     of that subtitle.
       (e) Enforcement by States.--
       (1) Civil action.--In any case in which the attorney 
     general of a State has reason to believe that an interest of 
     the residents of that State has been or is threatened or 
     adversely affected by any person engaging in a practice that 
     violates section 5 of this Act, the State, as parens patriae, 
     may bring a civil action on behalf of the residents of the 
     State in a district court of the United States of appropriate 
     jurisdiction or in any other court of competent 
     jurisdiction--
       (A) to enjoin further violation of section 5 of this Act by 
     the defendant; or
       (B) to obtain damages on behalf of residents of the State, 
     in an amount equal to the greater of--
       (i) the actual monetary loss suffered by such residents; or
       (ii) the amount determined under paragraph (2).
       (2) Statutory damages.--
       (A) In general.--For purposes of paragraph (1)(B)(ii), the 
     amount determined under this paragraph is the amount 
     calculated by multiplying the number of willful, knowing, or 
     negligent violations by an amount, in the discretion of the 
     court, of up to $10 (with each separately addressed unlawful 
     message received by such residents treated as a separate 
     violation). In determining the per-violation penalty under 
     this subparagraph, the court shall take into account the 
     degree of culpability, any history of prior such conduct, 
     ability to pay, the extent of economic gain resulting from 
     the violation, and such other matters as justice may require.
       (B) Limitation.--For any violation of section 5 (other than 
     section 5(a)(1)), the amount determined under subparagraph 
     (A) may not exceed $500,000, except that if the court finds 
     that the defendant committed the violation willfully and 
     knowingly, the court may increase the limitation established 
     by this paragraph from $500,000 to an amount not to exceed 
     $1,500,000.
       (3) Attorney fees.--In the case of any successful action 
     under paragraph (1), the State shall be awarded the costs of 
     the action and reasonable attorney fees as determined by the 
     court.
       (4) Rights of Federal regulators.--The State shall serve 
     prior written notice of any action under paragraph (1) upon 
     the Federal Trade Commission or the appropriate Federal 
     regulator determined under subsection (b) and provide the 
     Commission or appropriate Federal regulator with a copy of 
     its complaint, except in any case in which such prior notice 
     is not feasible, in which case the State shall serve such 
     notice immediately upon instituting such action. The Federal 
     Trade Commission or appropriate Federal regulator shall have 
     the right--
       (A) to intervene in the action;
       (B) upon so intervening, to be heard on all matters arising 
     therein;
       (C) to remove the action to the appropriate United States 
     district court; and
       (D) to file petitions for appeal.
       (5) Construction.--For purposes of bringing any civil 
     action under paragraph (1), nothing in this Act shall be 
     construed to prevent an attorney general of a State from 
     exercising the powers conferred on the attorney general by 
     the laws of that State to--
       (A) conduct investigations;
       (B) administer oaths or affirmations; or
       (C) compel the attendance of witnesses or the production of 
     documentary and other evidence.
       (6) Venue; service of process.--
       (A) Venue.--Any action brought under paragraph (1) may be 
     brought in the district court of the United States that meets 
     applicable requirements relating to venue under section 1391 
     of title 28, United States Code.
       (B) Service of process.--In an action brought under 
     paragraph (1), process may be served in any district in which 
     the defendant--
       (i) is an inhabitant; or
       (ii) maintains a physical place of business.
       (7) Limitation on state action while federal action is 
     pending.--If the Commission or other appropriate Federal 
     agency under subsection (b) has instituted a civil action or 
     an administrative action for violation of this Act, no State 
     attorney general may bring an action under this subsection 
     during the pendency of that action against any defendant 
     named in the complaint of the Commission or the other agency 
     for any violation of this Act alleged in the complaint.
       (f) Action by Provider of Internet Access Service.--
       (1) Action authorized.--A provider of Internet access 
     service adversely affected by a violation of section 5 may 
     bring a civil action in any district court of the United 
     States with jurisdiction over the defendant, or in any other 
     court of competent jurisdiction, to--
       (A) enjoin further violation by the defendant; or
       (B) recover damages in an amount equal to the greater of--
       (i) actual monetary loss incurred by the provider of 
     Internet access service as a result of such violation; or
       (ii) the amount determined under paragraph (2).
       (2) Statutory damages.--
       (A) In general.--For purposes of paragraph (1)(B)(ii), the 
     amount determined under this paragraph is the amount 
     calculated by multiplying the number of willful, knowing, or 
     negligent violations by an amount, in the discretion of the 
     court, of up to $10 (with each separately addressed unlawful 
     message carried over the facilities of the provider of 
     Internet access service or sent to an electronic mail address 
     obtained from the provider of Internet access service in 
     violation of section 5(b) treated as a separate violation). 
     In determining the per-violation penalty under this 
     subparagraph, the court shall take into account the degree of 
     culpability, any history of prior such conduct, ability to 
     pay, the extent of economic gain resulting from the 
     violation, and such other matters as justice may require.
       (B) Limitation.--For any violation of section 5 (other than 
     section 5(a)(1)), the amount determined under subparagraph 
     (A) may not exceed $500,000, except that if the court finds 
     that the defendant committed the violation willfully and 
     knowingly, the court may increase the limitation established 
     by this paragraph from $500,000 to an amount not to exceed 
     $1,500,000.
       (3) Attorney fees.--In any action brought pursuant to 
     paragraph (1), the court may, in its discretion, require an 
     undertaking for the payment of the costs of such action, and 
     assess reasonable costs, including reasonable attorneys' 
     fees, against any party.

     SEC. 7. EFFECT ON OTHER LAWS.

       (a) Federal Law.--
       (1) Nothing in this Act shall be construed to impair the 
     enforcement of section 223 or 231 of the Communications Act 
     of 1934 (47 U.S.C. 223 or 231, respectively), chapter 71 
     (relating to obscenity) or 110 (relating to sexual 
     exploitation of children) of title 18, United States Code, or 
     any other Federal criminal statute.
       (2) Nothing in this Act shall be construed to affect in any 
     way the Commission's authority to bring enforcement actions 
     under FTC Act for materially false or deceptive 
     representations in commercial electronic mail messages.
       (b) State Law.--
       (1) In general.--This Act supersedes any State or local 
     government statute, regulation, or rule regulating the use of 
     electronic mail to send commercial messages.
       (2) Exceptions.--Except as provided in paragraph (3), this 
     Act does not supersede or pre-empt--
       (A) State trespass, contract, or tort law or any civil 
     action thereunder; or
       (B) any provision of Federal, State, or local criminal law 
     or any civil remedy available under such law that relates to 
     acts of fraud or theft perpetrated by means of the 
     unauthorized transmission of commercial electronic mail 
     messages.
       (3) Limitation on exceptions.--Paragraph (2) does not apply 
     to a State or local government statute, regulation, or rule 
     that directly regulates unsolicited commercial electronic 
     mail and that treats the mere sending of unsolicited 
     commercial electronic mail in a manner that complies with 
     this Act as sufficient to constitute a violation of such 
     statute, regulation, or rule or to create a cause of action 
     thereunder.
       (c) No Effect on Policies of Providers of Internet Access 
     Service.--Nothing in this Act shall be construed to have any 
     effect on the lawfulness or unlawfulness, under any other 
     provision of law, of the adoption, implementation, or 
     enforcement by a provider of Internet access service of a 
     policy of declining to transmit, route, relay, handle, or 
     store certain types of electronic mail messages.

     SEC. 8. STUDY OF EFFECTS OF UNSOLICITED COMMERCIAL ELECTRONIC 
                   MAIL.

       (a) In general.--Not later than 24 months after the date of 
     the enactment of this Act, the Commission, in consultation 
     with the Department of Justice and other appropriate 
     agencies, shall submit a report to the Congress that provides 
     a detailed analysis of the effectiveness and enforcement of 
     the provisions of this Act and the need (if any) for the 
     Congress to modify such provisions.
       (b) Required Analysis.--The Commission shall include in the 
     report required by subsection (a) an analysis of the extent 
     to which technological and marketplace developments, 
     including changes in the nature of the devices through which 
     consumers access their electronic mail messages, may affect 
     the practicality and effectiveness of the provisions of this 
     Act.

     SEC. 9 SEPARABILITY.

       If any provision of this Act or the application thereof to 
     any person or circumstance is held invalid, the remainder of 
     this Act and the application of such provision to other 
     persons or circumstances shall not be affected.

     SEC. 10. EFFECTIVE DATE.

       The provisions of this Act shall take effect 120 days after 
     the date of the enactment of this Act.

  Mr. WYDEN. Mr. President, I am pleased today to be teaming up again 
with my good friend Senator Burns to reintroduce legislation to address 
the rising tide of unsolicited commercial e-mail, commonly known as 
``spam.''
  In the last Congress, our anti-spam legislation was approved 
unanimously by the Senate Commerce Committee. Since that time--nearly a 
year ago now--the problem of spam has been increasing at an alarming 
rate. Roughly

[[Page S5208]]

40 percent of all e-mail traffic in the United States is spam, up from 
8 percent in late 2001 and nearly doubling in the past six months. By 
2004, according to some estimates, a typical company that fails to take 
defensive action could find that over 50 percent of its e-mail messages 
will be spam. This isn't just annoying, it's costly: one consulting 
group has estimated that spam will cost U.S. organizations more than 
$10 billion this year, due to expenses for anti-spam equipment and 
manpower and lost productivity.
  If nothing is done, the situation is only likely to get worse. The 
fundamental problem--and what makes spam different from other types of 
marketing--is that it is so cheap to send huge volumes of messages. 
With the stroke of a key, the spammer can let fly a massive torrent of 
e-mails. And since the sender doesn't pay any per-message postage, the 
incentive is to send as many as possible. The cost of all these extra 
messages is borne by the Internet service providers, ISPs, and the 
recipients, not by the sender. So as far as the spammer is concerned, 
the sky is the limit.
  Anyone who uses e-mail should be deeply concerned about this trend. 
In a few short years, e-mail quickly went from a novelty to a core 
medium of communication for millions of Americans. They came to rely on 
it daily, for business and personal communications alike. But just as 
quickly as e-mail rose to prominence, its usefulness could dwindle--
buried under an avalanche of endless ``Get Rich Quick,'' ``Lose Weight 
Fast,'' and offensive pornographic marketing pitches. As consumers grow 
frustrated with bloated in-boxes, and as ISP networks and e-commerce 
websites are slowed by mounting junk e-mail traffic jams, enthusiasm 
for the entire medium of e-mail and e-commerce could sour.
  Right now, e-mail users and ISPs are trying to manage the problem as 
best they can. They use filtering software, or lists of known spammers, 
or sign up for special anti-spam services. But these tactics can be 
burdensome, costly, and only partially effective. The fact is, existing 
laws do not provide sufficient tools. More help is needed.
  Many States have moved to address the issue. But e-mail is not a 
medium that respects, or even recognizes, State borders. Indeed, e-mail 
addresses tell nothing about which State the user is located in, so the 
sender and recipient of an e-mail message may have no clue where the 
other is located. Therefore, this is one area where a State-by-State 
patchwork of rules makes no sense. It is time for a nationwide 
approach.
  That is why Senator Burns and I are reintroducing the ``Controlling 
the Assault of Non-Solicited Pornography and Marketing Act''--the CAN 
SPAM Act, for short. This bipartisan legislation says that if you want 
to send unsolicited marketing e-mail, you've got to play by a set of 
rules--rules that allow the recipient to see where the messages are 
coming from, and to tell the sender to stop. The basic goal is simple: 
give the consumer more control.
  Specifically, the bill would prohibit the use of falsified or 
deceptive headers or subject lines, so that consumers will be able to 
identify the true source of the message. A sender of unsolicited 
marketing e-mail would also be required to provide the recipient with a 
return address or similar mechanism that can be used to tell the 
sender, ``no more.'' And once a consumer says ``no more,'' a sender 
would be required to honor that request. Senders of unsolicited 
commercial messages would also be required to include a clear 
notification that the message is an advertisement or solicitation, and 
a valid physical postal address.
  The bill includes strong enforcement provisions to ensure compliance. 
Spammers that intentionally disguise their identities would be subject 
to misdemeanor criminal penalties. The Federal Trade Commission would 
have authority to impose civil fines. State attorneys general would be 
able to bring suit on behalf of the citizens of their states. And ISPs 
would be able to bring suit to keep unlawful spam off their networks. 
In all cases, particularly high penalties would be available for true 
``bad actors''--the shady, high-volume spammers who have no intention 
of behaving in a lawful and responsible manner.
  Our goal here is not to discourage legitimate online communications 
between businesses and their customers. Senator Burns and I have no 
intention of interfering with a company's ability to use e-mail to 
inform customers of warranty information, provide account holders with 
monthly account statements, and so forth. Rather, we want to go after 
those unscrupulous individuals who use e-mail in an annoying and 
misleading fashion. I believe this bill strikes that important balance.
  Senator Burns and I have been at this for three years now, and have 
worked with many different groups in shaping the legislation. We 
believe we have made real progress in addressing some of the legitimate 
concerns that were raised about previous versions of the bill. 
Naturally, there are interested parties who have additional ideas for 
measures they would like to see. We will be happy to continue to work 
with them, and I would also point out that the bill calls for a study 
to evaluate this initial Federal step against spam and to determine 
whether further provisions are needed. But the bill we are introducing 
today offers a workable, common-sense approach that should be 
politically viable this year.
  I am pleased that Senators Breaux, Landrieu, Schumer, and Thomas are 
joining Senator Burns and me in cosponsoring this legislation. I urge 
the rest of my Senate colleagues to join with us on moving it forward 
as promptly as possible, so that the Senate won't still be debating the 
issue, with no action taken, several years from now.
                                 ______
                                 
      By Mr. Smith.
  S. 879. A bill to amend the Internal Revenue Code of 1986 to increase 
and extend the special depreciation allowance, and for other purpose; 
to the Committee on Finance.
  Mr. SMITH. Mr. President, I rise today to introduce the Economic 
Stimulus Act of 2003, legislation that will allow a 50 percent bonus 
depreciation over a 5 year period. Last year I was proud to introduce 
and pass a 30 percent bonus depreciation incentive as part of 
legislation signed into law in March 2002. We had great bipartisan 
support on this issue and I hope that similar action will take place 
during consideration of this year's tax bill.
  I introduce the Economic Stimulus Act of 2003 in order to build on 
last year's effort by both increasing that bonus to 50 percent and 
extending it through 2008. Our economy clearly needs a boost, and this 
provision will complement many of the provisions in President Bush's 
economic growth package.
  Recently, U.S. Department of Commerce data revealed that private 
investment in high tech equipment ended it's decline as this provision 
went into effect last year and has begun to increase modestly in the 
past year. A significant increase in that bonus along with an extension 
of its effective date can only boost business investment even further. 
By extending the effective date past next year, businesses will be able 
to better plan for sustained increases in technology investment.
  This legislation will provide an immediate and broad stimulus to the 
U.S. economy by encouraging business investment. In my own state of 
Oregon I can look to both heavy industry and the hi tech sector and see 
the real return this legislation will have on our economy. Heavy 
industry in my state will have an ability to save family-wage jobs and 
put additional employees to work in Oregon. For example, the rail 
supply industry has been hard hit, and though there is a need for 
investment, there has been a reluctance to invest significant sums that 
are necessary to sustain this industry. Bonus depreciation provisions 
is an additional incentive that will lead institutional investors, 
leasing companies, shippers and railroads to invest in new rail 
equipment.
  In Oregon's high-tech sector the strong increase in the first year 
depreciation amount will have a real and positive impact on the 
investment environment for high-tech equipment, such as computer 
hardware, software and broadband network infrastructure. This 
legislation will definitely stimulate the demand for the software and 
the whole high-tech sector. In Oregon, the hi-tech sector has been a 
major component of economic growth and I am intent that this engine of 
growth continue to provide stimulus to the economy.

[[Page S5209]]

  I note that there are a myriad of bonus depreciation proposals out 
there. Most don't provide enough lead time however to make real and 
substantive business decisions. The current downturn is caused in part 
by a decline in business investment. So what kind of investment can be 
stimulated by a year-long depreciation incentive? It probably gives 
business people time to buy a chair and some new wastebaskets.
  But a year is not enough time to start a major project that could 
employ thousands of people. It doesn't allow time to build heavy 
equipment, modernize a lumber mill, revamp a corporate computer system, 
repair a railbed, or construct an airplane. It doesn't allow enough 
time to obtain building permits, perform environmental reviews, or 
complete architectural or engineering studies.
  We need to create a booming economy not just for today, but for the 
next several years. So I must emphasize that short depreciation 
proposals lack economic weight.
  Bonus depreciation is probably the best idea of any stimulus 
proposal. I ask that all my colleagues consider and support the 
Economic Stimulus Act of 2003. I ask unanimous consent that the text of 
this bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 879

       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 ``Economic Stimulus Act of 
     2003''.

     SEC. 2. EXPANSION OF SPECIAL DEPRECIATION ALLOWANCE.

       (a) In General.--Subsection (k) of section 168 (relating to 
     accelerated cost recovery system) is amended--
       (1) by adding at the end of paragraph (1) the following new 
     flush sentence:
     ``In the case of any qualified property acquired by the 
     taxpayer pursuant to a written binding contract which was 
     entered into after the date of the enactment of the Economic 
     Stimulus Act of 2003, subparagraph (A) shall be applied by 
     substituting `50 percent' for `30 percent'.'',
       (2) by redesignating subclauses (III) and (IV) of paragraph 
     (2)(A)(i) as subclauses (IV) and (V), respectively,
       (3) by inserting after subclause (II) of paragraph 
     (2)(A)(i) the following new subclause:

       ``(III) which is a motion picture film or videotape (as 
     defined in section 167(f)(1)(B) for which a deduction is 
     allowable under section 167 without regard to this 
     subsection,'',

       (4) by striking clause (iv) of paragraph (2)(A) and 
     inserting the following new clause:
       ``(iv) which is placed in service by the taxpayer--

       ``(I) except as provided in subclauses (II) and (III), 
     before April 1, 2010,
       ``(II) in the case of transportation property described in 
     subparagraph (B), before the later of the date which is 90 
     days after delivery of such property or which is 10 years 
     after the date of the enactment of the Economic Stimulus Act 
     of 2003, or
       ``(III) in the case of other property described in 
     subparagraph (B), before January 1, 2011.'',

       (5) by inserting ``transportation property which meets the 
     requirements of clauses (i), (ii), and (iii) of subparagraph 
     (A), or other'' before ``property'' in the matter preceding 
     subclause (I) of paragraph (2)(B)(i),
       (6) by striking ``production before September 11, 2004.'' 
     in paragraph (2)(B)(ii) and inserting ``production--

       ``(I) with respect to transportation property, before the 
     earlier of the date which is 90 days after delivery of such 
     property or which is 10 years after the date of the enactment 
     of the Economic Stimulus Act of 2003, and
       ``(II) with respect to other property, before January 1, 
     2010.'',

       (7) by striking ``September 11, 2004'' in the heading of 
     clause (ii) of paragraph (2)(B) and inserting ``certain'',
       (8) by striking ``subparagraph'' in paragraph (2)(B)(iii) 
     and inserting ``paragraph'',
       (9) by striking ``September 11, 2004'' each place it 
     appears in the subsection and inserting ``January 1, 2010'', 
     and
       (10) by striking ``September 11, 2004'' in the heading 
     thereof and inserting ``January 1, 2010''.
       (b) Conforming Amendments.--
       (1) The heading for clause (i) of section 1400L(b)(2)(C) of 
     the Internal Revenue Code of 1986 is amended by striking ``30 
     percent additional'' and inserting ``Additional''.
       (2) Section 1400L(b)(2)(D) of such Code is amended by 
     inserting ``(as in effect on the day after the date of the 
     enactment of this section)'' after ``section 168(k)(2)(D)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property acquired after the date of the 
     enactment of this Act, in taxable years ending after such 
     date.
                                 ______
                                 
      By Mr. BINGAMAN (for himself, Mr. Cochran, Mrs. Lincoln, Mr. 
        Hatch, Mr. Jeffords, Ms. Landrieu, and Mr. Dayton):
  S. 881. A bill to amend title XVIII of the Social Security Act to 
establish a minimum geographic cost-of-practice index value for 
physicians' services furnished under the Medicare program; to the 
Committee on Finance.
  Mr. Bingaman. Mr. President, the legislation I am introducing today 
with Senators Cochran, Lincoln, Hatch, Jeffords, Landrieu, and Dayton 
entitled the ``Rural Equity Payment Index Reform Act of 2003'' is 
designed to reduce the work payment inequity between urban and rural 
localities under the Medicare physician fee schedule. This legislation 
is a companion bill to HR 33, introduced by Representative Doug 
Bereuter, which now has over 65 House cosponsors.
  In my own State of New Mexico, recruitment and retention of 
physicians in rural areas is an ongoing problem, which is contributed 
to, in a part, by inequities in payments these physicians receive in 
comparison to their urban counterparts. With only 170 physicians per 
100,000 people, New Mexico ranks well behind the national average with 
regard to primary care and specialist physicians.
  Lack of adequate reimbursement, in the face of increasing costs, is a 
critical factor leading to the shortage of physician services in my 
state, and in other rural areas. The State of New Mexico ranks 32nd in 
the nation in terms of Medicare reimbursement, as defined by the 
geographic adjustment factor used to set reimbursement rates. Yet, an 
office visit to a rural physician is no different in time, effort, or 
workload compared to an office visit to an urban physician. 
Geographically adjusting the quantifiable workload simply makes no 
sense; physician work should be valued equally, irrespective of where a 
physician works.
  This inequity unfairly ``punishes'' physicians in non-metropolitan 
areas, where there are often proportionately larger populations of 
Medicare beneficiaries. In effect, the rural areas subsidize healthcare 
in urban areas, while they struggle to attract health care 
professionals. Since Medicare beneficiaries pay into the program on the 
basis of income and wages, and beneficiaries pay the same premium for 
part B services, these inequitable physician fee payments result in 
substantial cross-subsidies from people living in low payment States to 
people living in higher payment States.
  Targeted efforts to provide relief to rural doctors in low payment 
localities with more equitable payments would improve access to primary 
and tertiary services. The bill I am introducing would lessen the 
disparity that currently exists between rural and urban areas. It 
gradually phases in a floor that upwardly adjusts reimbursement rates 
for rural providers, without lowering the reimbursement for urban 
providers, so that the discrepancy will progressively be corrected.
  This bill would phase-in a floor of 1.000 for the Medicare 
``physician work adjuster'', thereby raising all localities with a work 
adjuster below 1.000 to that level. This proposed change would be put 
in place without regard to the budget neutrality agreement in the 
present law. The phase-in approach softens the budgetary implications 
by spreading it out over four years.
  It is estimated that payment rates to New Mexico physicians will 
increase by 2.8 million dollars over a 4-year period. In my state, this 
represents an important increase in reimbursements for physicians, but 
it also represents a tangible acknowledgement of the hard work and 
efforts that our physicians commit to patient care, particularly rural 
based physicians.
  Some of the following organizations, which have expressed support for 
this legislation, include the National Rural Health Association, the 
American College of Physicians/American Society of Internal Medicine, 
and the American Physical Therapy association.
  I ask unanimous consent that letters of support and the text of the 
bill be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 881

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

     SECTION 1. SHORT TITLE; FINDINGS.

       (a) Short Title.--This Act may be cited as the ``Rural 
     Equity Payment Index Reform Act of 2003''.

[[Page S5210]]

       (b) Findings.--Congress makes the following findings:
       (1) Variations in the physician work adjustment factors 
     under section 1848(e) of the Social Security Act (42 U.S.C. 
     1395w-4w(e)) result in a physician work payment inequity 
     between urban and rural localities under the medicare 
     physician fee schedule.
       (2) The amount the medicare program spends on its 
     beneficiaries varies substantially across the country, far 
     more than can be accounted for by differences in the cost of 
     living or differences in health status.
       (3) Since beneficiaries and others pay into the program on 
     the basis of income and wages and beneficiaries pay the same 
     premium for part B services, these payments result in 
     substantial cross-subsidies from people living in low payment 
     States with conservative practice styles or beneficiary 
     preferences to people living in higher payment States with 
     aggressive practice styles or beneficiary preferences.
       (4) Congress has been mindful of these variations when it 
     comes to capitation payments made to managed care plans under 
     the Medicare+Choice program and has put in place floors that 
     increase monthly payments by more than one-third in some of 
     the lowest payment counties over what would otherwise occur. 
     But this change addresses only a very small fraction of 
     medicare beneficiaries who are presently enrolled in 
     Medicare+Choice plans operating in low payment counties.
       (5) Unfortunately, Congress has only begun to address the 
     underlying problem of substantial geographic variations in 
     fee-for-service spending under traditional medicare.
       (6) Improvements in rural hospital payment systems under 
     the medicare program help to reduce aggregate per capita 
     payment variation as rural hospitals are in large part 
     located in low payment counties.
       (7) Many rural communities have great difficulty attracting 
     and retaining physicians and other skilled health 
     professionals.
       (8) Targeted efforts to provide relief to rural doctors in 
     low payment localities would further reduce variation by 
     improving access to primary and tertiary services along with 
     more equitable payment.
       (9) Geographic adjustment factors in the medicare program's 
     resource-based relative value scale unfairly suppress fee-
     for-service payments to rural providers.
       (10) Actual costs are not presently being measured 
     accurately and payments do not reflect the costs of providing 
     care.
       (11) Unless something is done about medicare payment in 
     rural areas, as the baby boom cohort ages into medicare, the 
     financial demands on rural communities to subsidize care for 
     their aged and disabled medicare beneficiaries will progress 
     from difficult to impossible in another 10 years.
       (12) The impact on rural health care infrastructure will be 
     first felt in economically depressed rural areas where the 
     ability to shift costs is already limited.

     SEC. 2. PHYSICIAN FEE SCHEDULE WAGE INDEX REVISION.

       Section 1848(e)(1) of the Social Security Act (42 U.S.C. 
     1395w-4(e)(1)) is amended--
       (1) in subparagraph (A), by striking ``subparagraphs (B) 
     and (C)'' and inserting ``subparagraphs (B), (C), and (E)''; 
     and
       (2) by adding at the end the following new subparagraph:
       ``(E) Floor for work geographic indices.--
       ``(i) In general.--Notwithstanding the work geographic 
     index otherwise calculated under subparagraph (A)(iii), in no 
     case may the work geographic index applied for payment under 
     this section be less than--

       ``(I) 0.976 for services furnished during 2004;
       ``(II) 0.987 for services furnished during 2005;
       ``(III) 0.995 for services furnished during 2006; and
       ``(IV) 1.000 for services furnished during 2007 and 
     subsequent years.

       ``(ii) Exemption from limitation on annual adjustments.--
     The increase in expenditures attributable to clause (i) shall 
     not be taken into account in applying subsection 
     (c)(2)(B)(ii)(II).''.
                                  ____


               NRHA Supports ``Equal Pay for Equal Work''

       Washington, DC., Jan. 7.--The National Rural Health 
     Association (NRHA) today strongly endorsed legislation 
     introduced by Representative Doug Bereuter (R.-Neb) that 
     would provide rural physicians with Medicare payments closer 
     to those of their urban counterparts. The Rural Equity 
     Payment Index Reform Act addresses the little known fact that 
     the federal government pays rural doctors at a lower rate.
       ``An office visit to a rural physician is no different than 
     an office visit to an urban physician,'' NRHA President Wayne 
     Myers, M.D., said. ``The idea that physicians are reimbursed 
     for their work and their skills at a lower rate simply on the 
     basis that they choose to practice in a rural area and serve 
     our rural communities is completely ludicrous.''
       The Bereuter bill would lessen the disparity that currently 
     exists between urban and rural areas. By gradually phasing in 
     a floor that upwardly adjusts reimbursement rates for rural 
     providers, without lowering the reimbursement in urban areas, 
     the discrepancy in payment will progressively be corrected. 
     ``These health care providers put as much or even more time, 
     skill and intensity into a patient visit as their urban 
     counterparts,'' Rep. Bereuter said, ``yet they are paid less 
     for their work under the Medicare program. This is a formula 
     that is punishing non-metropolitan areas.''
       Under the current Medicare physician payment formula, 
     residents of non-metropolitan areas essentially subsidize the 
     delivery of health care in metropolitan areas. Even though 
     rural areas tend to have larger populations of Medicare 
     beneficiaries, they are subsidizing health care in urban 
     areas, while their own communities are struggling to attract 
     health care professionals.
       ``This is a top priority issue for the NRHA,'' Myers said. 
     ``In fact, this disparity in health care is among the basic 
     reasons the NRHA exists. ``For far too long, rural American 
     health care has been overlooked in Washington. We applaud 
     Congressman Bereuter for his efforts and look forward to 
     working with him to ensure rural physicians--and rural 
     residents alike--receive an equitable deal.''
       The NRHA is a national nonprofit membership organization 
     that provides leadership on rural health issues. The 
     association's mission is to improve the health of rural 
     Americans and to provide leadership on rural health issues 
     through advocacy, communications, education and research. The 
     NRHA membership is made up of a diverse collection of 
     individuals and organizations.
                                  ____



                        American Physical Therapy Association,

                                                   March 25, 2003.
     Hon. Doug Bereuter (R-NE),
     Rayburn House Office Building,
     Washington, DC.
       Dear congressman Bereuter: The American Physical Therapy 
     Association (APTA) would like to express its appreciation for 
     your legislation to correct an inequity in Medicare payments 
     to rural health care providers. APTA strongly supports HR 33, 
     The Rural Equity Payment Index Reform (REPaIR) Act. This 
     legislation is a positive step to ensuring improved access to 
     quality health care services, including those delivered by 
     licensed physical therapists, in rural America. The current 
     inequity of payment to health care providers under the 
     Medicare physician fee schedule and its Geographic Medical 
     Practice Index needs to be corrected to ensure that qualified 
     providers continue to serve the needs of our rural 
     communities.
       Physical therapists are highly qualified and recognized 
     providers under Medicare who bill for their services under 
     the Medicare Physician Fee Schedule. Your legislation (HR 33) 
     would improve access and payment for appropriate physical 
     therapy services in rural and underserved areas. This 
     legislation would also go a long way to attract and retain 
     physical therapist to consider rural areas for practice and 
     service. Access to qualified health care providers is a 
     growing problem in rural America and your legislation is one 
     of many steps to reverse this trend.
       We applaud your dedication to rural health and express our 
     support that Congress pass HR 33, The Rural Equity Payment 
     Index Reform (REPaIR) Act in this Congress. If you have 
     questions, please feel free to contact Justin Moore at 703-
     706-3162 or [email protected].
           Sincerely,
                                                   G. David Mason,
                               Vice President, Government Affairs.
                                 ______
                                 
      By Mr. BAUCUS (for himself and Mr. Grassley):
  S. 882. A bill to amend the Internal Revenue Code of 1986 to provide 
improvements in tax administration and taxpayer safeguards, and for 
other purposes; to the Committee on Finance.
  Mr. GRASSLEY. Mr. President, today we are introducing the Tax 
Administration Good Government Act.
  The legislation contains five major components. First, it provides 
additional safeguards for taxpayers. Second, the legislation 
significantly simplifies the current interest and penalty regimes. 
Third, the Act also includes the proposals passed out of the Finance 
Committee on April 2, 2003 and included in a bill introduced by 
Senators Hatch and Breaux to modernize the United States Tax Court.
  Fourth, our legislation also includes several provisions, some of 
which were requested by the Treasury Department and the Joint Committee 
on Taxation, to strike an appropriate balance in protecting taxpayer 
confidentiality through disclosure reforms. Finally, the legislation 
takes a small, but important step toward simplification of the tax code 
through the elimination of obsolete provisions.
  We have worked closely with the Treasury Department, the Internal 
Revenue Service, the National Taxpayer Advocate and the Joint Committee 
on Taxation to develop this package of proposals to promote good 
government in the administration of our tax code.
  Congress's responsibility for the tax system does not stop after we 
pass tax law changes. We have an oversight responsibility to ensure 
that taxpayer rights are protected, that our tax laws are not 
administered counter to Congressional intent, that the judicial

[[Page S5211]]

body with primary jurisdiction over the tax laws has the tools 
necessary to provide independent review of controversies between 
taxpayers and the Internal Revenue Service, and to take steps to 
simplify the tax code whenever possible.
  It is our intention to pass a package of tax administration good 
government proposals out of the Finance Committee in the coming months. 
We urge our colleagues to support this important legislation.
  We also submit for the Record a more detailed description of the 
specific provisions included in the Tax Administration Good Government 
Act.
  I ask unanimous consent that the text of the bill and the description 
be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 882

       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 
     Administration Good Government 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.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; etc.

  TITLE I--IMPROVEMENTS IN TAX ADMINISTRATION AND TAXPAYER SAFEGUARDS

  Subtitle A--Improving Efficiency and Safeguards in Internal Revenue 
                           Service Collection

Sec. 101. Waiver of user fee for installment agreements using automated 
              withdrawals.
Sec. 102. Partial payment of tax liability in installment agreements.
Sec. 103. Termination of installment agreements.
Sec. 104. Office of Chief Counsel review of offers in compromise.
Sec. 105. Seven-day threshold on tolling of statute of limitations 
              during National Taxpayer Advocate review.
Sec. 106. Increase in penalty for bad checks or money orders.
Sec. 107. Financial management service fees.
Sec. 108. Elimination of restriction on offsetting refunds from former 
              residents.

                  Subtitle B--Processing and Personnel

Sec. 111. Explanation of statute of limitations and consequences of 
              failure to file.
Sec. 112. Disclosure of tax information to facilitate combined 
              employment tax reporting.
Sec. 113. Expansion of declaratory judgment remedy to tax-exempt 
              organizations.
Sec. 114. Amendment to Treasury auction reforms.
Sec. 115. Revisions relating to termination of employment of Internal 
              Revenue Service employees for misconduct.
Sec. 116. IRS Oversight Board approval of use of critical pay 
              authority.
Sec. 117. Low-income taxpayer clinics.
Sec. 118. Enrolled agents.
Sec. 119. Establishment of disaster response team.
Sec. 120. Accelerated tax refunds.
Sec. 121. Study on clarifying record-keeping responsibilities.
Sec. 122. Streamline reporting process for National Taxpayer Advocate.

                      Subtitle C--Other Provisions

Sec. 131. Penalty on failure to report interests in foreign financial 
              accounts.
Sec. 132. Repeal of personal holding company tax.

                TITLE II--REFORM OF PENALTY AND INTEREST

Sec. 201. Individual estimated tax.
Sec. 202. Corporate estimated tax.
Sec. 203. Increase in large corporation threshold for estimated tax 
              payments.
Sec. 204. Abatement of interest.
Sec. 205. Deposits made to suspend running of interest on potential 
              underpayments.
Sec. 206. Freeze of provision regarding suspension of interest where 
              Secretary fails to contact taxpayer.
Sec. 207. Expansion of interest netting.
Sec. 208. Clarification of application of Federal tax deposit penalty.
Sec. 209. Frivolous tax submissions.

            TITLE III--UNITED STATES TAX COURT MODERNIZATION

                    Subtitle A--Tax Court Procedure

Sec. 301. Jurisdiction of Tax Court over collection due process cases.
Sec. 302. Authority for special trial judges to hear and decide certain 
              employment status cases.
Sec. 303. Confirmation of authority of Tax Court to apply doctrine of 
              equitable recoupment.
Sec. 304. Tax Court filing fee in all cases commenced by filing 
              petition.
Sec. 305. Amendments to appoint employees.
Sec. 306. Expanded use of Tax Court practice fee for pro se taxpayers.

             Subtitle B--Tax Court Pension and Compensation

Sec. 311. Annuities for survivors of Tax Court judges who are 
              assassinated.
Sec. 312. Cost-of-living adjustments for Tax Court judicial survivor 
              annuities.
Sec. 313. Life insurance coverage for Tax Court judges.
Sec. 314. Cost of life insurance coverage for Tax Court judges age 65 
              or over.
Sec. 315. Modification of timing of lump-sum payment of judges' accrued 
              annual leave.
Sec. 316. Participation of Tax Court judges in the Thrift Savings Plan.
Sec. 317. Exemption of teaching compensation of retired judges from 
              limitation on outside earned income.
Sec. 318. General provisions relating to magistrate judges of the Tax 
              Court.
Sec. 319. Annuities to surviving spouses and dependent children of 
              magistrate judges of the Tax Court.
Sec. 320. Retirement and annuity program.
Sec. 321. Incumbent magistrate judges of the Tax Court.
Sec. 322. Provisions for recall.
Sec. 323. Effective date.

                TITLE IV--CONFIDENTIALITY AND DISCLOSURE

Sec. 401. Clarification of definition of church tax inquiry.
Sec. 402. Collection activities with respect to joint return 
              disclosable to either spouse based on oral request.
Sec. 403. Taxpayer representatives not subject to examination on sole 
              basis of representation of taxpayers.
Sec. 404. Prohibition of disclosure of taxpayer identifying number with 
              respect to disclosure of accepted offers-in-compromise.
Sec. 405. Compliance by contractors and other agents with 
              confidentiality safeguards.
Sec. 406. Higher standards for requests for and consents to disclosure.
Sec. 407. Civil damages for unauthorized inspection or disclosure.
Sec. 408. Expanded disclosure in emergency circumstances.
Sec. 409. Disclosure of taxpayer identity for tax refund purposes.
Sec. 410. Disclosure to State officials of proposed actions related to 
              section 501(c) organizations.
Sec. 411. Treatment of public records.
Sec. 412. Investigative disclosures.
Sec. 413. TIN matching.
Sec. 414. Form 8300 disclosures.
Sec. 415. Technical amendment.

 TITLE V--SIMPLIFICATION THROUGH ELIMINATION OF INOPERATIVE PROVISIONS

Sec. 501. Simplification through elimination of inoperative provisions.

  TITLE I--IMPROVEMENTS IN TAX ADMINISTRATION AND TAXPAYER SAFEGUARDS

  Subtitle A--Improving Efficiency and Safeguards in Internal Revenue 
                           Service Collection

     SEC. 101. WAIVER OF USER FEE FOR INSTALLMENT AGREEMENTS USING 
                   AUTOMATED WITHDRAWALS.

       (a) In General.--Section 6159 (relating to agreements for 
     payment of tax liability in installments) is amended by 
     redesignating subsection (e) as subsection (f) and by 
     inserting after subsection (d) the following:
       ``(e) Waiver of User Fees for Installment Agreements Using 
     Automated Withdrawals.--In the case of a taxpayer who enters 
     into an installment agreement in which automated installment 
     payments are agreed to, the Secretary shall waive the fee (if 
     any) for entering into the installment agreement.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to agreements entered into on or after the date 
     of the enactment of this Act.

     SEC. 102. PARTIAL PAYMENT OF TAX LIABILITY IN INSTALLMENT 
                   AGREEMENTS.

       (a) In General.--
       (1) Section 6159(a) (relating to authorization of 
     agreements) is amended--
       (A) by striking ``satisfy liability for payment of'' and 
     inserting ``make payment on'', and
       (B) by inserting ``full or partial'' after ``facilitate''.
       (2) Section 6159(c) (relating to Secretary required to 
     enter into installment agreements in certain cases) is 
     amended in the matter preceding paragraph (1) by inserting 
     ``full'' before ``payment''.
       (b) Requirement To Review Partial Payment Agreements Every 
     Two Years.--Section 6159, as amended by this Act, is amended 
     by redesignating subsections (d), (e), and (f) as subsections 
     (e), (f), and (g), respectively, and inserting after 
     subsection (c) the following new subsection:
       ``(d) Secretary Required To Review Installment Agreements 
     for Partial Collection Every Two Years.--In the case of

[[Page S5212]]

     an agreement entered into by the Secretary under subsection 
     (a) for partial collection of a tax liability, the Secretary 
     shall review the agreement at least once every 2 years.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to agreements entered into on or after the date 
     of the enactment of this Act.

     SEC. 103. TERMINATION OF INSTALLMENT AGREEMENTS.

       (a) In General.--Section 6159(b)(4) (relating to failure to 
     pay an installment or any other tax liability when due or to 
     provide requested financial information) is amended by 
     striking ``or'' at the end of subparagraph (B), by 
     redesignating subparagraph (C) as subparagraph (E), and by 
     inserting after subparagraph (B) the following:
       ``(C) to make a Federal tax deposit under section 6302 at 
     the time such deposit is required to be made,
       ``(D) to file a return of tax imposed under this title by 
     its due date (including extensions), or''.
       (b) Conforming Amendment.--Section 6159(b)(4) is amended by 
     striking ``Failure to pay an installment or any other tax 
     liability when due or to provide requested financial 
     information'' and inserting ``Failure to make payments or 
     deposits or file returns when due or to provide requested 
     financial information''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to failures occurring on or after the date of the 
     enactment of this Act.

     SEC. 104. OFFICE OF CHIEF COUNSEL REVIEW OF OFFERS IN 
                   COMPROMISE.

       (a) In General.--Section 7122(b) (relating to record) is 
     amended by striking ``Whenever a compromise'' and all that 
     follows through ``his delegate'' and inserting ``If the 
     Secretary determines that an opinion of the General Counsel 
     for the Department of the Treasury, or the Counsel's 
     delegate, is required with respect to a compromise, there 
     shall be placed on file in the office of the Secretary such 
     opinion''.
       (b) Conforming Amendments.--Section 7122(b) is amended by 
     striking the second and third sentences.
       (c) Effective Date.--The amendments made by this section 
     shall apply to offers-in-compromise submitted or pending on 
     or after the date of the enactment of this Act.

     SEC. 105. SEVEN-DAY THRESHOLD ON TOLLING OF STATUTE OF 
                   LIMITATIONS DURING NATIONAL TAXPAYER ADVOCATE 
                   REVIEW.

       (a) In General.--Section 7811(d)(1) (relating to suspension 
     of running of period of limitation) is amended by inserting 
     after ``application,'' the following: ``but only if the date 
     of such decision is at least 7 days after the date of the 
     taxpayer's application''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to applications filed after the date of the 
     enactment of this Act.

     SEC. 106. INCREASE IN PENALTY FOR BAD CHECKS OR MONEY ORDERS.

       (a) In General.--Section 6657 (relating to bad checks) is 
     amended--
       (1) by striking ``$750'' and inserting ``$1,250'', and
       (2) by striking ``$15'' and inserting ``$25''.
       (b) Effective Date.--The amendments made by this section 
     apply to checks or money orders received after December 31, 
     2003.

     SEC. 107. FINANCIAL MANAGEMENT SERVICE FEES.

       Notwithstanding any other provision of law, the Financial 
     Management Service may charge the Internal Revenue Service, 
     and the Internal Revenue Service may pay the Financial 
     Management Service, a fee sufficient to cover the full cost 
     of implementing a continuous levy program under subsection 
     (h) of section 6331 of the Internal Revenue Code of 1986. Any 
     such fee shall be based on actual levies made and shall be 
     collected by the Financial Management Service by the 
     retention of a portion of amounts collected by levy pursuant 
     to that subsection. Amounts received by the Financial 
     Management Service as fees under that subsection shall be 
     deposited into the account of the Department of the Treasury 
     under section 3711(g)(7) of title 31, United States Code, and 
     shall be collected and accounted for in accordance with the 
     provisions of that section. The amount credited against the 
     taxpayer's liability on account of the continuous levy shall 
     be the amount levied, without reduction for the amount paid 
     to the Financial Management Service as a fee.

     SEC. 108. ELIMINATION OF RESTRICTION ON OFFSETTING REFUNDS 
                   FROM FORMER RESIDENTS.

       Section 6402(e) (relating to collection of past-due, 
     legally enforceable State income tax obligations) is amended 
     by striking paragraph (2) and by redesignating paragraphs 
     (3), (4), (5), (6), and (7) as paragraphs (2), (3), (4), (5), 
     and (6), respectively.

                  Subtitle B--Processing and Personnel

     SEC. 111. EXPLANATION OF STATUTE OF LIMITATIONS AND 
                   CONSEQUENCES OF FAILURE TO FILE.

       The Secretary of the Treasury or the Secretary's delegate 
     shall, as soon as practicable but not later than 180 days 
     after the date of the enactment of this Act, revise the 
     statement required by section 6227 of the Omnibus Taxpayer 
     Bill of Rights (Internal Revenue Service Publication No. 1), 
     and any instructions booklet accompanying a general income 
     tax return form for taxable years beginning after 2001 
     (including forms 1040, 1040A, 1040EZ, and any similar or 
     successor forms relating thereto), to provide for an 
     explanation of--
       (1) the limitations imposed by section 6511 of the Internal 
     Revenue Code of 1986 on credits and refunds; and
       (2) the consequences under such section 6511 of the failure 
     to file a return of tax.

     SEC. 112. DISCLOSURE OF TAX INFORMATION TO FACILITATE 
                   COMBINED EMPLOYMENT TAX REPORTING.

       Section 6103(d)(5) is amended to read as follows:
       ``(5) Disclosure for combined employment tax reporting.--
     The Secretary may disclose taxpayer identity information and 
     signatures to any agency, body, or commission of any State 
     for the purpose of carrying out with such agency, body, or 
     commission a combined Federal and State employment tax 
     reporting program approved by the Secretary. Subsections 
     (a)(2) and (p)(4) and sections 7213 and 7213A shall not apply 
     with respect to disclosures or inspections made pursuant to 
     this paragraph.''.

     SEC. 113. EXPANSION OF DECLARATORY JUDGMENT REMEDY TO TAX-
                   EXEMPT ORGANIZATIONS.

       (a) In General.--Paragraph (1) of section 7428(a) (relating 
     to creation of remedy) is amended--
       (1) in subparagraph (B) by inserting after ``509(a))'' the 
     following: ``or as a private operating foundation (as defined 
     in section 4942(j)(3))''; and
       (2) by amending subparagraph (C) to read as follows:
       ``(C) with respect to the initial qualification or 
     continuing qualification of an organization as an 
     organization described in section 501(c) (other than 
     paragraph (3)) or 501(d) which is exempt from tax under 
     section 501(a), or''.
       (b) Court Jurisdiction.--Subsection (a) of section 7428 is 
     amended in the material following paragraph (2) by striking 
     ``United States Tax Court, the United States Claims Court, or 
     the district court of the United States for the District of 
     Columbia'' and inserting the following: ``United States Tax 
     Court (in the case of any such determination or failure) or 
     the United States Claims Court or the district court of the 
     United States for the District of Columbia (in the case of a 
     determination or failure with respect to an issue referred to 
     in subparagraph (A) or (B) of paragraph (1)),''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to pleadings filed with respect to determinations 
     (or requests for determinations) made after December 31, 
     2003.

     SEC. 114. AMENDMENT TO TREASURY AUCTION REFORMS.

       (a) In General.--Clause (i) of section 202(c)(4)(B) of the 
     Government Securities Act Amendments of 1993 (31 U.S.C. 3121 
     note) is amended by inserting before the semicolon ``(or, if 
     earlier, at the time the Secretary releases the minutes of 
     the meeting in accordance with paragraph (2))''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to meetings held after the date of the enactment 
     of this Act.

     SEC. 115. REVISIONS RELATING TO TERMINATION OF EMPLOYMENT OF 
                   INTERNAL REVENUE SERVICE EMPLOYEES FOR 
                   MISCONDUCT.

       (a) In General.--Subchapter A of chapter 80 (relating to 
     application of internal revenue laws) is amended by inserting 
     after section 7804 the following new section:

     ``SEC. 7804A. TERMINATION OF EMPLOYMENT FOR MISCONDUCT.

       ``(a) In General.--Subject to subsection (c), the 
     Commissioner shall terminate the employment of any employee 
     of the Internal Revenue Service if there is a final 
     administrative or judicial determination that such employee 
     committed any act or omission described under subsection (b) 
     in the performance of the employee's official duties. Such 
     termination shall be a removal for cause on charges of 
     misconduct.
       ``(b) Acts or Omissions.--The acts or omissions described 
     under this subsection are--
       ``(1) willful failure to obtain the required approval 
     signatures on documents authorizing the seizure of a 
     taxpayer's home, personal belongings, or business assets,
       ``(2) providing a false statement under oath with respect 
     to a material matter involving a taxpayer or taxpayer 
     representative,
       ``(3) with respect to a taxpayer or taxpayer 
     representative, the violation of--
       ``(A) any right under the Constitution of the United 
     States, or
       ``(B) any civil right established under--
       ``(i) title VI or VII of the Civil Rights Act of 1964,
       ``(ii) title IX of the Education Amendments of 1972,
       ``(iii) the Age Discrimination in Employment Act of 1967,
       ``(iv) the Age Discrimination Act of 1975,
       ``(v) section 501 or 504 of the Rehabilitation Act of 1973, 
     or
       ``(vi) title I of the Americans with Disabilities Act of 
     1990,
       ``(4) falsifying or destroying documents to conceal 
     mistakes made by any employee with respect to a matter 
     involving a taxpayer or taxpayer representative,
       ``(5) assault or battery on a taxpayer or taxpayer 
     representative, but only if there is a criminal conviction, 
     or a final judgment by a court in a civil case, with respect 
     to the assault or battery,
       ``(6) violations of this title, Department of the Treasury 
     regulations, or policies of the Internal Revenue Service 
     (including the Internal Revenue Manual) for the purpose of

[[Page S5213]]

     retaliating against, or harassing, a taxpayer or taxpayer 
     representative,
       ``(7) willful misuse of the provisions of section 6103 for 
     the purpose of concealing information from a congressional 
     inquiry,
       ``(8) willful failure to file any return of tax required 
     under this title on or before the date prescribed therefor 
     (including any extensions) when a tax is due and owing, 
     unless such failure is due to reasonable cause and not due to 
     willful neglect,
       ``(9) willful understatement of Federal tax liability, 
     unless such understatement is due to reasonable cause and not 
     due to willful neglect, and
       ``(10) threatening to audit a taxpayer for the purpose of 
     extracting personal gain or benefit.
       ``(c) Determinations of Commissioner.--
       ``(1) In general.--The Commissioner may take a personnel 
     action other than termination for an act or omission 
     described under subsection (b).
       ``(2) Discretion.--The exercise of authority under 
     paragraph (1) shall be at the sole discretion of the 
     Commissioner and may not be delegated to any other officer. 
     The Commissioner, in the Commissioner's sole discretion, may 
     establish a procedure which will be used to determine whether 
     an individual should be referred to the Commissioner for a 
     determination by the Commissioner under paragraph (1).
       ``(3) No appeal.--Any determination of the Commissioner 
     under this subsection may not be appealed in any 
     administrative or judicial proceeding.
       ``(d) Definition.--For the purposes of the provisions 
     described in clauses (i), (ii), and (iv) of subsection 
     (b)(3)(B), references to a program or activity regarding 
     Federal financial assistance or an education program or 
     activity receiving Federal financial assistance shall include 
     any program or activity conducted by the Internal Revenue 
     Service for a taxpayer.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     80 is amended by inserting after the item relating to section 
     7804 the following new item:

``Sec. 7804A. Termination of employment for misconduct.''.

       (c) Repeal of Superseded Section.--Section 1203 of the 
     Internal Revenue Service Restructuring and Reform Act of 1998 
     (Public Law 105-206; 112 Stat. 720) is repealed.
       (d) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 116. IRS OVERSIGHT BOARD APPROVAL OF USE OF CRITICAL PAY 
                   AUTHORITY.

       (a) In General.--Section 7802(d)(3) (relating to 
     management) is amended by striking ``and'' at the end of 
     subparagraph (B), by striking the period at the end of 
     subparagraph (C) and inserting ``; and'', and by adding at 
     the end the following new subparagraph:
       ``(D) review and approve the Commissioner's use of critical 
     pay authority under section 9502 of title 5, United States 
     Code, and streamlined critical pay authority under section 
     9503 of such title.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to personnel hired after the date of the 
     enactment of this Act.

     SEC. 117. LOW-INCOME TAXPAYER CLINICS.

       (a) Grants for Return Preparation Clinics.--
       (1) In general.--Chapter 77 (relating to miscellaneous 
     provisions) is amended by inserting after section 7526 the 
     following new section:

     ``SEC. 7526A. RETURN PREPARATION CLINICS FOR LOW-INCOME 
                   TAXPAYERS.

       ``(a) In General.--The Secretary may, subject to the 
     availability of appropriated funds, make grants to provide 
     matching funds for the development, expansion, or 
     continuation of qualified return preparation clinics.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Qualified return preparation clinic.--
       ``(A) In general.--The term `qualified return preparation 
     clinic' means a clinic which--
       ``(i) does not charge more than a nominal fee for its 
     services (except for reimbursement of actual costs incurred), 
     and
       ``(ii) operates programs which assist low-income taxpayers 
     in preparing and filing their Federal income tax returns, 
     including schedules reporting sole proprietorship or farm 
     income.
       ``(B) Assistance to low-income taxpayers.--A clinic is 
     treated as assisting low-income taxpayers under subparagraph 
     (A)(ii) if at least 90 percent of the taxpayers assisted by 
     the clinic have incomes which do not exceed 250 percent of 
     the poverty level, as determined in accordance with criteria 
     established by the Director of the Office of Management and 
     Budget.
       ``(2) Clinic.--The term `clinic' includes--
       ``(A) a clinical program at an eligible educational 
     institution (as defined in section 529(e)(5)) which satisfies 
     the requirements of paragraph (1) through student assistance 
     of taxpayers in return preparation and filing, and
       ``(B) an organization described in section 501(c) and 
     exempt from tax under section 501(a) which satisfies the 
     requirements of paragraph (1).
       ``(c) Special Rules and Limitations.--
       ``(1) Aggregate limitation.--Unless otherwise provided by 
     specific appropriation, the Secretary shall not allocate more 
     than $10,000,000 per year (exclusive of costs of 
     administering the program) to grants under this section.
       ``(2) Other applicable rules.--Rules similar to the rules 
     under paragraphs (2) through (7) of section 7526(c) shall 
     apply with respect to the awarding of grants to qualified 
     return preparation clinics.''.
       (2) Clerical amendment.--The table of sections for chapter 
     77 is amended by inserting after the item relating to section 
     7526 the following new item:

``Sec. 7526A. Return preparation clinics for low-income taxpayers.''.

       (b) Grants for Taxpayer Representation and Assistance 
     Clinics.--
       (1) Increase in authorized grants.--Section 7526(c)(1) 
     (relating to aggregate limitation) is amended by striking 
     ``$6,000,000'' and inserting ``$10,000,000''.
       (2) Use of grants for overhead expenses prohibited.--
       (A) In general.--Section 7526(c) (relating to special rules 
     and limitations) is amended by adding at the end the 
     following new paragraph:
       ``(6) Use of grants for overhead expenses prohibited.--No 
     grant made under this section may be used for the overhead 
     expenses of any clinic or of any institution sponsoring such 
     clinic.''.
       (B) Conforming amendments.--Section 7526(c)(5) is amended--
       (i) by inserting ``qualified'' before ``low-income'', and
       (ii) by striking the last sentence.
       (3) Promotion of Clinics.--Section 7526(c), as amended by 
     paragraph (2), is amended by adding at the end the following 
     new paragraph:
       ``(7) Promotion of clinics.--The Secretary is authorized to 
     promote the benefits of and encourage the use of low-income 
     taxpayer clinics through the use of mass communications, 
     referrals, and other means.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to grants made after the date of the enactment of 
     this Act.

     SEC. 118. ENROLLED AGENTS.

       (a) In General.--Chapter 77 (relating to miscellaneous 
     provisions) is amended by adding at the end the following new 
     section:

     ``SEC. 7527. ENROLLED AGENTS.

       ``(a) In General.--The Secretary may prescribe such 
     regulations as may be necessary to regulate the conduct of 
     enrolled agents in regards to their practice before the 
     Internal Revenue Service.
       ``(b) Use of Credentials.--Any enrolled agents properly 
     licensed to practice as required under rules promulgated 
     under section (a) herein shall be allowed to use the 
     credentials or designation as `enrolled agent', `EA', or 
     `E.A.'.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     77 is amended by adding at the end the following new item:

``Sec. 7527. Enrolled agents.''.

       (c) Prior Regulations.--Nothing in the amendments made by 
     this section shall be construed to have any effect on part 10 
     of title 31, Code of Federal Regulations, or any other 
     Federal rule or regulation issued before the date of the 
     enactment of this Act.

     SEC. 119. ESTABLISHMENT OF DISASTER RESPONSE TEAM.

       (a) In General.--Section 7508A (relating to authority to 
     postpone certain tax-related deadlines by reason of 
     presidentially declared disaster) is amended by adding at the 
     end the following new subsection:
       ``(c) Duties of Disaster Response Team.--
       ``(1) Response to disasters.--The Secretary shall--
       ``(A) establish as a permanent office in the national 
     office of the Internal Revenue Service a disaster response 
     team composed of members, who in addition to their regular 
     responsibilities, shall assist taxpayers in clarifying and 
     resolving Federal tax matters associated with or resulting 
     from any Presidentially declared disaster (as so defined), 
     and
       ``(B) respond to requests by such taxpayers for filing 
     extensions and technical guidance expeditiously.
       ``(2) Personnel of disaster response team.--The disaster 
     response team shall be composed of--
       ``(A) personnel from the Office of the Taxpayer Advocate, 
     and
       ``(B) personnel from the national office of the Internal 
     Revenue Service with expertise in individual, corporate, and 
     small business tax matters.
       ``(3) Coordination with fema.--The disaster response team 
     shall operate in coordination with the Director of the 
     Federal Emergency Management Agency.
       ``(4) Toll-free telephone number.--The Commissioner of 
     Internal Revenue shall establish and maintain a toll-free 
     telephone number for taxpayers to use to receive assistance 
     from the disaster response team.
       ``(5) Internet webpage site.--The Commissioner of Internal 
     Revenue shall establish and maintain a site on the Internet 
     webpage of the Internal Revenue Service for information for 
     taxpayers described in paragraph (1)(A).''.
       (b) FEMA.--The Director of the Federal Emergency Management 
     Agency shall work in coordination with the disaster response 
     team established under section 7804(c)(1)(A) of the Internal 
     Revenue Code of 1986 to provide timely assistance to disaster 
     victims described in such section, including--
       (1) informing the disaster response team regarding any tax-
     related problems or issues arising in connection with the 
     disaster,

[[Page S5214]]

       (2) providing the toll-free telephone number established 
     and maintained by the Internal Revenue Service for the 
     disaster victims in all materials provided to such victims, 
     and
       (3) providing the information described in section 
     7804(c)(5) of such Code on the Internet webpage of the 
     Federal Emergency Management Agency or through a link on such 
     webpage to the Internet webpage site of the Internal Revenue 
     Service described in such section.
       (c) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 120. ACCELERATED TAX REFUNDS.

       (a) Study.--The Secretary of the Treasury shall study the 
     implementation of an accelerated refund program for taxpayers 
     who--
       (1) maintain the same filing characteristics from year to 
     year, and
       (2) elect the direct deposit option for any refund under 
     the program.
       (b) Report.--Not later than the date which is 1 year after 
     the date of the enactment of this Act, the Secretary of the 
     Treasury shall transmit a report of the study described in 
     subsection (a), including recommendations, to the Committee 
     on Finance of the Senate and the Committee on Ways and Means 
     of the House of Representatives.

     SEC. 121. STUDY ON CLARIFYING RECORD-KEEPING 
                   RESPONSIBILITIES.

       (a) Study.--The Secretary of the Treasury shall study--
       (1) the scope of the records required to be maintained by 
     taxpayers under section 6001 of the Internal Revenue Code of 
     1986,
       (2) the utility of requiring taxpayers to maintain all 
     records indefinitely,
       (3) such requirement given the necessity to upgrade 
     technological storage for outdated records,
       (4) the number of negotiated records retention agreements 
     requested by taxpayers and the number entered into by the 
     Internal Revenue Service, and
       (5) proposals regarding taxpayer record-keeping.
       (b) Report.--Not later than the date which is 1 year after 
     the date of the enactment of this Act, the Secretary of the 
     Treasury shall transmit a report of the study described in 
     subsection (a), including recommendations, to the Committee 
     on Finance of the Senate and the Committee on Ways and Means 
     of the House of Representatives.

     SEC. 122. STREAMLINE REPORTING PROCESS FOR NATIONAL TAXPAYER 
                   ADVOCATE.

       (a) One Annual Report.--Subparagraph (B) of section 
     7803(c)(2) (relating to functions of Office) is amended--
       (1) by striking all matter preceding subclause (I) of 
     clause (ii) and inserting the following:
       ``(B) Annual report.--
       ``(i) In general.--Not later than December 31 of each 
     calendar year, the National Taxpayer Advocate shall report to 
     the Committee of Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate on 
     the objectives of the Office of the Taxpayer of Advocate for 
     the fiscal year beginning in such calendar year and the 
     activities of such Office during the fiscal year ending 
     during such calendar year. Any such report shall contain full 
     and substantive analysis, in addition to statistical 
     information, and shall--'',
       (2) by striking ``clause (ii)'' in clause (iv) and 
     inserting ``clause (i)'', and
       (3) by redesignating clauses (iii) and (iv) as clauses (ii) 
     and (iii), respectively.
       (b) Effective Date.--The amendments made by this section 
     shall apply to reports in calendar year 2003 and thereafter.

                      Subtitle C--Other Provisions

     SEC. 131. PENALTY ON FAILURE TO REPORT INTERESTS IN FOREIGN 
                   FINANCIAL ACCOUNTS.

       (a) In General.--Section 5321(a)(5) of title 31, United 
     States Code, is amended to read as follows:
       ``(5) Foreign financial agency transaction violation.--
       ``(A) Penalty authorized.--The Secretary of the Treasury 
     may impose a civil money penalty on any person who violates, 
     or causes any violation of, any provision of section 5314.
       ``(B) Amount of penalty.--
       ``(i) In general.--Except as provided in subparagraph (C), 
     the amount of any civil penalty imposed under subparagraph 
     (A) shall not exceed $5,000.
       ``(ii) Reasonable cause exception.--No penalty shall be 
     imposed under subparagraph (A) with respect to any violation 
     if--

       ``(I) such violation was due to reasonable cause, and
       ``(II) the amount of the transaction or the balance in the 
     account at the time of the transaction was properly reported.

       ``(C) Willful violations.--In the case of any person 
     willfully violating, or willfully causing any violation of, 
     any provision of section 5314--
       ``(i) the maximum penalty under subparagraph (B)(i) shall 
     be increased to the greater of--

       ``(I) $25,000, or
       ``(II) the amount (not exceeding $100,000) determined under 
     subparagraph (D), and

       ``(ii) subparagraph (B)(ii) shall not apply.
       ``(D) Amount.--The amount determined under this 
     subparagraph is--
       ``(i) in the case of a violation involving a transaction, 
     the amount of the transaction, or
       ``(ii) in the case of a violation involving a failure to 
     report the existence of an account or any identifying 
     information required to be provided with respect to an 
     account, the balance in the account at the time of the 
     violation.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to violations occurring after the date of the 
     enactment of this Act.

     SEC. 132. REPEAL OF PERSONAL HOLDING COMPANY TAX.

       (a) In General.--Part II of subchapter G of chapter 1 
     (relating to personal holding companies) is hereby repealed.
       (b) Conforming Amendments.--
       (1) Section 12(2) is amended to read as follows:
       ``(2) For accumulated earnings tax, see part I of 
     subchapter G (sec. 531 and following).''.
       (2) Section 26(b)(2) is amended by striking subparagraph 
     (G) and by redesignating the succeeding subparagraphs 
     accordingly.
       (3) Section 30A(c) is amended by striking paragraph (3) and 
     by redesignating paragraph (4) as paragraph (3).
       (4) Section 41(e)(7)(E) is amended by adding ``and'' at the 
     end of clause (i), by striking clause (ii), and by 
     redesignating clause (iii) as clause (ii).
       (5) Section 56(b)(2) is amended by striking subparagraph 
     (C) and by redesignating subparagraph (D) as subparagraph 
     (C).
       (6) Section 170(e)(4)(D) is amended by adding ``and'' at 
     the end of clause (i), by striking clause (ii), and by 
     redesignating clause (iii) as clause (ii).
       (7) Section 111(d) is amended to read as follows:
       ``(d) Special Rules for Accumulated Earnings Tax.--In 
     applying subsection (a) for the purpose of determining the 
     accumulated earnings tax under section 531--
       ``(1) any excluded amount under subsection (a) allowed for 
     purposes of this subtitle (other than section 531) shall be 
     allowed whether or not such amount resulted in a reduction of 
     the tax under section 531 for the prior taxable year, and
       ``(2) where any excluded amount under subsection (a) was 
     not allowed as a deduction for the prior taxable year for 
     purposes of this subtitle other than section 531 but was 
     allowable for the same taxable year under section 531, then 
     such excluded amount shall be allowable if it did not result 
     in a reduction of the tax under section 531.''.
       (8)(A) Section 316(b) is amended by striking paragraph (2) 
     and by redesignating paragraph (3) as paragraph (2).
       (B) Section 331(b) is amended by striking ``(other than a 
     distribution referred to in paragraph (2)(B) of section 
     316(b))''.
       (9) Section 341(d) is amended--
       (A) by striking ``section 544(a)'' and inserting ``section 
     465(f)'', and
       (B) by inserting before the period at the end of the next 
     to the last sentence ``and such paragraph (2) shall be 
     applied by inserting `by or for his partner' after `his 
     family' ''.
       (10) Section 381(c) is amended by striking paragraphs (14) 
     and (17).
       (11) Section 443(e) is amended by striking paragraph (2) 
     and by redesignating paragraphs (3), (4), and (5) as 
     paragraphs (2), (3), and (4), respectively.
       (12) Section 447(g)(4)(A) is amended by striking ``other 
     than--'' and all that follows and inserting ``other than an S 
     corporation.''
       (13)(A) Section 465(a)(1)(B) is amended to read as follows:
       ``(B) a C corporation which is closely held,''.
       (B) Section 465(a)(3) is amended to read as follows:
       ``(3) Closely held determination.--For purposes of 
     paragraph (1), a corporation is closely held if, at any time 
     during the last half of the taxable year, more than 50 
     percent in value of its outstanding stock is owned, directly 
     or indirectly, by or for not more than 5 individuals. For 
     purposes of this paragraph, an organization described in 
     section 401(a), 501(c)(17), or 509(a) or a portion of a trust 
     permanently set aside or to be used exclusively for the 
     purposes described in section 642(c) shall be considered an 
     individual.''
       (C) Section 465 is amended by adding at the end the 
     following new subsection:
       ``(f) Constructive Ownership Rules.--For purposes of 
     subsection (a)(3)--
       ``(1) Stock not owned by individual.--Stock owned, directly 
     or indirectly, by or for a corporation, partnership, estate, 
     or trust shall be considered as being owned proportionately 
     by its shareholders, partners, or beneficiaries.
       ``(2) Family ownership.--An individual shall be considered 
     as owning the stock owned, directly or indirectly, by or for 
     his family. For purposes of this paragraph, the family of an 
     individual includes only his brothers and sisters (whether by 
     the whole or half blood), spouse, ancestors, and lineal 
     descendants.
       ``(3) Options.--If any person has an option to acquire 
     stock, such stock shall be considered as owned by such 
     person. For purposes of this paragraph, an option to acquire 
     such an option, and each one of a series of such options, 
     shall be considered as an option to acquire such stock.
       ``(4) Application of family and option rules.--Paragraphs 
     (2) and (3) shall be applied if, but only if, the effect is 
     to make the corporation closely held under subsection (a)(3).
       ``(5) Constructive ownership as actual ownership.--Stock 
     constructively owned by

[[Page S5215]]

     a person by reason of the application of paragraph (1) or 
     (3), shall, for purposes of applying paragraph (1) or (2), be 
     treated as actually owned by such person; but stock 
     constructively owned by an individual by reason of the 
     application of paragraph (2) shall not be treated as owned by 
     him for purposes of again applying such paragraph in order to 
     make another the constructive owner of such stock.
       ``(6) Option rule in lieu of family rule.--If stock may be 
     considered as owned by an individual under either paragraph 
     (2) or (3) it shall be considered as owned by him under 
     paragraph (3).
       ``(7) Convertible securities.--Outstanding securities 
     convertible into stock (whether or not convertible during the 
     taxable year) shall be considered as outstanding stock if the 
     effect of the inclusion of all such securities is to make the 
     corporation closely held under subsection (a)(3). The 
     requirement under the preceding sentence that all convertible 
     securities must be included if any are to be included shall 
     be subject to the exception that, where some of the 
     outstanding securities are convertible only after a later 
     date than in the case of others, the class having the earlier 
     conversion date may be included although the others are not 
     included, but no convertible securities shall be included 
     unless all outstanding securities having a prior conversion 
     date are also included.''
       (D) Section 465(c)(7)(B) is amended by striking clause (i) 
     and by redesignating clauses (ii) and (iii) as clauses (i) 
     and (ii), respectively.
       (E) Section 465(c)(7)(G) is amended to read as follows:
       ``(G) Loss of 1 member of affiliated group may not offset 
     income of personal service corporation.--Nothing in this 
     paragraph shall permit any loss of a member of an affiliated 
     group to be used as an offset against the income of any other 
     member of such group which is a personal service corporation 
     (as defined in section 269A(b) but determined by substituting 
     `5 percent' for `10 percent' in section 269A(b)(2)).''
       (14) Sections 508(d), 4947, and 4948(c)(4) are each amended 
     by striking ``545(b)(2),'' each place it appears.
       (15) Section 532(b) is amended by striking paragraph (1) 
     and by redesignating paragraphs (2), (3), and (4) as 
     paragraphs (1), (2), and (3), respectively.
       (16) Sections 535(b)(1) and 556(b)(1) are each amended by 
     striking ``section 541'' and inserting ``section 541 (as in 
     effect before its repeal)''.
       (17)(A) Section 553(a)(1) is amended by striking ``section 
     543(d)'' and inserting ``subsection (c)''.
       (B) Section 553 is amended by adding at the end the 
     following new subsection:
       ``(c) Active Business Computer Software Royalties.--
       ``(1) In general.--For purposes of subsection (a), the term 
     `active business computer software royalties' means any 
     royalties--
       ``(A) received by any corporation during the taxable year 
     in connection with the licensing of computer software, and
       ``(B) with respect to which the requirements of paragraphs 
     (2), (3), (4), and (5) are met.
       ``(2) Royalties must be received by corporation actively 
     engaged in computer software business.--The requirements of 
     this paragraph are met if the royalties described in 
     paragraph (1)--
       ``(A) are received by a corporation engaged in the active 
     conduct of the trade or business of developing, 
     manufacturing, or producing computer software, and
       ``(B) are attributable to computer software which--
       ``(i) is developed, manufactured, or produced by such 
     corporation (or its predecessor) in connection with the trade 
     or business described in subparagraph (A), or
       ``(ii) is directly related to such trade or business.
       ``(3) Royalties must constitute at least 50 percent of 
     income.--The requirements of this paragraph are met if the 
     royalties described in paragraph (1) constitute at least 50 
     percent of the ordinary gross income of the corporation for 
     the taxable year.
       ``(4) Deductions under sections 162 and 174 relating to 
     royalties must equal or exceed 25 percent of ordinary gross 
     income.--
       ``(A) In general.--The requirements of this paragraph are 
     met if--
       ``(i) the sum of the deductions allowable to the 
     corporation under sections 162, 174, and 195 for the taxable 
     year which are properly allocable to the trade or business 
     described in paragraph (2) equals or exceeds 25 percent of 
     the ordinary gross income of such corporation for such 
     taxable year, or
       ``(ii) the average of such deductions for the 5-taxable 
     year period ending with such taxable year equals or exceeds 
     25 percent of the average ordinary gross income of such 
     corporation for such period.

     If a corporation has not been in existence during the 5-
     taxable year period described in clause (ii), then the period 
     of existence of such corporation shall be substituted for 
     such 5-taxable year period.
       ``(B) Deductions allowable under section 162.--For purposes 
     of subparagraph (A), a deduction shall not be treated as 
     allowable under section 162 if it is specifically allowable 
     under another section.
       ``(C) Limitation on allowable deductions.--For purposes of 
     subparagraph (A), no deduction shall be taken into account 
     with respect to compensation for personal services rendered 
     by the 5 individual shareholders holding the largest 
     percentage (by value) of the outstanding stock of the 
     corporation. For purposes of the preceding sentence 
     individuals holding less than 5 percent (by value) of the 
     stock of such corporation shall not be taken into account.''
       (18) Section 561(a) is amended by striking paragraph (3), 
     by inserting ``and'' at the end of paragraph (1), and by 
     striking '', and'' at the end of paragraph (2) and inserting 
     a period.
       (19) Section 562(b) is amended to read as follows:
       ``(b) Distributions in Liquidation.--Except in the case of 
     a foreign personal holding company described in section 552--
       ``(1) in the case of amounts distributed in liquidation, 
     the part of such distribution which is properly chargeable to 
     earnings and profits accumulated after February 28, 1913, 
     shall be treated as a dividend for purposes of computing the 
     dividends paid deduction, and
       ``(2) in the case of a complete liquidation occurring 
     within 24 months after the adoption of a plan of liquidation, 
     any distribution within such period pursuant to such plan 
     shall, to the extent of the earnings and profits (computed 
     without regard to capital losses) of the corporation for the 
     taxable year in which such distribution is made, be treated 
     as a dividend for purposes of computing the dividends paid 
     deduction.

     For purposes of paragraph (1), a liquidation includes a 
     redemption of stock to which section 302 applies. Except to 
     the extent provided in regulations, the preceding sentence 
     shall not apply in the case of any mere holding or investment 
     company which is not a regulated investment company.''
       (20) Section 563 is amended by striking subsection (b).
       (21) Section 564 is hereby repealed.
       (22) Section 631(c) is amended by striking ``or section 
     545(b)(5)''.
       (23) Section 852(b)(1) is amended by striking ``which is a 
     personal holding company (as defined in section 542) or''.
       (24)(A) Section 856(h)(1) is amended to read as follows:
       ``(1) In general.--For purposes of subsection (a)(6), a 
     corporation, trust, or association is closely held if the 
     stock ownership requirement of section 465(a)(3) is met.''
       (B) Section 856(h)(3)(A)(i) is amended by striking 
     ``section 542(a)(2)'' and inserting ``section 465(a)(3)''.
       (C) Paragraph (3) of section 856(h) is amended by striking 
     subparagraph (B) and by redesignating subparagraphs (C) and 
     (D) as subparagraphs (B) and (C), respectively.
       (D) Subparagraph (C) of section 856(h)(3), as redesignating 
     by the preceding subparagraph, is amended by striking 
     ``subparagraph (C)'' and inserting ``subparagraph (B)''.
       (25) The last sentence of section 882(c)(2) is amended to 
     read as follows:
     ``The preceding sentence shall not be construed to deny the 
     credit provided by section 33 for tax withheld at source or 
     the credit provided by section 34 for certain uses of 
     gasoline.''.
       (26) Section 936(a)(3) is amended by striking subparagraph 
     (C), by inserting ``or'' at the end of subparagraph (B), and 
     by redesignating subparagraph (D) as subparagraph (C).
       (27) Section 992(d) is amended by striking paragraph (2) 
     and by redesignating succeeding paragraphs accordingly.
       (28) Section 992(e) is amended by striking ``and section 
     541 (relating to personal holding company tax)''.
       (29) Section 1202(e)(8) is amended by striking ``section 
     543(d)(1)'' and inserting ``section 553(c)(1)''.
       (30) Section 1362(d)(3)(C)(iii) is amended by adding at the 
     end the following new sentence: ``References to section 542 
     in the preceding sentence shall be treated as references to 
     such section as in effect on the day before its repeal.''
       (31) Section 1504(c)(2)(B) is amended by adding ``and'' at 
     the end of clause (i), by striking clause (ii), and by 
     redesignating clause (iii) as clause (ii).
       (32) Section 2057(e)(2)(C) is amended by adding at the end 
     the following new sentence: ``References to sections 542 and 
     543 in the preceding sentence shall be treated as references 
     to such sections as in effect on the day before their 
     repeal.''
       (33) Sections 6422 is amended by striking paragraph (3) and 
     by redesignating paragraphs (4) through (12) and paragraphs 
     (3) through (11), respectively.
       (34) Section 6501 is amended by striking subsection (f).
       (35) Section 6503(k) is amended by striking paragraph (1) 
     and by redesignating paragraphs (2) through (5) as paragraphs 
     (1) through (4), respectively.
       (36) Section 6515 is amended by striking paragraph (1) and 
     by redesignating paragraphs (2) through (6) as paragraphs (1) 
     through (5), respectively.
       (37) Subsections (d)(1)(B) and (e)(2) of section 6662 are 
     each amended by striking ``or a personal holding company (as 
     defined in section 542)''.
       (38) Section 6683 is hereby repealed.
       (c) Clerical Amendments.--
       (1) The table of parts for subchapter G of chapter 1 is 
     amended by striking the item relating to part II.
       (2) The table of sections for part IV of such subchapter G 
     is amended by striking the item relating to section 564.
       (3) The table of sections for part I of subchapter B of 
     chapter 68 is amended by striking the item relating to 
     section 6683.

[[Page S5216]]

       (d) Effective Date.--The amendments made by this Act shall 
     apply to taxable years beginning after December 31, 2003.

                TITLE II--REFORM OF PENALTY AND INTEREST

     SEC. 201. INDIVIDUAL ESTIMATED TAX.

       (a) Increase in Exception for Individuals Owing Small 
     Amount of Tax.--Section 6654(e)(1) (relating to exception 
     where tax is small amount) is amended by striking ``$1,000'' 
     and inserting ``$2,000''.
       (b) Computation of Addition to Tax.--Subsections (a) and 
     (b) of section 6654 (relating to failure by individual to pay 
     estimated taxes) are amended to read as follows:
       ``(a) Addition to the Tax.--
       ``(1) In general.--Except as otherwise provided in this 
     section, in the case of any underpayment of estimated tax by 
     an individual for a taxable year, there shall be added to the 
     tax under chapters 1 and 2 for the taxable year the amount 
     determined under paragraph (2) for each day of underpayment.
       ``(2) Amount.--The amount of the addition to tax for any 
     day shall be the product of the underpayment rate established 
     under subsection (b)(2) multiplied by the amount of the 
     underpayment.
       ``(b) Amount of Underpayment; Interest Rate.--For purposes 
     of subsection (a)--
       ``(1) Amount.--The amount of the underpayment on any day 
     shall be the excess of--
       ``(A) the sum of the required installments for the taxable 
     year the due dates for which are on or before such day, over
       ``(B) the sum of the amounts (if any) of estimated tax 
     payments made on or before such day on such required 
     installments.
       ``(2) Determination of interest rate.--
       ``(A) In general.--The underpayment rate with respect to 
     any day in an installment underpayment period shall be the 
     underpayment rate established under section 6621 for the 
     first day of the calendar quarter in which such installment 
     underpayment period begins.
       ``(B) Installment underpayment period.--For purposes of 
     subparagraph (A), the term `installment underpayment period' 
     means the period beginning on the day after the due date for 
     a required installment and ending on the due date for the 
     subsequent required installment (or in the case of the 4th 
     required installment, the 15th day of the 4th month following 
     the close of a taxable year).
       ``(C) Daily rate.--The rate determined under subparagraph 
     (A) shall be applied on a daily basis and shall be based on 
     the assumption of 365 days in a calendar year.
       ``(3) Termination of estimated tax interest.--No day after 
     the end of the installment underpayment period for the 4th 
     required installment specified in paragraph (2)(B) for a 
     taxable year shall be treated as a day of underpayment with 
     respect to such taxable year.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 202. CORPORATE ESTIMATED TAX.

       (a) Increase in Small Tax Amount Exception.--Section 
     6655(f) (relating to exception where tax is small amount) is 
     amended by striking ``$500'' and inserting ``$1,000''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 203. INCREASE IN LARGE CORPORATION THRESHOLD FOR 
                   ESTIMATED TAX PAYMENTS.

       (a) In General.--Section 6655(g)(2) (defining large 
     corporation) is amended--
       (1) by striking ``$1,000,000'' in subparagraph (A) and 
     inserting ``the applicable amount'',
       (2) by redesignating subparagraph (B) as subparagraph (C), 
     and
       (3) by inserting after subparagraph (A) the following new 
     subparagraph:
       ``(B) Applicable amount.--For purposes of subparagraph (A), 
     the applicable amount is $1,000,000 increased (but not above 
     $1,500,000) by $50,000 for each taxable year beginning after 
     2004.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 204. ABATEMENT OF INTEREST.

       (a) Abatement of Interest for Periods Attributable to Any 
     Unreasonable IRS Error or Delay.--Section 6404(e)(1) is 
     amended--
       (1) by striking ``in performing a ministerial or managerial 
     act'' in subparagraphs (A) and (B),
       (2) by striking ``deficiency'' in subparagraph (A) and 
     inserting ``underpayment of any tax, addition to tax, or 
     penalty imposed by this title'', and
       (3) by striking ``tax described in section 6212(a)'' in 
     subparagraph (B) and inserting ``tax, addition to tax, or 
     penalty imposed by this title''.
       (b) Abatement of Interest to Extent Interest Is 
     Attributable to Taxpayer Reliance on Written Statements of 
     the IRS.--Subsection (f) of section 6404 is amended--
       (1) in the subsection heading, by striking ``Penalty or 
     Addition'' and inserting ``Interest, Penalty, or Addition''; 
     and
       (2) in paragraph (1) and in subparagraph (B) of paragraph 
     (2), by striking ``penalty or addition'' and inserting 
     ``interest, penalty, or addition''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to interest accruing on or after the 
     date of the enactment of this Act.

     SEC. 205. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON 
                   POTENTIAL UNDERPAYMENTS.

       (a) In General.--Subchapter A of chapter 67 (relating to 
     interest on underpayments) is amended by adding at the end 
     the following new section:

     ``SEC. 6603. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON 
                   POTENTIAL UNDERPAYMENTS, ETC.

       ``(a) Authority To Make Deposits Other Than As Payment of 
     Tax.--A taxpayer may make a cash deposit with the Secretary 
     which may be used by the Secretary to pay any tax imposed 
     under subtitle A or B or chapter 41, 42, 43, or 44 which has 
     not been assessed at the time of the deposit. Such a deposit 
     shall be made in such manner as the Secretary shall 
     prescribe.
       ``(b) No Interest Imposed.--To the extent that such deposit 
     is used by the Secretary to pay tax, for purposes of section 
     6601 (relating to interest on underpayments), the tax shall 
     be treated as paid when the deposit is made.
       ``(c) Return of Deposit.--Except in a case where the 
     Secretary determines that collection of tax is in jeopardy, 
     the Secretary shall return to the taxpayer any amount of the 
     deposit (to the extent not used for a payment of tax) which 
     the taxpayer requests in writing.
       ``(d) Payment of Interest.--
       ``(1) In general.--For purposes of section 6611 (relating 
     to interest on overpayments), a deposit which is returned to 
     a taxpayer shall be treated as a payment of tax for any 
     period to the extent (and only to the extent) attributable to 
     a disputable tax for such period. Under regulations 
     prescribed by the Secretary, rules similar to the rules of 
     section 6611(b)(2) shall apply.
       ``(2) Disputable tax.--
       ``(A) In general.--For purposes of this section, the term 
     `disputable tax' means the amount of tax specified at the 
     time of the deposit as the taxpayer's reasonable estimate of 
     the maximum amount of any tax attributable to disputable 
     items.
       ``(B) Safe harbor based on 30-day letter.--In the case of a 
     taxpayer who has been issued a 30-day letter, the maximum 
     amount of tax under subparagraph (A) shall not be less than 
     the amount of the proposed deficiency specified in such 
     letter.
       ``(3) Other definitions.--For purposes of paragraph (2)--
       ``(A) Disputable item.--The term `disputable item' means 
     any item of income, gain, loss, deduction, or credit if the 
     taxpayer--
       ``(i) has a reasonable basis for its treatment of such 
     item, and
       ``(ii) reasonably believes that the Secretary also has a 
     reasonable basis for disallowing the taxpayer's treatment of 
     such item.
       ``(B) 30-day letter.--The term `30-day letter' means the 
     first letter of proposed deficiency which allows the taxpayer 
     an opportunity for administrative review in the Internal 
     Revenue Service Office of Appeals.
       ``(4) Rate of interest.--The rate of interest allowable 
     under this subsection shall be the Federal short-term rate 
     determined under section 6621(b), compounded daily.
       ``(e) Use of Deposits.--
       ``(1) Payment of tax.--Except as otherwise provided by the 
     taxpayer, deposits shall be treated as used for the payment 
     of tax in the order deposited.
       ``(2) Returns of deposits.--Deposits shall be treated as 
     returned to the taxpayer on a last-in, first-out basis.''.
       (b) Clerical Amendment.--The table of sections for 
     subchapter A of chapter 67 is amended by adding at the end 
     the following new item:

``Sec. 6603. Deposits made to suspend running of interest on potential 
              underpayments, etc.''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to deposits made after December 31, 2003.
       (2) Coordination with deposits made under revenue procedure 
     84-58.--In the case of an amount held by the Secretary of the 
     Treasury or his delegate on the date of the enactment of this 
     Act as a deposit in the nature of a cash bond deposit 
     pursuant to Revenue Procedure 84-58, the date that the 
     taxpayer identifies such amount as a deposit made pursuant to 
     section 6603 of the Internal Revenue Code (as added by this 
     Act) shall be treated as the date such amount is deposited 
     for purposes of such section 6603.

     SEC. 206. FREEZE OF PROVISIONS REGARDING SUSPENSION OF 
                   INTEREST WHERE SECRETARY FAILS TO CONTACT 
                   TAXPAYER.

       (a) In General.--Section 6404(G) (relating to suspension of 
     interest and certain penalties where secretary fails to 
     contact taxpayer) is amended by striking ``1-year period (18-
     month period in the case of taxable years beginning before 
     January 1, 2004)'' both places it appears and inserting ``18-
     month period''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 207. EXPANSION OF INTEREST NETTING.

       (a) In General.--Subsection (d) of section 6621 (relating 
     to elimination of interest on overlapping periods of tax 
     overpayments and underpayments) is amended by adding at the 
     end the following: ``Solely for purposes of the preceding 
     sentence, section 6611(e) shall not apply.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to interest accrued after December 31, 2003.

[[Page S5217]]

     SEC. 208. CLARIFICATION OF APPLICATION OF FEDERAL TAX DEPOSIT 
                   PENALTY.

       Nothing in section 6656 of the Internal Revenue Code of 
     1986 shall be construed to permit the percentage specified in 
     subsection (b)(1)(A)(iii) thereof to apply other than in a 
     case where the failure is for more than 15 days.

     SEC. 209. FRIVOLOUS TAX SUBMISSIONS.

       (a) Civil Penalties.--Section 6702 is amended to read as 
     follows:

     ``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.

       ``(a) Civil Penalty for Frivolous Tax Returns.--A person 
     shall pay a penalty of $5,000 if--
       ``(1) such person files what purports to be a return of a 
     tax imposed by this title but which--
       ``(A) does not contain information on which the substantial 
     correctness of the self-assessment may be judged, or
       ``(B) contains information that on its face indicates that 
     the self-assessment is substantially incorrect; and
       ``(2) the conduct referred to in paragraph (1)--
       ``(A) is based on a position which the Secretary has 
     identified as frivolous under subsection (c), or
       ``(B) reflects a desire to delay or impede the 
     administration of Federal tax laws.
       ``(b) Civil Penalty for Specified Frivolous Submissions.--
       ``(1) Imposition of penalty.--Except as provided in 
     paragraph (3), any person who submits a specified frivolous 
     submission shall pay a penalty of $5,000.
       ``(2) Specified frivolous submission.--For purposes of this 
     section--
       ``(A) Specified frivolous submission.--The term `specified 
     frivolous submission' means a specified submission if any 
     portion of such submission--
       ``(i) is based on a position which the Secretary has 
     identified as frivolous under subsection (c), or
       ``(ii) reflects a desire to delay or impede the 
     administration of Federal tax laws.
       ``(B) Specified submission.--The term `specified 
     submission' means--
       ``(i) a request for a hearing under--

       ``(I) section 6320 (relating to notice and opportunity for 
     hearing upon filing of notice of lien), or
       ``(II) section 6330 (relating to notice and opportunity for 
     hearing before levy), and

       ``(ii) an application under--

       ``(I) section 7811 (relating to taxpayer assistance 
     orders),
       ``(II) section 6159 (relating to agreements for payment of 
     tax liability in installments), or
       ``(III) section 7122 (relating to compromises).

       ``(3) Opportunity to withdraw submission.--If the Secretary 
     provides a person with notice that a submission is a 
     specified frivolous submission and such person withdraws such 
     submission promptly after such notice, the penalty imposed 
     under paragraph (1) shall not apply with respect to such 
     submission.
       ``(c) Listing of Frivolous Positions.--The Secretary shall 
     prescribe (and periodically revise) a list of positions which 
     the Secretary has identified as being frivolous for purposes 
     of this subsection. The Secretary shall not include in such 
     list any position that the Secretary determines meets the 
     requirement of section 6662(d)(2)(B)(ii)(II).
       ``(d) Reduction of Penalty.--The Secretary may reduce the 
     amount of any penalty imposed under this section if the 
     Secretary determines that such reduction would promote 
     compliance with and administration of the Federal tax laws.
       ``(e) Penalties in Addition to Other Penalties.--The 
     penalties imposed by this section shall be in addition to any 
     other penalty provided by law.''
       (b) Treatment of Frivolous Requests for Hearings Before 
     Levy.--
       (1) Frivolous requests disregarded.--Section 6330 (relating 
     to notice and opportunity for hearing before levy) is amended 
     by adding at the end the following new subsection:
       ``(g) Frivolous Requests for Hearing, etc.--Notwithstanding 
     any other provision of this section, if the Secretary 
     determines that any portion of a request for a hearing under 
     this section or section 6320 meets the requirement of clause 
     (i) or (ii) of section 6702(b)(2)(A), then the Secretary may 
     treat such portion as if it were never submitted and such 
     portion shall not be subject to any further administrative or 
     judicial review.''
       (2) Preclusion from raising frivolous issues at hearing.--
     Section 6330(c)(4) is amended--
       (A) by striking ``(A)'' and inserting ``(A)(i)'';
       (B) by striking ``(B)'' and inserting ``(ii)'';
       (C) by striking the period at the end of the first sentence 
     and inserting ``; or''; and
       (D) by inserting after subparagraph (A)(ii) (as so 
     redesignated) the following:
       ``(B) the issue meets the requirement of clause (i) or (ii) 
     of section 6702(b)(2)(A).''
       (3) Statement of grounds.--Section 6330(b)(1) is amended by 
     striking ``under subsection (a)(3)(B)'' and inserting ``in 
     writing under subsection (a)(3)(B) and states the grounds for 
     the requested hearing''.
       (c) Treatment of Frivolous Requests for Hearings Upon 
     Filing of Notice of Lien.--Section 6320 is amended--
       (1) in subsection (b)(1), by striking ``under subsection 
     (a)(3)(B)'' and inserting ``in writing under subsection 
     (a)(3)(B) and states the grounds for the requested hearing'', 
     and
       (2) in subsection (c), by striking ``and (e)'' and 
     inserting ``(e), and (g)''.
       (d) Treatment of Frivolous Applications for Offers-in-
     Compromise and Installment Agreements.--Section 7122 is 
     amended by adding at the end the following new subsection:
       ``(e) Frivolous Submissions, etc.--Notwithstanding any 
     other provision of this section, if the Secretary determines 
     that any portion of an application for an offer-in-compromise 
     or installment agreement submitted under this section or 
     section 6159 meets the requirement of clause (i) or (ii) of 
     section 6702(b)(2)(A), then the Secretary may treat such 
     portion as if it were never submitted and such portion shall 
     not be subject to any further administrative or judicial 
     review.''
       (e) Clerical Amendment.--The table of sections for part I 
     of subchapter B of chapter 68 is amended by striking the item 
     relating to section 6702 and inserting the following new 
     item:

``Sec. 6702. Frivolous tax submissions.''
       (f) Effective Date.--The amendments made by this section 
     shall apply to submissions made and issues raised after the 
     date on which the Secretary first prescribes a list under 
     section 6702(c) of the Internal Revenue Code of 1986, as 
     amended by subsection (a).

            TITLE III--UNITED STATES TAX COURT MODERNIZATION

                    Subtitle A--Tax Court Procedure

     SEC. 301. JURISDICTION OF TAX COURT OVER COLLECTION DUE 
                   PROCESS CASES.

       (a) In General.--Paragraph (1) of section 6330(d) (relating 
     to proceeding after hearing) is amended to read as follows:
       ``(1) Judicial review of determination.--The person may, 
     within 30 days of a determination under this section, appeal 
     such determination to the Tax Court (and the Tax Court shall 
     have jurisdiction with respect to such matter).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to determinations made after the date of the 
     enactment of this Act.

     SEC. 302. AUTHORITY FOR SPECIAL TRIAL JUDGES TO HEAR AND 
                   DECIDE CERTAIN EMPLOYMENT STATUS CASES.

       (a) In General.--Section 7443A(b) (relating to proceedings 
     which may be assigned to special trial judges) is amended by 
     striking ``and'' at the end of paragraph (4), by 
     redesignating paragraph (5) as paragraph (6), and by 
     inserting after paragraph (4) the following new paragraph:
       ``(5) any proceeding under section 7436(c), and''.
       (b) Conforming Amendment.--Section 7443A(c) is amended by 
     striking ``or (4)'' and inserting ``(4), or (5)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to any proceeding under section 7436(c) of the 
     Internal Revenue Code of 1986 with respect to which a 
     decision has not become final (as determined under section 
     7481 of such Code) before the date of the enactment of this 
     Act.

     SEC. 303. CONFIRMATION OF AUTHORITY OF TAX COURT TO APPLY 
                   DOCTRINE OF EQUITABLE RECOUPMENT.

       (a) Confirmation of Authority of Tax Court To Apply 
     Doctrine of Equitable Recoupment.--Section 6214(b) (relating 
     to jurisdiction over other years and quarters) is amended by 
     adding at the end the following new sentence: 
     ``Notwithstanding the preceding sentence, the Tax Court may 
     apply the doctrine of equitable recoupment to the same extent 
     that it is available in civil tax cases before the district 
     courts of the United States and the United States Court of 
     Federal Claims.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to any action or proceeding in the United States 
     Tax Court with respect to which a decision has not become 
     final (as determined under section 7481 of the Internal 
     Revenue Code of 1986) as of the date of the enactment of this 
     Act.

     SEC. 304. TAX COURT FILING FEE IN ALL CASES COMMENCED BY 
                   FILING PETITION.

       (a) In General.--Section 7451 (relating to fee for filing a 
     Tax Court petition) is amended by striking all that follows 
     ``petition'' and inserting a period.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 305. AMENDMENTS TO APPOINT EMPLOYEES.

       (a) In General.--Subsection (a) of section 7471 (relating 
     to Tax Court employees) is amended to read as follows:
       ``(a) Appointment and Compensation.--
       ``(1) Clerk.--The Tax Court may appoint a clerk without 
     regard to the provisions of title 5, United States Code, 
     governing appointments in the competitive service. The clerk 
     shall serve at the pleasure of the Tax Court.
       ``(2) Law clerks and secretaries.--
       ``(A) In general.--The judges and special trial judges of 
     the Tax Court may appoint law clerks and secretaries, in such 
     numbers as the Tax Court may approve, without regard to the 
     provisions of title 5, United States Code, governing 
     appointments in the competitive service. Any such law clerk 
     or secretary shall serve at the pleasure of the appointing 
     judge.
       ``(B) Exemption from federal leave provisions.--A law clerk 
     appointed under this subsection shall be exempt from the 
     provisions of subchapter I of chapter 63 of title 5, United 
     States Code. Any unused sick leave or annual leave standing 
     to the employee's

[[Page S5218]]

     credit as of the effective date of this subsection shall 
     remain credited to the employee and shall be available to the 
     employee upon separation from the Federal Government.
       ``(3) Deputies and other employees.--The clerk may appoint 
     necessary deputies and employees without regard to the 
     provisions of title 5, United States Code, governing 
     appointments in the competitive service. Such deputies and 
     employees shall be subject to removal by the clerk.
       ``(4) Pay.--The Tax Court may fix and adjust the 
     compensation for the clerk and other employees of the Tax 
     Court without regard to the provisions of chapter 51, 
     subchapter III of chapter 53, or section 5373 of title 5, 
     United States Code. To the maximum extent feasible, the Tax 
     Court shall compensate employees at rates consistent with 
     those for employees holding comparable positions in the 
     judicial branch.
       ``(5) Programs.--The Tax Court may establish programs for 
     employee evaluations, incentive awards, flexible work 
     schedules, premium pay, and resolution of employee 
     grievances.
       ``(6) Discrimination prohibited.--The Tax Court shall--
       ``(A) prohibit discrimination on the basis of race, color, 
     religion, age, sex, national origin, political affiliation, 
     marital status, or handicapping condition; and
       ``(B) promulgate regulations providing procedures for 
     resolving complaints of discrimination by employees and 
     applicants for employment.
       ``(7) Experts and consultants.--The Tax Court may procure 
     the services of experts and consultants under section 3109 of 
     title 5, United States Code.
       ``(8) Rights to certain appeals reserved.--Notwithstanding 
     any other provision of law, an individual who is an employee 
     of the Tax Court on the day before the effective date of this 
     subsection and who, as of that day, was entitled to--
       ``(A) appeal a reduction in grade or removal to the Merit 
     Systems Protection Board under chapter 43 of title 5, United 
     States Code,
       ``(B) appeal an adverse action to the Merit Systems 
     Protection Board under chapter 75 of title 5, United States 
     Code,
       ``(C) appeal a prohibited personnel practice described 
     under section 2302(b) of title 5, United States Code, to the 
     Merit Systems Protection Board under chapter 77 of that 
     title,
       ``(D) make an allegation of a prohibited personnel practice 
     described under section 2302(b) of title 5, United States 
     Code, with the Office of Special Counsel under chapter 12 of 
     that title for action in accordance with that chapter, or
       ``(E) file an appeal with the Equal Employment Opportunity 
     Commission under part 1614 of title 29 of the Code of Federal 
     Regulations,
     shall be entitled to file such appeal or make such an 
     allegation so long as the individual remains an employee of 
     the Tax Court.
       ``(9) Competitive status.--Notwithstanding any other 
     provision of law, any employee of the Tax Court who has 
     completed at least 1 year of continuous service under a non 
     temporary appointment with the Tax Court acquires a 
     competitive status for appointment to any position in the 
     competitive service for which the employee possesses the 
     required qualifications.
       ``(10) Merit system principles; prohibited personnel 
     practices; and preference eligibles.--Any personnel 
     management system of the Tax Court shall--
       ``(A) include the principles set forth in section 2301(b) 
     of title 5, United States Code;
       ``(B) prohibit personnel practices prohibited under section 
     2302(b) of title 5, United States Code; and
       ``(C) in the case of any individual who would be a 
     preference eligible in the executive branch, the Tax Court 
     will provide preference for that individual in a manner and 
     to an extent consistent with preference accorded to 
     preference eligibles in the executive branch.''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on the date the United States Tax Court 
     adopts a personnel management system after the date of the 
     enactment of this Act.

     SEC. 306. EXPANDED USE OF TAX COURT PRACTICE FEE FOR PRO SE 
                   TAXPAYERS.

       (a) In General.--Section 7475(b) (relating to use of fees) 
     is amended by inserting before the period at the end ``and to 
     provide services to pro se taxpayers''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

             Subtitle B--Tax Court Pension and Compensation

     SEC. 311. ANNUITIES FOR SURVIVORS OF TAX COURT JUDGES WHO ARE 
                   ASSASSINATED.

       (a) Eligibility in Case of Death by Assassination.--
     Subsection (h) of section 7448 (relating to annuities to 
     surviving spouses and dependent children of judges) is 
     amended to read as follows:
       ``(h) Entitlement to Annuity.--
       ``(1) In general.--
       ``(A) Annuity to surviving spouse.--If a judge described in 
     paragraph (2) is survived by a surviving spouse but not by a 
     dependent child, there shall be paid to such surviving spouse 
     an annuity beginning with the day of the death of the judge 
     or following the surviving spouse's attainment of the age of 
     50 years, whichever is the later, in an amount computed as 
     provided in subsection (m).
       ``(B) Annuity to child.--If such a judge is survived by a 
     surviving spouse and a dependent child or children, there 
     shall be paid to such surviving spouse an immediate annuity 
     in an amount computed as provided in subsection (m), and 
     there shall also be paid to or on behalf of each such child 
     an immediate annuity equal to the lesser of--
       ``(i) 10 percent of the average annual salary of such judge 
     (determined in accordance with subsection (m)), or
       ``(ii) 20 percent of such average annual salary, divided by 
     the number of such children.
       ``(C) Annuity to surviving dependent children.--If such a 
     judge leaves no surviving spouse but leaves a surviving 
     dependent child or children, there shall be paid to or on 
     behalf of each such child an immediate annuity equal to the 
     lesser of--
       ``(i) 20 percent of the average annual salary of such judge 
     (determined in accordance with subsection (m)), or
       ``(ii) 40 percent of such average annual salary, divided by 
     the number of such children.
       ``(2) Covered judges.--Paragraph (1) applies to any judge 
     electing under subsection (b)--
       ``(A) who dies while a judge after having rendered at least 
     5 years of civilian service computed as prescribed in 
     subsection (n), for the last 5 years of which the salary 
     deductions provided for by subsection (c)(1) or the deposits 
     required by subsection (d) have actually been made or the 
     salary deductions required by the civil service retirement 
     laws have actually been made, or
       ``(B) who dies by assassination after having rendered less 
     than 5 years of civilian service computed as prescribed in 
     subsection (n) if, for the period of such service, the salary 
     deductions provided for by subsection (c)(1) or the deposits 
     required by subsection (d) have actually been made.
       ``(3) Termination of annuity.--
       ``(A) In the case of a surviving spouse.--The annuity 
     payable to a surviving spouse under this subsection shall be 
     terminable upon such surviving spouse's death or such 
     surviving spouse's remarriage before attaining age 55.
       ``(B) In the case of a child.--The annuity payable to a 
     child under this subsection shall be terminable upon (i) the 
     child attaining the age of 18 years, (ii) the child's 
     marriage, or (iii) the child's death, whichever first occurs, 
     except that if such child is incapable of self-support by 
     reason of mental or physical disability the child's annuity 
     shall be terminable only upon death, marriage, or recovery 
     from such disability.
       ``(C) In the case of a dependent child after death of 
     surviving spouse.--In case of the death of a surviving spouse 
     of a judge leaving a dependent child or children of the judge 
     surviving such spouse, the annuity of such child or children 
     shall be recomputed and paid as provided in paragraph (1)(C).
       ``(D) Recomputation.--In any case in which the annuity of a 
     dependent child is terminated under this subsection, the 
     annuities of any remaining dependent child or children, based 
     upon the service of the same judge, shall be recomputed and 
     paid as though the child whose annuity was so terminated had 
     not survived such judge.
       ``(4) Special rule for assassinated judges.--In the case of 
     a survivor or survivors of a judge described in paragraph 
     (2)(B), there shall be deducted from the annuities otherwise 
     payable under this section an amount equal to--
       ``(A) the amount of salary deductions provided for by 
     subsection (c)(1) that would have been made if such 
     deductions had been made for 5 years of civilian service 
     computed as prescribed in subsection (n) before the judge's 
     death, reduced by
       ``(B) the amount of such salary deductions that were 
     actually made before the date of the judge's death.
       (b) Definition of Assassination.--Section 7448(a) (relating 
     to definitions) is amended by adding at the end the following 
     new paragraph:
       ``(8) The terms `assassinated' and `assassination' mean the 
     killing of a judge that is motivated by the performance by 
     that judge of his or her official duties.''.
       (c) Determination of Assassination.--Subsection (i) of 
     section 7448 is amended--
       (1) by striking the subsection heading and inserting the 
     following:
       ``(i) Determinations by Chief Judge.--
       ``(1) Dependency and disability.--'',
       (2) by moving the text 2 ems to the right, and
       (3) by adding at the end the following new paragraph:
       ``(2) Assassination.--The chief judge shall determine 
     whether the killing of a judge was an assassination, subject 
     to review only by the Tax Court. The head of any Federal 
     agency that investigates the killing of a judge shall provide 
     information to the chief judge that would assist the chief 
     judge in making such a determination.''.
       (d) Computation of Annuities.--Subsection (m) of section 
     7448 is amended--
       (1) by striking the subsection heading and inserting the 
     following:
       ``(m) Computation of Annuities.--
       ``(1) In general.--'',
       (2) by moving the text 2 ems to the right, and
       (3) by adding at the end the following new paragraph:
       ``(2) Assassinated judges.--In the case of a judge who is 
     assassinated and who has served less than 3 years, the 
     annuity of the surviving spouse of such judge shall be based

[[Page S5219]]

     upon the average annual salary received by such judge for 
     judicial service.''.
       (e) Other Benefits.--Section 7448 is amended by adding at 
     the end the following:
       ``(u) Other Benefits.--In the case of a judge who is 
     assassinated, an annuity shall be paid under this section 
     notwithstanding a survivor's eligibility for or receipt of 
     benefits under chapter 81 of title 5, United States Code, 
     except that the annuity for which a surviving spouse is 
     eligible under this section shall be reduced to the extent 
     that the total benefits paid under this section and chapter 
     81 of that title for any year would exceed the current salary 
     for that year of the office of the judge.''.

     SEC. 312. COST-OF-LIVING ADJUSTMENTS FOR TAX COURT JUDICIAL 
                   SURVIVOR ANNUITIES.

       (a) In General.--Subsection (s) of section 7448 (relating 
     to annuities to surviving spouses and dependent children of 
     judges) is amended to read as follows:
       ``(s) Increases in Survivor Annuities.--Each time that an 
     increase is made under section 8340(b) of title 5, United 
     States Code, in annuities payable under subchapter III of 
     chapter 83 of that title, each annuity payable from the 
     survivors annuity fund under this section shall be increased 
     at the same time by the same percentage by which annuities 
     are increased under such section 8340(b).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply with respect to increases made under section 
     8340(b) of title 5, United States Code, in annuities payable 
     under subchapter III of chapter 83 of that title, taking 
     effect after the date of the enactment of this Act.

     SEC. 313. LIFE INSURANCE COVERAGE FOR TAX COURT JUDGES.

       (a) In General.--Section 7447 (relating to retirement of 
     judges) is amended by adding at the end the following new 
     subsection:
       ``(j) Life insurance coverage.--For purposes of chapter 87 
     of title 5, United States Code (relating to life insurance), 
     any individual who is serving as a judge of the Tax Court or 
     who is retired under this section is deemed to be an employee 
     who is continuing in active employment.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to any individual serving as a judge of the 
     United States Tax Court or to any retired judge of the United 
     States Tax Court on the date of the enactment of this Act.

     SEC. 314. COST OF LIFE INSURANCE COVERAGE FOR TAX COURT 
                   JUDGES AGE 65 OR OVER.

       Section 7472 (relating to expenditures) is amended by 
     inserting after the first sentence the following new 
     sentence: ``Notwithstanding any other provision of law, the 
     Tax Court is authorized to pay on behalf of its judges, age 
     65 or over, any increase in the cost of Federal Employees' 
     Group Life Insurance imposed after April 24, 1999, including 
     any expenses generated by such payments, as authorized by the 
     chief judge in a manner consistent with such payments 
     authorized by the Judicial Conference of the United States 
     pursuant to section 604(a)(5) of title 28, United States 
     Code.''.

     SEC. 315. MODIFICATION OF TIMING OF LUMP-SUM PAYMENT OF 
                   JUDGES' ACCRUED ANNUAL LEAVE.

       (a) In General.--Section 7443 (relating to membership of 
     the Tax Court) is amended by adding at the end the following 
     new subsection:
       ``(h) Lump-Sum Payment of Judges' Accrued Annual Leave.--
     Notwithstanding the provisions of sections 5551 and 6301 of 
     title 5, United States Code, when an individual subject to 
     the leave system provided in chapter 63 of that title is 
     appointed by the President to be a judge of the Tax Court, 
     the individual shall be entitled to receive, upon appointment 
     to the Tax Court, a lump-sum payment from the Tax Court of 
     the accumulated and accrued current annual leave standing to 
     the individual's credit as certified by the agency from which 
     the individual resigned.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to any judge of the United States Tax Court who 
     has an outstanding leave balance on the date of the enactment 
     of this Act and to any individual appointed by the President 
     to serve as a judge of the United States Tax Court after such 
     date.

     SEC. 316. PARTICIPATION OF TAX COURT JUDGES IN THE THRIFT 
                   SAVINGS PLAN.

       (a) In General.--Section 7447 (relating to retirement of 
     judges), as amended by this Act, is amended by adding at the 
     end the following new subsection:
       ``(k) Thrift Savings Plan.--
       ``(1) Election to contribute.--
       ``(A) In general.--A judge of the Tax Court may elect to 
     contribute to the Thrift Savings Fund established by section 
     8437 of title 5, United States Code.
       ``(B) Period of election.--An election may be made under 
     this paragraph only during a period provided under section 
     8432(b) of title 5, United States Code, for individuals 
     subject to chapter 84 of such title.
       ``(2) Applicability of title 5 provisions.--Except as 
     otherwise provided in this subsection, the provisions of 
     subchapters III and VII of chapter 84 of title 5, United 
     States Code, shall apply with respect to a judge who makes an 
     election under paragraph (1).
       ``(3) Special rules.--
       ``(A) Amount contributed.--The amount contributed by a 
     judge to the Thrift Savings Fund in any pay period shall not 
     exceed the maximum percentage of such judge's basic pay for 
     such period as allowable under section 8440f of title 5, 
     United States Code. Basic pay does not include any retired 
     pay paid pursuant to this section.
       ``(B) Contributions for benefit of judge.--No contributions 
     may be made for the benefit of a judge under section 8432(c) 
     of title 5, United States Code.
       ``(C) Applicability of section 8433(b) of title 5 whether 
     or not judge retires.--Section 8433(b) of title 5, United 
     States Code, applies with respect to a judge who makes an 
     election under paragraph (1) and who either--
       ``(i) retires under subsection (b), or
       ``(ii) ceases to serve as a judge of the Tax Court but does 
     not retire under subsection (b).
     Retirement under subsection (b) is a separation from service 
     for purposes of subchapters III and VII of chapter 84 of that 
     title.
       ``(D) Applicability of section 8351(b)(5) of title 5.--The 
     provisions of section 8351(b)(5) of title 5, United States 
     Code, shall apply with respect to a judge who makes an 
     election under paragraph (1).
       ``(E) Exception.--Notwithstanding subparagraph (C), if any 
     judge retires under this section, or resigns without having 
     met the age and service requirements set forth under 
     subsection (b)(2), and such judge's nonforfeitable account 
     balance is less than an amount that the Executive Director of 
     the Office of Personnel Management prescribes by regulation, 
     the Executive Director shall pay the nonforfeitable account 
     balance to the participant in a single payment.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act, 
     except that United States Tax Court judges may only begin to 
     participate in the Thrift Savings Plan at the next open 
     season beginning after such date.

     SEC. 317. EXEMPTION OF TEACHING COMPENSATION OF RETIRED 
                   JUDGES FROM LIMITATION ON OUTSIDE EARNED 
                   INCOME.

       (a) In General.--Section 7447 (relating to retirement of 
     judges), as amended by this Act, is amended by adding at the 
     end the following new subsection:
       ``(l) Teaching Compensation of Retired Judges.--For 
     purposes of the limitation under section 501(a) of the Ethics 
     in Government Act of 1978 (5 U.S.C. App.), any compensation 
     for teaching approved under subsection (a)(5) of that section 
     shall not be treated as outside earned income when received 
     by a judge of the Tax Court who has retired under subsection 
     (b) for teaching performed during any calendar year for which 
     such a judge has met the requirements of subsection (c), as 
     certified by the chief judge of the Tax Court.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to any individual serving as a retired judge of 
     the United States Tax Court on or after the date of the 
     enactment of this Act.

     SEC. 318. GENERAL PROVISIONS RELATING TO MAGISTRATE JUDGES OF 
                   THE TAX COURT.

       (a) Title of Special Trial Judge Changed to Magistrate 
     Judge of the Tax Court.--The heading of section 7443A is 
     amended to read as follows:

     ``SEC. 7443A. MAGISTRATE JUDGES OF THE TAX COURT.''.

       (b) Appointment, Tenure, and Removal.--Subsection (a) of 
     section 7443A is amended to read as follows:
       ``(a) Appointment, Tenure, and Removal.--
       ``(1) Appointment.--The chief judge may, from time to time, 
     appoint and reappoint magistrate judges of the Tax Court for 
     a term of 8 years. The magistrate judges of the Tax Court 
     shall proceed under such rules as may be promulgated by 
     the Tax Court.
       ``(2) Removal.--Removal of a magistrate judge of the Tax 
     Court during the term for which he or she is appointed shall 
     be only for incompetency, misconduct, neglect of duty, or 
     physical or mental disability, but the office of a magistrate 
     judge of the Tax Court shall be terminated if the judges of 
     the Tax Court determine that the services performed by the 
     magistrate judge of the Tax Court are no longer needed. 
     Removal shall not occur unless a majority of all the judges 
     of the Tax Court concur in the order of removal. Before any 
     order of removal shall be entered, a full specification of 
     the charges shall be furnished to the magistrate judge of the 
     Tax Court, and he or she shall be accorded by the judges of 
     the Tax Court an opportunity to be heard on the charges.''.
       (c) Salary.--Section 7443A(d) (relating to salary) is 
     amended by striking ``90'' and inserting ``92''.
       (d) Exemption From Federal Leave Provisions.--Section 7443A 
     is amended by adding at the end the following new subsection:
       ``(f) Exemption From Federal Leave Provisions.--
       ``(1) In general.--A magistrate judge of the Tax Court 
     appointed under this section shall be exempt from the 
     provisions of subchapter I of chapter 63 of title 5, United 
     States Code.
       ``(2) Treatment of unused leave.--
       ``(A) After service as magistrate judge.--If an individual 
     who is exempted under paragraph (1) from the subchapter 
     referred to in such paragraph was previously subject to such 
     subchapter and, without a break in service, again becomes 
     subject to such subchapter on completion of the individual's 
     service as a magistrate judge, the unused annual leave and 
     sick leave standing to the individual's credit when such 
     individual was exempted from this subchapter is

[[Page S5220]]

     deemed to have remained to the individual's credit.
       ``(B) Computation of annuity.--In computing an annuity 
     under section 8339 of title 5, United States Code, the total 
     service of an individual specified in subparagraph (A) who 
     retires on an immediate annuity or dies leaving a survivor or 
     survivors entitled to an annuity includes, without regard to 
     the limitations imposed by subsection (f) of such section 
     8339, the days of unused sick leave standing to the 
     individual's credit when such individual was exempted from 
     subchapter I of chapter 63 of title 5, United States Code, 
     except that these days will not be counted in determining 
     average pay or annuity eligibility.
       ``(C) Lump sum payment.--Any accumulated and current 
     accrued annual leave or vacation balances credited to a 
     magistrate judge as of the date of the enactment of this 
     subsection shall be paid in a lump sum at the time of 
     separation from service pursuant to the provisions and 
     restrictions set forth in section 5551 of title 5, United 
     States Code, and related provisions referred to in such 
     section.''.
       (e) Conforming Amendments.--
       (1) The heading of subsection (b) of section 7443A is 
     amended by striking ``Special Trial Judges'' and inserting 
     ``Magistrate Judges of the Tax Court''.
       (2) Section 7443A(b) is amended by striking ``special trial 
     judges of the court'' and inserting ``magistrate judges of 
     the Tax Court''.
       (3) Subsections (c) and (d) of section 7443A are amended by 
     striking ``special trial judge'' and inserting ``magistrate 
     judge of the Tax Court'' each place it appears.
       (4) Section 7443A(e) is amended by striking ``special trial 
     judges'' and inserting ``magistrate judges of the Tax 
     Court''.
       (5) Section 7456(a) is amended by striking ``special trial 
     judge'' each place it appears and inserting ``magistrate 
     judge''.
       (6) Subsection (c) of section 7471 is amended--
       (A) by striking the subsection heading and inserting 
     ``Magistrate Judges of the Tax Court.--'', and
       (B) by striking ``special trial judges'' and inserting 
     ``magistrate judges''.

     SEC. 319. ANNUITIES TO SURVIVING SPOUSES AND DEPENDENT 
                   CHILDREN OF MAGISTRATE JUDGES OF THE TAX COURT.

       (a) Definitions.--Section 7448(a) (relating to 
     definitions), as amended by this Act, is amended by 
     redesignating paragraphs (5), (6), (7), and (8) as paragraphs 
     (7), (8), (9), and (10), respectively, and by inserting after 
     paragraph (4) the following new paragraphs:
       ``(5) The term `magistrate judge' means a judicial officer 
     appointed pursuant to section 7443A, including any individual 
     receiving an annuity under section 7443B, or chapters 83 or 
     84, as the case may be, of title 5, United States Code, 
     whether or not performing judicial duties under section 
     7443C.
       ``(6) The term `magistrate judge's salary' means the salary 
     of a magistrate judge received under section 7443A(d), any 
     amount received as an annuity under section 7443B, or 
     chapters 83 or 84, as the case may be, of title 5, United 
     States Code, and compensation received under section 
     7443C.''.
       (b) Election.--Subsection (b) of section 7448 (relating to 
     annuities to surviving spouses and dependent children of 
     judges) is amended--
       (1) by striking the subsection heading and inserting the 
     following:
       ``(b) Election.--
       ``(1) Judges.--'',
       (2) by moving the text 2 ems to the right, and
       (3) by adding at the end the following new paragraph:
       ``(2) Magistrate judges.--Any magistrate judge may by 
     written election filed with the chief judge bring himself or 
     herself within the purview of this section. Such election 
     shall be filed not later than the later of 6 months after--
       ``(A) 6 months after the date of the enactment of this 
     paragraph,
       ``(B) the date the judge takes office, or
       ``(C) the date the judge marries.''.
       (c) Conforming Amendments.--
       (1) The heading of section 7448 is amended by inserting 
     ``AND MAGISTRATE JUDGES'' after ``JUDGES''.
       (2) The item relating to section 7448 in the table of 
     sections for part I of subchapter C of chapter 76 is amended 
     by inserting ``and magistrate judges'' after ``judges''.
       (3) Subsections (c)(1), (d), (f), (g), (h), (j), (m), (n), 
     and (u) of section 7448, as amended by this Act, are each 
     amended--
       (A) by inserting ``or magistrate judge'' after ``judge'' 
     each place it appears other than in the phrase ``chief 
     judge'', and
       (B) by inserting ``or magistrate judge's'' after 
     ``judge's'' each place it appears.
       (4) Section 7448(c) is amended--
       (A) in paragraph (1), by striking ``Tax Court judges'' and 
     inserting ``Tax Court judicial officers'',
       (B) in paragraph (2)--
       (i) in subparagraph (A), by inserting ``and section 
     7443A(d)'' after ``(a)(4)'', and
       (ii) in subparagraph (B), by striking ``subsection (a)(4)'' 
     and inserting ``subsections (a)(4) and (a)(6)''.
       (5) Section 7448(g) is amended by inserting ``or section 
     7443B'' after ``section 7447'' each place it appears, and by 
     inserting ``or an annuity'' after ``retired pay''.
       (6) Section 7448(j)(1) is amended--
       (A) in subparagraph (A), by striking ``service or retired'' 
     and inserting ``service, retired'', and by inserting ``, or 
     receiving any annuity under section 7443B or chapters 83 or 
     84 of title 5, United States Code,'' after ``section 7447'', 
     and
       (B) in the last sentence, by striking ``subsections (a)(6) 
     and (7)'' and inserting ``paragraphs (8) and (9) of 
     subsection (a)''.
       (7) Section 7448(m)(1), as amended by this Act, is 
     amended--
       (A) by inserting ``or any annuity under section 7443B or 
     chapters 83 or 84 of title 5, United States Code'' after 
     ``7447(d)'', and
       (B) by inserting ``or 7443B(m)(1)(B) after ``7447(f)(4)''.
       (8) Section 7448(n) is amended by inserting ``his years of 
     service pursuant to any appointment under section 7443A,'' 
     after ``of the Tax Court,''.
       (9) Section 3121(b)(5)(E) is amended by inserting ``or 
     magistrate judge'' before ``of the United States Tax Court''.
       (10) Section 210(a)(5)(E) of the Social Security Act is 
     amended by inserting ``or magistrate judge'' before ``of the 
     United States Tax Court''.

     SEC. 320. RETIREMENT AND ANNUITY PROGRAM.

       (a) Retirement and Annuity Program.--Part I of subchapter C 
     of chapter 76 is amended by inserting after section 7443A the 
     following new section:

     ``SEC. 7443B. RETIREMENT FOR MAGISTRATE JUDGES OF THE TAX 
                   COURT.

       ``(a) Retirement Based on Years of Service.--A magistrate 
     judge of the Tax Court to whom this section applies and who 
     retires from office after attaining the age of 65 years and 
     serving at least 14 years, whether continuously or otherwise, 
     as such magistrate judge shall, subject to subsection (f), be 
     entitled to receive, during the remainder of the magistrate 
     judge's lifetime, an annuity equal to the salary being 
     received at the time the magistrate judge leaves office.
       ``(b) Retirement Upon Failure of Reappointment.--A 
     magistrate judge of the Tax Court to whom this section 
     applies who is not reappointed following the expiration of 
     the term of office of such magistrate judge, and who retires 
     upon the completion of the term shall, subject to subsection 
     (f), be entitled to receive, upon attaining the age of 65 
     years and during the remainder of such magistrate judge's 
     lifetime, an annuity equal to that portion of the salary 
     being received at the time the magistrate judge leaves office 
     which the aggregate number of years of service, not to exceed 
     14, bears to 14, if--
       ``(1) such magistrate judge has served at least 1 full term 
     as a magistrate judge, and
       ``(2) not earlier than 9 months before the date on which 
     the term of office of such magistrate judge expires, and not 
     later than 6 months before such date, such magistrate judge 
     notified the chief judge of the Tax Court in writing that 
     such magistrate judge was willing to accept reappointment to 
     the position in which such magistrate judge was serving.
       ``(c) Service of at Least 8 Years.--A magistrate judge of 
     the Tax Court to whom this section applies and who retires 
     after serving at least 8 years, whether continuously or 
     otherwise, as such a magistrate judge shall, subject to 
     subsection (f), be entitled to receive, upon attaining the 
     age of 65 years and during the remainder of the magistrate 
     judge's lifetime, an annuity equal to that portion of the 
     salary being received at the time the magistrate judge leaves 
     office which the aggregate number of years of service, not to 
     exceed 14, bears to 14. Such annuity shall be reduced by \1/
     6\ of 1 percent for each full month such magistrate judge was 
     under the age of 65 at the time the magistrate judge left 
     office, except that such reduction shall not exceed 20 
     percent.
       ``(d) Retirement for Disability.--A magistrate judge of the 
     Tax Court to whom this section applies, who has served at 
     least 5 years, whether continuously or otherwise, as such a 
     magistrate judge, and who retires or is removed from office 
     upon the sole ground of mental or physical disability shall, 
     subject to subsection (f), be entitled to receive, during the 
     remainder of the magistrate judge's lifetime, an annuity 
     equal to 40 percent of the salary being received at the time 
     of retirement or removal or, in the case of a magistrate 
     judge who has served for at least 10 years, an amount equal 
     to that proportion of the salary being received at the time 
     of retirement or removal which the aggregate number of years 
     of service, not to exceed 14, bears to 14.
       ``(e) Cost-of-Living Adjustments.--A magistrate judge of 
     the Tax Court who is entitled to an annuity under this 
     section is also entitled to a cost-of-living adjustment in 
     such annuity, calculated and payable in the same manner as 
     adjustments under section 8340(b) of title 5, United States 
     Code, except that any such annuity, as increased under this 
     subsection, may not exceed the salary then payable for the 
     position from which the magistrate judge retired or was 
     removed.
       ``(f) Election; Annuity in Lieu of Other Annuities.--
       ``(1) In general.--A magistrate judge of the Tax Court 
     shall be entitled to an annuity under this section if the 
     magistrate judge elects an annuity under this section by 
     notifying the chief judge of the Tax Court not later than the 
     later of--
       ``(A) 5 years after the magistrate judge of the Tax Court 
     begins judicial service, or
       ``(B) 5 years after the date of the enactment of this 
     subsection.
     Such notice shall be given in accordance with procedures 
     prescribed by the Tax Court.

[[Page S5221]]

       ``(2) Annuity in lieu of other annuity.--A magistrate judge 
     who elects to receive an annuity under this section shall not 
     be entitled to receive--
       ``(A) any annuity to which such magistrate judge would 
     otherwise have been entitled under subchapter III of chapter 
     83, or under chapter 84 (except for subchapters III and VII), 
     of title 5, United States Code, for service performed as a 
     magistrate or otherwise,
       ``(B) an annuity or salary in senior status or retirement 
     under section 371 or 372 of title 28, United States Code,
       ``(C) retired pay under section 7447, or
       ``(D) retired pay under section 7296 of title 38, United 
     States Code.
       ``(3) Coordination with title 5.--A magistrate judge of the 
     Tax Court who elects to receive an annuity under this 
     section--
       ``(A) shall not be subject to deductions and contributions 
     otherwise required by section 8334(a) of title 5, United 
     States Code,
       ``(B) shall be excluded from the operation of chapter 84 
     (other than subchapters III and VII) of such title 5, and
       ``(C) is entitled to a lump-sum credit under section 
     8342(a) or 8424 of such title 5, as the case may be.
       ``(g) Calculation of Service.--For purposes of calculating 
     an annuity under this section--
       ``(1) service as a magistrate judge of the Tax Court to 
     whom this section applies may be credited, and
       ``(2) each month of service shall be credited as \1/12\ of 
     a year, and the fractional part of any month shall not be 
     credited.
       ``(h) Covered Positions and Service.--This section applies 
     to any magistrate judge of the Tax Court or special trial 
     judge of the Tax Court appointed under this subchapter, but 
     only with respect to service as such a magistrate judge or 
     special trial judge after a date not earlier than 9\1/2\ 
     years before the date of the enactment of this subsection.
       ``(i) Payments Pursuant to Court Order.--
       ``(1) In general.--Payments under this section which would 
     otherwise be made to a magistrate judge of the Tax Court 
     based upon his or her service shall be paid (in whole or in 
     part) by the chief judge of the Tax Court to another person 
     if and to the extent expressly provided for in the terms of 
     any court decree of divorce, annulment, or legal separation, 
     or the terms of any court order or court-approved property 
     settlement agreement incident to any court decree of divorce, 
     annulment, or legal separation. Any payment under this 
     paragraph to a person bars recovery by any other person.
       ``(2) Requirements for payment.--Paragraph (1) shall apply 
     only to payments made by the chief judge of the Tax Court 
     after the date of receipt by the chief judge of written 
     notice of such decree, order, or agreement, and such 
     additional information as the chief judge may prescribe.
       ``(3) Court defined.--For purposes of this subsection, the 
     term `court' means any court of any State, the District of 
     Columbia, the Commonwealth of Puerto Rico, Guam, the Northern 
     Mariana Islands, or the Virgin Islands, and any Indian tribal 
     court or courts of Indian offense.
       ``(j) Deductions, Contributions, and Deposits.--
       ``(1) Deductions.--Beginning with the next pay period after 
     the chief judge of the Tax Court receives a notice under 
     subsection (f) that a magistrate judge of the Tax Court has 
     elected an annuity under this section, the chief judge shall 
     deduct and withhold 1 percent of the salary of such 
     magistrate judge. Amounts shall be so deducted and withheld 
     in a manner determined by the chief judge. Amounts deducted 
     and withheld under this subsection shall be deposited in the 
     Treasury of the United States to the credit of the Tax Court 
     Judicial Officers' Retirement Fund. Deductions under this 
     subsection from the salary of a magistrate judge shall 
     terminate upon the retirement of the magistrate judge or upon 
     completion of 14 years of service for which contributions 
     under this section have been made, whether continuously or 
     otherwise, as calculated under subsection (g), whichever 
     occurs first.
       ``(2) Consent to deductions; discharge of claims.--Each 
     magistrate judge of the Tax Court who makes an election under 
     subsection (f) shall be deemed to consent and agree to the 
     deductions from salary which are made under paragraph (1). 
     Payment of such salary less such deductions (and any 
     deductions made under section 7448) is a full and complete 
     discharge and acquittance of all claims and demands for all 
     services rendered by such magistrate judge during the period 
     covered by such payment, except the right to those benefits 
     to which the magistrate judge is entitled under this section 
     (and section 7448).
       ``(k) Deposits for Prior Service.--Each magistrate judge of 
     the Tax Court who makes an election under subsection (f) may 
     deposit, for service performed before such election for which 
     contributions may be made under this section, an amount equal 
     to 1 percent of the salary received for that service. Credit 
     for any period covered by that service may not be allowed for 
     purposes of an annuity under this section until a deposit 
     under this subsection has been made for that period.
       ``(l) Individual Retirement Records.--The amounts deducted 
     and withheld under subsection (j), and the amounts deposited 
     under subsection (k), shall be credited to individual 
     accounts in the name of each magistrate judge of the Tax 
     Court from whom such amounts are received, for credit to the 
     Tax Court Judicial Officers' Retirement Fund.
       ``(m) Annuities Affected in Certain Cases.--
       ``(1) 1-year forfeiture for failure to perform judicial 
     duties.--Subject to paragraph (3), any magistrate judge of 
     the Tax Court who retires under this section and who fails to 
     perform judicial duties required of such individual by 
     section 7443C shall forfeit all rights to an annuity under 
     this section for a 1-year period which begins on the 1st day 
     on which such individual fails to perform such duties.
       ``(2) Permanent forfeiture of retired pay where certain 
     non-government services performed.--Subject to paragraph (3), 
     any magistrate judge of the Tax Court who retires under this 
     section and who thereafter performs (or supervises or directs 
     the performance of) legal or accounting services in the field 
     of Federal taxation for the individual's client, the 
     individual's employer, or any of such employer's clients, 
     shall forfeit all rights to an annuity under this section for 
     all periods beginning on or after the first day on which the 
     individual performs (or supervises or directs the performance 
     of) such services. The preceding sentence shall not apply to 
     any civil office or employment under the Government of the 
     United States.
       ``(3) Forfeitures not to apply where individual elects to 
     freeze amount of annuity.--
       ``(A) In general.--If a magistrate judge of the Tax Court 
     makes an election under this paragraph--
       ``(i) paragraphs (1) and (2) (and section 7443C) shall not 
     apply to such magistrate judge beginning on the date such 
     election takes effect, and
       ``(ii) the annuity payable under this section to such 
     magistrate judge, for periods beginning on or after the date 
     such election takes effect, shall be equal to the annuity to 
     which such magistrate judge is entitled on the day before 
     such effective date.
       ``(B) Election requirements.--An election under 
     subparagraph (A)--
       ``(i) may be made by a magistrate judge of the Tax Court 
     eligible for retirement under this section, and
       ``(ii) shall be filed with the chief judge of the Tax 
     Court.

     Such an election, once it takes effect, shall be irrevocable.
       ``(C) Effective date of election.--Any election under 
     subparagraph (A) shall take effect on the first day of the 
     first month following the month in which the election is 
     made.
       ``(4) Accepting other employment.--Any magistrate judge of 
     the Tax Court who retires under this section and thereafter 
     accepts compensation for civil office or employment under the 
     United States Government (other than for the performance of 
     functions as a magistrate judge of the Tax Court under 
     section 7443C) shall forfeit all rights to an annuity under 
     this section for the period for which such compensation is 
     received. For purposes of this paragraph, the term 
     `compensation' includes retired pay or salary received in 
     retired status.
       ``(n) Lump-Sum Payments.--
       ``(1) Eligibility.--
       ``(A) In general.--Subject to paragraph (2), an individual 
     who serves as a magistrate judge of the Tax Court and--
       ``(i) who leaves office and is not reappointed as a 
     magistrate judge of the Tax Court for at least 31 consecutive 
     days,
       ``(ii) who files an application with the chief judge of the 
     Tax Court for payment of a lump-sum credit,
       ``(iii) is not serving as a magistrate judge of the Tax 
     Court at the time of filing of the application, and
       ``(iv) will not become eligible to receive an annuity under 
     this section within 31 days after filing the application,

     is entitled to be paid the lump-sum credit. Payment of the 
     lump-sum credit voids all rights to an annuity under this 
     section based on the service on which the lump-sum credit is 
     based, until that individual resumes office as a magistrate 
     judge of the Tax Court.
       ``(B) Payment to survivors.--Lump-sum benefits authorized 
     by subparagraphs (C), (D), and (E) of this paragraph shall be 
     paid to the person or persons surviving the magistrate judge 
     of the Tax Court and alive on the date title to the payment 
     arises, in the order of precedence set forth in subsection 
     (o) of section 376 of title 28, United States Code, and in 
     accordance with the last 2 sentences of paragraph (1) of that 
     subsection. For purposes of the preceding sentence, the term 
     `judicial official' as used in subsection (o) of such section 
     376 shall be deemed to mean `magistrate judge of the Tax 
     Court' and the terms `Administrative Office of the United 
     States Courts' and `Director of the Administrative Office of 
     the United States Courts' shall be deemed to mean `chief 
     judge of the Tax Court'.
       ``(C) Payment upon death of judge before receipt of 
     annuity.--If a magistrate judge of the Tax Court dies before 
     receiving an annuity under this section, the lump-sum credit 
     shall be paid.
       ``(D) Payment of annuity remainder.--If all annuity rights 
     under this section based on the service of a deceased 
     magistrate judge of the Tax Court terminate before the total 
     annuity paid equals the lump-sum credit, the difference shall 
     be paid.
       ``(E) Payment upon death of judge during receipt of 
     annuity.--If a magistrate judge of the Tax Court who is 
     receiving an annuity under this section dies, any accrued 
     annuity benefits remaining unpaid shall be paid.

[[Page S5222]]

       ``(F) Payment upon termination.--Any accrued annuity 
     benefits remaining unpaid on the termination, except by 
     death, of the annuity of a magistrate judge of the Tax Court 
     shall be paid to that individual.
       ``(G) Payment upon accepting other employment.--Subject to 
     paragraph (2), a magistrate judge of the Tax Court who 
     forfeits rights to an annuity under subsection (m)(4) before 
     the total annuity paid equals the lump-sum credit shall be 
     entitled to be paid the difference if the magistrate judge of 
     the Tax Court files an application with the chief judge of 
     the Tax Court for payment of that difference. A payment under 
     this subparagraph voids all rights to an annuity on which the 
     payment is based.
       ``(2) Spouses and former spouses.--
       ``(A) In general.--Payment of the lump-sum credit under 
     paragraph (1)(A) or a payment under paragraph (1)(G)--
       ``(i) may be made only if any current spouse and any former 
     spouse of the magistrate judge of the Tax Court are notified 
     of the magistrate judge's application, and
       ``(ii) shall be subject to the terms of a court decree of 
     divorce, annulment, or legal separation, or any court or 
     court approved property settlement agreement incident to such 
     decree, if--

       ``(I) the decree, order, or agreement expressly relates to 
     any portion of the lump-sum credit or other payment involved, 
     and
       ``(II) payment of the lump-sum credit or other payment 
     would extinguish entitlement of the magistrate judge's spouse 
     or former spouse to any portion of an annuity under 
     subsection (i).

       ``(B) Notification.--Notification of a spouse or former 
     spouse under this paragraph shall be made in accordance with 
     such procedures as the chief judge of the Tax Court shall 
     prescribe. The chief judge may provide under such procedures 
     that subparagraph (A)(i) may be waived with respect to a 
     spouse or former spouse if the magistrate judge establishes 
     to the satisfaction of the chief judge that the whereabouts 
     of such spouse or former spouse cannot be determined.
       ``(C) Resolution of 2 or more orders.--The chief judge 
     shall prescribe procedures under which this paragraph shall 
     be applied in any case in which the chief judge receives 2 or 
     more orders or decrees described in subparagraph (A).
       ``(3) Definition.--For purposes of this subsection, the 
     term `lump-sum credit' means the unrefunded amount consisting 
     of--
       ``(A) retirement deductions made under this section from 
     the salary of a magistrate judge of the Tax Court,
       ``(B) amounts deposited under subsection (k) by a 
     magistrate judge of the Tax Court covering earlier service, 
     and
       ``(C) interest on the deductions and deposits which, for 
     any calendar year, shall be equal to the overall average 
     yield to the Tax Court Judicial Officers' Retirement Fund 
     during the preceding fiscal year from all obligations 
     purchased by the Secretary during such fiscal year under 
     subsection (o); but does not include interest--
       ``(i) if the service covered thereby aggregates 1 year or 
     less, or
       ``(ii) for the fractional part of a month in the total 
     service.
       ``(o) Tax Court Judicial Officers' Retirement Fund.--
       ``(1) Establishment.--There is established in the Treasury 
     a fund which shall be known as the `Tax Court Judicial 
     Officers' Retirement Fund'. Amounts in the Fund are 
     authorized to be appropriated for the payment of annuities, 
     refunds, and other payments under this section.
       ``(2) Investment of Fund.--The Secretary shall invest, in 
     interest bearing securities of the United States, such 
     currently available portions of the Tax Court Judicial 
     Officers' Retirement Fund as are not immediately required for 
     payments from the Fund. The income derived from these 
     investments constitutes a part of the Fund.
       ``(3) Unfunded liability.--
       ``(A) In general.--There are authorized to be appropriated 
     to the Tax Court Judicial Officers' Retirement Fund amounts 
     required to reduce to zero the unfunded liability of the 
     Fund.
       ``(B) Unfunded liability.--For purposes of subparagraph 
     (A), the term `unfunded liability' means the estimated 
     excess, determined on an annual basis in accordance with the 
     provisions of section 9503 of title 31, United States Code, 
     of the present value of all benefits payable from the Tax 
     Court Judicial Officers' Retirement Fund over the sum of--
       ``(i) the present value of deductions to be withheld under 
     this section from the future basic pay of magistrate judges 
     of the Tax Court, plus
       ``(ii) the balance in the Fund as of the date the unfunded 
     liability is determined.
       ``(p) Participation in Thrift Savings Plan.--
       ``(1) Election to contribute.--
       ``(A) In general.--A magistrate judge of the Tax Court who 
     elects to receive an annuity under this section or under 
     section 321 of the Tax Administration Good Government Act may 
     elect to contribute an amount of such individual's basic pay 
     to the Thrift Savings Fund established by section 8437 of 
     title 5, United States Code.
       ``(B) Period of election.--An election may be made under 
     this paragraph only during a period provided under section 
     8432(b) of title 5, United States Code, for individuals 
     subject to chapter 84 of such title.
       ``(2) Applicability of title 5 provisions.--Except as 
     otherwise provided in this subsection, the provisions of 
     subchapters III and VII of chapter 84 of title 5, United 
     States Code, shall apply with respect to a magistrate judge 
     who makes an election under paragraph (1).
       ``(3) Special rules.--
       ``(A) Amount contributed.--The amount contributed by a 
     magistrate judge to the Thrift Savings Fund in any pay period 
     shall not exceed the maximum percentage of such judge's basic 
     pay for such pay period as allowable under section 8440f of 
     title 5, United States Code.
       ``(B) Contributions for benefit of judge.--No contributions 
     may be made for the benefit of a magistrate judge under 
     section 8432(c) of title 5, United States Code.
       ``(C) Applicability of section 8433(b) of title 5.--Section 
     8433(b) of title 5, United States Code, applies with respect 
     to a magistrate judge who makes an election under paragraph 
     (1) and--
       ``(i) who retires entitled to an immediate annuity under 
     this section (including a disability annuity under subsection 
     (d) of this section) or section 321 of the Tax Administration 
     Good Government Act,
       ``(ii) who retires before attaining age 65 but is entitled, 
     upon attaining age 65, to an annuity under this section or 
     section 321 of the Tax Administration Good Government Act, or
       ``(iii) who retires before becoming entitled to an 
     immediate annuity, or an annuity upon attaining age 65, under 
     this section or section 321 of the Tax Administration Good 
     Government Act.
       ``(D) Separation from service.--With respect to a 
     magistrate judge to whom this subsection applies, retirement 
     under this section or section 321 of the Tax Administration 
     Good Government Act is a separation from service for purposes 
     of subchapters III and VII of chapter 84 of title 5, United 
     States Code.
       ``(4) Definitions.--For purposes of this subsection, the 
     terms `retirement' and `retire' include removal from office 
     under section 7443A(a)(2) on the sole ground of mental or 
     physical disability.
       ``(5) Offset.--In the case of a magistrate judge who 
     receives a distribution from the Thrift Savings Fund and who 
     later receives an annuity under this section, that annuity 
     shall be offset by an amount equal to the amount which 
     represents the Government's contribution to that person's 
     Thrift Savings Account, without regard to earnings 
     attributable to that amount. Where such an offset would 
     exceed 50 percent of the annuity to be received in the first 
     year, the offset may be divided equally over the first 2 
     years in which that person receives the annuity.
       ``(6) Exception.--Notwithstanding clauses (i) and (ii) of 
     paragraph (3)(C), if any magistrate judge retires under 
     circumstances making such magistrate judge eligible to make 
     an election under subsection (b) of section 8433 of title 5, 
     United States Code, and such magistrate judge's 
     nonforfeitable account balance is less than an amount that 
     the Executive Director of the Office of Personnel Management 
     prescribes by regulation, the Executive Director shall pay 
     the nonforfeitable account balance to the participant in a 
     single payment.''.
       (b) Conforming Amendment.--The table of section for part I 
     of subchapter C of chapter 76 is amended by inserting after 
     the item relating to section 7443A the following new item:

``Sec. 7443B. Retirement for magistrate judges of the Tax Court.''.

     SEC. 321. INCUMBENT MAGISTRATE JUDGES OF THE TAX COURT.

       (a) Retirement Annuity Under Title 5 and Section 7443B of 
     the Internal Revenue Code of 1986.--A magistrate judge of the 
     United States Tax Court in active service on the date of the 
     enactment of this Act shall, subject to subsection (b), be 
     entitled, in lieu of the annuity otherwise provided under the 
     amendments made by this title, to--
       (1) an annuity under subchapter III of chapter 83, or under 
     chapter 84 (except for subchapters III and VII), of title 5, 
     United States Code, as the case may be, for creditable 
     service before the date on which service would begin to be 
     credited for purposes of paragraph (2), and
       (2) an annuity calculated under subsection (b) or (c) and 
     subsection (g) of section 7443B of the Internal Revenue Code 
     of 1986, as added by this Act, for any service as a 
     magistrate judge of the United States Tax Court or special 
     trial judge of the United States Tax Court but only with 
     respect to service as such a magistrate judge or special 
     trial judge after a date not earlier than 9\1/2\ years prior 
     to the date of the enactment of this Act (as specified in the 
     election pursuant to subsection (b)) for which deductions and 
     deposits are made under subsections (j) and (k) of such 
     section 7443B, as applicable, without regard to the minimum 
     number of years of service as such a magistrate judge of the 
     United States Tax Court, except that--
       (A) in the case of a magistrate judge who retired with less 
     than 8 years of service, the annuity under subsection (c) of 
     such section 7443B shall be equal to that proportion of the 
     salary being received at the time the magistrate judge leaves 
     office which the years of service bears to 14, subject to a 
     reduction in accordance with subsection (c) of such section 
     7443B if the magistrate judge is under age 65 at the time he 
     or she leaves office, and
       (B) the aggregate amount of the annuity initially payable 
     on retirement under this subsection may not exceed the rate 
     of pay

[[Page S5223]]

     for the magistrate judge which is in effect on the day before 
     the retirement becomes effective.
       (b) Filing of Notice of Election.--A magistrate judge of 
     the United States Tax Court shall be entitled to an annuity 
     under this section only if the magistrate judge files a 
     notice of that election with the chief judge of the United 
     States Tax Court specifying the date on which service would 
     begin to be credited under section 7443B of the Internal 
     Revenue Code of 1986, as added by this Act, in lieu of 
     chapter 83 or chapter 84 of title 5, United States Code. Such 
     notice shall be filed in accordance with such procedures as 
     the chief judge of the United States Tax Court shall 
     prescribe.
       (c) Lump-Sum Credit Under Title 5.--A magistrate judge of 
     the United States Tax Court who makes an election under 
     subsection (b) shall be entitled to a lump-sum credit under 
     section 8342 or 8424 of title 5, United States Code, as the 
     case may be, for any service which is covered under section 
     7443B of the Internal Revenue Code of 1986, as added by this 
     Act, pursuant to that election, and with respect to which any 
     contributions were made by the magistrate judge under the 
     applicable provisions of title 5, United States Code.
       (d) Recall.--With respect to any magistrate judge of the 
     United States Tax Court receiving an annuity under this 
     section who is recalled to serve under section 7443C of the 
     Internal Revenue Code of 1986, as added by this Act--
       (1) the amount of compensation which such recalled 
     magistrate judge receives under such section 7443C shall be 
     calculated on the basis of the annuity received under this 
     section, and
       (2) such recalled magistrate judge of the United States Tax 
     Court may serve as a reemployed annuitant to the extent 
     otherwise permitted under title 5, United States Code.

     Section 7443B(m)(4) of the Internal Revenue Code of 1986, as 
     added by this Act, shall not apply with respect to service as 
     a reemployed annuitant described in paragraph (2).

     SEC. 322. PROVISIONS FOR RECALL.

       (a) In General.--Part I of subchapter C of chapter 76, as 
     amended by this Act, is amended by inserting after section 
     7443B the following new section:

     ``SEC. 7443C. RECALL OF MAGISTRATE JUDGES OF THE TAX COURT.

       ``(a) Recalling of Retired Magistrate Judges.--Any 
     individual who has retired pursuant to section 7443B or the 
     applicable provisions of title 5, United States Code, upon 
     reaching the age and service requirements established 
     therein, may at or after retirement be called upon by the 
     chief judge of the Tax Court to perform such judicial duties 
     with the Tax Court as may be requested of such individual for 
     any period or periods specified by the chief judge; except 
     that in the case of any such individual--
       ``(1) the aggregate of such periods in any 1 calendar year 
     shall not (without such individual's consent) exceed 90 
     calendar days, and
       ``(2) such individual shall be relieved of performing such 
     duties during any period in which illness or disability 
     precludes the performance of such duties.

     Any act, or failure to act, by an individual performing 
     judicial duties pursuant to this subsection shall have the 
     same force and effect as if it were the act (or failure to 
     act) of a magistrate judge of the Tax Court.
       ``(b) Compensation.--For the year in which a period of 
     recall occurs, the magistrate judge shall receive, in 
     addition to the annuity provided under the provisions of 
     section 7443B or under the applicable provisions of title 5, 
     United States Code, an amount equal to the difference between 
     that annuity and the current salary of the office to which 
     the magistrate judge is recalled. The annuity of the 
     magistrate judge who completes that period of service, who is 
     not recalled in a subsequent year, and who retired under 
     section 7443B, shall be equal to the salary in effect at the 
     end of the year in which the period of recall occurred for 
     the office from which such individual retired.
       ``(c) Rulemaking Authority.--The provisions of this section 
     may be implemented under such rules as may be promulgated by 
     the Tax Court.''.
       (b) Conforming Amendment.--The table of sections for part I 
     of subchapter C of chapter 76, as amended by this Act, is 
     amended by inserting after the item relating to section 7443B 
     the following new item:

``Sec. 7443C. Recall of magistrate judges of the Tax Court.''.

     SEC. 323. EFFECTIVE DATE.

       Except as otherwise provided, the amendments made by this 
     subtitle shall take effect on the date of the enactment of 
     this Act.

                TITLE IV--CONFIDENTIALITY AND DISCLOSURE

     SEC. 401. CLARIFICATION OF DEFINITION OF CHURCH TAX INQUIRY.

       Subsection (i) of section 7611 (relating to section not to 
     apply to criminal investigations, etc.) is amended by 
     striking ``or'' at the end of paragraph (4), by striking the 
     period at the end of paragraph (5) and inserting ``, or'', 
     and by inserting after paragraph (5) the following:
       ``(6) information provided by the Secretary related to the 
     standards for exemption from tax under this title and the 
     requirements under this title relating to unrelated business 
     taxable income.''.

     SEC. 402. COLLECTION ACTIVITIES WITH RESPECT TO JOINT RETURN 
                   DISCLOSABLE TO EITHER SPOUSE BASED ON ORAL 
                   REQUEST.

       (a) In General.--Paragraph (8) of section 6103(e) (relating 
     to disclosure of collection activities with respect to joint 
     return) is amended by striking ``in writing'' the first place 
     it appears.
       (b) Elimination of Reporting Requirement.--Section 
     7803(d)(1) (relating to annual reporting) is amended by 
     striking subparagraph (B) and by redesignating subparagraphs 
     (C), (D), (E), (F), and (G) as subparagraphs (B), (C), (D), 
     (E), and (F), respectively.
       (c) Effective Dates.--
       (1) Subsection (a).--The amendment made by subsection (a) 
     shall apply to requests made after the date of the enactment 
     of this Act.
       (2) Subsection (b).--The amendment made by subsection (b) 
     shall apply to reports made after the date of the enactment 
     of this Act.

     SEC. 403. TAXPAYER REPRESENTATIVES NOT SUBJECT TO EXAMINATION 
                   ON SOLE BASIS OF REPRESENTATION OF TAXPAYERS.

       (a) In General.--Paragraph (1) of section 6103(h) (relating 
     to disclosure to certain Federal officers and employees for 
     purposes of tax administration, etc.) is amended--
       (1) by striking ``treasury.--Returns and return 
     information'' and inserting ``treasury.--
       ``(A) In general.--Returns and return information'', and
       (2) by adding at the end the following new subparagraph:
       ``(B) Taxpayer representatives.--Notwithstanding 
     subparagraph (A), the return or return information of the 
     representative of a taxpayer whose return is being examined 
     by an officer or employee of the Department of the Treasury 
     shall not be open to inspection by such officer or employee 
     on the sole basis of the representative's relationship to the 
     taxpayer unless a supervisor of such officer or employee has 
     approved the inspection of the return or return information 
     of such representative on a basis other than by reason of 
     such relationship.''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on the date which is 180 days after the 
     date of the enactment of this Act.

     SEC. 404. PROHIBITION OF DISCLOSURE OF TAXPAYER IDENTIFYING 
                   NUMBER WITH RESPECT TO DISCLOSURE OF ACCEPTED 
                   OFFERS-IN-COMPROMISE.

       (a) In General.--Paragraph (1) of section 6103(k) (relating 
     to disclosure of certain returns and return information for 
     tax administrative purposes) is amended by inserting ``(other 
     than the taxpayer's identifying number)'' after ``Return 
     information''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to disclosures made after the date of the 
     enactment of this Act.

     SEC. 405. COMPLIANCE BY CONTRACTORS AND OTHER AGENTS WITH 
                   CONFIDENTIALITY SAFEGUARDS.

       (a) In General.--Section 6103(p) (relating to State law 
     requirements) is amended by adding at the end the following 
     new paragraph:
       ``(9) Disclosure to contractors and other agents.--
     Notwithstanding any other provision of this section, no 
     return or return information shall be disclosed to any 
     contractor or other agent of a Federal, State, or local 
     agency unless such agency, to the satisfaction of the 
     Secretary--
       ``(A) has requirements in effect which require each such 
     contractor or other agent which would have access to returns 
     or return information to provide safeguards (within the 
     meaning of paragraph (4)) to protect the confidentiality of 
     such returns or return information,
       ``(B) agrees to conduct an on-site review every 3 years 
     (mid-point review in the case of contracts or agreements of 
     less than 1 year in duration) of each contractor or other 
     agent to determine compliance with such requirements,
       ``(C) submits the findings of the most recent review 
     conducted under subparagraph (B) to the Secretary as part of 
     the report required by paragraph (4)(E), and
       ``(D) certifies to the Secretary for the most recent annual 
     period that such contractor or other agent is in compliance 
     with all such requirements.

     The certification required by subparagraph (D) shall include 
     the name and address of each contractor and other agent, a 
     description of the contract or agreement with such contractor 
     or other agent, and the duration of such contract or 
     agreement. The requirements of this paragraph shall not apply 
     to disclosures pursuant to subsection (n) for purposes of 
     Federal tax administration.''.
       (b) Conforming Amendment.--Subparagraph (B) of section 
     6103(p)(8) is amended by inserting ``or paragraph (9)'' after 
     ``subparagraph (A)''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to disclosures made after December 31, 2003.
       (2) Certifications.--The first certification under section 
     6103(p)(9)(D) of the Internal Revenue Code of 1986, as added 
     by subsection (a), shall be made with respect to calendar 
     year 2004.

     SEC. 406. HIGHER STANDARDS FOR REQUESTS FOR AND CONSENTS TO 
                   DISCLOSURE.

       (a) In General.--Subsection (c) of section 6103 (relating 
     to disclosure of returns and return information to designee 
     of taxpayer) is amended--

[[Page S5224]]

       (1) by striking ``Taxpayer.--The Secretary'' and inserting 
     ``Taxpayer.--
       ``(1) In General.--The Secretary'', and
       (2) by adding at the end the following new paragraphs:
       ``(2) Restrictions on persons obtaining information.--The 
     return of any taxpayer, or return information with respect to 
     such taxpayer, disclosed to a person or persons under 
     paragraph (1) for a purpose specified in writing, 
     electronically, or orally may be disclosed or used by such 
     person or persons only for the purpose of, and to the extent 
     necessary in, accomplishing the purpose for disclosure 
     specified and shall not be disclosed or used for any other 
     purpose.
       ``(3) Requirements for form prescribed by secretary.--For 
     purposes of this subsection, the Secretary shall prescribe a 
     form for written requests and consents which shall--
       ``(A) contain a warning, prominently displayed, informing 
     the taxpayer that the form should not be signed unless it is 
     completed,
       ``(B) state that if the taxpayer believes there is an 
     attempt to coerce him to sign an incomplete or blank form, 
     the taxpayer should report the matter to the Treasury 
     Inspector General for Tax Administration, and
       ``(C) contain the address and telephone number of the 
     Treasury Inspector General for Tax Administration.
       ``(4) Cross Reference.--

  ``For provision providing for civil damages for violation of 
paragraph (2), see section 7431(i).''.
       (b) Civil Damages.--Section 7431 (relating to civil damages 
     for unauthorized inspection or disclosure of returns and 
     return information) is amended by adding at the end the 
     following new subsection:
       ``(i) Disclosure or Use of Returns and Return Information 
     Obtained Under Subsection 6103(c).--Disclosure or use of 
     returns or return information obtained under section 6103(c) 
     other than for--
       ``(1) the purpose of, and to the extent necessary in, 
     accomplishing the purpose for disclosure specified in 
     writing, electronically, or orally, or
       ``(2) subject to the safeguards set forth in section 6103, 
     for purposes permitted under section 6103,
     shall be treated as a violation of section 6103(a).''.
       (b) Report.--Not later than 18 months after the date of the 
     enactment of this Act, the Secretary of the Treasury shall 
     submit a report to the Congress on compliance with the 
     designation and certification requirements applicable to 
     requests for or consent to disclosure of returns and return 
     information under section 6103(c) of the Internal Revenue 
     Code of 1986, as amended by subsection (a). Such report 
     shall--
       (1) evaluate (on the basis of random sampling) whether--
       (A) the amendment made by subsection (a) is achieving the 
     purposes of this section;
       (B) requesters and submitters for such disclosure are 
     continuing to evade the purposes of this section and, if so, 
     how; and
       (C) the sanctions for violations of such requirements are 
     adequate; and
       (2) include such recommendations that the Secretary of the 
     Treasury considers necessary or appropriate to better achieve 
     the purposes of this section.
       (d) Sunset of Existing Consents.--Notwithstanding any other 
     provision of law, any request for or consent to disclose any 
     return or return information under section 6103(c) of the 
     Internal Revenue Code of 1986 made before the date of the 
     enactment of this Act shall remain in effect until the 
     earlier of the date such request or consent is otherwise 
     terminated or the date which is 3 taxable years after such 
     date of enactment.
       (e) Effective Date.--The amendments made by this section 
     shall apply to requests and consents made after 3 months 
     after the date of the enactment of this Act.

     SEC. 407. CIVIL DAMAGES FOR UNAUTHORIZED INSPECTION OR 
                   DISCLOSURE.

       (a) Notice to Taxpayer.--Subsection (e) of section 7431 
     (relating to notification of unlawful inspection and 
     disclosure) is amended by adding at the end the following: 
     ``The Secretary shall also notify such taxpayer if the 
     Internal Revenue Service or, upon notice to the Secretary by 
     a Federal or State agency, if such Federal or State agency, 
     proposes an administrative determination as to disciplinary 
     or adverse action against an employee arising from the 
     employee's unauthorized inspection or disclosure of the 
     taxpayer's return or return information. The notice described 
     in this subsection shall include the date of the inspection 
     or disclosure and the rights of the taxpayer under such 
     administrative determination.''.
       (b) Exhaustion of Administrative Remedies Required.--
     Section 7431, as amended by this Act, is amended by adding at 
     the end the following new subsection:
       ``(j) Exhaustion of Administrative Remedies Required.--A 
     judgment for damages shall not be awarded under subsection 
     (c) unless the court determines that the plaintiff has 
     exhausted the administrative remedies available to such 
     plaintiff within the Internal Revenue Service.''.
       (c) Payment Authority Clarified.--
       (1) In general.--Section 7431, as amended by subsection 
     (b), is amended by adding at the end the following new 
     subsection:
       ``(k) Payment Authority.--Claims pursuant to this section 
     shall be payable out of funds appropriated under section 1304 
     of title 31, United States Code.''.
       (2) Annual reports of payments.--The Secretary of the 
     Treasury shall annually report to the Committee of Finance of 
     the Senate and the Committee on Ways and Means of the House 
     of Representatives regarding payments made from the United 
     States Judgment Fund under section 7431(k) of the Internal 
     Revenue Code of 1986.
       (d) Burden of Proof for Good Faith Exception Rests With 
     Secretary.--Section 7431(b) (relating to exceptions) is 
     amended by adding at the end the following new flush 
     sentence:
     ``In any proceeding involving the issue of the existence of 
     good faith, the burden of proof with respect to such issue 
     shall be on the Secretary.''.
       (e) Reports.--Subsection (p) of section 6103 (relating to 
     procedure and recordkeeping), as amended by this Act, is 
     amended by adding at the end the following new paragraph:
       ``(10) Report on willful unauthorized disclosure and 
     inspection.--As part of the report required by paragraph 
     (3)(C) for each calendar year, the Secretary shall furnish 
     information regarding the willful unauthorized disclosure and 
     inspection of returns and return information, including the 
     number, status, and results of--
       ``(A) administrative investigations,
       ``(B) civil lawsuits brought under section 7431 (including 
     the amounts for which such lawsuits were settled and the 
     amounts of damages awarded), and
       ``(C) criminal prosecutions.''.
       (c) Effective Dates.--
       (1) Notice.--The amendment made by subsection (a) shall 
     apply to determinations made after the date of the enactment 
     of this Act.
       (2) Exhaustion of remedies and burden of proof.--The 
     amendments made by subsections (b) and (d) shall apply to 
     inspections and disclosures occurring on and after the date 
     of the enactment of this Act.
       (3) Payment authority.--The amendment made by subsection 
     (c)(1) shall take effect on the date of the enactment of this 
     Act.
       (4) Reports.--The amendment made by subsection (e) shall 
     apply to calendar years ending after the date of the 
     enactment of this Act.

     SEC. 408. EXPANDED DISCLOSURE IN EMERGENCY CIRCUMSTANCES.

       (a) In General.--Section 6103(i)(3)(B)(i) (relating to 
     danger of death or physical injury) is amended by striking 
     ``or State law enforcement agency'' and inserting ``, State, 
     or local law enforcement agency''.
       (b) Conforming Amendments.--Section 6103(p)(4) is amended--
       (1) by striking ``(i)(3)(B)(i) or (7)(A)(ii)'' and 
     inserting ``(i)(7)(A)(ii)'', and
       (2) by striking ``, (i)(3)(B)(i),''.
       (c) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 409. DISCLOSURE OF TAXPAYER IDENTITY FOR TAX REFUND 
                   PURPOSES.

       (a) In General.--Section 6103(m)(1) (relating to tax 
     refunds) is amended by striking ``taxpayer identity 
     information to the press and other media'' and by inserting 
     ``a person's name and the city, State, and zip code of the 
     person's mailing address to the press, other media, and 
     through any other means of mass communication,''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 410. DISCLOSURE TO STATE OFFICIALS OF PROPOSED ACTIONS 
                   RELATED TO SECTION 501(C) ORGANIZATIONS.

       (a) In General.--Subsection (c) of section 6104 is amended 
     by striking paragraph (2) and inserting the following new 
     paragraphs:
       ``(2) Disclosure of proposed actions related to charitable 
     organizations.--
       ``(A) Specific notifications.--In the case of an 
     organization to which paragraph (1) applies, the Secretary 
     may disclose to the appropriate State officer--
       ``(i) a notice of proposed refusal to recognize such 
     organization as an organization described in section 
     501(c)(3) or a notice of proposed revocation of such 
     organization's recognition as an organization exempt from 
     taxation,
       ``(ii) the issuance of a letter of proposed deficiency of 
     tax imposed under section 507 or chapter 41 or 42, and
       ``(iii) the names, addresses, and taxpayer identification 
     numbers of organizations which have applied for recognition 
     as organizations described in section 501(c)(3).
       ``(B) Additional disclosures.--Returns and return 
     information of organizations with respect to which 
     information is disclosed under subparagraph (A) may be made 
     available for inspection by or disclosed to an appropriate 
     State officer.
       ``(C) Procedures for disclosure.--Information may be 
     inspected or disclosed under subparagraph (A) or (B) only--
       ``(i) upon written request by an appropriate State officer, 
     and
       ``(ii) for the purpose of, and only to the extent necessary 
     in, the administration of State laws regulating such 
     organizations.

     Such information may only be inspected by or disclosed to 
     representatives of the appropriate State officer designated 
     as the individuals who are to inspect or to receive the 
     returns or return information under this paragraph on behalf 
     of such officer. Such representatives shall not include any 
     contractor or agent.
       ``(D) Disclosures other than by request.--The Secretary may 
     make available for inspection or disclose returns and return 
     information of an organization to which paragraph (1) applies 
     to an appropriate State

[[Page S5225]]

     officer of any State if the Secretary determines that such 
     inspection or disclosure may facilitate the resolution of 
     Federal or State issues relating to the tax-exempt status of 
     such organization.
       ``(3) Disclosure with respect to certain other exempt 
     organizations.--Upon written request by an appropriate State 
     officer, the Secretary may make available for inspection or 
     disclosure returns and return information of an organization 
     described in paragraph (2), (4), (6), (7), (8), (10), or (13) 
     of section 501(c) for the purpose of, and to the extent 
     necessary in, the administration of State laws regulating the 
     solicitation or administration of the charitable funds or 
     charitable assets of such organizations. Such information may 
     be inspected only by or disclosed only to representatives of 
     the appropriate State officer designated as the individuals 
     who are to inspect or to receive the returns or return 
     information under this paragraph on behalf of such officer. 
     Such representatives shall not include any contractor or 
     agent.
       ``(4) Use in civil judicial and administrative 
     proceedings.--Returns and return information disclosed 
     pursuant to this subsection may be disclosed in civil 
     administrative and civil judicial proceedings pertaining to 
     the enforcement of State laws regulating such organizations 
     in a manner prescribed by the Secretary similar to that for 
     tax administration proceedings under section 6103(h)(4).
       ``(5) No disclosure if impairment.--Returns and return 
     information shall not be disclosed under this subsection, or 
     in any proceeding described in paragraph (4), to the extent 
     that the Secretary determines that such disclosure would 
     seriously impair Federal tax administration.
       ``(6) Definitions.--For purposes of this subsection--
       ``(A) Return and return information.--The terms `return' 
     and `return information' have the respective meanings given 
     to such terms by section 6103(b).
       ``(B) Appropriate state officer.--The term `appropriate 
     State officer' means--
       ``(i) the State attorney general,
       ``(ii) in the case of an organization to which paragraph 
     (1) applies, any other State official charged with overseeing 
     organizations of the type described in section 501(c)(3), and
       ``(iii) in the case of an organization to which paragraph 
     (3) applies, the head of an agency designated by the State 
     attorney general as having primary responsibility for 
     overseeing the solicitation of funds for charitable 
     purposes.''.
       (b) Conforming Amendments.--
       (1) Subsection (a) of section 6103 is amended--
       (A) by inserting ``or any appropriate State officer who has 
     or had access to returns or return information under section 
     6104(c)'' after ``this section'' in paragraph (2), and
       (B) by striking ``or subsection (n)'' in paragraph (3) and 
     inserting ``subsection (n), or section 6104(c)''.
       (2) Subparagraph (A) of section 6103(p)(3) is amended by 
     inserting ``and section 6104(c)'' after ``section'' in the 
     first sentence.
       (3) Paragraph (4) of section 6103(p), as amended by section 
     202(b)(2)(B) of the Trade Act of 2002 (Public Law 107-210; 
     116 Stat. 961), is amended by striking ``or (17)'' after 
     ``any other person described in subsection (l)(16)'' each 
     place it appears and inserting ``or (18) or any appropriate 
     State officer (as defined in section 6104(c))''.
       (4) The heading for paragraph (1) of section 6104(c) is 
     amended by inserting ``for charitable organizations''.
       (5) Paragraph (2) of section 7213(a) is amended by 
     inserting ``or under section 6104(c)'' after ``6103''.
       (6) Paragraph (2) of section 7213A(a) is amended by 
     inserting ``or 6104(c)'' after ``6103''.
       (7) Paragraph (2) of section 7431(a) is amended by 
     inserting ``(including any disclosure in violation of section 
     6104(c))'' after ``6103''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act 
     but shall not apply to requests made before such date.

     SEC. 411. TREATMENT OF PUBLIC RECORDS.

       (a) In General.--Section 6103(b) (relating to definitions) 
     is amended by adding at the end the following new paragraph:
       ``(12) Treatment of public records.--Returns and return 
     information shall not be subject to subsection (a) if 
     disclosed--
       ``(A) in the course of any judicial or administrative 
     proceeding or pursuant to tax administration activities, and
       ``(B) properly made part of the public record.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect before, on, and after the date of the 
     enactment of this Act.

     SEC. 412. INVESTIGATIVE DISCLOSURES.

       (a) In General.--Section 6103 (confidentiality and 
     disclosure of returns and return information) is amended by 
     redesignating subsection (q) as subsection (r) and by 
     inserting after subsection (p) the following new subsection:
       ``(q) Investigative Disclosures.--Nothing in this section 
     may be construed to prohibit investigative agents of the 
     Internal Revenue Service from identifying themselves, their 
     organizational affiliation, and the criminal nature of an 
     investigation when contacting third parties in writing or in 
     person.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 413. TIN MATCHING.

       (a) In General.--Section 6103(k) (relating to disclosure of 
     certain returns and return information for tax administration 
     purposes) is amended by adding at the end the following new 
     paragraph:
       ``(10) TIN matching.--The Secretary may disclose to any 
     person required to provide a taxpayer identifying number (as 
     described in section 6109) to the Secretary whether such 
     information matches records maintained by the Secretary.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 414. FORM 8300 DISCLOSURES.

       (a) In General.--Section 6103(p)(4) (relating to 
     safeguards) is amended by striking ``(15),'' both places it 
     appears.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 415. TECHNICAL AMENDMENT.

       (a) In General.--Section 6103(i)(7)(A) (relating to 
     disclosure to law enforcement agencies) is amended by adding 
     at the end the following new clause:
       ``(v) Taxpayer identity.--For purposes of this 
     subparagraph, a taxpayer's identity shall not be treated as 
     taxpayer return information.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

 TITLE V--SIMPLIFICATION THROUGH ELIMINATION OF INOPERATIVE PROVISIONS

     SEC. 501. SIMPLIFICATION THROUGH ELIMINATION OF INOPERATIVE 
                   PROVISIONS.

       (a) In General.--
       (1) Adjustments in tax tables so that inflation will not 
     result in tax increases.--Paragraph (7) of section 1(f) is 
     amended to read as follows:
       ``(7) Special rule for certain brackets.--In prescribing 
     tables under paragraph (1) which apply to taxable years 
     beginning in a calendar year after 1994, the cost-of-living 
     adjustment used in making adjustments to the dollar amounts 
     at which the 36 percent rate bracket begins or at which the 
     39.6 percent rate bracket begins shall be determined under 
     paragraph (3) by substituting `1993' for `1992'.''.
       (2) Reduced capital gain rates for qualified 5-year gain.--
     Paragraph (2) of section 1(h) is amended by striking ``In the 
     case of any taxable year beginning after December 31, 2000, 
     the'' and inserting ``The''.
       (3) Credit for producing fuel from nonconventional 
     source.--Section 29 is amended by striking subsection (e) and 
     by redesignating subsections (f) and (g) as subsections (e) 
     and (f), respectively.
       (4) Earned income credit.--Paragraph (1) of section 32(b) 
     is amended--
       (A) by striking subparagraphs (B) and (C), and
       (B) in subparagraph (A) by striking ``(A) In general.--In 
     the case of taxable years beginning after 1995'' and moving 
     the table 2 ems to the left.
       (5) General business credits.--Subsection (d) of section 38 
     is amended by striking paragraph (3).
       (6) Carryback and carryforward of unused credits.--
     Subsection (d) of section 39 is amended by striking 
     paragraphs (1) through (8) and by redesignating paragraphs 
     (9) and (10) as paragraphs (1) and (2), respectively.
       (7) Adjustments based on adjusted current earnings.--Clause 
     (ii) of section 56(g)(4)(F) is amended by striking ``In the 
     case of any taxable year beginning after December 31, 1992, 
     clause'' and inserting ``Clause''.
       (8) Items of tax preference; depletion.--Paragraph (1) of 
     section 57(a) is amended by striking ``Effective with respect 
     to taxable years beginning after December 31, 1992, this'' 
     and inserting ``This''.
       (9) Intangible drilling costs.--
       (A) Clause (i) of section 57(a)(2)(E) is amended by 
     striking ``In the case of any taxable year beginning after 
     December 31, 1992, this'' and inserting ``This''.
       (B) Clause (ii) of section 57(a)(2)(E) is amended by 
     striking ``(30 percent in the case of taxable years beginning 
     in 1993)''.
       (10) Annuities; certain proceeds of endowment and life 
     insurance contracts.--Section 72 is amended--
       (A) in subsection (c)(4) by striking ``; except that if 
     such date was before January 1, 1954, then the annuity 
     starting date is January 1, 1954'', and
       (B) in subsection (g)(3) by striking ``January 1, 1954, 
     or'' and ``, whichever is later''.
       (11) Accident and health plans.--Section 105(f) is amended 
     by striking ``or (d)''.
       (12) Flexible spending arrangements.--Section 106(c)(1) is 
     amended by striking ``Effective on and after January 1, 1997, 
     gross'' and inserting ``Gross''.
       (13) Certain combat zone compensation of members of the 
     armed forces.--Subsection (c) of section 112 is amended--
       (A) by striking ``(after June 24, 1950)'' in paragraph (2), 
     and
       (B) striking ``such zone;'' and all that follows in 
     paragraph (3) and inserting ``such zone.''.
       (14) Principal residence.--Section 121(b)(3) is amended--
       (A) by striking subparagraph (B); and
       (B) in subparagraph (A) by striking ``(A) In general.--'' 
     and moving the text 2 ems to the left.

[[Page S5226]]

       (15) Certain reduced uniformed services retirement pay.--
     Section 122(b)(1) is amended by striking ``after December 31, 
     1965,''.
       (16) Great plains conservation program.--Section 126(a) is 
     amended by striking paragraph (6) and by redesignating 
     paragraphs (7), (8), (9), and (10) as paragraphs (6), (7), 
     (8), and (9), respectively.
       (17) Mortgage revenue bonds for residences in federal 
     disaster areas.--Section 143(k) is amended by striking 
     paragraph (11).
       (18) Interim authority for governor.--
       (A) Section 146(e) is amended by striking paragraph (2) and 
     by redesignating paragraph (3) as paragraph (2).
       (B) Section 42(h)(3)(F) is amended by striking ``(other 
     than paragraph (2)(B) thereof)''.
       (19) Treble damage payments under the antitrust law.--
     Section 162(g) is amended by striking the last sentence.
       (20) State legislators' travel expenses away from home.--
     Paragraph (4) of section 162(h) is amended by striking ``For 
     taxable years beginning after December 31, 1980, this'' and 
     inserting ``This''.
       (21) Interest.--
       (A) Section 163 is amended by striking paragraph (6) of 
     subsection (d) and paragraph (5) (relating to phase-in of 
     limitation) of subsection (h).
       (B) Section 56(b)(1)(C) is amended by striking clause (ii) 
     and by redesignating clauses (iii), (iv), and (v) as clauses 
     (ii), (iii), and (iv), respectively.
       (22) Charitable, etc., contributions and gifts.--Section 
     170 is amended by striking subsection (k).
       (23) Amortizable bond premium.--Subparagraph (B) of section 
     171(b)(1) is amended to read as follows:
       ``(B)(i) in the case of a bond described in subsection 
     (a)(2), with reference to the amount payable on maturity or 
     earlier call date, and
       ``(ii) in the case of a bond described in subsection 
     (a)(1), with reference to the amount payable on maturity (or 
     if it results in a smaller amortizable bond premium 
     attributable to the period of earlier call date, with 
     reference to the amount payable on earlier call date), and''.
       (24) Net operating loss carrybacks and carryovers.--
       (A) Section 172 is amended--
       (i) by striking subparagraph (D) of subsection (b)(1) and 
     by redesignating subparagraphs (E), (F), and (G) as 
     subparagraphs (D), (E), and (F), respectively,
       (ii) by striking subsection (g), and
       (iii) by striking subparagraph (F) of subsection (h)(2).
       (B) Section 172(h)(4) is amended by striking ``subsection 
     (b)(1)(E)'' each place it appears and inserting ``subsection 
     (b)(1)(D)''.
       (C) Section 172(i)(3) is amended by striking ``subsection 
     (b)(1)(G)'' each place it appears and inserting ``subsection 
     (b)(1)(F)''.
       (D) Section 172(j) is amended by striking ``subsection 
     (b)(1)(H)'' each place it appears and inserting ``subsection 
     (b)(1)(G)''.
       (E) Section 172, as amended by subparagraphs (A) through 
     (D) of this paragraph, is amended--
       (i) by redesignating subsections (h), (i), and (j) as 
     subsections (g), (h), and (i), respectively,
       (ii) by striking ``subsection (h)'' each place it appears 
     and inserting ``subsection (g)'', and
       (iii) by striking ``subsection (i)'' each place it appears 
     and inserting ``subsection (h)''.
       (25) Research and experimental expenditures.--Subparagraph 
     (A) of section 174(a)(2) is amended to read as follows:
       ``(A) Without consent.--A taxpayer may, without the consent 
     of the Secretary, adopt the method provided in this 
     subsection for his first taxable year for which expenditures 
     described in paragraph (1) are paid or incurred.''.
       (26) Amortization of certain research and experimental 
     expenditures.--Paragraph (2) of section 174(b)(2) is amended 
     by striking ``beginning after December 31, 1953''.
       (27) Soil and water conservation expenditures.--Paragraph 
     (1) of section 175(d) is amended to read as follows:
       ``(1) Without consent.--A taxpayer may, without the consent 
     of the Secretary, adopt the method provided in this section 
     for his first taxable year for which expenditures described 
     in subsection (a) are paid or incurred.''.
       (28) Activities not engaged in for profit.--Section 
     183(e)(1) is amended by striking the last sentence.
       (29) Dividends received on certain preferred stock; and 
     dividends paid on certain preferred stock of public 
     utilities.--
       (A) Sections 244 and 247 are hereby repealed and the table 
     of sections for part VIII of subchapter B of chapter 1 is 
     amended by striking the items relating to sections 244 and 
     247.
       (B) Paragraph (5) of section 172(d) is amended to read as 
     follows:
       ``(5) Computation of deduction for dividends received.--The 
     deductions allowed by section 243 (relating to dividends 
     received by corporations) and 245 (relating to dividends 
     received from certain foreign corporations) shall be computed 
     without regard to section 246(b) (relating to limitation on 
     aggregate amount of deductions).''.
       (C) Paragraph (1) of section 243(c) is amended to read as 
     follows:
       ``(1) In general.--In the case of any dividend received 
     from a 20-percent owned corporation, subsection (a)(1) shall 
     be applied by substituting `80 percent' for `70 percent'.''.
       (D) Section 243(d) is amended by striking paragraph (4).
       (E) Section 246 is amended--
       (i) by striking ``, 244,'' in subsection (a)(1),
       (ii) in subsection (b)(1)--

       (I) by striking ``sections 243(a)(1), and 244(a),'' the 
     first place it appears and inserting ``section 243(a)(1),'',
       (II) by striking ``244(a),'' the second place it appears 
     therein, and
       (III) by striking ``subsection (a) or (b) of section 245, 
     and 247,'' and inserting ``and subsection (a) or (b) of 
     section 245,'', and

       (iii) by striking ``, 244,'' in subsection (c)(1).
       (F) Section 246A is amended by striking ``, 244,'' both 
     places it appears in subsections (a) and (e).
       (G) Sections 263(g)(2)(B)(iii), 277(a), 301(e)(2), 
     469(e)(4), 512(a)(3)(A), subparagraphs (A), (C), and (D) of 
     section 805(a)(4), 805(b)(5), 812(e)(2)(A), 
     815(c)(2)(A)(iii), 832(b)(5), 833(b)(3)(E), 1059(b)(2)(B), 
     and 1244(c)(2)(C) are each amended by striking ``, 244,'' 
     each place it appears.
       (H) Section 805(a)(4)(B) is amended by striking ``, 
     244(a),'' each place it appears.
       (I) Section 810(c)(2)(B) is amended by striking ``244 
     (relating to dividends on certain preferred stock of public 
     utilities),''.
       (30) Organization expenses.--Section 248(c) is amended by 
     striking ``beginning after December 31, 1953,'' and by 
     striking the last sentence.
       (31) Bond repurchase premium.--Section 249(b)(1) is amended 
     by striking ``, in the case of bonds or other evidences of 
     indebtedness issued after February 28, 1913,''.
       (32) Amount of gain where loss previously disallowed.--
     Section 267(d) is amended by striking ``(or by reason of 
     section 24(b) of the Internal Revenue Code of 1939)'' in 
     paragraph (1), by striking ``after December 31, 1953,'' in 
     paragraph (2), by striking the second sentence, and by 
     striking ``or by reason of section 118 of the Internal 
     Revenue Code of 1939'' in the last sentence.
       (33) Acquisitions made to evade or avoid income tax.--
     Paragraphs (1) and (2) of section 269(a) are each amended by 
     striking ``or acquired on or after October 8, 1940,''.
       (34) Interest on indebtedness incurred by corporations to 
     acquire stock or assets of another corporation.--Section 279 
     is amended--
       (A) by striking ``after December 31, 1967,'' in subsection 
     (a)(2),
       (B) by striking ``after October 9, 1969,'' in subsection 
     (b),
       (C) by striking ``after October 9, 1969, and'' in 
     subsection (d)(5), and
       (D) by striking subsection (i) and by redesignating 
     subsection (j) as subsection (i).
       (35) Special rules relating to corporate preference 
     items.--Paragraph (4) of section 291(a) is amended by 
     striking ``In the case of taxable years beginning after 
     December 31, 1984, section'' and inserting ``Section''.
       (36) Qualifications for tax credit employee stock ownership 
     plan.--Section 409 is amended by striking subsections (a), 
     (g), and (q).
       (37) Funding standards.--Section 412(m)(4) is amended--
       (A) by striking ``the applicable percentage'' in 
     subparagraph (A) and inserting ``25 percent'', and
       (B) by striking subparagraph (C) and by redesignating 
     subparagraph (D) as subparagraph (C).
       (38) Retiree health accounts.--Section 420 is amended--
       (A) by striking paragraph (4) in subsection (b) and by 
     redesignating paragraph (5) as paragraph (4), and
       (B) by amending paragraph (2) of subsection (c) to read as 
     follows:
       ``(2) Requirements relating to pension benefits accruing 
     before transfer.--The requirements of this paragraph are met 
     if the plan provides that the accrued pension benefits of any 
     participant or beneficiary under the plan become 
     nonforfeitable in the same manner which would be required if 
     the plan had terminated immediately before the qualified 
     transfer (or in the case of a participant who separated 
     during the 1-year period ending on the date of the transfer, 
     immediately before such separation).''.
       (39) Employee stock purchase plans.--Section 423(a) is 
     amended by striking ``after December 31, 1963,''.
       (40) Limitation on deductions for certain farming.--Section 
     464 is amended--
       (A) by striking ``any farming syndicate (as defined in 
     subsection (c))'' both places it appears in subsections (a) 
     and (b) and inserting ``any taxpayer to whom subsection (f) 
     applies'', and
       (B) by striking subsection (g).
       (41) Deductions limited to amount at risk.--
       (A) Paragraph (3) of section 465(c) is amended by striking 
     ``In the case of taxable years beginning after December 31, 
     1978, this'' and inserting ``This''.
       (B) Paragraph (2) of section 465(e)(2)(A) is amended by 
     striking ``beginning after December 31, 1978''.
       (42) Nuclear decommissioning costs.--Section 468A(e)(2) is 
     amended--
       (A) by striking ``at the rate set forth in subparagraph 
     (B)'' in subparagraph (A) and inserting ``at a rate of 20 
     percent'', and
       (B) by striking subparagraph (B) and by redesignating 
     subparagraphs (C) and (D) as subparagraphs (B) and (C), 
     respectively.
       (43) Passive activity losses and credits limited.--
       (A) Section 469 is amended by striking subsection (m).
       (B) Subsection (b) of section 58 is amended by adding 
     ``and'' at the end of paragraph (1), by striking paragraph 
     (2), and by redesignating paragraph (3) as paragraph (2).

[[Page S5227]]

       (44) Adjustments required by changes in method of 
     accounting.--Section 481(b)(3) is amended by striking 
     subparagraph (C).
       (45) Exemption from tax on corporations, certain trusts, 
     etc.--Section 501 is amended by striking subsection (p).
       (46) Requirements for exemption.--
       (A) Section 503(a)(1) is amended to read as follows:
       ``(1) General rule.--An organization described in paragraph 
     (17) or (18) of section 501(a) or described in section 401(a) 
     and referred to in section 4975(g)(2) or (3) shall not be 
     exempt from taxation under section 501(a) if it has engaged 
     in a prohibited transaction.''.
       (B) Paragraph (2) of section 503(a) is amended by striking 
     ``described in section 501(c)(17) or (18) or paragraph 
     (a)(1)(B)'' and inserting ``described in paragraph (1)''.
       (C) Subsection (c) of section 503 is amended by striking 
     ``described in section 501(c)(17) or (18) or subsection 
     (a)(1)(B)'' and inserting ``described in subsection (a)(1)''.
       (47) Amounts received by surviving annuitant under joint 
     and survivor annuity contract.--Subparagraph (A) of section 
     691(d)(1) is amended by striking ``after December 31, 1953, 
     and''.
       (48) Income taxes of members of armed forces on death.--
     Section 692(a)(1) is amended by striking ``after June 24, 
     1950''.
       (49) Insurance company taxable income.--
       (A) Section 832(e) is amended by striking ``of taxable 
     years beginning after December 31, 1966,''.
       (B) Section 832(e)(6) is amended by striking ``In the case 
     of any taxable year beginning after December 31, 1970, the'' 
     and by inserting ``The''.
       (50) Tax on nonresident alien individuals.--Subparagraph 
     (B) of section 871(a)(1) is amended to read as follows:
       ``(B) gains described in subsection (b) or (c) of section 
     631,''.
       (51) Property on which lessee has made improvements.--
     Section 1019 is amended by striking the last sentence.
       (52) Involuntary conversion.--Section 1033 is amended by 
     striking subsection (j) and by redesignating subsection (k) 
     as subsection (j).
       (53) Property acquired during affiliation.--Section 1051 is 
     repealed and the table of sections for part IV of subchapter 
     O of chapter 1 is amended by striking the item relating to 
     section 1051.
       (54) Holding period of property.--
       (A) Paragraph (5) of section 1223 is amended by striking 
     ``(or under so much of section 1052(c) as refers to section 
     113(a)(23) of the Internal Revenue Code of 1939)''.
       (B) Paragraph (7) of section 1223 is amended by striking 
     the last sentence.
       (C) Paragraph (9) of section 1223 is repealed.
       (55) Property used in the trade or business and involuntary 
     conversions.--Subparagraph (A) of section 1231(c)(2) is 
     amended by striking ``beginning after December 31, 1981''.
       (56) Sale or exchange of patents.--Section 1235 is 
     amended--
       (A) by striking subsection (c) and by redesignating 
     subsections (d) and (e) as (c) and (d), respectively, and
       (B) by striking ``(d)'' in subsection (b) and inserting 
     ``(c)''.
       (57) Dealers in securities.--Subsection (b) of section 1236 
     is amended by striking ``after November 19, 1951,''.
       (58) Sale of patents.--Subsection (a) of section 1249 is 
     amended by striking ``after December 31, 1962,''.
       (59) Gain from disposition of farm land.--Paragraph (1) of 
     section 1252(a) is amended by striking ``after December 31, 
     1969,'' both places it appears.
       (60) Treatment of amounts received on retirement or sale or 
     exchange of debt instruments.--Subsection (c) of section 1271 
     is amended to read as follows:
       ``(c) Special Rule for Certain Obligations with Respect to 
     Which Original Issue Discount not Currently Includible.--
       ``(1) In general.--On the sale or exchange of debt 
     instruments issued by a government or political subdivision 
     thereof after December 31, 1954, and before July 2, 1982, or 
     by a corporation after December 31, 1954, and on or before 
     May 27, 1969, any gain realized which does not exceed--
       ``(A) an amount equal to the original issue discount, or
       ``(B) if at the time of original issue there was no 
     intention to call the debt instrument before maturity, an 
     amount which bears the same ratio to the original issue 
     discount as the number of complete months that the debt 
     instrument was held by the taxpayer bears to the number of 
     complete months from the date of original issue to the date 
     of maturity,
     shall be considered as ordinary income.
       ``(2) Subsection (a)(2)(A) not to apply.--Subsection 
     (a)(2)(A) shall not apply to any debt instrument referred to 
     in subparagraph (A) of this paragraph.
       ``(3) Cross reference.--

  ``For current inclusion of original issue discount, see section 
1272.''.
       (61) Amount and method of adjustment.--Section 1314 is 
     amended by striking subsection (d) and by redesignating 
     subsection (e) as subsection (d).
       (62) Election; revocation; termination.--Clause (iii) of 
     section 1362(d)(3) is amended by striking ``unless'' and all 
     that follows and inserting ``unless the corporation was an S 
     corporation for such taxable year.''.
       (63) Old-age, survivors, and disability insurance.--
     Subsection (a) of section 1401 is amended by striking ``the 
     following percent'' and all that follows and inserting ``12.4 
     percent of the amount of the self-employment income for such 
     taxable year.''.
       (64) Hospital insurance.--Subsection (b) of section 1401 is 
     amended by striking ``the following percent'' and all that 
     follows and inserting ``2.9 percent of the amount of the 
     self-employment income for such taxable year.''.
       (65) Ministers, members of religious orders, and christian 
     science practitioners.--Paragraph (3) of section 1402(e) is 
     amended by striking ``whichever of the following dates is 
     later: (A)'' and by striking ``; or (B)'' and all that 
     follows and by inserting a period.
       (66) Withholding of tax on nonresident aliens.--The first 
     sentence of subsection (b) of section 1441 and the first 
     sentence of paragraph (5) of section 1441(c) are each amended 
     by striking ``gains subject to tax'' and all that follows 
     through ``October 4, 1966'' and inserting ``and gains subject 
     to tax under section 871(a)(1)(D)''.
       (67) Affiliated group defined.--Subparagraph (A) of section 
     1504(a)(3) is amended by striking ``for a taxable year which 
     includes any period after December 31, 1984'' in clause (i) 
     and by striking ``in a taxable year beginning after December 
     31, 1984'' in clause (ii).
       (68) Disallowance of the benefits of the graduated 
     corporate rates and accumulated earnings credit.--
       (A) Subsection (a) of section 1551 is amended by striking 
     paragraph (1) and by redesignating paragraphs (2) and (3) as 
     paragraphs (1) and (2), respectively.
       (B) Section 1551(b) is amended--
       (i) by striking ``or (2)'' in paragraph (1), and
       (ii) by striking ``(a)(3)'' in paragraph (2) and inserting 
     ``(a)(2)''.
       (69) Definition of wages.--Section 3121(b) is amended by 
     striking paragraph (17).
       (70) Credits against tax.--
       (A) Paragraph (4) of section 3302(f) is amended by striking 
     ``subsection--'' and all that follows through ``(A) In 
     general.--'', by striking subparagraph (B), by redesignating 
     clauses (i) and (ii) as subparagraphs (A) and (B), 
     respectively, and by moving the text of such subparagraphs 
     (as so redesignated) 2 ems to the left.
       (B) Paragraph (5) of section 3302(f) is amended by striking 
     subparagraphs (D) and by redesignating subparagraph (E) as 
     subparagraph (D).
       (71) Domestic service employment taxes.--Section 3510(b) is 
     amended by striking paragraph (4).
       (72) Tax on fuel used in commercial transportation on 
     inland waterways.--Section 4042(b)(2)(A) is amended to read 
     as follows:
       ``(A) The Inland Waterways Trust Fund financing rate is 20 
     cents per gallon.''.
       (73) Transportation by air.--Section 4261(e) is amended--
       (A) in paragraph (1) by striking subparagraph (C), and
       (B) by striking paragraph (5).
       (74) Taxes on failure to distribute income.--Section 4942 
     is amended--
       (A) by striking subsection (f)(2)(D),
       (B) in subsection (g)(2)(A) by striking ``For all taxable 
     years beginning on or after January 1, 1975, subject'' and 
     inserting ``Subject'',
       (C) in subsection (g) by striking paragraph (4), and
       (D) in subsection (i)(2) by striking ``beginning after 
     December 31, 1969, and''.
       (75) Taxes on taxable expenditures.--Section 4945(f) is 
     amended by striking ``(excluding therefrom any preceding 
     taxable year which begins before January 1, 1970)''.
       (76) Returns.--Subsection (a) of section 6039D is amended 
     by striking ``beginning after December 31, 1984,''.
       (77) Information returns.--Subsection (c) of section 6060 
     is amended by striking ``year'' and all that follows and 
     inserting ``year.''.
       (78) Abatements.--Section 6404(f) is amended by striking 
     paragraph (3).
       (79) Failure by corporation to pay estimated income tax.--
     Clause (i) of section 6655(g)(4)(A) is amended by striking 
     ``(or the corresponding provisions of prior law)''.
       (80) Retirement.--Section 7447(i)(3)(B)(ii) is amended by 
     striking ``at 4 percent per annum to December 31, 1947, and 
     at 3 percent per annum thereafter'', and inserting ``at 3 
     percent per annum''.
       (81) Annuities to surviving spouses and dependent children 
     of judges.--
       (A) Paragraph (2) of section 7448(a) is amended by striking 
     ``or under section 1106 of the Internal Revenue Code of 
     1939'' and by striking ``or pursuant to section 1106(d) of 
     the Internal Revenue Code of 1939''.
       (B) Subsection (g) of section 7448 is amended by striking 
     ``or other than pursuant to section 1106 of the Internal 
     Revenue Code of 1939''.
       (C) Subsection (j)(1) and (j)(2) of section 7448 are each 
     amended by striking ``at 4 percent per annum to December 31, 
     1947, and at 3 percent per annum thereafter'' and inserting 
     ``at 3 percent per annum''.
       (82) Merchant marine capital construction funds.--Paragraph 
     (4) of section 7518(g) is amended by striking ``any 
     nonqualified withdrawal'' and all that follows through 
     ``shall be determined'' and inserting ``any nonqualified 
     withdrawal shall be determined''.
       (83) Valuation tables.--Paragraph (3) of section 7520(c) is 
     amended--
       (A) by striking ``Not later than December 31, 1989, the'' 
     and inserting ``The'', and

[[Page S5228]]

       (B) by striking ``thereafter'' in the last sentence 
     thereof.
       (84) Administration and collection of taxes in 
     possessions.--Section 7651 is amended by striking paragraph 
     (4) and by redesignating paragraph (5) as paragraph (4).
       (85) Definition of employee.--(A) Section 7701(a)(20) is 
     amended by striking ``chapter 21'' and all that follows and 
     inserting ``chapter 21.''.
       (b) Effective Date.--
       (1) General rule.--Except as otherwise provided in 
     paragraph (2), the amendments made by subsection (a) shall 
     take effect on the date of enactment of this Act.
       (2) Savings provision.--If--
       (A) any provision amended or repealed by subsection (a) 
     applied to--
       (i) any transaction occurring before the date of the 
     enactment of this Act,
       (ii) any property acquired before such date of enactment, 
     or
       (iii) any item of income, loss, deduction, or credit taken 
     into account before such date of enactment, and
       (B) the treatment of such transaction, property, or item 
     under such provision would (without regard to the amendments 
     made by subsection (a)) affect the liability for tax for 
     periods ending after such date of enactment,
     nothing in the amendments made by subsection (a) shall be 
     construed to affect the treatment of such transaction, 
     property, or item for purposes of determining liability for 
     tax for periods ending after such date of enactment.
                                  ____


    Tax Administration Good Government Act Introduced April 10, 2003


    i. improve tax administration and establish taxpayer safeguards

     Collection
       Waiver of user fee for installment agreements using 
     automated withdrawals. The IRS imposes a $43 user fee on 
     taxpayers entering into an installment agreement. The 
     proposal would waive the user fee if the taxpayer agrees to 
     automated withdrawal of installment payments from a bank 
     account. This proposal will help facilitate collection 
     through automated withdrawals.
       Authorize partial pay installment agreements. The proposal 
     restores authority that the IRS had prior to 1998 to allow 
     IRS to enter into installment agreements with taxpayers that 
     want to resolve their tax liability but cannot afford to make 
     payments large enough to fully pay the liability at the end 
     of the term of the installment agreement. The proposal would 
     permit the collection of taxes from cases that are otherwise 
     placed in the currently not collectible inventory.
       Terminate installment agreements for failure to file 
     returns and failure to make tax deposits. The proposal would 
     stop the downward spiral where taxpayers owe more and the 
     Government collects less. Although a significant number of 
     taxpayers violate the terms of their installment agreements 
     by failing to timely file their tax returns or make required 
     Federal tax deposits, the IRS is not permitted to terminate 
     installment agreements for these reasons.
       Remove $50,000 threshold requirement for office of chief 
     counsel review of offers in compromise--IRC section 7122(b). 
     The proposal would remove the dollar threshold and give IRS 
     discretion in determining when a Chief Counsel opinion is 
     necessary. IRS attorneys are presently required to review 
     offers where the tax assessed, including penalties and 
     interest, exceeds $50,000. As a practical matter, IRS lawyer 
     offer little in the way of review and often contribute to the 
     delay in processing OICs.
       Seven-day threshold on tolling of statute of limitations 
     during National Taxpayer Advocate review. The proposal 
     provides additional time, without tolling the statute of 
     limitations, for review by the National Taxpayer Advocate for 
     taxpayer assistance orders.
       Increase Penalty for Bad Checks. Proposal would increase 
     penalty for bad checks to $20 or 2 % of amount over $1,000.
       Allow the Financial Management Service to Retain 
     Transaction Fees from Levied Amounts. Proposal would allow 
     FMS to retain directly a portion of the levied funds as 
     payment of FMS fees. A delinquent taxpayer, however, would 
     receive full credit for the amount levied upon (i.e., the 
     amount credited to a taxpayer's account would not be reduced 
     by FMS's fee). The IRS pays FMS fees out of its own 
     appropriations. The proposal would alter internal government 
     accounting and allow the use of appropriated funds to 
     administer the tax system.
       Elimination or Restriction on Offsetting Refunds from 
     former residents. The proposal would allow States to offset 
     Federal tax refunds owed by former residents. In 1998, 
     Congress authorized the state refund offset program. However, 
     the provision did not authorize states to offset Federal tax 
     refunds for State tax debts owed by former residents who had 
     subsequently moved to another State. Former residents have 
     the same safeguards as residents in these situations and 
     there is strong precedence that clearly gives States 
     authority to impose and collect taxes on former residents.
     Processing and Personnel
       Explanation of Statute of Limitations and Consequences of 
     Failure to Timely File. The proposal would require the IRS to 
     provide taxpayers with an explanation of the consequences of 
     failing to timely file refund claims.
       Disclosure of tax information to facilitate combined 
     employment tax reporting. The proposal would expand and make 
     permanent the disclosure authority of the IRS to permit 
     disclosures of name, address, taxpayer identification number, 
     and signature to any State entity for purposes of carrying 
     out a combined federal and state employment tax reporting 
     program. Under current law, no tax information may be 
     furnished by the Internal Revenue Service to another agency 
     except as permitted under section 6103 which requires the 
     other agency to establish procedural safeguards satisfactory 
     to the IRS. A pilot program was established in 1997 in the 
     State of Montana to assess the feasibility and desirability 
     of expanding combined reporting. Reports from Montana were 
     very positive about the program.
       Expansion of declaratory judgment remedy to tax-exempt 
     organizations. The proposal would extend declaratory judgment 
     procedures similar to those currently available only to 
     charities under section 7428 to other section 501(c) 
     determinations. The proposal would limit jurisdiction over 
     controversies involving such determinations to the United 
     States Tax Court. In addition, the proposal would modify the 
     present-law declaratory judgment procedures to provide that 
     an organization is deemed to have exhausted its 
     administrative remedies under the declaratory judgment 
     procedures at the expiration of (1) 270 days after the date 
     on which the request for a determination was made, or (2) in 
     the case of a failure by any office of the IRS to make a 
     determination (other than the office responsible for initial 
     determinations with respect to the issue), 450 days after the 
     date on which the request for a determination was made. 
     The proposal would also require the organization to take, 
     in a timely manner, all reasonable steps to secure such 
     determination.
       Amendment to Treasury auction reforms. The proposal would 
     permit earlier disclosure upon the release by the Secretary 
     of the minutes of the meeting. Under current law, members of 
     the Treasury Borrowing Advisory Committee are prohibited from 
     disclosing anything relating to the securities to be 
     auctioned in a midquarter refunding by the Secretary until 
     the Secretary makes a public announcement of the refunding.
       Revisions relating to termination of employment of IRS 
     employee misconduct. Proposal would modify section 1203 by 
     removing the late filing of refund returns from the list of 
     violations and removing employee versus employee acts (i.e. 
     for violation of an employee's rather than a taxpayer's 
     Constitutional or civil rights) from the list of violations.
       IRS Oversight Board approval of use of critical pay 
     authority. The proposal would require IRS Oversight Board 
     review and approve the use of critical pay authority. 
     Critical pay allows the IRS to hire employees critical to the 
     mission of the IRS as well as allow the IRS to hire up to 40 
     individuals for four year terms under streamlined procedures.
       Low-income taxpayer clinics. The proposal would increase 
     the authorization for low-income taxpayer controversy clinics 
     to $10 million and authorize a similar grant program for low-
     income taxpayer preparation clinics for $10 million. The 
     proposal would specify that grants may not be used for any 
     purpose other than those specified in the Code (this 
     restriction would be inapplicable to funds from other 
     sources). The proposal would also authorize the IRS to 
     promote the benefits and encourage the use of low-income 
     taxpayer clinics.
       Enrolled agents. The proposal would add a new section to 
     the Code permitting the Secretary to prescribe regulations to 
     regulate the conduct of enrolled agents in regard to their 
     practice before the IRS and to permit enrolled agents meeting 
     the Secretary's qualifications to use the credentials or 
     designation ``enrolled agent'', ``EA'', or ``E.A.''.
       Establishment of disaster response team. Proposal would 
     require the IRS to establish a permanent Disaster Response 
     Team which, in coordination with the Federal Emergency 
     Management Agency, is to assist taxpayers in clarifying and 
     resolving tax matters associated with a Presidentially 
     declared disaster or a terroristic or military action. The 
     Team is to be staffed by IRS employees with a relevant 
     knowledge and experience, including a representative from the 
     Office of the Taxpayer Advocate.
       Accelerated tax refunds. Proposal would require the 
     Secretary of Treasury to study and report to the tax writing 
     committees on options to accelerate tax refunds for taxpayers 
     who maintain the same filing characteristics and elect the 
     direct option for any refund.
       Study on clarifying record-keeping responsibilities. The 
     proposal would require the Secretary of the Treasury to study 
     the scope of records required to be maintained by taxpayers, 
     the utility of requiring taxpayers to maintain records 
     indefinitely, the taxpayer burden incurred by such 
     requirement given the necessity to upgrade technological 
     storage for outdated records, the number of negotiated 
     records retention agreements requested by taxpayers and the 
     number entered into by the IRS, and proposals regarding 
     taxpayer record-keeping. Under current law, every person 
     liable for any tax imposed by the Code, or for any collection 
     thereof, shall keep such records as the Secretary of the 
     Treasury may from time to time prescribe.
       Streamline National Taxpayer Advocate Annual Reports. Each 
     year, the National Taxpayer Advocate is required to issue two 
     reports to Congress: (1) an annual report on

[[Page S5229]]

     objectives of the Advocate for the year due June 30 and (2) 
     an annual report on the Advocate's activities including the 
     20 most serious problems confronting taxpayers. The 
     Advocate's office spends an enormous amount of time and 
     effort preparing these reports. The proposal would streamline 
     the reporting process by requiring the Advocate to issue only 
     one report each year.
       Penalty on failure to report interests in foreign financial 
     accounts. The proposal would establish a $5,000 penalty for 
     non-willful failure to report interest in foreign bank 
     accounts. Under present law there is only a penalty of 
     $25,000 for willful failures.
       Repeal of personal holding company tax. The proposal would 
     repeal the personal holding company (PHC) tax. Subsequent 
     changes in the tax code resulted in the provisions 
     ineffectiveness as originally intended.


           II. Simplification of Interest and Penalty Regimes

       Individual estimated tax. The proposal simplifies the 
     individual estmated tax penalty including, increase the 
     penalty threshold for individuals to $2,000 from $1,000; 
     apply one interest rate per estimated tax underpayment; and 
     adopt 365-day year.
       Corporate estimated tax. The proposal simplifies the 
     corporate estimated tax penalty by increasing the exception 
     for small amount of tax shown on the return from less than 
     $500 to less than $1,000.
       Increase in large corporation threshold for estimated tax 
     payments. The proposal simplifies the corporate estimated tax 
     by expanding the safe harbor exception used by small 
     corporations by increasing the threshold from $1 million to 
     $1.5 million of taxable income.
       Expansion of interest abatement. The proposal would: (1) 
     expand the circumstances in which interest may be abated to 
     include periods attributable to any unreasonable IRS error or 
     delay and (2) allow the abatement of interest to the extent 
     interest is attributable to the taxpayer's reliance on 
     written statement by the IRS.
       Deposits made to stop the running of interest. Proposal 
     would permit deposits to be made to an interest bearing 
     account within Treasury to cover tax underpayments related to 
     issues potentially subject to dispute with the IRS.
       Freeze provision regarding suspension of interest where 
     Secretary fails to contact taxpayer. The proposal would 
     repeal current law which requires the suspension of interest 
     on taxes owed until 21 days after the IRS sends a notice of 
     deficiency. The suspension is triggered if the IRS fails to 
     contact the taxpayer within 1 year for taxable years after 
     January 1, 2004 or 18 months for taxable years before January 
     1, 2004. The proposal is unnecessary with expanded interest 
     abatement.
       Expansion of interest netting. Applies interest netting 
     rules without regard to the 45-day period in which the 
     Secretary may refund an overpayment of tax without the 
     payment of interest.
       Clarification of application of Federal tax deposit 
     penalty. The proposal would clarify that the 10 percent 
     penalty rate only applies in cases where the failure to 
     deposit extends for more than 15 days.
       Frivolous tax submissions. The proposal would increase the 
     penalty for frivolous tax returns from $500 to $5,000. In 
     addition, the proposal would permit the IRS to dismiss 
     requests for Collection Due Process hearings, installment 
     agreements, offers-in-compromise, and taxpayer assistance 
     orders if they are based on frivolous arguments or are 
     intended to delay or impede tax administration. Individuals 
     submitting such requests are subject to a $5,000 penalty for 
     repeat behavior or failure to withdraw the request after 
     being given the opportunity to do so.


                   iii. u.s. tax court modernization

       Jurisdiction of Tax Court over collection due process 
     cases. Currently, if a taxpayer's underlying tax liability 
     does not relate to income taxes or a type of tax over which 
     the Tax Court normally has deficiency jurisdiction, there is 
     no opportunity for Tax Court review and the taxpayer must 
     file in a District Court to obtain review. This provision 
     consolidates judicial review of collection due process 
     activity in the Tax Court.
       Authority for special trial judges to hear and decide 
     certain employment status cases. This provision clarifies 
     that the Tax Court may authorize its special trial judges to 
     enter decisions in employment status cases that are subject 
     to small case proceedings under section 7436(c).
       Confirmation of authority of Tax Court to apply doctrine of 
     equitable recoupment. The common-law principle of equitable 
     recoupment permits a party to asset an otherwise time-barred 
     claim to reduce or defeat an opponent's claim if both claims 
     arise from the same transaction. This provision confirms 
     statutorily that the Tax Court may apply equitable recoupment 
     principles to the same extent as District Court and the Court 
     of Federal Claims.
       Tax Court filing fee in all cases commenced by filing 
     petition. This provision clarifies, in keeping with current 
     Tax Court procedure, that the Tax Court is authorized to 
     impose a $60 filing fee for all cases commenced by petition. 
     The proposal would eliminate the need to amend section 7451 
     each time the Tax Court is granted new jurisdiction.
       Amendments to appoint employees. Currently, the Tax Court 
     has to go to the executive branch, the Office of Personnel 
     Management, to change a position. It is inappropriate to 
     require the Tax Court to seek permission from the executive 
     since that branch is a party (Commissioner of Internal 
     Revenue) before the Tax Court. This change would allow the 
     Tax Court to be independent in fact and perception from the 
     Executive Branch while ensuring that basic employee rights, 
     protections, and remedies are retained or required in an 
     appropriate way (e.g., whistleblower protection, civil 
     rights, merit system principles, etc.).
       Expanded use of Tax Court practice fee for pro se 
     taxpayers. The Tax Court is authorized to charge 
     practitioners a fee of up to $30 per year and to use these 
     fees to pursue disciplinary matters. The provision expands 
     use of these fees to provide services to pro se taxpayers. 
     Fees could be used for education programs for pro se 
     taxpayers.
       Annuities for survivors of Tax Court judges who are 
     assassinated. The reality is that many people do not like to 
     pay taxes. there is as much risk of a Tax Court judge being 
     assassinated as any other Federal judge. The proposal would 
     conform the treatment of Tax Court judges to District Court 
     judges.
       Cost-of-living adjustments for Tax Court judicial survivor 
     annuities. All Federal employees have this provision except 
     the Tax Court. Survivors of Tax Court judges are subject to 
     an obsolete method of indexing.
       Life insurance coverage for Tax Court judges. This simply 
     codifies current Office of Personnel Management 
     interpretation, as was previously done for District Court 
     judges.
       Cost of life insurance coverage for Tax Court judges age 65 
     or over. Congress established the Tax Court in 1969 and 
     required that Tax Court judges receive the same compensation 
     as District Court judges. The District Court judges were 
     given this benefit to ensure that there was no diminution of 
     their compensation (as required by the Constitution). This 
     provision is in keeping with the original intent of Congress.
       Modification of timing of lump-sum payment of judge's 
     accrued annual leave. District Court judges are allowed to 
     receive a lump-sum payment due to the life-time tenure of 
     Article III judges. Tax Court judges, while they have a 15 
     year term, effectively have a life-time term because they are 
     always subject to recall.
       Participation of Tax Court judges in the Thrift Savings 
     Plan. The proposal would allow Tax Court judges to 
     participate in Thrift Savings Plan. Currently, only 19 
     federal government employees are left out of the Thrift 
     Savings Plan (i.e., Tax Court judges).
       Exemption of teaching compensation of retired judges for 
     limitation on outside earned income. After retirement, Tax 
     Court judges should have the same ability to teach as 
     District Court judges.
       General provisions relating to magistrate judges of the Tax 
     Court. ``Magistrate'' is more recognizable to the American 
     public because it is the term used by Article III courts. The 
     provision changes the term ``Special Trial Judge'' to 
     ``Magistrate Judge of the United States Tax Court'' and 
     provides for alignment of term of office and removal 
     applicable to District Court magistrate judges.
       Annuities to surviving spouses and dependent children of 
     magistrate judges of the Tax Court. This section gives 
     Magistrates/Special Trial Judges the same advantages as Tax 
     Court judges, thus ensuring a greater pool of participants in 
     the fund.
       Retirement and annuity program for magistrate judges. A 
     retirement and annuity program more aligned with District 
     Court Magistrates and the Tax Court judges is key for 
     attracting and retaining qualified judges.
       Incumbent magistrate judges of the Tax Court. The provision 
     provides transition rules similar to those given to the 
     District Court magistrate judges.
       Provisions for recall. Article III judges are ``self-
     recalling'' (i.e., they decide for themselves whether they 
     are recalled or not). In contrast, Tax Court judges are 
     subject to provisions that authorize mandatory recall by the 
     Chief Judge. These provisions authorize the recall of 
     Magistrates/Special Trial judges in a manner similar to those 
     now applicable to the regular judges of the Court.


               iv. confidentiality and disclosure reforms

       Clarification of definition of church tax inquiry. The 
     proposal would clarify that the present-law church tax 
     inquiry procedures do not apply to contacts made by the IRS 
     for the purpose of educating churches with respect to the law 
     governing tax-exempt organizations. For example, the proposal 
     clarifies that the IRS does not violate the church tax 
     inquiry procedures when written materials are provided to a 
     church or churches for the purpose of educating such church 
     or churches with respect to the types of activities that are 
     not permissible under section 501(c)(3).
       Collection activities with respect to joint return 
     disclosable to either spouse based on oral request. The 
     proposal would eliminate the requirement for former spouses 
     to make a written request for disclosure of collection 
     activities with respect to a joint return. Under present law, 
     section 6103(e)(7) permits the IRS to disclose return 
     information to the same persons who may have access to a 
     return under the other provisions of section 6103(e), thus 
     either spouse may obtain return information regarding a joint 
     return upon oral request.
       Taxpayer representatives not subject to examination on sole 
     basis of representation of taxpayers. The proposal would 
     clarify that

[[Page S5230]]

     an IRS employee conducting an examination of a taxpayer is 
     not authorized to inspect a taxpayer representative's return 
     or return information solely on the basis of the 
     representative relationship to the taxpayer. Under the 
     proposal, the supervisor of the IRS employee would be 
     required to approve such inspection after making a 
     determination that other grounds justified such an 
     inspection. The proposal would not affect the ability of 
     employees of the IRS Director of Professional Responsibility, 
     or other employees whose assigned duties concern the 
     regulation of practice before the IRS, to access returns and 
     return information of a representative.
       Prohibition of disclosure of taxpayer identifying number 
     with respect to disclosure of accepted offers-in-compromise. 
     The proposal would prohibit the disclosure of the taxpayer 
     identification number as part of the publicly available 
     summaries of accepted offers in compromise.
       Compliance by contractors with confidentiality safeguards. 
     The proposal would require that a State or Federal agency 
     conduct on-site reviews of all of its contractors receiving 
     Federal returns and return information every three years. 
     This review is intended to cover secure storage, restricting 
     access, computer security, and other safeguards deemed 
     appropriate by the Secretary. Under the proposal, the State 
     or Federal agency would be required to submit a report of its 
     findings to the IRS and certify annually that all contractors 
     are in compliance with the requirements to safeguard the 
     confidentiality of Federal returns and return information.
       Higher standards for requests for and consents to 
     disclosure. The proposal would render invalid a consent that 
     does not designate a recipient or is not dated at the time of 
     execution. The person submitting the consent to the IRS would 
     be required to verify under penalties of perjury that the 
     form was complete and dated at the time it was signed by the 
     taxpayer. Inspection or disclosure of a return or return 
     information pursuant to an invalid consent would be 
     unauthorized under section 6103. Thus, a person making such 
     unauthorized disclosure or inspection could be liable for 
     civil damages under section 7431, and criminal penalties 
     under section 7213 or 7213A for willful unauthorized 
     disclosure or inspection.
       Civil damages for unauthorized inspection or disclosure. 
     The proposal would require the IRS to notify a taxpayer at 
     the point of proposed administrative action as to 
     disciplinary or adverse action against an employee arising 
     from the unauthorized inspection or disclosure of the 
     taxpayer's return or return information.
       Expanded disclosure in emergency circumstances. The 
     proposal would permit disclosure to local law enforcement 
     authorities emergency situations including suicide threats.
       Disclosure of taxpayer identity for tax refund purposes.--
     On April 15, 2002, about 1.7 million people who did not file 
     their 1998 income tax return who lose more than $2.3 billion 
     in tax refunds. When the IRS is unable to find a taxpayer due 
     a refund, present law provides that it may use ``the press or 
     other media'' to notify the taxpayer of the refund. The IRS 
     believes the current statutory framework in Section 6103(m) 
     does not permit disclosure via the Internet. The proposal 
     would allow the IRS to use any means of ``mass 
     communicating,'' including the Internet to notify a taxpayer 
     of an undelivered refund.
       Disclosure to State officials of proposed actions related 
     to section 501(c) organizations. The proposal provides that 
     upon written request by an appropriate State officer, the 
     Secretary may disclose: (1) a notice of proposed refusal to 
     recognize an organization as a section 501(c)(3) 
     organization; (2) a notice of proposed revocation of tax-
     exemption of a section 501(c)(3) organization; (3) the 
     issuance of a proposed deficiency of tax imposed under 
     section 507, chapter 41, or chapter 42; (4) the names, 
     addresses, and taxpayer identification numbers of 
     organizations that have applied for recognition as section 
     501(c)(3) organizations; and (5) returns and return 
     information of organizations with respect to which 
     information has been disclosed under (1) through (4) above. 
     Disclosure or inspection is permitted for the purpose of, and 
     only to the extent necessary in, the administration of State 
     laws regulating section 501(c)(3) organizations, such as laws 
     regulating tax-exempt status, charitable trusts, charitable 
     solicitation, and fraud.
       Treatment of public records. The proposal clarifies that 
     public record data (e.g., press releases re criminal cases) 
     does not retain 6103 protections in the files of the IRS.
       Investigative disclosures. The proposal permits the IRS 
     Criminal Investigation agents to identify themselves, 
     organizational affiliation, and criminal nature of 
     investigation when contacting third parties in writing or in 
     person.
       TIN matching. The proposal permits taxpayer identification 
     number (TIN) verification by persons required to provide the 
     information to the IRS (limited to whether information 
     matches) to permit early error resolution and enhance 
     compliance. Under present law, over 30 million information 
     returns are received by the IRS from payors that contain 
     missing or incorrect name and TIN information. However, the 
     IRS is only permitted to disclose the error to the payor at 
     the point at which the payment is subject to backup 
     withholding.
       Form 8300 disclosures. The proposal ensures that the Form 
     8300 (for reporting transactions in excess of $10,000) can be 
     disclosed to law enforcement in the same manner as financial 
     reporting documents required under the Bank Secrecy Act 
     (under Title 31).


    V. SIMPLIFICATION THROUGH ELIMINATION OF INOPERATIVE PROVISIONS

       1. Adjustments in tax tables so that inflation will not 
     result in tax increases. Paragraph (7) of section 1(f) is 
     amended to read as follows: ``(7) Special rule for certain 
     brackets--In prescribing tables under paragraph (1) which 
     apply to taxable years beginning in a calendar year after 
     1994, the cost-of-living adjustment used in making 
     adjustments to the dollar amounts at which the 36 percent 
     bracket begins or at which the 39.6 rate bracket begins shall 
     be determined under paragraph (3) by substituting `1993' for 
     `1992'.''
       2. Reduced capital gain rates for qualified 5-year gain. 
     Paragraph (2) of section 1(h) is amended by striking ``In the 
     case of taxable years beginning after December 31, 2000, 
     the'' and inserting ``The''.
       3. Credit for producing fuel from nonconventional source. 
     Section 29 is amended by striking subsection (e).
       4. Earned income credit. Paragraph (1) of section 32(b) is 
     amended by striking subparagraphs (B) and (C) and by striking 
     ``(A) In General. In the case of taxable years beginning 
     after 1995:''.
       5. General business credits. Subsection (d) of section 38 
     is amended by striking paragraph (3).
       6. Carryback and carryforward of unused credits. Section 39 
     is amended by striking subsection (d).
       7. Adjustments based on adjusted current earnings. Clause 
     (ii) of section 56(g)(4)(F) is amended by striking ``In the 
     case of any taxable year beginning after December 31, 1992, 
     clause'' and inserting ``Clause''.
       8. Items of tax preference; Depletion. Paragraph (1) of 
     section 57(a) is amended by striking ``Effective with respect 
     to taxable years beginning after December 31, 1992, this'' 
     and inserting ``This''.
       9. Intangible drilling costs. Clause (i) of section 
     57(a)(E) is amended by striking ``In the case of any taxable 
     year beginning after December 31, 1992, this'' and inserting 
     ``This''. Clause (ii) of section 57(a)(2)(E) is amended by 
     striking ``(30 percent in the case of taxable years beginning 
     in 1993''.
       10. Annuities; certain proceeds of endowment and life 
     insurance contracts. Paragraph (4) of section 72(c) is 
     amended by striking ``under the contract'' and all that 
     follows and inserting'' under the contract.'' Paragraph (3) 
     of section 72(g) is amended by striking ``January 1, 1954, 
     or''.
       11. Accident and health plans. Section 105(f) is amended by 
     striking ``or (d)''.
       12. Flexible spending arrangements. Section 106(c)(1) is 
     amended by striking ``Effective on and after January 1, 1997, 
     gross'' and inserting ``Gross''.
       13. Certain combat zone compensation of members of the 
     Armed Forces. Subsection (c) of section 112 is amended by 
     striking ``(after June 24, 1950)'' in paragraph (2), and 
     striking ``such zone,'' and all that follows in paragraph (3) 
     and inserting ``such zone.''
       14. Principal residence. Section 121(b)(3) is amended by 
     striking subparagraph (B).
       15. Certain reduced uniformed services retirement pay. 
     Section 112(b)(1) is amended by striking ``after December 31, 
     1965,''.
       16. Great plains conservation program. Section 126(a) is 
     amended by striking paragraph (6).
       17. Mortgage revenue bonds--Federal disaster area 
     modifications. Eliminate special qualified mortgage bond 
     rules or residences located in Federal disaster areas. 
     (utility expired January 1, 1999).
       18. Interim authority for governors regarding allocation of 
     private activity bond volume limits. Eliminate temporary 
     gubernatorial authority to allocate the volume limit.
       19. Treble damage payments under the antitrust law. Section 
     162(g) is amended by striking the last sentence.
       20. State legislators' travel expenses away from home. 
     Paragraph (4) of section 162(h) is amended by striking ``For 
     taxable years beginning after December 31, 1980, this'' and 
     inserting ``This''.
       21. Interest. Section 163 is amended by striking paragraph 
     (6) of subsection (d) and paragraph (5) of subsection (h). 
     Section 56(b)(1)(C) is amended by striking clause (ii) and by 
     redesignating clauses (iii) and (iv) as clauses (ii) and 
     (iii) respectively.
       22. Charitable, etc., contributions and gifts. Section 170 
     is amended by striking subsection (k).
       23. Amortizable bond premium. Subparagraph (B) of section 
     171(b)(1) is amended to read as follows:
       ``(B)(i) in the case of a bond described in subsection 
     (a)(2), with reference to the amount payable on maturity or 
     earlier call date, and
       ``(ii) in the case of a bond described in subsection 
     (a)(1), with reference to the amount payable on maturity (or 
     if it results in a smaller amortizable bond premium 
     attributable to the period to earlier call date, with 
     reference to the amount payable on earlier call date), and''
       24. Net operating loss carrybacks and carryovers. Section 
     172 is amended by striking subparagraph (D) of subsection 
     (b)(1), subsection (g), and subparagraph (F) of the paragraph 
     (h)(2).
       25. Research and experimental expenditures. Subparagraph 
     (A) of section 174(a)(2) is amended to read as follows: ``(A) 
     Without

[[Page S5231]]

     consent.--A taxpayer may, without the consent of the 
     Secretary, adopt the method provided in this subsection for 
     his first taxable year for which expenditures described in 
     paragraph (l) are paid or incurred.''
       26. Amortization of certain research and experimental 
     expenditures. Paragraph (2) of section 174(b)(2) is amended 
     by striking ``beginning after December 31, 1953''.
       27. Soil and water conservation expenditures. Paragraph (1) 
     of section 175(d) is amended to read as follows: ``(1) 
     Without consent.--A taxpayer may, without the consent of the 
     Secretary, adopt the method provided in this section for his 
     first taxable year for which expenditures described in 
     subsection (a) are paid or incurred.''
       28. Activities not engaged in for profit. Section 183(e)(1) 
     is amended by striking the last sentence.
       29. Dividends received on certain preferred stock; and 
     Dividends paid on certain preferred stock of public 
     utilities. Sections 244 and 247 are repealed. Paragraph (5) 
     of section 172(d) is amended to read as follows:
       ``(5) Computation of deduction for dividends received. The 
     deductions allowed by section 243 and 245 shall be computed 
     without regard to section 246(b) (relating to limitation on 
     aggregate amount of deductions).''
       Paragraph (1) of section 243(c) is amended to read as 
     follows:
       ``(1) In General.--In the case of any dividend received 
     from a 20-percent owned corporation, subsection (a)(1) shall 
     be applied by substituting `80 percent' for `70 percent'.''
       Section 243(d) is amended by striking paragraph (4).
       Section 246 is amended--
       (i) by striking ``, 244,'' in subsection (a)(1),
       (ii) by striking ``sections 243(a)(1), and 244(a),'' the 
     first place it appears in subsection (b)(1) and inserting 
     ``section 243(a)(1),'' and by striking ``244(a),'' the second 
     place it appears therein, and
       (iii) by striking in subsection (c)(1).
       Section 246A is amended by striking ``244'' in subsections 
     (a) and (e).
       Sections 277(a), 301(e), 469(e)(4), 512(a)(3)(A), 
     subparagraphs (A), (C), and (D) of section 805(a)(4), 
     805(b)(5), 812(e)(2)(A), 832(b)(5), 833(b)(3)(E), 
     1059(b)(2)(B), and 1244(c)(2)(C) are each amended by striking 
     ``, 244,'' each place it appears.
       Section 805(a)(4)(B) is amended by striking ``, 244(a),'' 
     each place it appears.
       Section 810(c)(2) is amended by striking ``244 (relating to 
     dividends on certain preferred stock of public utilities),''.
       30. Organization expenses. Section 248(c) is amended by 
     striking ``beginning after December 31, 1953,'' and by 
     striking the last sentence.
       31. Bond repurchase premium. Section 249(b)(1) is amended 
     by striking ``, in the case of bonds or other evidences of 
     indebtedness issued after February 28, 1913,''.
       32. Amount of gain where loss previously disallowed. 
     Section 267(d) is amended by striking ``(or by reason of 
     section 24(b) of the Internal Revenue Code of 1939)'' in 
     paragraph (1), by striking ``after December 31, 1953,'' in 
     paragraph (2), by striking the second sentence, and by 
     striking ``or by reason of section 118 of the Internal 
     Revenue Code of 1939'' in the last sentence.
       33. Acquisitions made to evade or avoid income tax. 
     Paragraphs (1) and (2) of section 269 are each amended by 
     striking ``or acquired on or after October 8, 1940,''.
       34. Interest on indebtedness incurred by corporations to 
     acquire stock or assets of another corporation. Section 279 
     is amended--(A) by striking ``after December 31, 1967,'' in 
     subsection (a)(2), (B) by striking ``after October 9, 1969,'' 
     in subsections (b), (C) by striking ``after October 9, 1969, 
     and'', and (D) by striking subsection (i) and redesignating 
     subsection (j) as subsection (i).
       35. Special rules relating to corporate preference items. 
     Paragraph (4) of section 291(a) is amended by striking ``In 
     the case of taxable years beginning after December 31, 1984, 
     section'' and inserting ``Section''.
       36. Qualifications for tax credit employee stock ownership 
     plan. Section 409 is amended by striking subsections (a), 
     (g), and (p).
       37. Funding standards. Section 412(m)(4) is amended by 
     striking ``the applicable percentage'' in subparagraph (A) 
     and by inserting ``25 percent'', and by striking subparagraph 
     (C).
       38. Retiree health accounts. Section 420 is amended by 
     striking subsections (b)(4) and (c)(2)(B).
       39. Employee stock purchase plans. Section 423(a) is 
     amended by striking ``after December 31, 1963,''.
       40. Limitation on deductions for certain farming. Section 
     464 is amended by striking ``any farming syndicate (as 
     defined in subsection (c))'' in subsections (a) and (b) and 
     inserting ``any taxpayer to whom subsection (f) applies'', 
     and by striking subsections (c) and (g).
       41. Deductions limited to amount at risk. Paragraph (3) of 
     section 465(c)(3) is amended by striking ``In the case of 
     taxable years beginning after December 31, 1978, this'' and 
     inserting ``This''. Paragraph (2) of section 465(e)(2)(A) is 
     amended by striking ``beginning after December 31, 1978''.
       42. Nuclear decommissioning costs. Section 468A(e)(2) is 
     amended by striking ``at the rate set forth in subparagraph 
     (B)'' in subparagraph (A) and inserting ``at a rate of 20 
     percent'', and by striking subparagraph (B).
       43. Passive activity losses and credits limited. Section 
     469 is amended by striking subsection (m). Subsection (b) of 
     section 58 is amended by adding ``and'' at the end of 
     paragraph (1), by striking paragraph (2), and by 
     redesignating paragraph (3) as paragraph (2).
       44. Adjustments required by changes in method of 
     accounting. Section 481(b)(3) is amended by striking 
     subparagraph (C).
       45. Exemption from tax on corporations, certain trusts, 
     etc. Section 501 is amended by striking subsection (p).
       46. Requirements for exemption. Section 503(a)(1) is 
     amended to read as follows: ``(1) General rule.--An 
     organization described in paragraph (17) or (18) of section 
     501(a) or described in section 401(a) and referred to in 
     section 4975(g)(2) or (3) shall not be exempt from taxation 
     under section 501(a) if it has engaged in a prohibited 
     transaction.'' Paragraph (2) of section 503(a) is amended by 
     striking ``described in section 501(c)(17) or (18) or 
     paragraph (a)(1)(B)'' and inserting ``described in paragraph 
     (1)''. Subsection (c) of section 503 is amended by striking 
     ``described in section 501(c)(17) or (18) or subsection 
     (a)(1)(B)'' and inserting ``described in subsection (a)(1)''.
       47. Amounts received by surviving annuitant under joint and 
     survivor annuity contract. Subparagraph (A) of section 
     691(d)(1) is amended by striking ``after December 31, 1953, 
     and''.
       48. Income taxes of members of Armed Forces on death. 
     Section 692(a)(1) is amended by striking ``after June 24, 
     1950''.
       49. Insurance company taxable income. Section 832(e)(1) is 
     amended by striking ``of taxable years beginning after 
     December 31, 1966,'' Section 832(e)(6) is amended by striking 
     ``In the case of any taxable year beginning after December 
     31, 1970, the'' and by inserting ``The''.
       50. Tax on nonresident alien individuals. Subparagraph (B) 
     of section 871(a)(1) is amended to read as follows: ``(B) 
     gains described in section 631(b) or (c),''.
       51. Property on which lessee has made improvements. Section 
     1019 is amended by striking the last sentence.
       52. Involuntary conversion. Section 1033 is amended by 
     striking subsection (j).
       53. Property acquired during affiliation. Section 1051 is 
     repealed.
       54. Holding period of property. Paragraphs (5) of section 
     1223 is amended by striking ``(or under so much of section 
     1052(c) as refers to section 113(a)(23) of the Internal 
     Revenue Code of 1939)''. Paragraph (7) of section 1223 is 
     amended by striking the last sentence. Paragraph (9) of 
     section 1223 is repealed.
       55. Property used in the trade or business and involuntary 
     conversions. Paragraph (2) of section 1231(c) is amended by 
     striking ``beginning after December 31, 1981''.
       56. Sale or exchange of patents. Section 1235 is amended by 
     striking subsection (c) and redesignating subsections (d) and 
     (e) as (c) and (d) respectively.
       57. Dealers in securities. Subsection (b) of section 1236 
     is amended by striking ``after November 19, 1951,''.
       58. Sale of patents. Subsection (a) of section 1249 is 
     amended by striking ``after December 31, 1962,''.
       59. Gain from disposition of farm land. Subparagraph (a) of 
     section 1252 is amended by striking ``after December 31, 
     1969,''.
       60. Treatment of amounts received on retirement or sale or 
     exchange of debt instruments. Subsection (c) of section 1271 
     is amended by striking paragraph (1).
       61. Amount and method of adjustment. Section 1314 is 
     amended by striking subsection (d).
       62. Election; revocation; termination. Clause (iii) of 
     section 1362(d)(3) is amended by striking ``unless`` and all 
     that follows and inserting ``unless the corporation was an S 
     corporation for such taxable year.''
       63. Old-age, survivors, and disability insurance. 
     Subsection (a) of section 1401 is amended by striking ``the 
     following percent'' and all that follows and inserting ``12.4 
     percent of the amount of the self-employment income for such 
     taxable year.''
       64. Hospital insurance. Subsection (b) of section 1401 is 
     amended by striking ``the following percent'' and all that 
     follows and inserting ``2.9 percent of the amount of the 
     self-employment income for such taxable year.''
       65. Ministers, members of religious orders, and Christian 
     Science practitioners. Paragraph (3) of section 1402(e) is 
     amended by striking ``whichever of the following dates is 
     later: (A)'' and by striking ``; or (B)'' and all that 
     follows and by inserting a period.
       66. Withholding of tax on nonresident aliens. The first 
     sentence of subsection (b) of section 1441 and the first 
     sentence of paragraph (5) of section 1441(c) are each amended 
     by striking the ``gains subject to tax'' and all that follows 
     through ``October 4, 1966'' and inserting ``and gains subject 
     to tax under section 871(a)(1)(D)''
       67. Affiliated group defined. Subparagraph (A) of section 
     1504(a)(3) is amended by striking ``for a taxable year which 
     includes any period after December 31, 1984'' in clause (i) 
     and by striking ``in a taxable year beginning after December 
     31, 1984'' in clause (ii).
       68. Disallowance of the benefits of the graduated corporate 
     rates and accumulated earnings credit. Subsection (a) of 
     section 1551 is amended--
       (1) by striking paragraph (1) and designating paragraphs 
     (2) and (3) as (1) and (2) respectively, and
       (2) by striking ``(2) or (3)'' and inserting ``(1) or 
     (2)''.
       Subsection (b) of section 1551 is amended by striking ``or 
     (2)''.
       69. Definition of wages. Section 3121(b) is amended by 
     striking paragraph (17).
       70. Credits against tax. Section 3302(f) is amended by 
     striking paragraphs (4)(B) and (5)(D).

[[Page S5232]]

       71. Domestic service employment taxes. Section 3510(b) is 
     amended by striking paragraph (4).
       72. Tax on fuel used in commercial transportation on inland 
     waterways. Section 4042(b)(2)(A) is amended to read as 
     follows: ``(A) The Inland Waterways Trust Fund financing rate 
     is 20 cents per gallon.''
       73. Transportation by air. Section 4261(e) is amended by 
     striking paragraphs (1)(C) and (5).
       74. Taxes on failure to distribute income. Section 4942 is 
     amended--
       (1) by striking subsection (f)(2)(D),
       (2) by striking ``For all taxable years beginning on or 
     after January 1, 1975, subject'' and inserting ``Subject'' in 
     subsection (g)(2)(A),
       (3) by striking subsection (g)(4), and
       (4) by striking ``after December 31, 1969, and'' in 
     subsection (i)(2).
       75. Taxes on taxable expenditures. Section 4945(f) is 
     amended by striking ``(excluding therefrom any preceding 
     taxable year which begins before January 1, 1970)''.
       76. Returns. Subsection (a) of section 6039D is amended by 
     striking ``beginning after December 31, 1984,''
       77. Information returns. Subsection (c) of section 6060 is 
     amended by striking ``year'' and all that follows and 
     inserting ``year.''.
       78. Abatements. Section 6404(f) is amended by striking 
     paragraph (3).
       79. Failure by corporation to pay estimated income tax. 
     Clause (i) of section 6655(g)(4)(A) is amended by striking 
     ``(or the corresponding provisions of prior law)''.
       80. Retirement. Section 7447(i)(3)(B)(ii) is amended by 
     striking ``at 4 percent per annum to December 31, 1947, and 
     at 3 percent per annum thereafter'', and inserting ``at 3 
     percent per annum''.
       81. Annuities to surviving spouses and dependent children 
     of judges. Paragraph (2) of section 7448(a) is amended by 
     striking ``or under section 1106 of the Internal Revenue Code 
     of 1939''.
       Subsectin (g) of section 7448 is amended by striking ``or 
     other than pursuant to section 106 of the Internal Revenue 
     Code of 1939''.
       Subsection (j)(1)(B) and (j)(2) of section 7448 are each 
     amended by striking ``at 4 percent per annum to December 31, 
     1947, and at 3 percent per annum thereafter'' and inserting 
     ``at 3 percent per annum''.
       82. Merchant Marine capital construction funds. Paragraph 
     (4) of section 7518(g) is amended by striking ``any 
     nonqualified withdrawal'' and all that follows through 
     ``shall be determined'' and inserting ``any nonqualified 
     withdrawal shall be determined''.
       83. Valuation tables. Paragraph (3) of section 7520(c) is 
     amended by striking ``not later than December 31, 1989, the'' 
     and inserting ``The''.
       84. Administration and collection of taxes in possessions. 
     Section 7561 is amended by striking paragraph (4).
       85. Definition of employee. Section 7701(a)(20) is amended 
     by striking ``chapter 21'' and all that follows and inserting 
     ``chapter 21.''.
       Effective Date.--
       General Rule.--Except as otherwise provided in this part, 
     the amendments made by this part shall take effect of the 
     date of enactment of this Act.
       Savings Provision.--If
       (1) any provision amended or repealed by this part applied 
     to--
       (a) any transaction occurring before the date of the 
     enactment of this Act,
       (b) any property acquired before such date of enactment, or
       (c) any item of income, loss, deduction, or credit taken 
     into account before such date of enactment, and
       (2) the treatment of such transaction, property, or item 
     under such provision would (without regard to the amendments 
     made by this part) affect the liability for tax for periods 
     ending after such date of enactment, nothing in the 
     amendments made by this part shall be construed to affect the 
     treatment of such transaction, property, or item for purposes 
     of determining liability for tax for periods ending after 
     such date of enactment.
                                 ______
                                 
      By Mr. BREAUX (for himself, Mr. Chafee, Mr. Bingaman, Ms. 
        Landrieu, Mr. Lieberman, Mrs. Clinton, Mr. Miller, and Mr. 
        Graham of Florida):
  S. 883. A bill to amend title XIX of the Social Security Act to 
revise and simplify the transitional medical assistance (TMA) program; 
to the Committee on Finance.
  Mr. BREAUX. Mr. President, I ask unamimous 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. 883

       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 ``Transitional Medical 
     Assistance Improvement Act of 2003''.

     SEC. 2. REVISION AND SIMPLIFICATION OF THE TRANSITIONAL 
                   MEDICAL ASSISTANCE PROGRAM (TMA).

       (a) Option of Continuous Eligibility for 12 Months; Option 
     of Continuing Coverage for Up To an Additional Year.--
       (1) Option of continuous eligibility for 12 months by 
     making reporting requirements optional.--Section 1925(b) of 
     the Social Security Act (42 U.S.C. 1396r-6(b)) is amended--
       (A) in paragraph (1), by inserting ``, at the option of a 
     State,'' after ``and which'';
       (B) in paragraph (2)(A), by inserting ``Subject to 
     subparagraph (C):'' after ``(A) Notices.--'';
       (C) in paragraph (2)(B), by inserting ``Subject to 
     subparagraph (C):'' after ``(B) Reporting requirements.--'';
       (D) by adding at the end the following new subparagraph:
       ``(C) State option to waive notice and reporting 
     requirements.--A State may waive some or all of the reporting 
     requirements under clauses (i) and (ii) of subparagraph (B). 
     Insofar as it waives such a reporting requirement, the State 
     need not provide for a notice under subparagraph (A) relating 
     to such requirement.''; and
       (E) in paragraph (3)(A)(iii), by inserting ``the State has 
     not waived under paragraph (2)(C) the reporting requirement 
     with respect to such month under paragraph (2)(B) and if'' 
     after ``6-month period if''.
       (2) State option to extend eligibility for low-income 
     individuals for up to 12 additional months.--Section 1925 of 
     such Act (42 U.S.C. 1396r-6) is further amended--
       (A) by redesignating subsections (c) through (f) as 
     subsections (d) through (g), respectively; and
       (B) by inserting after subsection (b) the following new 
     subsection:
       ``(c) State Option of Up To 12 Months of Additional 
     Eligibility.--
       ``(1) In general.--Notwithstanding any other provision of 
     this title, each State plan approved under this title may 
     provide, at the option of the State, that the State shall 
     offer to each family which received assistance during the 
     entire 6-month period under subsection (b) and which meets 
     the applicable requirement of paragraph (2), in the last 
     month of the period the option of extending coverage under 
     this subsection for the succeeding period not to exceed 12 
     months.
       ``(2) Income restriction.--The option under paragraph (1) 
     shall not be made available to a family for a succeeding 
     period unless the State determines that the family's average 
     gross monthly earnings (less such costs for such child care 
     as is necessary for the employment of the caretaker relative) 
     as of the end of the 6-month period under subsection (b) does 
     not exceed 185 percent of the official poverty line (as 
     defined by the Office of Management and Budget, and revised 
     annually in accordance with section 673(2) of the Omnibus 
     Budget Reconciliation Act of 1981) applicable to a family of 
     the size involved.
       ``(3) Application of extension rules.--The provisions of 
     paragraphs (2), (3), (4), and (5) of subsection (b) shall 
     apply to the extension provided under this subsection in the 
     same manner as they apply to the extension provided under 
     subsection (b)(1), except that for purposes of this 
     subsection--
       ``(A) any reference to a 6-month period under subsection 
     (b)(1) is deemed a reference to the extension period provided 
     under paragraph (1) and any deadlines for any notices or 
     reporting and the premium payment periods shall be modified 
     to correspond to the appropriate calendar quarters of 
     coverage provided under this subsection; and
       ``(B) any reference to a provision of subsection (a) or (b) 
     is deemed a reference to the corresponding provision of 
     subsection (b) or of this subsection, respectively.''.
       (b) State Option To Waive Receipt of Medicaid for 3 of 
     Previous 6 Months To Qualify for TMA.--Section 1925(a)(1) of 
     such Act (42 U.S.C. 1396r-6(a)(1)) is amended by adding at 
     the end the following: ``A State may, at its option, also 
     apply the previous sentence in the case of a family that was 
     receiving such aid for fewer than 3 months, or that had 
     applied for and was eligible for such aid for fewer than 3 
     months, during the 6 immediately preceding months described 
     in such sentence.''.
       (c) Elimination of Sunset for TMA.--
       (1) Subsection (g) of section 1925 of such Act (42 U.S.C. 
     1396r-6), as redesignated under subsection (a)(2), is 
     repealed.
       (2) Section 1902(e)(1) of such Act (42 U.S.C. 1396a(e)(1)) 
     is amended by striking ``(A) Notwithstanding'' and all that 
     follows through ``During such period, for'' in subparagraph 
     (B) and inserting ``For''.
       (d) CMS Report on Enrollment and Participation Rates Under 
     TMA.--Section 1925 of such Act (42 U.S.C. 1396r-6), as 
     amended by subsections (a)(2)(A) and (c)(1), is amended by 
     inserting after subsection (f) the following:
       ``(g) Additional Provisions.--
       ``(1) Collection and reporting of participation 
     information.--Each State shall--
       ``(A) collect and submit to the Secretary, in a format 
     specified by the Secretary, information on average monthly 
     enrollment and average monthly participation rates for adults 
     and children under this section; and
       ``(B) make such information publicly available.

     Such information shall be submitted under subparagraph (A) at 
     the same time and frequency in which other enrollment 
     information under this title is submitted to the Secretary. 
     Using such information, the Secretary shall submit to 
     Congress annual reports concerning such rates.''.
       (e) Coordination of Work.--Section 1925(g) of such Act (42 
     U.S.C. 1396r-6(g)), as added by subsection (d), is amended by 
     adding at the end the following new paragraph:

[[Page S5233]]

       ``(2) Coordination with administration for children and 
     families.--The Administrator of the Centers for Medicare & 
     Medicaid Services, in carrying out this section, shall work 
     with the Assistant Secretary for the Administration for 
     Children and Families to develop guidance or other technical 
     assistance for States regarding best practices in 
     guaranteeing access to transitional medical assistance under 
     this section.''.
       (f) Elimination of TMA Requirement for States That Extend 
     Coverage to Children and Parents Through 185 Percent of 
     Poverty.--
       (1) In general.--Section 1925 of such Act (42 U.S.C. 1396r-
     6) is further amended by adding at the end the following:
       ``(h) Provisions Optional for States That Extend Coverage 
     to Children and Parents Through 185 Percent of Poverty.--A 
     State may meet (but is not required to meet) the requirements 
     of subsections (a) and (b) if it provides for medical 
     assistance under section 1931 to families (including both 
     children and caretaker relatives) the average gross monthly 
     earning of which (less such costs for such child care as is 
     necessary for the employment of a caretaker relative) is at 
     or below a level that is at least 185 percent of the official 
     poverty line (as defined by the Office of Management and 
     Budget, and revised annually in accordance with section 
     673(2) of the Omnibus Budget Reconciliation Act of 1981) 
     applicable to a family of the size involved.''.
       (2) Conforming amendments.--Section 1925 of such Act (42 
     U.S.C. 1396r-6) is further amended, in subsections (a)(1) and 
     (b)(1), by inserting ``, but subject to subsection (h),'' 
     after ``Notwithstanding any other provision of this title,'' 
     each place it appears.
       (g) Requirement of Notice for All Families Losing TANF.--
     Subsection (a)(2) of section 1925 of such Act (42 U.S.C. 
     1396r-6) is amended by adding at the end the following flush 
     sentences:

     ``Each State shall provide, to families whose aid under part 
     A or E of title IV has terminated but whose eligibility for 
     medical assistance under this title continues, written notice 
     of their ongoing eligibility for such medical assistance. If 
     a State makes a determination that any member of a family 
     whose aid under part A or E of title IV is being terminated 
     is also no longer eligible for medical assistance under this 
     title, the notice of such determination shall be supplemented 
     by a 1-page notification form describing the different ways 
     in which individuals and families may qualify for such 
     medical assistance and explaining that individuals and 
     families do not have to be receiving aid under part A or E of 
     title IV in order to qualify for such medical assistance. 
     Such notice shall further be supplemented by information on 
     how to apply for child health assistance under the State 
     children's health insurance program under title XXI and how 
     to apply for medical assistance under this title.''.
       (h) Extending Use of Outstationed Workers To Accept 
     Applications for Transitional Medical Assistance.--Section 
     1902(a)(55) of such Act (42 U.S.C. 1396a(a)(55)) is amended 
     by inserting ``and under section 1931'' after 
     ``(a)(10)(A)(ii)(IX)''.
       (i) Effective Dates.--
       (1) In general.--Except as provided in this subsection, the 
     amendments made by this section shall apply to calendar 
     quarters beginning on or after October 1, 2002.
       (2) Notice.--The amendment made by subsection (g) shall 
     take effect 6 months after the date of enactment of this Act.
       (3) Delay permitted for state plan amendment.--In the case 
     of a State plan for medical assistance under title XIX of the 
     Social Security Act which the Secretary of Health and Human 
     Services determines requires State legislation (other than 
     legislation appropriating funds) in order for the plan to 
     meet the additional requirements imposed by the amendments 
     made by this section, the State plan shall not be regarded as 
     failing to comply with the requirements of such title solely 
     on the basis of its failure to meet these additional 
     requirements before the first day of the first calendar 
     quarter beginning after the close of the first regular 
     session of the State legislature that begins after the date 
     of enactment of this Act. For purposes of the previous 
     sentence, in the case of a State that has a 2-year 
     legislative session, each year of such session shall be 
     deemed to be a separate regular session of the State 
     legislature.
                                 ______
                                 
      By Ms. LANDRIEU (for herself, Mr. Nelson of Nebraska, Mr. Shelby, 
        Mrs. Lincoln, Mrs. Hutchison, Mr. Johnson, Mr. Bunning, and Mr. 
        Reid):
  S. 884. A bill to amend the Consumer Credit Protection Act to assure 
meaningful disclosures of the terms of rental-purchase agreements, 
including disclosures of all costs to consumers under such agreements, 
to provide certain substantive rights to consumers under such 
agreements, and for other purposes; to the Committee on Banking, 
Housing, and Urban Affairs.
  Ms. LANDRIEU. 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. 884

       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 ``Consumer Rental-Purchase 
     Agreement Act of 2003''.

     SEC. 2. FINDINGS AND DECLARATION OF PURPOSES.

       (a) Findings.--Congress finds that--
       (1) the rental-purchase industry provides a service that 
     meets and satisfies the demands of many consumers;
       (2) each year, approximately 2,300,000 United States 
     households enter into rental-purchase transactions, and over 
     a 5-year period, approximately 4,900,000 United States 
     households will do so;
       (3) competition among the various firms engaged in the 
     extension of rental-purchase transactions would be 
     strengthened by informed use of rental-purchase transactions; 
     and
       (4) the informed use of rental-purchase transactions 
     results from an awareness of the cost thereof by consumers.
       (b) Purposes.--The purposes of this Act are to assure the 
     availability of rental-purchase transactions; and to assure 
     simple, meaningful, and consistent disclosure of rental-
     purchase terms so that consumers will be able to more readily 
     compare the available rental-purchase terms and avoid 
     uninformed use of rental-purchase transactions, and to 
     protect consumers against unfair rental-purchase practices.

     SEC. 3. CONSUMER CREDIT PROTECTION ACT.

       The Consumer Credit Protection Act (15 U.S.C. 1601 et seq.) 
     is amended by adding at the end the following new title:

                ``TITLE X--RENTAL-PURCHASE TRANSACTIONS

``Sec. 1001. Short title; definitions.
``Sec. 1002. Exempted transactions.
``Sec. 1003. General disclosure requirements.
``Sec. 1004. Rental-purchase disclosures.
``Sec. 1005. Other agreement provisions.
``Sec. 1006. Right to acquire ownership.
``Sec. 1007. Prohibited provisions.
``Sec. 1008. Statement of accounts.
``Sec. 1009. Renegotiations and extensions.
``Sec. 1010. Point-of-rental disclosures.
``Sec. 1011. Rental-purchase advertising.
``Sec. 1012. Civil liability.
``Sec. 1013. Additional grounds for civil liability.
``Sec. 1014. Liability of assignees.
``Sec. 1015. Regulations.
``Sec. 1016. Enforcement.
``Sec. 1017. Criminal liability for willful and knowing violation.
``Sec. 1018. Relation to other laws.
``Sec. 1019. Effect on Government agencies.
``Sec. 1020. Compliance date.

     ``SEC. 1001. SHORT TITLE; DEFINITIONS.

       ``(a) Short Title.--This title may be cited as the `Rental-
     Purchase Protections Act'.
       ``(b) Definitions.--For purposes of this title, the 
     following definitions shall apply:
       ``(1) Advertisement.--The term `advertisement' means a 
     commercial message in any medium that promotes, directly or 
     indirectly, a rental-purchase agreement, but does not include 
     price tags, window signs, or other in-store merchandising 
     aids.
       ``(2) Agricultural purpose.--The term `agricultural 
     purpose' includes--
       ``(A) the production, harvest, exhibition, marketing, 
     transformation, processing, or manufacture of agricultural 
     products by a natural person who cultivates plants or 
     propagates or nurtures agricultural products; and
       ``(B) the acquisition of farmlands, real property with a 
     farm residence, or personal property and services used 
     primarily in farming.
       ``(3) Board.--The term `Board' means the Board of Governors 
     of the Federal Reserve System.
       ``(4) Cash price.--The term `cash price' means the price at 
     which a merchant, in the ordinary course of business, offers 
     to sell for cash the property that is the subject of the 
     rental-purchase transaction.
       ``(5) Consumer.--The term `consumer' means a natural person 
     who is offered or enters into a rental-purchase agreement.
       ``(6) Date of consummation.--The term `date of 
     consummation' means the date on which a consumer becomes 
     contractually obligated under a rental-purchase agreement.
       ``(7) Initial payment.--The term `initial payment' means 
     the amount to be paid before or at the time of consummation 
     of the agreement, or the time of delivery of the property 
     covered by the agreement if delivery occurs after 
     consummation, including--
       ``(A) the rental payment;
       ``(B) service, processing, or administrative charges;
       ``(C) any delivery fee;
       ``(D) refundable security deposit;
       ``(E) taxes;
       ``(F) mandatory fees or charges; and
       ``(G) any optional fees or charges agreed to by the 
     consumer.
       ``(8) Merchant.--The term `merchant' means a person who 
     provides the use of property through a rental-purchase 
     agreement in the ordinary course of business and to whom the 
     initial payment by the consumer under the agreement is 
     payable.
       ``(9) Payment schedule.--The term `payment schedule' means 
     the amount and timing of the periodic payments and the total 
     number of all periodic payments that the consumer will make 
     if the consumer acquires ownership of the property by making 
     all periodic payments.

[[Page S5234]]

       ``(10) Periodic payment.--The term `periodic payment' means 
     the total payment that a consumer will make for a specific 
     rental period after the initial payment, including the rental 
     payment, taxes, mandatory fees or charges, and any optional 
     fees or charges agreed to by the consumer.
       ``(11) Property.--The term `property' means property that 
     is not real property under the laws of the State in which the 
     property is located when it is made available under a rental-
     purchase agreement.
       ``(12) Rental payment.--The term `rental payment' means 
     rent required to be paid by a consumer for the possession and 
     use of property for a specific rental period, but does not 
     include taxes or any fees or charges.
       ``(13) Rental period.--The term `rental period' means a 
     week, month, or other specific period of time, during which 
     the consumer has a right to possess and use property that is 
     the subject of a rental-purchase agreement after paying the 
     rental payment and any applicable taxes for such period.
       ``(14) Rental-purchase agreement.--
       ``(A) In general.--The term `rental-purchase agreement' 
     means a contract in the form of a bailment or lease for the 
     use of property by a consumer for an initial period of 4 
     months or less, that is renewable with each payment by the 
     consumer, and that permits but does not obligate the consumer 
     to become the owner of the property.
       ``(B) Exclusions.--The term `rental-purchase agreement' 
     does not include--
       ``(i) a credit sale (as defined in section 103(g) of the 
     Truth in Lending Act);
       ``(ii) a consumer lease (as defined in section 181(1) of 
     the Truth in Lending Act); or
       ``(iii) a transaction giving rise to a debt incurred in 
     connection with the business of lending money or a thing of 
     value.
       ``(15) Rental-purchase cost.--
       ``(A) In general.--For purposes of sections 1010 and 1011, 
     the term `rental-purchase cost' means the sum of all rental 
     payments and mandatory fees or charges imposed by the 
     merchant as a condition of entering into a rental-purchase 
     agreement or acquiring ownership of property under a rental-
     purchase agreement, including--
       ``(i) any service, processing, or administrative charge;
       ``(ii) any fee for an investigation or credit report; and
       ``(iii) any charge for delivery required by the merchant.
       ``(B) Excluded items.--The following fees or charges shall 
     not be taken into account in determining the rental-purchase 
     cost with respect to a rental-purchase transaction:
       ``(i) Fees and charges prescribed by law, which actually 
     are or will be paid to public officials or government 
     entities, such as sales tax.
       ``(ii) Fees and charges for optional products and services 
     offered in connection with a rental-purchase agreement.
       ``(16) State.--The term `State' means any State of the 
     United States, the District of Columbia, any territory of the 
     United States, Puerto Rico, Guam, American Samoa, the Trust 
     Territory of the Pacific Islands, the Virgin Islands, and the 
     Northern Mariana Islands.
       ``(17) Total cost.--The term `total cost' means the sum of 
     the initial payment and all periodic payments in the payment 
     schedule to be paid by the consumer to acquire ownership of 
     the property that is the subject of the rental-purchase 
     agreement.

     ``SEC. 1002. EXEMPTED TRANSACTIONS.

       ``This title does not apply to rental-purchase agreements 
     primarily for business, commercial, or agricultural purposes, 
     or those made with agencies or instrumentalities of the 
     Federal Government or a State or political subdivision 
     thereof.

     ``SEC. 1003. GENERAL DISCLOSURE REQUIREMENTS.

       ``(a) Recipient of Disclosure.--A merchant shall disclose 
     to any person who will be a signatory to a rental-purchase 
     agreement the information required by sections 1004 and 1005.
       ``(b) Timing of Disclosure.--The disclosures required under 
     sections 1004 and 1005 shall be made before the consummation 
     of the rental-purchase agreement, and clearly and 
     conspicuously in writing as part of the rental-purchase 
     agreement to be signed by the consumer.
       ``(c) Clearly and Conspicuously.--As used in this section, 
     the term `clearly and conspicuously' means that information 
     required to be disclosed to the consumer shall be worded 
     plainly and simply, and appear in a type size, prominence, 
     and location as to be readily noticeable, readable, and 
     comprehensible to an ordinary consumer.

     ``SEC. 1004. RENTAL-PURCHASE DISCLOSURES.

       ``(a) In General.--For each rental-purchase agreement, the 
     merchant shall disclose to the consumer, to the extent 
     applicable--
       ``(1) the date of the consummation of the rental-purchase 
     transaction and the identities of the merchant and the 
     consumer;
       ``(2) a brief description of the rental property, which 
     shall be sufficient to identify the property to the consumer, 
     including an identification or serial number, if applicable, 
     and a statement indicating whether the property is new or 
     used;
       ``(3) a description of any fee, charge, or penalty, in 
     addition to the periodic payment, that the consumer may be 
     required to pay under the agreement, which shall be 
     separately identified by type and amount;
       ``(4) a clear and conspicuous statement that the 
     transaction is a rental-purchase agreement and that the 
     consumer will not obtain ownership of the property until the 
     consumer has paid the total dollar amount necessary to 
     acquire ownership;
       ``(5) the amount of any initial payment, which includes the 
     first periodic payment, and the total amount of any fees, 
     taxes, or other charges, required to be paid by the consumer;
       ``(6) the amount of the cash price of the property that is 
     the subject of the rental-purchase agreement, and, if the 
     agreement involves the rental of 2 or more items as a set (as 
     may be defined by the Board in regulation) a statement of the 
     aggregate cash price of all items shall satisfy this 
     requirement;
       ``(7) the amount and timing of periodic payments, and the 
     total number of periodic payments necessary to acquire 
     ownership of the property under the rental-purchase 
     agreement;
       ``(8) the total cost, using that term, and a brief 
     description, such as `This is the amount that you will pay 
     the merchant if you make all periodic payments to acquire 
     ownership of the property.';
       ``(9) a statement of the right of the consumer to terminate 
     the agreement without paying any fee or charge not previously 
     due under the agreement by voluntarily surrendering or 
     returning the property in good repair upon expiration of any 
     lease term; and
       ``(10) substantially the following statement: `OTHER 
     IMPORTANT TERMS: See your rental-purchase agreement for 
     additional important information on early termination 
     procedures, purchase option rights, responsibilities for 
     loss, damage, or destruction of the property, warranties, 
     maintenance responsibilities, and other charges or penalties 
     you may incur.'.
       ``(b) Form of Disclosure.--The disclosures required by 
     paragraphs (4) through (10) of subsection (a) shall--
       ``(1) be segregated from other information at the beginning 
     of the rental-purchase agreement;
       ``(2) contain only directly related information; and
       ``(3) be identified in boldface, upper-case letters as 
     follows: `IMPORTANT RENTAL-PURCHASE DISCLOSURES'.
       ``(c) Disclosure Requirements Relating to Insurance 
     Premiums and Liability Waivers.--
       ``(1) In general.--A merchant shall clearly and 
     conspicuously disclose in writing to the consumer before the 
     consummation of a rental-purchase agreement that the purchase 
     of leased property insurance or liability waiver coverage is 
     not required as a condition for entering into the rental-
     purchase agreement.
       ``(2) Affirmative written request after cost disclosure.--A 
     merchant may provide insurance or liability waiver coverage, 
     directly or indirectly, in connection with a rental-purchase 
     transaction only if--
       ``(A) the merchant clearly and conspicuously discloses to 
     the consumer the cost of each component of such coverage 
     before the consummation of the rental-purchase agreement; and
       ``(B) the consumer signs an affirmative written request for 
     such coverage after receiving the disclosures required under 
     paragraph (1) and subparagraph (A) of this paragraph.
       ``(d) Accuracy of Disclosure.--
       ``(1) In general.--The disclosures required to be made 
     under subsection (a) shall be accurate as of the date on 
     which the disclosures are made, based on the information 
     available to the merchant.
       ``(2) Information subsequently rendered inaccurate.--If 
     information required to be disclosed under subsection (a) is 
     subsequently rendered inaccurate as a result of any agreement 
     between the merchant and the consumer subsequent to the 
     delivery of the required disclosures, the resulting 
     inaccuracy shall not constitute a violation of this title.

     ``SEC. 1005. OTHER AGREEMENT PROVISIONS.

       ``(a) In General.--Each rental-purchase agreement shall--
       ``(1) provide a statement specifying whether the merchant 
     or the consumer is responsible for loss, theft, damage, or 
     destruction of the property;
       ``(2) provide a statement specifying whether the merchant 
     or the consumer is responsible for maintaining or servicing 
     the property, together with a brief description of the 
     responsibility;
       ``(3) provide that the consumer may terminate the agreement 
     without paying any charges not previously due under the 
     agreement by voluntarily surrendering or returning the 
     property that is the subject of the agreement upon expiration 
     of any rental period;
       ``(4) contain a provision for reinstatement of the 
     agreement, which at a minimum--
       ``(A) permits a consumer who fails to make a timely rental 
     payment to reinstate the agreement, without losing any rights 
     or options which exist under the agreement, by the payment of 
     all past due rental payments and any other charges then due 
     under the agreement and a payment for the next rental period 
     within 7 business days after failing to make a timely rental 
     payment if the consumer pays monthly, or within 3 business 
     days after failing to make a timely rental payment if the 
     consumer pays more frequently than monthly;
       ``(B) if the consumer returns or voluntarily surrenders the 
     property covered by the agreement, other than through 
     judicial process, during the applicable reinstatement period 
     set forth in subparagraph (A), permits

[[Page S5235]]

     the consumer to reinstate the agreement during a period of at 
     least 60 days after the date of the return or surrender of 
     the property by the payment of all amounts previously due 
     under the agreement, any applicable fees, and a payment for 
     the next rental period;
       ``(C) if the consumer has paid 50 percent or more of the 
     total cost necessary to acquire ownership and returns or 
     voluntarily surrenders the property, other than through 
     judicial process, during the applicable reinstatement period 
     set forth in subparagraph (A), permits the consumer to 
     reinstate the agreement during a period of at least 120 days 
     after the date of the return of the property by the 
     payment of all amounts previously due under the agreement, 
     any applicable fees, and a payment for the next rental 
     period; and
       ``(D) permits the consumer, upon reinstatement of the 
     agreement, to receive the same property, if available, that 
     was the subject of the rental-purchase agreement, or if the 
     same property is not available, a substitute item of 
     comparable quality and condition, except that the Board may, 
     by regulation or order, exempt any independent small business 
     (as defined by regulation of the Board) from the requirement 
     of providing the same or comparable product during the 
     extended reinstatement period provided in subparagraph (C), 
     if the Board determines, taking into account such standards 
     as the Board determines appropriate, that the reinstatement 
     right provided in subparagraph (C) would provide excessive 
     hardship for the independent small business;
       ``(5) provide a statement specifying the terms under which 
     the consumer shall acquire ownership of the property that is 
     the subject of the rental-purchase agreement either by 
     payment of the total cost to acquire ownership, as provided 
     in section 1006, or by exercise of any early purchase option 
     provided in the rental-purchase agreement;
       ``(6) provide a statement disclosing that if any part of a 
     manufacturer's express warranty covers the property at the 
     time the consumer acquires ownership of the property, the 
     warranty will be transferred to the consumer if allowed by 
     the terms of the warranty; and
       ``(7) provide, to the extent applicable, a description of 
     any grace period for making any periodic payment, the amount 
     of any security deposit, if any, to be paid by the consumer 
     upon initiation of the rental-purchase agreement, and the 
     terms for refund of such security deposit to the consumer 
     upon return, surrender or purchase of the property.
       ``(b) Repossession During Reinstatement Period.--Subsection 
     (a)(4) shall not be construed so as to prevent a merchant 
     from attempting to repossess property during the 
     reinstatement period pursuant to subsection (a)(4)(A), but 
     such a repossession does not affect the right of the consumer 
     to reinstatement under subsection (a)(4).

     ``SEC. 1006. RIGHT TO ACQUIRE OWNERSHIP.

       ``(a) In General.--The consumer shall acquire ownership of 
     the property that is the subject of the rental-purchase 
     agreement, and the rental-purchase agreement shall terminate, 
     upon compliance by the consumer with the requirements of 
     subsection (b) or any early payment option provided in the 
     rental purchase agreement, and upon payment of any past due 
     payments and fees, as permitted by regulation of the Board.
       ``(b) Payment of Total Cost.--The consumer shall acquire 
     ownership of the rental property upon payment of the total 
     cost of the rental-purchase agreement, as defined in section 
     1001(17), and as disclosed to the consumer in the rental-
     purchase agreement pursuant to section 1004(a).
       ``(c) Additional Fees Prohibited.--A merchant shall not 
     require the consumer to pay, as a condition for acquiring 
     ownership of the property that is the subject of the rental-
     purchase agreement, any fee or charge in addition to, or in 
     excess of, the regular periodic payments required by 
     subsection (b), or any early purchase option amount provided 
     in the rental-purchase agreement, as applicable. A 
     requirement that the consumer pay an unpaid late charge or 
     other fee or charge which the merchant has previously billed 
     to the consumer shall not constitute an additional fee or 
     charge for purposes of this subsection.
       ``(d) Transfer of Ownership Rights.--Upon payment by the 
     consumer of all payments necessary to acquire ownership under 
     subsection (b) or any early purchase option amount provided 
     in the rental-purchase agreement, as applicable, the merchant 
     shall--
       ``(1) deliver, or mail to the last known address of the 
     consumer, such documents or other instruments which the Board 
     has determined, by regulation, are necessary to acknowledge 
     full ownership by the consumer of the property acquired 
     pursuant to the rental-purchase agreement; and
       ``(2) transfer to the consumer the unexpired portion of any 
     warranties provided by the manufacturer, distributor, or 
     seller of the property, which shall apply as if the consumer 
     were the original purchaser of the property, except where 
     such transfer is prohibited by the terms of the warranty.

     ``SEC. 1007. PROHIBITED PROVISIONS.

       ``A rental-purchase agreement may not contain--
       ``(1) a confession of judgment;
       ``(2) a negotiable instrument;
       ``(3) a security interest or any other claim of a property 
     interest in any goods, except those goods, the use of which 
     is provided by the merchant pursuant to the agreement;
       ``(4) a wage assignment;
       ``(5) a provision requiring the waiver of any legal claim 
     or remedy created by this title or other provision of Federal 
     or State law;
       ``(6) a provision requiring the consumer, in the event that 
     the property subject to the rental-purchase agreement is 
     lost, stolen, damaged, or destroyed, to pay an amount in 
     excess of the least of--
       ``(A) the fair market value of the property, as determined 
     by regulation of the Board;
       ``(B) any early purchase option amount provided in the 
     rental-purchase agreement; or
       ``(C) the actual cost of repair, as appropriate;
       ``(7) a provision authorizing the merchant, or a person 
     acting on behalf of the merchant, to enter the dwelling of 
     the consumer or other premises without obtaining the consent 
     of the consumer, or to commit any breach of the peace in 
     connection with the repossession of the rental property or 
     the collection of any obligation or alleged obligation of the 
     consumer arising out of the rental-purchase agreement;
       ``(8) a provision requiring the purchase of insurance or 
     liability damage waiver to cover the property that is the 
     subject of the rental-purchase agreement, except as permitted 
     by regulation of the Board; or
       ``(9) a provision requiring the consumer to pay more than 1 
     late fee or charge for an unpaid or delinquent periodic 
     payment, regardless of the period in which the payment 
     remains unpaid or delinquent, or to pay a late fee or charge 
     for any periodic payment because a previously assessed late 
     fee has not been paid in full.

     ``SEC. 1008. STATEMENT OF ACCOUNTS.

       ``Upon request of a consumer, a merchant shall provide a 
     statement of the account of the consumer. If a consumer 
     requests a statement for an individual account more than 4 
     times in any 12-month period, the merchant may charge a 
     reasonable fee for the additional statements requested in 
     excess of 4 times during that 12-month period.

     ``SEC. 1009. RENEGOTIATIONS AND EXTENSIONS.

       ``(a) Renegotiations.--For purposes of this section, a 
     `renegotiation' occurs when a rental-purchase agreement is 
     satisfied and replaced by a new agreement undertaken by the 
     same consumer. A renegotiation requires new disclosures under 
     this title, except as provided in subsection (c).
       ``(b) Extensions.--For purposes of this section, an 
     `extension' is an agreement by the consumer and the merchant 
     to continue an existing rental-purchase agreement beyond the 
     original end of the payment schedule, but does not include a 
     continuation that is the result of a renegotiation.
       ``(c) Exceptions.--New disclosures under this title are not 
     required for the following, even if they meet the definition 
     of a renegotiation or an extension under this section:
       ``(1) A reduction in payments.
       ``(2) A deferment of 1 or more payments.
       ``(3) The extension of a rental-purchase agreement.
       ``(4) The substitution of property with property that has a 
     substantially equivalent or greater economic value, provided 
     that the rental-purchase cost does not increase.
       ``(5) The deletion of property in a multiple-item 
     agreement.
       ``(6) A change in the rental period, provided that the 
     rental-purchase cost does not increase.
       ``(7) An agreement resulting from a court proceeding.
       ``(8) Any other event described in regulations prescribed 
     by the Board.

     ``SEC. 1010. POINT-OF-RENTAL DISCLOSURES.

       ``(a) In General.--For any item of property or set of items 
     displayed or offered for rental-purchase, the merchant shall 
     display on or next to the item or set of items a card, tag, 
     or label that clearly and conspicuously discloses--
       ``(1) a brief description of the property;
       ``(2) whether the property is new or used;
       ``(3) the cash price of the property;
       ``(4) the amount of each rental payment;
       ``(5) the total number of rental payments necessary to 
     acquire ownership of the property; and
       ``(6) the rental-purchase cost.
       ``(b) Form of Disclosure.--
       ``(1) In general.--A merchant may make the disclosures 
     required by subsection (a) in the form of a list or catalog 
     which is readily available to the consumer at the point of 
     rental if the merchandise is not displayed in the showroom of 
     the merchant, or if displaying a card, tag, or label would be 
     impractical due to the size of the merchandise.
       ``(2) Clearly and conspicuously.--As used in this section, 
     the term `clearly and conspicuously' means that information 
     required to be disclosed to the consumer shall appear in a 
     type size, prominence, and location as to be noticeable, 
     readable, and comprehensible to an ordinary consumer.

     ``SEC. 1011. RENTAL-PURCHASE ADVERTISING.

       ``(a) In General.--If an advertisement for a rental-
     purchase transaction refers to or states the amount of any 
     payment for any specific item or set of items, the merchant 
     making the advertisement shall also clearly and conspicuously 
     state in the advertisement for the item or set of items 
     advertised--
       ``(1) that the transaction advertised is a rental-purchase 
     agreement;
       ``(2) the amount, timing, and total number of rental 
     payments necessary to acquire ownership under the rental-
     purchase agreement;

[[Page S5236]]

       ``(3) the amount of the rental-purchase cost;
       ``(4) that to acquire ownership of the property, the 
     consumer must pay the rental-purchase cost plus applicable 
     taxes; and
       ``(5) whether the stated payment amount and advertised 
     rental-purchase cost is for new or used property.
       ``(b) Prohibition.--An advertisement for a rental-purchase 
     agreement shall not state or imply that a specific item or 
     set of items is available at specific amounts or terms, 
     unless the merchant usually and customarily offers, or will 
     offer, the item or set of items at the stated amounts or 
     terms.
       ``(c) Clearly and Conspicuously.--
       ``(1) In general.--For purposes of this section, the term 
     `clearly and conspicuously' means that required disclosures 
     shall be presented in a type, size, shade, contrast, 
     prominence, location, and manner, as applicable to 
     different media for advertising, so as to be readily 
     noticeable and comprehensible to the ordinary consumer.
       ``(2) Regulatory guidance.--The Board shall prescribe 
     regulations on principles and factors to meet the clear and 
     conspicuous standard, as appropriate to print, video, audio, 
     and computerized advertising, reflecting the principles and 
     factors typically applied in each medium by the Federal Trade 
     Commission.
       ``(3) Limitation.--Nothing contrary to, inconsistent with, 
     or in mitigation of, the disclosures required by this section 
     shall be used in any advertisement in any medium, and no 
     audio, video, or print technique shall be used that is likely 
     to obscure or detract significantly from the communication of 
     the required disclosures.

     ``SEC. 1012. CIVIL LIABILITY.

       ``(a) In General.--Except as otherwise provided in section 
     1013, any merchant who fails to comply with any requirement 
     of this title with respect to any consumer is liable to such 
     consumer as provided for leases in section 130. For purposes 
     of this section, the term `creditor' as used in section 130 
     shall include a `merchant', as defined in section 1001.
       ``(b) Jurisdiction of Courts; Limitation on Actions.--
       ``(1) In general.--Notwithstanding section 130(e), any 
     action under this section may be brought in any United States 
     district court, or in any other court of competent 
     jurisdiction, before the end of the 1-year period beginning 
     on the date on which the last payment was made by the 
     consumer under the rental-purchase agreement.
       ``(2) Recoupment or set-off.--This subsection shall not bar 
     a consumer from asserting a violation of this title in an 
     action to collect an obligation arising from a rental-
     purchase agreement, which was brought after the end of the 1-
     year period described in paragraph (1) as a matter of defense 
     by recoupment or set-off in such action, except as otherwise 
     provided by State law.

     ``SEC. 1013. ADDITIONAL GROUNDS FOR CIVIL LIABILITY.

       ``(a) Individual Cases With Actual Damages.--Any merchant 
     who fails to comply with any requirement imposed under 
     section 1010 or 1011 with respect to any consumer who suffers 
     actual damage from the violation shall be liable to such 
     consumer as provided in section 130.
       ``(b) Pattern or Practice of Violations.--If a merchant 
     engages in a pattern or practice of violating any requirement 
     imposed under section 1010 or 1011, the Federal Trade 
     Commission or an appropriate State attorney general, in 
     accordance with section 1016, may initiate an action to 
     enforce sanctions against the merchant, including--
       ``(1) an order to cease and desist from such practices; and
       ``(2) a civil money penalty of such amount as the court may 
     impose, based on such factors as the court may determine to 
     be appropriate.

     ``SEC. 1014. LIABILITY OF ASSIGNEES.

       ``(a) Assignees Included.--For purposes of section 1013 and 
     this section, the term `merchant' includes an assignee of a 
     merchant.
       ``(b) Liabilities of Assignees.--
       ``(1) Apparent violation.--An action under section 1012 or 
     1013 for a violation of this title may be brought against an 
     assignee only if the violation is apparent on the face of the 
     rental-purchase agreement to which it relates.
       ``(2) Apparent violation defined.--For purposes of this 
     subsection, a violation that is apparent on the face of a 
     rental-purchase agreement includes, but is not limited to, a 
     disclosure that can be determined to be incomplete or 
     inaccurate from the face of the agreement.
       ``(3) Involuntary assignment.--An assignee has no liability 
     under this section in a case in which the assignment is 
     involuntary.
       ``(4) Rule of construction.--No provision of this section 
     shall be construed as limiting or altering the liability 
     under section 1012 or 1013 of a merchant assigning a rental-
     purchase agreement.
       ``(b) Proof of Disclosure.--In an action by or against an 
     assignee, the consumer's written acknowledgment of receipt of 
     a disclosure, made as part of the rental-purchase agreement, 
     shall be conclusive proof that the disclosure was made, if 
     the assignee had no knowledge that the disclosure had not 
     been made when the assignee acquired the rental-purchase 
     agreement to which it relates.

     ``SEC. 1015. REGULATIONS.

       ``(a) In General.--The Board shall prescribe regulations, 
     as necessary to carry out this title, to prevent its 
     circumvention, and to facilitate compliance with its 
     requirements.
       ``(b) Model Disclosure Forms.--
       ``(1) Board authority.--The Board may publish model 
     disclosure forms and clauses for common rental-purchase 
     agreements to facilitate compliance with the disclosure 
     requirements of this title and to aid the consumer in 
     understanding the transaction by utilizing readily 
     understandable language to simplify the technical nature of 
     the disclosures.
       ``(2) Content.--In devising forms described in paragraph 
     (1), the Board shall consider the use by merchants of data 
     processing or similar automated equipment.
       ``(3) Use not mandatory.--Nothing in this title may be 
     construed to require a merchant to use any model form or 
     clause published by the Board under this section.
       ``(4) Determination of compliance.--A merchant shall be 
     deemed to be in compliance with the requirement to provide 
     disclosure under section 1003(a) if the merchant--
       ``(A) uses any appropriate model form or clause published 
     by the Board under this section; or
       ``(B) uses any such model form or clause, and changes it by 
     deleting any information which is not required by this title 
     or rearranging the format, if in making such deletion or 
     rearranging the format, the merchant does not affect the 
     substance, clarity, or meaningful sequence of the disclosure.
       ``(c) Effective Date of Regulations.--
       ``(1) In general.--Any regulation prescribed by the Board, 
     or any amendment or interpretation thereof, shall not be 
     effective before the October 1 that follows the date of 
     publication of the regulation in final form by at least 6 
     months.
       ``(2) Authority to modify.--The Board may, at its 
     discretion--
       ``(A) lengthen the period of time described in paragraph 
     (1) to permit merchants to adjust to accommodate new 
     requirements; or
       ``(B) shorten that period of time, if the Board makes a 
     specific finding that such action is necessary to comply with 
     the findings of a court or to prevent unfair or deceptive 
     practices.
       ``(3) Voluntary compliance.--Notwithstanding paragraph (1) 
     or (2), a merchant may comply with any newly prescribed 
     disclosure requirement prior to its effective date.

     ``SEC. 1016. ENFORCEMENT.

       ``(a) Federal Enforcement.--Compliance with this title 
     shall be enforced under the Federal Trade Commission Act (15 
     U.S.C. 41 et seq.), and a violation of any requirement 
     imposed under this title shall be deemed a violation of a 
     requirement imposed under that Act. All of the functions and 
     powers of the Federal Trade Commission under the Federal 
     Trade Commission Act are available to the Commission to 
     enforce compliance by any person with the requirements of 
     this title, irrespective of whether that person is engaged in 
     commerce or meets any other jurisdictional test under the 
     Federal Trade Commission Act.
       ``(b) State Enforcement.--
       ``(1) In general.--An action to enforce the requirements 
     imposed by this title may also be brought by the appropriate 
     State attorney general in any appropriate United States 
     district court, or any other court of competent jurisdiction.
       ``(2) Prior written notice.--
       ``(A) In general.--The State attorney general shall provide 
     prior written notice of any civil action described in 
     paragraph (1) to the Federal Trade Commission, and shall 
     provide the Commission with a copy of the complaint.
       ``(B) Emergency action.--If prior notice required by this 
     paragraph is not feasible, the State attorney general shall 
     provide notice to the Commission immediately upon instituting 
     the action.
       ``(3) FTC intervention.--The Commission may--
       ``(A) intervene in an action described in paragraph (1);
       ``(B) upon intervening--
       ``(i) remove the action to the appropriate United States 
     district court, if it was not originally brought there; and
       ``(ii) be heard on all matters arising in the action; and
       ``(C) file a petition for appeal.

     ``SEC. 1017. CRIMINAL LIABILITY FOR WILLFUL AND KNOWING 
                   VIOLATION.

       ``Whoever willfully and knowingly gives false or inaccurate 
     information, or fails to provide information which that 
     person is required to disclose under the provisions of this 
     title or any regulation issued under this title shall be 
     subject to the penalty provisions as provided in section 112.

     ``SEC. 1018. RELATION TO OTHER LAWS.

       ``(a) Relation to State Law.--
       ``(1) No effect on consistent state laws.--Except as 
     otherwise provided in subsection (b), this title does not 
     annul, alter, or affect in any manner the meaning, scope, or 
     applicability of the laws of any State relating to rental-
     purchase agreements, except to the extent that those laws are 
     inconsistent with any provision of this title, and then only 
     to the extent of the inconsistency.
       ``(2) Determination of inconsistency.--Upon its own motion 
     or upon the request of an interested party, which is 
     submitted in accordance with procedures prescribed by 
     regulation of the Board, the Board shall determine whether 
     any such inconsistency exists. If the Board determines that a 
     term or provision of a State law is inconsistent with

[[Page S5237]]

     a provision of this title, merchants located in that State 
     shall not be required to comply with that term or provision, 
     and shall incur no liability under the law of that State for 
     failure to follow such term or provision, notwithstanding 
     that such determination is subsequently amended, 
     rescinded, or determined by judicial or other authority to 
     be invalid for any reason.
       ``(3) Greater protection under state law.--Except as 
     provided in subsection (b), for purposes of this section, a 
     term or provision of a State law is not inconsistent with the 
     provisions of this title if the term or provision affords 
     greater protection and benefit to the consumer than the 
     protection and benefit provided under this title, as 
     determined by the Board, on its own motion or upon the 
     petition of any interested party.
       ``(b) State Laws Relating to Characterization of 
     Transaction.--Notwithstanding subsection (a), this title 
     shall supersede any State law, to the extent that such law--
       ``(1) regulates a rental-purchase agreement as a security 
     interest, credit sale, retail installment sale, conditional 
     sale, or any other form of consumer credit, or that imputes 
     to a rental-purchase agreement the creation of a debt or 
     extension of credit; or
       ``(2) requires the disclosure of a percentage rate 
     calculation, including a time-price differential, an annual 
     percentage rate, or an effective annual percentage rate.
       ``(c) Relation to Federal Trade Commission Act.--No 
     provision of this title shall be construed as limiting, 
     superseding, or otherwise affecting the applicability of the 
     Federal Trade Commission Act to any merchant or rental-
     purchase transaction.

     ``SEC. 1019. EFFECT ON GOVERNMENT AGENCIES.

       ``No civil liability or criminal penalty under this title 
     may be imposed on the United States or any of its departments 
     or agencies, any State or political subdivision thereof, or 
     any agency of a State or political subdivision thereof.

     ``SEC. 1020. COMPLIANCE DATE.

       ``Compliance with this title shall not be required until 6 
     months after the date of enactment of this title. In any 
     case, a merchant may comply with this title at any time after 
     such date of enactment.''.
                                 ______
                                 
      By Mr. KYL (for himself and Mr. Cornyn):
  S. 887. A bill to amend the Internal Revenue Code of 1986 to apply an 
excise tax to excessive attorneys fees for legal judgments, 
settlements, or agreements that operate as a tax; to the Committee on 
Finance.
  Mr. KYL. Mr. President, I rise today to introduce the Intermediate 
Sanctions Compensatory Revenue Adjustment Act of 2003, ISCRAA. This 
legislation will restore to the States billions of dollars in revenue 
due to them from a massive lawsuit recently conducted on their behalf 
the tobacco-Related Medicaid expenses litigation. ISCRAA amends an 
existing provision of the Federal tax code in order to enforce basic, 
universally accepted fiduciary standards governing the award of 
attorneys fees. By applying these standards to the attorneys who 
represented the states in the tobacco settlement, ISCRAA reasonably can 
be expected to restore to the states income with a present value of 
approximately $9 billion. I have included at the end of my statement a 
chart detailing how much each state can expect to recover.
  ISCRAA's tax formula is borrowed from the 1996 Tax Act's Intermediate 
Sanctions Tax, IST, which applies a two-step excise tax to any 
excessive or unreasonable compensation that the managers of a trust pay 
to themselves from the assets of the trust. The IST framework 
encourages the trustee to restore the excessive portion of any fee to 
the trust--when he does so, the IST's punitive taxes do not apply.
  ISCRAA extends the IST to another type of trust relationship: that 
between a lawyer and his client. ISCRAA applies the IST tax formula to 
any unreasonable or excessive income that a lawyer collects from 
litigation resulting in a judgment or settlement in excess of $100 
million. To avoid IST taxes, an attorney must restore the excessive 
portion of the fee to the client.
  As my colleague Senator Cornyn will explain today, the ethical and 
legal abuses that resulted from the 1998 State tobacco settlement make 
the need for this legislation manifest. Senator CORNYN also will 
discuss the law of attorneys' fiduciary obligations, which establishes 
that a fee award is the property of the client--and that any unethical 
fee must be restored to the client, regardless of how the fee award is 
structured.
  I will discuss today how ISCRAA will affect massive litigations 
generally. In order to gauge the reasonableness of a lawyer's fee 
award, ISCRAA adopts and codifies a liberal version of the lodestar-
multiplier system. As I will later explain in greater detail, ISCRAA 
allows fee multipliers of up to 500 percent of reasonable hourly rates. 
This limit is as generous as the most liberal limits adopted by state 
courts, and considerably more generous than the limits that federal 
courts have applied in $100 million cases. ISCRAA's fee formula 
guarantees that attorneys' fiduciary obligations will be respected, 
while providing plaintiff's lawyers with ample incentive to provide 
high-quality legal representation in these types of cases.
  Federal supervision of fee awards resulting from $100 million 
litigations is appropriate for several reasons. First, because of their 
sheer size, these types of lawsuits inevitably operate as a tax on the 
consuming public. Few defendants actually can afford to pay such 
judgments with cash on hand. Instead, the affected industries simply 
will raise the prices that they charge to their customers.
  This is exactly what has happened in the State Medicaid tobacco 
settlement--according to the leading proponents of that litigation. The 
first State attorney general to file suit against the tobacco companies 
has admitted that ``what always happens in these cases is the industry 
passes the costs to the consumer.'' Other commentators agree that this 
has occurred in the tobacco litigation. As one law-review article 
notes, ``the [tobacco] settlement * * * is a tax because it's a set of 
payments made by tobacco companies that depend on how many packs they 
sell; in short, it looks like a tax and quacks like a tax.''
  Because of the way that these massive judgments typically are 
satisfied, it is particularly important to ensure that attorneys are 
paid in proportion to the services that they provided--rather than 
solely on the basis of the size of the recovery. Again, the State 
tobacco settlement highlights the nature of the problem. As two of the 
leading academic commentators have noted, it is ``very troubl[ing]'' 
that under that agreement, ``a group of private citizens [are] getting 
paid a percentage of a tax increase they helped pass.'' The sheer size 
of the tobacco settlement--and the fact that attorneys fees were based 
on this size, rather than on the attorneys' actual efforts--has given 
the fee awards an uncanny resemblance to the medieval practice of tax 
farming. In all but name, the government has licensed a group of 
private individuals to collect a tax from the consuming public.
  I would emphasize at this point that ISCRAA is not an attack on the 
State tobacco lawsuits. The bill does not pass judgment on the merits 
or the appropriateness of this type of litigation. ISCRAA simply is 
designed to ensure that when such lawsuits are brought on the public's 
behalf, the public receive its fair share of the proceeds. If a State 
chooses to seek compensatory revenue from industry for past harms, then 
the resulting tax on the public--minus the reasonable value of the 
legal services actually provided--must go to the State treasury.
  There are several reasons why $100 million is an appropriate 
threshold for applying ISCRAA's fee formula. First, the courts 
themselves have indicated that fee agreements based primarily on the 
size of the recovery tend to become unreasonable when judgements reach 
this size. As one court has stated, ``in much smaller cases, a fee 
award of 33 percent does not present the danger of providing the 
plaintiff's counsel with the windfall that would accompany a `megafund' 
settlement of $100 million or upwards. But it is quite different when 
the figures hit the really big time.'' Or as the Third Circuit notes, 
``courts have generally decreased the percentage awarded [for attorneys 
fees] as the amount recovered increases, and $100 million seems to be 
the informal marker of a 'very large' settlement.''
  The logic of avoiding judgment-based awards in these very large cases 
is straightforward. As one court explains, ``it is not 150 times more 
difficult to prepare, try, and settle a $150 million case than it is to 
try a $1 million case, but the application of a percentage comparable 
to that in a smaller case may yield an award 150 times greater.'' Thus, 
according to another court, ``there is considerable merit'' to 
disallowing standard percentage awards as the ``size of the [recovery] 
fund increases. In many instances the increase [in the recovery] is 
merely a factor of the size of the class and has no direct relationship 
to the efforts of counsel.''

[[Page S5238]]

  It also bears mention that because of its $100 million threshold, 
ISCRAA applies to a fairly limited universe of cases. As courts have 
remarked, ``there are few so-called `megafund' cases with settlements 
over $100 million.'' In 2001, the U.S. Court of Appeals for the Third 
Circuit attempted to catalogue all common-fund cases in federal court 
that resulted in recoveries greater than $100 million. Though such 
litigations have been more frequent in recent years, the Third Circuit 
identified only 22 such cases since 1985. See in re Cendant Corp. 
PRIDES Litig., 243 F.3d 722, 737 (3d Cir. 2001).
  ISCRAA is somewhat broader than the criteria that Cendant Corp. 
employed to collect cases. ISCRAA is not limited to common-fund cases--
it also applies to judgments won on behalf of tax-exempt entities or 
even single individuals. ISCRAA also applies to cases brought in State 
court, and it aggregates identical claims that are brought against 
common defendants in separate actions, in order to prevent evasion of 
its limits through the subdivision of actions. Nevertheless, ISCRAA's 
scope remains fairly narrow. An academic specialist who is familiar 
with developments in this field has reviewed the bill and concluded 
that because of its ``relatively high threshold,'' ISCRAA probably 
would apply only to about 15-20 litigations per year. I will include a 
copy of this professor's letter to me in the Congressional Record.
  Finally, a $100 million threshold also is appropriate because it 
limits ISCRAA's reach to litigations that are a natural subject of 
congress's authority to regulate interstate commerce. It is well-
established that ``Congress' commerce authority includes the power to 
regulate . . . those [economic] activities that substantially affect 
interstate commerce.'' United States v. Morrison, 529 U.S. 598, 609 
(2000). See also United States v. Lopez, 514 U.S. 549 (1995). Both the 
executive and the legislative branches previously have identified $100 
million as guideline for determining whether a matter has a significant 
impact on interState commerce. See, e.g. Executive Order 12866; 
Congressional Review Act, 5 U.S.C. Sec. 804(2); Unfunded Mandates Act, 
2 U.S.C. Sec. 1532(a). Because it is limited to litigations of this 
size, ISCRAA is consistent with congress's power and obligation to 
protect the flow of commerce between states.
  Another point that I would like to emphasize today is that ISCRAA is 
not an anti-plaintiffs' lawyer bill. It is not stingy toward trial 
attorneys. ISCRAA is carefully designed to protect fiduciary interests 
while providing plaintiffs' lawyers with ample incentives to provide 
high-quality legal representation in large litigations. ISCRAA's fee 
formula is as generous as the limits set by the most liberal State 
courts that engage in meaningful review of attorneys fees, and is 
considerably more generous than the Federal courts' practices in $100 
million cases. Moreover, the multiplier criteria that ISCRAA employs 
universally are recognized as legitimate prerequisites for a 
contingency fee--even by trial lawyers' professional associations.
  Federal courts primarily rely on two systems for calculating 
attorneys fees in cases, such as class actions, in which they are 
required to set ``reasonable fees:'' the percentage method and the 
lodestar-multiplier method. The percentage method, as its name implies, 
calculates fees as a percentage of the total recovery. The lodestar 
system, by contrast, requires a court to first calculate a fee based on 
the number of hours that the lawyer worked multiplied by prevailing 
hourly rates, the ``lodestar''. The court then multiplies this lodestar 
fee again in order to reward the attorney for the risk of nonpayment of 
fees that he assumed and for any exceptional services that he provided.
  Over the last thirty years, courts have moved back and forth between 
these two systems. Only a few courts make lodestar-multipliers the 
exclusive means of awarding attorneys fees. But as one academic 
commentator has noted, ``lodestar, or hours-based methods, have been 
adopted in every [federal judicial] circuit.''
  And more importantly, in large-recovery cases, there has been very 
little difference between lodestar and percentage systems. This is 
because even when courts apply a percentage to calculate fees, and as 
judgements become very large, courts typically also calculate a 
reasonable lodestar in order to determine what constitutes a reasonable 
percentage. Thus, again, as the Third Circuit notes, ``courts have 
generally decreased the percentage awarded as the amount recovered 
increases, and $100 million seems to be the informal marker of a `very 
large' settlement.''
  Courts have been wary of awarding fees based on percentages alone. As 
one State supreme court explains: ``to begin the assessment by 
arbitrarily picking a percentage amount without any reliance on a 
cognizable structure invites decisions that are nonobjective and 
inconsistent. What constitutes a reasonable percentage may differ from 
one judge to another depending on each judge's predilections, 
background, and geographical location in the state.''
  Thus ``courts that employ the percentage approach appear to be 
motivated in part by a lodestar dynamic. Because courts are reluctant 
to give fee awards totally incommensurate with the efforts of the 
attorneys, percentage awards generally decrease as the amount of the 
recovery increases.''
  One result of the cross-use of the lodestar and percentage systems is 
that even when courts use the percentage system, those awards 
overwhelmingly tend to reflect a reasonable lodestar multiplier. 
Therefore, even percentage-based cases tend to provide evidence of the 
range of multipliers that the courts consider to be reasonable.
  In 2001, the Third Circuit ``set forth a chart of fee awards given in 
Federal courts since 1985 in class actions in which the settlement fund 
exceeded $100 million and in which the percentage of recovery method 
was used.'' Cendant Corp. The court identified 17 such cases. In almost 
every case, the Third Circuit could calculate the multiplier that was 
used, and ``the lodestar multiplier in those cases never exceeded 
2.99.'' And in the direct lodestar-multiplier cases that court 
identified, the multiplier ranged from 1.2 to 3.25.
  Other courts, surveying smaller cases than the $100 million 
recoveries examined in Cendant Corp., have identified larger 
multipliers. One Federal district court has ``observe[d] that in 
virtually every case where the court notes a lodestar but awards fees 
based upon a percentage, the lodestar multiplier converted from this 
percentage is in the range of 1 to 4.'' Another Federal district court 
has found that ``the range of lodestar multipliers in large and 
complicated class actions runs from a low of 2.26 to a high of 4.5.''
  By contrast, some courts have declared that they would allow only 
lower multipliers. One Federal court has stated that ``only in the most 
exceptional circumstances would this court award a multiplier of 3 or 
greater. . . . this court believes that lodestars enhanced by 
multipliers less than 3 should adequately compensate even the most 
talented counsel.'' And the Seventh Circuit has suggested that ``it may 
be that a doubling of the lodestar would provide a sensible ceiling.''
  On the other hand, the Florida Supreme Court--which is generally 
regarded as one of the more plaintiff-friendly courts in the United 
States--has announced that: ``we set the maximum multiplier available 
in this common-fund category of cases at 5. . . . [A] multiplier which 
increases fees to five times the accepted hourly rate is sufficient to 
alleviate the contingency risk factor involved and attract high level 
counsel to common fund cases while producing a fee that remains within 
the bounds of reasonableness. We emphasize that 5 is a maximum 
multiplier.''
  ISCRAA adopts this more liberal standard. It allows fees as high as 
500 percent of reasonable hourly rates. ISCRAA awards multipliers based 
on two criteria: it allows up to 300 percent to be added onto the 
amount of reasonable hourly fees if a case that involved a substantial 
risk of nonrecovery of fees, and allows an additional 100 percent add-
on if the attorney provided exceptional services that improved the 
plaintiff's recovery.
  The criteria that ISCRAA employs universally are recognized as 
necessary prerequisites to the legitimacy of a contingency fee. 
``Courts in general have insisted that a contingent fee be

[[Page S5239]]

truly contingent. The typically elevated fee reflecting the risk to the 
lawyer of receiving no fee will be permitted only if the representation 
indeed involves a significant degree of risk.'' Charles W. Wolfram, 
Modern Legal Ethics Sec.  9.4, at 532 (1986). The risk requirement has 
been recognized ever since contingency fees first were allowed in the 
United States. The American Bar Association even noted at that time 
that ``a contract for a contingent fee, where sanctioned by law, should 
be reasonable under all the circumstances of the case, including the 
risk and uncertainty of the compensation.'' ABA Canons of Professional 
Ethics, Canon 13 (1908). Indeed, even the professional associations of 
plaintiffs' attorneys have, at times, acknowledged that contingent fees 
should be based on an actual contingency. In a guide to its members, 
the Association of Trial Lawyers of America has ``recommend[ed]'' that 
attorneys ``exercise sound judgment in using a percentage in the 
contingent fee contract that is commensurate with the risk, cost and 
effort required.'' ATLA, Keys to the Courthouse: Quick Facts on the 
Contingency Fee System 13 (1994).
  The criteria that ISCRAA employs are universally accepted--and the 
limits that it sets should be universally acceptable. ISCRAA is not 
intended to alter the considered standards of any jurisdiction. Rather, 
it is intended to enforce those standards--and to correct the 
occasional extreme outlier. Because ISCRAA incorporates a fee formula 
that is substantially more liberal than the usual practices of the 
federal courts in $100 million cases, we can be confident that high-
quality legal representation will remain available to plaintiffs in 
these large litigations. See, e.g. in re Sumitomo Copper Litig., 74 F. 
Supp. 2d 393, S.D.N.Y. 1999, RICO and Commodities Exchange Act case 
resulting in $116 million recovery; attorneys reviewed millions of 
pages of documents located throughout the world, many requiring 
translation from Japanese; Federal district court awards multiplier of 
250 percent for total fee of $32 million.
  Another issue that I will address today is the argument--occasionally 
raised in opposition to proposals to limit attorneys fees--that such 
restrictions violate attorneys' rights to freedom of contract.
  The first principle to keep in mind when questions of attorneys fees 
are considered is that ``a fiduciary relationship exists as a matter of 
law between attorney and client.'' (Illinois Supreme Court.) As one 
academic commentator has noted: ``[I]t is uncontroverted today that a 
lawyer is a fiduciary for, and therefore has a duty to deal fairly 
with, the client. . . . Lawyers are fiduciaries because retention of an 
attorney to exercise 'professional judgment' on the client's behalf 
necessarily involves reposing trust and confidence in the attorney. 
Exercising professional judgment requires that the lawyer advance the 
client's interests as the client would define them if the client were 
well-informed.''
  The lawyer's status as fiduciary places limits on his dealings with 
his client--including with regard to his fee. ``An attorney's freedom 
to contract with a client is subject to the constraints of ethical 
considerations.'' New Jersey Supreme Court. ``In setting fees, lawyers 
are fiduciaries who owe their clients greater duties than are owed 
under the general law of contracts.'' Massachusetts Appeals Court. ``As 
a result of lawyers' special role in the legal system, contracts 
between lawyer and client receive special scrutiny. . . . While freedom 
of contract is the guiding principle underlying contract law, 
contractual freedom is muted in the lawyer-client and lawyer-lawyer 
contexts.'' Joseph M. Perillo, law professor.
  The unique status of attorney fee contracts has led courts to reject 
analogies between such agreements and other business or service 
contracts. Perhaps the fullest exposition is provided by the Arizona 
Supreme Court: ``We realize that business contracts may be enforced 
between those in equal bargaining capacities, even though they turn out 
to be unfair, inequitable or harsh. However, a fee agreement between 
lawyer and client is not an ordinary business contract. The profession 
has both an obligation of public service and duties to clients which 
transcend ordinary business relationships and prohibit the lawyer from 
taking advantage of the client. Thus, in fixing and collecting fees the 
profession must remember that it is a branch of the administration of 
justice and not a mere money getting trade.' ABA Canons of Professional 
Ethics, Canon 12.''

  The same principle has been identified by the Florida Supreme Court: 
There is but little analogy between the elements that control the 
determination of a lawyer's fee and those which determine the 
compensation of skilled craftsmen in other fields. Lawyers are officers 
of the court. The court is an instrument of society for the 
administration of justice. Justice should be administered economically, 
efficiently, and expeditiously. The attorney's fee is, therefore, a 
very important factor in the administration of justice, and if it is 
not determined with proper relation to that fact it results in a 
species of social malpractice that undermines the confidence of the 
public in the bench and bar. It does more than that. It brings the 
court into disrepute and destroys its power to perform adequately the 
function of its creation.''
  In order to protect the lawyer's public role and to enforce his 
fiduciary obligations, the courts read a reasonableness requirement 
into every attorney fee contract. ``[T]he requirement that a fee be 
reasonable in amount overrides the terms of the contract, so that an 
`unreasonable' fee cannot be recovered, even if agreed to by the 
client.'' G. Hazard, Jr. & W. Hodes, The Law of Lawyering 1. 5:205 Fee 
Litigation and Arbitration 120 (1998 Supp.).
  As one court has stated, ``[A]n attorney is only entitled to fees 
which are fair and just and which adequately compensate him for his 
services. This is true no matter what fee is specified in the contract, 
because an attorney, as a fiduciary, cannot bind his client to pay a 
greater compensation for his services than the attorney would have the 
right to demand if no contract had been made. Therefore, as a matter of 
public policy, reasonableness is an implied term in every contract for 
attorney's fees.''

  Finally, when assessing whether a fee is reasonable, courts ask 
whether the fee is proportional to the services that were actually 
provided. ``Fees must be reasonably proportional to the services 
rendered and the situation presented.'' (Arizona Supreme Court.) ``If 
an attorney's fee is grossly disproportionate to the services rendered 
and is charged to a client who lacks full information about all of the 
relevant circumstances, the fee is `clearly excessive' . . . even 
though the client consented to such fee.'' West Virginia Supreme Court.
  Because attorneys are fiduciaries, they simply do not have complete 
freedom of contract in negotiating their fees. An attorney's dealings 
with his client always must reflect that the client comes to him in a 
position of trust--and therefore, the attorney's fee always must be 
reasonable. ISCRAA will help ensure that this important obligation is 
respected.
  Another subject that I would like to address today is ISCRAA's 
effective date. ISCRAA applies to attorney fee payments received after 
June 1, 2002. This effective date is appropriate under the 
circumstances of the State tobacco settlement for several reasons: 
first, Congress routinely enacts major tax legislation with effective 
dates that look back much further than does ISCRAA. The Supreme Court 
has ``repeatedly upheld [such moderately] retroactive tax legislation 
against a due process challenge.'' United States v. Carlton, 512 U.S. 
26, 30-31, 1994; see id. at 33, upholding tax whose ``actual 
retroactive effect . . . extended for a period only slightly greater 
than one year''.
  Second, ISCRAA is not even truly retroactive. ISCRAA does not change 
the substantive law governing attorneys fee awards. Rather, it simply 
enforces established, pre-existing fiduciary standards that already 
bind every attorney in every state. The Model Rules of Professional 
Conduct, at Rule 1.5(a), contain a clear, direct command that ``a 
lawyer's fee shall be reasonable.'' Similarly, the Model Code of 
Professional Responsibility, at DR 2-106, directs that an attorney 
``shall not enter into an agreement for, charge, or collect an illegal 
or clearly excessive fee.'' The Model Code further explains that an 
attorneys fee is ``clearly excessive when, after a review of the facts, 
a

[[Page S5240]]

lawyer of ordinary prudence would be left with a definite and firm 
conviction that the fee is in excess of a reasonable fee.'' Finally, as 
academic commentators point out, in addition to the model rules, ``all 
State rules of professional conduct prohibit attorneys from charging 
excessive fees.''
  As I described earlier, to enforce fiduciary standards, ISCRAA 
codifies and applies a very generous version of the fee multiplier 
system, allowing attorneys fees as high as 500 percent of reasonable 
hourly rates. This is considerably more generous than what Federal 
courts typically allow in large-judgment cases. No attorney can be 
heard to complain that he is subjected to a law that is more generous 
than his existing fiduciary obligations.
  Further, none of the tobacco-settlement attorneys can reasonably 
maintain that they have a vested right to see their fiduciary duties to 
the states go unenforced. Nevertheless, in order to be fair to all 
parties, ISCRAA's excise taxes are applied only to fees that were paid 
after June 1, 2002. By this date, all of the tobacco lawyers twice had 
received notice from George W. Bush that he intended to enact 
legislation to enforce their fiduciary obligations. In February 2000, 
then-candidate Bush promised that he would ``extend[] the `excess 
benefits' provision of the tax code to private lawyers who contract 
with states and municipalities,'' with ``the reasonableness of the fees 
* * * [to] be determined by the standard judicial `lodestar' method.'' 
And as early as February 2001, the current Administration announced 
that it anticipated providing ``additional public health resources for 
the States from the President's proposal to extend fiduciary 
responsibilities to the representatives of States in tobacco 
lawsuits.'' See A Blueprint for New Beginnings: A Responsible Budget 
for America's Priorities 80, Office of Management and Budget, February 
28, 2001.
  Under ISCRAA, all of the attorneys who participated in the State 
tobacco settlement still will be very liberally compensated. Because 
ISCRAA does not apply to the first three-and-a-half years of fee 
payments under the settlement, it exempts the first two-and-a-half 
billion dollars that these lawyers received. Every one of the tobacco 
lawyers will have more than enough money left to pay for the yachts, 
luxury cars, and vacation homes that were purchased with the tobacco 
proceeds. ISCRAA might simply be described as the one-yacht-per-lawyer 
rule.
  But most importantly, because ISCRAA applies to the last year's worth 
of tobacco fee payments, and to all future payments, it will return a 
substantial amount of funds to the States--money that already should 
belong to the States under any reasonable interpretation of fiduciary 
standards. It is critical that these funds be restored in this time of 
widespread fiscal crisis. Today a large number of the States face 
massive budget deficits that threaten their ability to provide health 
care to the indigent, to fully fund public education, and to guarantee 
adequate and effective law enforcement. When such needs risk going 
unmet, fee abuses that cost the States billions of dollars simply can 
no longer be ignored. The States must receive their fair share of the 
tobacco settlement proceeds--funds that are badly needed to support 
basic public services.
  Under the terms of the November 1998 Master Settlement Agreement, 
MSA, between the States and tobacco companies, $500 million in 
cigarette taxes is set aside every year to pay the attorneys who chose 
to have their fees awarded in arbitration. Because extraordinarily high 
fees were awarded by the arbitrators--estimated to total $15 billion--
the $500-million-a-year income stream, which is not adjusted for 
inflation, may have to be paid in perpetuity. In addition to this 
annuity, the MSA also sets aside an additional $1.25 billion in 
cigarette taxes to compensate those lawyers who choose to forego 
arbitration and negotiate their fees directly with the tobacco 
companies.
  The present value of the $500-million-a-year fee stream--discounting 
all future payments for the time value of money--has been 
conservatively estimated at just over $8 billion. Current and future 
payments from the $1.25 billion fee fund are less certain, since the 
grants made from that fund and their disbursement schedule have been 
kept obscure from the public. Because ISCRAA's effective date is June 
1, 2002, ISCRAA will probably recoup for the States an additional $1 
billion above the present value of future $500 million-a-year payments. 
ISCRAA does not affect the first three-and-a-half years of fees paid 
under the MSA. Because these payments almost certainly are adequate to 
pay all reasonable fees incurred in the litigation, ISCRAA would 
restore to the States virtually all fees paid after its effective date. 
Thus the net present value of the sums that ISCRAA would provide to the 
States can conservatively be estimated at $9 billion.
  By restoring these excess fee payments to the states' MSA escrow 
account and returning them to the States on a per capita basis, ISCRAA 
guarantees every State a very substantial recovery. Based on the 
estimates that I have described, even our Nation's smallest State, 
Wyoming, would recoup at least $15 million in tobacco fee payments, and 
other small States, such as North Dakota, would receive approximately 
$20 million. On the other hand, our nation's largest State, California, 
can expect to recoup at least $1 billion. Other large States would also 
see generous returns: Florida, $511 million; Illinois, $397 million; 
Michigan, $318 million; New York, $607 million; Ohio, $363 million; and 
Texas, $667 million.
  Here is how much each State can expect to recover:

Alabama....................................................$142,220,272
Alaska.......................................................20,046,569
Arizona.....................................................164,079,935
Arkansas.....................................................85,496,543
California................................................1,083,230,642
Colorado....................................................137,556,275
Connecticut.................................................108,911,511
Delaware.....................................................25,059,883
District of Columbia.........................................18,294,706
Florida.....................................................511,123,686
Georgia.....................................................261,806,474
Hawaii.......................................................38,745,502
Idaho........................................................41,381,203
Illinois....................................................397,174,614
Indiana.....................................................194,456,664
Iowa.........................................................93,585,167
Kansas.......................................................85,976,825
Kentucky....................................................129,257,603
Louisiana...................................................142,919,876
Maine........................................................40,772,615
Maryland....................................................169,384,021
Massachusetts...............................................203,046,997
Michigan....................................................317,835,940
Minnesota...................................................157,327,166
Mississippi..................................................90,973,451
Missouri....................................................178,937,382
Montana......................................................28,852,605
Nebraska.....................................................54,726,966
Nevada.......................................................63,905,164
New Hampshire................................................39,520,996
New Jersey..................................................269,094,724
New Mexico...................................................58,173,915
New York....................................................606,875,689
North Carolina..............................................257,420,675
North Dakota.................................................20,537,847
Ohio........................................................363,078,559
Oklahoma....................................................110,353,478
Oregon......................................................109,417,889
Pennsylvania................................................392,753,669
Rhode Island.................................................33,525,716
South Carolina..............................................128,305,961
South Dakota.................................................24,140,253
Tennessee...................................................181,945,847
Texas.......................................................666,850,647
Utah.........................................................71,417,756
Vermont......................................................19,470,563
Virginia....................................................226,374,115
Washington..................................................188,496,659
West Virginia................................................57,831,660
Wisconsin...................................................171,532,756
Wyoming......................................................15,791,372

  I ask unanimous consent that the text of the bill and the following 
four articles be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 887

       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 ``Intermediate Sanctions 
     Compensatory Revenue Adjustment Act of 2003'' (ISCRAA).

     SEC. 2. EXCISE TAXES ON EXCESS FEE TRANSACTIONS OF CERTAIN 
                   ATTORNEYS.

       (a) In General.--Subchapter D of chapter 42 of the Internal 
     Revenue Code of 1986 (relating to failure by certain 
     charitable organizations to meet certain qualification 
     requirements) is amended by adding at the end the following 
     new section:

     ``SEC. 4959. TAXES ON EXCESS FEE TRANSACTIONS.

       ``(a) Initial Taxes.--There is hereby imposed on the 
     collecting attorney in each excess fee transaction a tax 
     equal to 5 percent of the excess fee. The tax imposed by this 
     paragraph shall be paid by any collecting attorney referred 
     to in subsection (f)(1) with respect to such transaction.
       ``(b) Additional Tax on the Collecting Attorney.--In any 
     case in which a tax is imposed by subsection (a) on an excess 
     fee transaction and the excess fee involved in such 
     transaction is not corrected within the

[[Page S5241]]

     taxable period, there is hereby imposed a tax equal to 200 
     percent of the excess fee involved. The tax imposed by this 
     paragraph shall be paid by any collecting attorney referred 
     to in subsection (f)(1) with respect to such transaction.
       ``(c) Excess Fee Transaction; Excess Fee.--For purposes of 
     this section--
       ``(1) Excess fee transaction.--
       ``(A) In general.--The term `excess fee transaction' means 
     any transaction in which a fee is provided by an applicable 
     plaintiff (including payments resulting from litigation on 
     behalf of an applicable plaintiff determined on an hourly or 
     percentage basis, whether such fee is paid from the 
     applicable plaintiff's recovery, pursuant to a separately 
     negotiated agreement, or in any other manner), directly or 
     indirectly, to or for the use of any collecting attorney with 
     respect to such applicable plaintiff if the amount of the fee 
     provided exceeds the value of the services received in 
     exchange therefor or subsection (g)(1) applies.
       ``(B) Determination of value.--For purposes of subparagraph 
     (A), in determining whether the amount of the fee provided 
     exceeds the value of the services received in exchange 
     therefor, the value of the services shall be the sum of--
       ``(i) the reasonable expenses incurred by the collecting 
     attorney in the course of the representation of the 
     applicable plaintiff, and
       ``(ii) a reasonable fee based on--

       ``(I) the number of hours of non-duplicative, professional 
     quality legal work provided by the collecting attorney of 
     material value to the outcome of the representation of the 
     applicable plaintiff, taking into account the factors 
     described in subparagraphs (B) and (D) of subsection (h)(2),
       ``(II) reasonable hourly rates for the individuals 
     performing such work based on hourly rates charged by other 
     attorneys for the rendition of comparable services, including 
     rates charged by adversary defense counsel in the 
     representation, taking into account the factors described in 
     subparagraphs (A), (C), (E), and (G) of subsection (h)(2), 
     and
       ``(III) to the extent such items are not taken into account 
     in establishing the reasonable hourly rates under subclause 
     (II), an appropriate adjustment rate determined in accordance 
     with subparagraph (C) to compensate the collecting attorney 
     for periods of substantial risk of non-payment of fees and 
     for skillful or innovative services which increase the amount 
     of the applicable plaintiff's recovery.

       ``(C) Adjustment rate.--
       ``(i) In general.--For purposes of this paragraph, an 
     appropriate adjustment rate is a percentage of the reasonable 
     hourly rate under subparagraph (B)(ii)(II) which is added to 
     the amount of such rate and which is not more than the sum of 
     one risk percentage and one skill percentage described in 
     clauses (ii) and (iii), respectively.
       ``(ii) Risk percentage.--For purposes of this subparagraph, 
     the term `risk percentage' means a percentage rate that is 
     proportional to the collecting attorney's risk of nonrecovery 
     of fees and which is--

       ``(I) in the case of a collecting attorney who assumed a 
     substantial risk of nonpayment of fees, not more than 100 
     percent,
       ``(II) in the case of a collecting attorney who assumed a 
     substantial risk of nonpayment of fees and devoted more than 
     8,000 hours of legal work (as described in subparagraph 
     (B)(ii)(I)) and more than 2 years to the case before 
     resolution of all claims, not more than 200 percent, or
       ``(III) in the case of a collecting attorney who assumed a 
     substantial risk of nonpayment of fees and devoted more than 
     15,000 hours of legal work (as described in subparagraph 
     (B)(ii)(I)) and more than 4 years to the case before 
     resolution of all claims, not more than 300 percent.

       ``(iii) Skill percentage.--For purposes of this 
     subparagraph, the term `skill percentage' means, in the case 
     of a collecting attorney who has demonstrated exceptionally 
     skillful or innovative legal service which generated a 
     recovery for the applicable plaintiff substantially greater 
     than the typical recovery in similar cases, a percentage rate 
     that is proportional to the increase in the applicable 
     plaintiff's recovery and that is not more than 100 percent.
       ``(iv) Limitation.--An appropriate adjustment rate shall 
     not increase the collecting attorney's fee above an amount 
     that is proportional to the applicable plaintiff's recovery.
       ``(D) Court approval of fees.--Fee payments approved by any 
     court shall be presumed to not be in excess of the value of 
     the services received in exchange therefor if the court 
     approving the fee--
       ``(i) did not approve an adjustment rate greater than that 
     determined to be appropriate under subparagraph (C) in a case 
     where such fee included an adjustment rate, and
       ``(ii) obtained and relied upon a report of a legal 
     auditing firm with respect to such fee in accordance with the 
     procedures in subsection (h).
       ``(2) Excess fee.--The term `excess fee' means the excess 
     referred to in paragraph (1)(A).
       ``(d) Joint and Several Liability.--For purposes of this 
     section, if more than 1 person is liable for any tax imposed 
     by subsection (a), all such persons shall be jointly and 
     severally liable for such tax.
       ``(e) Applicable Plaintiff.--For purposes of this section, 
     the term `applicable plaintiff' means any person represented 
     by a collecting attorney with respect to a claim described in 
     subsection (f)(1).
       ``(f) Other Definitions and Rules.--For purposes of this 
     section--
       ``(1) Collecting attorney.--The term `collecting attorney' 
     means any person engaged in the practice of law who 
     represents--
       ``(A) any governmental entity, including any State, 
     municipality, or political subdivision of a State, or any 
     person acting on such entity's behalf, including pursuant to 
     Federal or State Qui Tam statutes, in a claim for recoupment 
     of payments made or to be made by such entity to or on behalf 
     of any natural person by reason, directly or indirectly, of a 
     breach of duty that causes damage to such natural person,
       ``(B) any organization described in paragraph (3) or (4) of 
     section 501(c) and exempt from tax under section 501(a), in a 
     claim for damages based on a breach of duty, whether civil or 
     criminal, causing damage to such organization,
       ``(C) any natural person seeking to recover damages in a 
     claim based on breaches of duty, whether civil or criminal, 
     causing damage to such natural person, or
       ``(D) any assignee or other holder of claims described in 
     subparagraph (A), (B), or (C),
     when 1 or more of such claims, whether or not joined in 1 
     action, involve the same or a coordinated group of 
     plaintiff's attorneys or similarly situated defendants, arise 
     out of the same transaction or set of facts or involve 
     substantially similar liability issues, and result in 
     settlements or judgments aggregating at least $100,000,000.
       ``(2) Taxable period.--The term `taxable period' means, 
     with respect to any excess fee transaction, the period 
     beginning with the date on which the transaction occurs and 
     ending 90 days after the earliest of--
       ``(A) the date of the mailing of a notice of deficiency 
     under section 6212 with respect to the tax imposed by 
     subsection (a), or
       ``(B) the date on which the tax imposed by subsection (a) 
     is assessed.
       ``(3) Correction.--
       ``(A) General rule.--Any excess fee transaction is 
     corrected by undoing the excess fee to the extent possible 
     and taking any additional measures necessary to place the 
     applicable plaintiff in a financial position not worse than 
     that in which such plaintiff would be if the collecting 
     attorney were dealing under the highest fiduciary standards.
       ``(B) Payment of excess fees.--
       ``(i) In general.--Except as provided in clause (ii), a 
     collecting attorney corrects an excess fee transaction by 
     paying any excess fees plus interest to the applicable 
     plaintiff.
       ``(ii) Certain settlements.--In the case of excess fees 
     arising from or related to that certain Master Settlement 
     Agreement of November 23, 1998, and other, concluded 
     Settlement Agreements based on State health care expenditures 
     pursuant to title XIX of the Social Security Act (42 U.S.C. 
     1396 et seq.), including lawsuits involving the States of 
     Florida, Minnesota, Mississippi, and Texas, the collecting 
     attorney corrects an excess fee transaction by paying any 
     excess fees plus interest to the 50 States in proportion to 
     each State's share of the United States population.
       ``(C) No waiver of fee.--No collecting attorney may avoid 
     imposition of any tax imposed by this section by transferring 
     any portion of the excess fee or refusing to accept any 
     portion of the excess fee.
       ``(g) Disclosure Requirements.--
       ``(1) Treatment as excess fee.--Any fee provided after the 
     date of the enactment of this subsection by an applicable 
     plaintiff (including payments resulting from litigation on 
     behalf of an applicable plaintiff determined on an hourly or 
     percentage basis, whether such fee is paid from the 
     applicable plaintiff's recovery, pursuant to a separately 
     negotiated agreement, or in any other manner), directly or 
     indirectly, to or for the use of any collecting attorney with 
     respect to such applicable plaintiff shall be deemed to be an 
     excess fee provided in an excess fee transaction unless the 
     disclosure requirements described in paragraph (2) are met.
       ``(2) Contents of statement.--The disclosure requirements 
     of this paragraph are met for any taxable year in which a 
     collecting attorney receives any fees with respect to a claim 
     described in subsection (f)(1), if such collecting attorney--
       ``(A) includes in the return of tax for such taxable year a 
     statement including the information described in subsection 
     (c)(1) with respect to such claim, and
       ``(B) provides a statement including the information 
     described in subsection (c)(1) to the applicable plaintiff 
     prior to the deadline (including extensions) for filing such 
     return.
       ``(h) Legal Auditing Firm.--
       ``(1) In general.--In any case before a Federal district 
     court or a State court in which the court approves fees paid 
     to a collecting attorney, the court shall seek bids from 
     legal auditing firms with a specialty in reviewing attorney 
     billings and select 1 such legal auditing firm to review the 
     billing records submitted by the collecting attorney, under 
     the same standards the firm would use if it were hired by a 
     private party to review legal bills submitted to the party, 
     for the reasonableness of such attorney's billing patterns 
     and practices. The court shall require the collecting 
     attorney to submit billing records, cost records, and any 
     other information sought by such firm in its review.

[[Page S5242]]

       ``(2) Review by legal auditing firm.--In reviewing the 
     billing records and work performed by the collecting 
     attorney, the legal auditing firm shall address all relevant 
     matters, including--
       ``(A) the hourly rates of the collecting attorney compared 
     with the prevailing market rates for the services rendered by 
     the collecting attorney,
       ``(B) the number of hours worked by the collecting attorney 
     on the case compared with other cases that the collecting 
     attorney worked on during the same period,
       ``(C) whether the collecting attorney performed tasks that 
     could have been performed by attorneys with lower billing 
     rates,
       ``(D) whether the collecting attorney used appropriate 
     billing methodology, including keeping contemporaneous time 
     records and using appropriate billing time increments,
       ``(E) whether particular tasks were staffed appropriately,
       ``(F) whether the costs and expenses submitted by the 
     collecting attorney were reasonable,
       ``(G) whether the collecting attorney exercised billing 
     judgment, and
       ``(H) any other matters normally addressed by the legal 
     auditing firm when reviewing attorney billings for private 
     clients.
       ``(3) Filing of report; response; burden of proof.--The 
     court shall set a date for the filing of the report of the 
     legal auditing firm, and allow the collecting attorney or any 
     applicable plaintiff to respond to the report within a 
     reasonable time period. The report shall be presumed correct 
     unless rebutted by the collecting attorney or any applicable 
     plaintiff by clear and convincing evidence.
       ``(4) Fee for legal auditing firm.--The fee for the report 
     of the legal auditing firm shall be paid from the collecting 
     attorney's fee award, the applicable plaintiff's recovery, or 
     both in a manner determined by the court.
       ``(i) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     this section, including regulations to prevent avoidance of 
     the purposes of this section and regulations requiring 
     recordkeeping and information reporting.''.
       (b) Conforming and Clerical Amendments.--
       (1) Subsections (a), (b), and (c) of section 4963 of the 
     Internal Revenue Code of 1986 are each amended by inserting 
     ``4959,'' after ``4958,''.
       (2) Subsection (e) of section 6213 of such Code is amended 
     by inserting ``4959 (relating to excess fee transactions),'' 
     before ``4971''.
       (3) Paragraphs (2) and (3) of section 7422(g) of such Code 
     are each amended by inserting ``4959,'' after ``4958,''.
       (4) The heading for subchapter D of chapter 42 of such Code 
     is amended to read as follows:

``Subchapter D--Failure by Certain Charitable Organizations and Persons 
 to Meet Certain Qualification Requirements and Fiduciary Standards.''.

       (5) The table of subchapters for chapter 42 of such Code is 
     amended by striking the item relating to subchapter D and 
     inserting the following:

``Subchapter D. Failure by certain charitable organizations and persons 
              to meet certain qualification requirements and fiduciary 
              standards.''.
       (6) The table of sections for subchapter D of chapter 42 of 
     such Code is amended by adding at the end the following new 
     item:

``Sec. 4959. Taxes on excess fee transactions.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to excess fees paid on or after June 1, 2002.

     SEC. 3. DECLARATORY JUDGMENTS RELATING TO EXCISE TAXES ON 
                   EXCESS FEE TRANSACTIONS OF CERTAIN ATTORNEYS.

       (a) In General.--Subchapter B of chapter 76 of the Internal 
     Revenue Code of 1986 (relating to judicial proceedings) is 
     amended by redesignating section 7437 as section 7438 and by 
     inserting after section 7436 the following new section:

     ``SEC. 7437. DECLARATORY JUDGMENTS RELATING TO TAX ON EXCESS 
                   FEE TRANSACTIONS.

       ``(a) In General.--In a case of actual controversy 
     involving--
       ``(1) a determination by the Secretary or the collecting 
     attorney with respect to the imposition of the excise tax on 
     excess fee transactions on such collecting attorney under 
     section 4959, or
       ``(2) a failure by the Secretary or the collecting attorney 
     to make such a determination,
     upon the filing of an appropriate pleading by an applicable 
     plaintiff, the Tax Court may make a declaration with respect 
     to such determination or failure. Any such declaration shall 
     have the force and effect of a decision of the Tax Court and 
     shall be reviewable as such.
       ``(b) Deferential Review.--If a collecting attorney's fee 
     has been approved by a court in accordance with section 
     4959(c)(1)(D) or by the Secretary pursuant to section 4959, 
     the Tax Court shall review the fee only for an abuse of 
     discretion.
       ``(c) Legal Auditing Firm.--In any petition for a 
     declaration referred to in subsection (a):
       ``(1) No previous report.--If a report by a legal auditing 
     firm that meets the requirements of section 4959(h) has not 
     been previously produced and relied on by another court, the 
     Tax Court shall hire such a legal auditing firm and rely on 
     its report pursuant to the procedures in section 4959(h).
       ``(2) Second report.--
       ``(A) In general.--If a report by a legal auditing firm has 
     been approved by a court in accordance with section 4959, the 
     Tax Court shall hire a second legal auditing firm upon the 
     request of the petitioner.
       ``(B) Fee for report.--The Tax Court may direct the 
     petitioner to pay the fee for any report of a legal auditing 
     firm provided pursuant to subparagraph (A).
       ``(d) Time for Bringing Action.--No proceeding may be 
     initiated under this section by any person until 90 days 
     after such person first notifies the Secretary of the excess 
     fee transaction with respect to which the proceeding relates.
       ``(e) Definitions.--For purposes of this section, any term 
     used in this section and also in section 4959 shall have the 
     meaning given such term by section 4959.''.
       (b) Clerical Amendment.--The table of sections for 
     subchapter B of chapter 76 of the Internal Revenue Code of 
     1986 is amended by striking the item relating to section 7437 
     and by inserting the following new items:

``Sec. 7437. Declaratory judgments relating to tax on excess fee 
              transactions.
``Sec. 7438. Cross references.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to actions after the date of the enactment of 
     this Act.
                                  ____


            [From the Connecticut Law Review, Summer, 2001]

   A Most Dangerous Indiscretion: the Legal, Economic, and Political 
             Legacy of the Governments' Tobacco Litigation

                        (By Margaret A. Little)

       In 1997 and 1998, the tobacco companies settled with four 
     states who were approaching trial under agreements valued at 
     around $40 billion. This was followed in late 1998 by a 
     Master Settlement Agreement (``MSA'') wherein forty-six 
     states entered into a massive $206 billion settlement 
     agreement with the tobacco companies. In addition, the 
     tobacco companies agreed to contribute $1.5 billion to an 
     anti-smoking ``education and advertising campaign'' and $250 
     million ``for a foundation dedicated to reducing teen 
     smoking.'' These agreements which total $246 billion are 
     reported to represent the largest privately negotiated 
     redistribution of wealth in world history. MSA further 
     obligates the tobacco companies to pay the private practice 
     attorneys hired by the settling states what has been 
     variously estimated at $8 to $10 billion in net present 
     value. Each state's legislature must pass a ``Qualifying 
     Statute'' to be eligible for the ``damage'' payments. The 
     agreement could not be fully implemented until courts in 
     eighty percent of the states ``in number and aggregate 
     damages'' has approved the settlement. The most significant 
     difference between the settlement with the states and the 
     1997 federal settlement is that the MSA confers no 
     protections on the tobacco companies from suits by smokers.
                                  ____


                [From the Economist, February 13, 1999]

                        Knights in Golden Armour

       For Americans, lawyers seem to embody extremes of both 
     heroism and greed, sometimes at the same time. A film 
     currently playing to packed cinemas across the country, ``A 
     Civil Action'', tells the true story of one crusading lawyer 
     (played by John Travolta) who bankrupted himself trying to 
     sue two big companies which had polluted a small town's 
     drinking water. But when they win, even lawyer-heroes expect 
     to be well paid. The small group of contingency-fee lawyers 
     who helped state governments bring the tobacco industry to 
     heel are about to collect fees so colossal that they dwarf 
     even the excesses of Wall Street investment bankers in the 
     mad, bad 1980s.
       Tobacco remains a bonanza for lawyers in all kinds of ways. 
     On February 10th, a Californian jury awarded $51.5m in 
     damages against Philip Morris to a woman with inoperable lung 
     cancer. The award, by far the largest in a smoking-related 
     lawsuit, was a brusque reminder that, despite last year's 
     settlement with the states, tobacco companies remain 
     vulnerable to suits brought by individuals; and that as long 
     as smokers want compensation, lawyers will reap fortunes.
       The legal profession is still trying to digest the 
     implications of the staggering $8.1 billion a three-man 
     arbitration panel awarded in December to lawyers for the work 
     they did in helping Florida, Mississippi and Texas win a 
     settlement from the tobacco industry for health-care costs. 
     Over the next six months, the panel is expected to use the 
     same criteria to set fees for the lawyers who represented 
     dozens of other states in the negotiations which led to a 
     national settlement last November. If they do, 250-450 lucky 
     lawyers could collect between $20 billion and $25 billion in 
     fees.
       ``These amounts are grotesque and absurd,'' says Lester 
     Brickman, a law professor at New York's Cardozo School of 
     Law. ``Most

[[Page S5243]]

     of this money should have gone to the states.'' Mr Brickman, 
     an expert on legal fees, predicts that the flood of cash 
     going to a small group of trial lawyers will finance a wave 
     of mass litigation against other industries, including 
     alcohol and fast food, on similar public-health grounds. This 
     approach is already being pursued by big-city mayors against 
     gun manufacturers and distributors with the help of some of 
     the same law firms which represented the states in their 
     suits against the tobacco companies.
       The lawyers involved in the tobacco suits insist that the 
     awards are fair, reflecting the risk they ran by taking on 
     the tobacco firms when no one, including the state attorneys-
     general, thought they had much chance of winning. The lawyers 
     worked without pay, and as part of the settlement have now 
     agreed to submit to arbitration rather than insist on a share 
     of the money the states will receive, which is what the 
     contracts they signed with many state governments would have 
     given them. ``The fees are huge,'' admits Philip Anderson, 
     the president of the American Bar Association. ``But these 
     lawyers were able to do something that governments have never 
     been able to achieve on their own--assemble enough evidence 
     to bring the tobacco industry to account. And the fees were 
     agreed by sophisticated parties on both sides.''
       Too much sophistication, in fact, may be the problem. 
     Unusually, neither plaintiffs nor defendants in these cases 
     seem to have had much interest in limiting the lawyers' fees. 
     Officially, these fees are being paid by the tobacco firms, 
     which spares the state attorneys-general the politically 
     embarrassing task of having to pay the lawyers huge amounts 
     of money out of their state's share of the settlement. The 
     lawyers agreed to arbitration because they knew that state 
     politicians could never have honoured their contingency 
     contracts, which would themselves have become the subject of 
     prolonged litigation. Most judges would have reduced the 
     amounts the lawyers would get.
       In any case, the arbitration is a mere fig-leaf. The money 
     going tot he lawyers was clearly part of the overall amount 
     that the tobacco companies were willing to pay to settle the 
     case. Whatever the lawyers get, the states do not.
       The reaction of the tobacco companies has also been 
     suspiciously muted. Brown & Williamson, one of the firms, 
     called the fee award ``obscene'', but the other companies 
     said little. One reason may be that they do not really care 
     about the size of the total fee award. Their deal with the 
     states caps the amount they must pay all the states' lawyers 
     of $500m a year. This will be divided by the lawyers 
     according to their proportions of the overall fee award. 
     Tobacco companies will also shell out another $1.25 billion 
     over the next five years to pay off those lawyers who do not 
     want to wait years to receive all their money. So the 
     companies' exposure is limited, no matter what the lawyers 
     get.
       In effect, the lawyers are becoming joint business partners 
     with the states and the tobacco companies in leaving a tax on 
     smokers. The overall settlement has been widely misreported 
     as giving the states $206 billion. But this is only the 
     amount that they will receive in the first 25 years. The 
     settlement actually runs in perpetuity, turning the tobacco 
     firms into permanent tax-collection agencies for the states. 
     The firms have already raised prices by about 50 cents a pack 
     to pay for the settlement. The $500m they will be handing 
     over to the lawyers annually will also be paid for by 
     smokers.
       If the total fee award to lawyers reaches $25 billion, 
     these annual payments will continue for the next 50 years. If 
     the outstanding fees are inflation-adjusted, as the 
     arbitrators decided they should be in Florida, Mississippi 
     and Texas, the payments to the lawyers and their heirs could 
     go on for ever, because the $500m annual cap will not be 
     inflation-adjusted. The tobacco firms are threatening to 
     challenge the inflation-adjustment provision in the courts 
     because they say it is not part of the national settlement 
     agreement.
       But inflation-adjusted or not, today's smokers--70% of whom 
     earn less than $40,000 a year--will be paying the lawyers as 
     well as the states, via the tobacco companies, for the rest 
     of their (abbreviated) lives. Tobacco companies' bottom-lines 
     will barely be affected. This is why tobacco shares rose 
     after the settlement with the states was announced in 
     November and barely reacted when the first gigantic fee 
     awards to lawyers were made in December.
       How the arbitrator came up with such a huge figure is 
     something of a mystery. The awards range from 20-35% of what 
     the three states will receive. But this is far more than the 
     8% fee agreed last May by the lawyers in Minnesota, the only 
     state actually to take its tobacco case all the way to trial.
                                  ____


 Morales, Friend Indicted in Texas Tobacco Case--Former AG Has Denied 
            Wrongdoing; Federal Charges Include Tax Evasion

             [From the Dallas Morning News, March 7, 2003]

                          (By George Kuempel)

       Austin.--Former Texas Attorney General Dan Morales and a 
     lawyer friend were indicted on federal charges Thursday, 
     accused of trying to defraud the state of hundreds of 
     millions in legal fees from its suit against the tobacco 
     industry.
       Mr. Morales, a Democrat who lost a bid for governor last 
     year, also was charged with illegally converting campaign 
     funds to personal use, filing bogus income tax information 
     and falsifying a bank loan application.
       He and Marc Murr of Houston, who also was indicted, are 
     expected to surrender to the FBI on Friday. They previously 
     have denied wrongdoing.
       U.S. Attorney Johnny Sutton called it ``a case of an 
     elected official charged with abusing the public trust.''
       ``This indictment alleges he violated that trust by 
     backdating contracts, forging government records and 
     converting campaign contributions to personal use,'' Mr. 
     Sutton said at the federal courthouse.
       The 12-count indictment issued by a federal grand jury 
     stemmed from a long-running investigation into payment of 
     legal fees from the state's $17.3 billion settlement with 
     tobacco companies when Mr. Morales was attorney general in 
     1998.
       It's a case that has been at the center of a political 
     wrangling for several years between Mr. Morales and 
     Republicans. And it comes just weeks after his brother, San 
     Antonio musician Michael Morales, pleaded guilty to 
     attempting to extort $280,000 from Democrat Tony Sanchez 
     during the campaign against Gov. Rick Perry.
       Dan Morales, now a private lawyer in Austin, is accused of 
     fraudulently trying to secure millions of dollars in fees for 
     Mr. Murr for work on the tobacco case that he did not do by 
     backdating contracts and forging government documents.
       The indictments of Dan Morales and Marc Murr are another 
     chapter in Texas' landmark $17.3 billion settlement with 
     tobacco companies that has included twists, turns and 
     reversals.
       Initial debate: Gov. George W. Bush and state Attorney 
     General John Cornyn, both Republicans, complained about $3.3 
     billion paid to five attorneys for their work on the 1998 
     settlement. Added intrigue: Mr. Morales said his friend Marc 
     Murr of Houston was also among the state's tobacco lawyers 
     and was due about $500 million. Mr. Morales had publicly 
     hired the five private attorneys and disclosed their 
     contracts; the deal with Mr. Murr was initially secret.
       The Murr deal: Mr. Morales said Mr. Murr was hired to be a 
     watchdog over the other lawyers and to advise him during the 
     litigation. The other lawyers initially said that they had 
     never heard of Mr. Murr, and later said he did little or no 
     work on the case.
       The initial inquiries: Mr. Cornyn, who succeeded Mr. 
     Morales as attorney general in 1999, began investigating the 
     Murr contract. Federal investigators started their inquiry 
     into the deals and the documents.
       The Murr money: In December 1998, Mr. Murr went before a 
     national arbitration panel and was awarded $1 million over 30 
     years from tobacco companies. Unbeknownst to the other 
     tobacco lawyers, Mr. Morales and Mr. Murr also formed a state 
     arbitration panel in September 1998 that gave Mr. Murr $260 
     million--an award he contended was binding. He cited a Jan. 
     31, 1997, contract with the state as evidence.
       Cornyn objects: In May 1999, Mr. Cornyn said that the Jan. 
     31, 1997, contract between Mr. Morales and Mr. Murr was a 
     fake and did not exist when it supposedly was signed.
       Sudden reversal: In U.S. District Court, Mr. Murr's 
     attorney dropped the $260 million claim on May 6, 1999. Mr. 
     Murr's attorney also told the court that at least one of the 
     contracts signed by his client and Mr. Morales was backdated 
     by as much as a year. Mr. Morales had denied any manipulation 
     of the contract. He said the investigations are spawned by 
     partisan political attacks.
       Mr. Morales is reported to have hired Mr. Murr without the 
     knowledge of the team of five high-profile trial lawyers he 
     contracted to represent the state in its lawsuit against the 
     big tobacco companies.
       At one time, Mr. Murr stood to receive $520 million as his 
     share of the $3.3 billion in fees awarded to the lawyers in 
     the case.
       His share was later reduced to $1 million, but he gave up 
     his claim to the money when allegations arose that he had 
     done no work on the case.
       According to the indictment, Mr. Morales and Mr. Murr 
     ``fabricated an outside counsel agreement, backdated to 
     January 31, 1997, which purportedly required the State to pay 
     a reasonable fee to Defendant Murr's corporation.''
       As part of the ``scheme,'' the two men fabricated another 
     outside counsel agreement, backdated to Oct. 17, 1996, which 
     assigned 3 percent of the state's recovery to Mr. Murr's 
     corporation.
       ``Defendant Morales directed a state employee to type and 
     then backdate the bogus agreement. Three percent of the 
     state's recovery was estimated to be $520 million,'' 
     according to the indictment.
       In May 1999, two forensic experts hired by The Dallas 
     Morning News said that the Morales-Murr contract shows 
     evidence of ``severe document manipulation.''
       The private lawyers who handled the tobacco case were John 
     Quinn and John Eddie Williams of Houston, Walter Umphrey and 
     Wayne Reaud of Beaumont, and Harold Nix of Daingerfield. They 
     have defended their actions in the case.
       Mr. Morales surprised some when he announced plans in 1995 
     to sue several big tobacco companies to help recover the 
     state's cost of treating patients suffering from tobacco-
     related illnesses.
       But questions were raised about the fees by Republicans, 
     including John Cornyn, who became attorney general in 1999 
     after Mr. Morales decided not to run again.

[[Page S5244]]

       Mr. Cornyn began a state investigation, and Andy Taylor, a 
     former assistant attorney general who headed that said of Mr. 
     Morales: ``He's toast.
       ``We looked at the computer hard drives and could tell to 
     the second when the backdating on the contracts occurred.''
       Mr. Taylor, a Houston lawyer, said prosecutors have 
     informed him that he will be called as a witness in the case. 
     He said delays in the indictment probably were because of the 
     lack of a permanent U.S. attorney for months before Mr. 
     Sutton's appointment and confirmation.
       Mr. Morales had slammed the inquiry as politically 
     motivated. ``There's not one shred of evidence or a single 
     document to support these lurid accusations.'' he said in 
     1999.
       Micheal Ramsey, an attorney for Mr. Murr, said Thursday of 
     the charges, ``My initial take is that it's unfair.''
       Both men are accused of conspiracy and mail fraud, which 
     can carry a penalty of up to five years in prison and a 
     $250,000 fine.
       The indictment also charges that Mr. Morales used $400,000 
     in campaign donations to buy a $775,000 house in Travis 
     County and he is accused of understating by $400,000 his 
     liabilities in applying for a $600,000 loan in 1999.
       Making a false application on a loan application is a 
     charge punishable by up to 30 years in prison and a $1 
     million fine.
       According to the indictments, Mr. Morales defrauded the 
     state, the Texas Ethics Commission, his contributors and 
     others from 1997 and 1999 by converting political donations 
     to personal use.
       He is charged in another court with making false statements 
     on his 1998 federal income tax return.
       The indictment alleges that in his joint return filed with 
     his wife, Mr. Morales listed their taxable income as $39,734 
     when he knew full well that ``their joint taxable income was 
     substantially in excess'' of that amount.


                              THE CHARGES

       Charges against former Attorney General Dan Morales include 
     accusations that he:
       Fraudulently tried to funnel $260 million in legal fees 
     from the state tobacco case to a friend, who also was 
     indicted.
       Illegally converted nearly $400,000 in campaign 
     contributions to his personal use.
       Made false statements to get a $600,000 mortgage for his 
     Travis County house.
       Filed a false tax return that understated his taxable 
     income for 1998.
                                  ____


             [From the Wall Street Journal, March 10, 2003]

                           Faust in Texas II

       The indictment of former Texas Attorney General Dan Morales 
     lifts the lid ever so slightly over one of the mysteriously 
     ignored scandals of the 1990s. We mean the national tobacco 
     settlement that turned into a $500 million-a-year tax for the 
     benefit of private tort lawyers.
       That's the amount the tobacco companies agreed to pay in 
     ``fees'' to private attorneys appointed by the state 
     politicos on contingency. Four years later, an itinerant 
     panel of three ``arbitrators'' is still moving from state to 
     state to decide how this revenue stream, roughly a present 
     value of $8 billion, will be divvied up.
       Texas was crucial to starting the landslide toward a 
     national settlement, and Mr. Morales selected the five 
     lawyers who handled the state's case and would eventually 
     receive an astounding $3.3 billion in fees. How these five 
     were picked, though no part of last week's indictment, is an 
     untold story in itself. Houston lawyer Joe Jamail, who waved 
     off a chance to participate, told a grand jury Mr. Morales 
     had demanded a $1 million gratuity to be named to the case.
       Never mind. A million bucks would soon appear a hilariously 
     trivial sum compared to the monumental fees the tobacco 
     lawyers would receive. Seeing the sums that were up for grabs 
     after the settlement was reached, Mr. Morales produced out of 
     the blue a friend, lawyer Marc Murr, whom he claimed was 
     entitled to $520 million. Mr. Morales even turned up a 
     document, never seen before, testifying to a fee agreement.
       The five private lawyers were apoplectic, insisting Mr. 
     Murr had done little work and implying the contract was a 
     forgery. Mr. Morales quickly retreated. He did not seek a 
     third term as attorney general.
       The Murr episode had not been forgotten, however, and last 
     week the U.S. Attorney's office in Austin brought charges 
     against Mr. Morales for making false statements and 
     concealing documents in an effort to enrich his friend. Mr. 
     Murr was also indicted.
       Hallelujah. We can only hope this proves a sideshow to the 
     main event. Mr. Jamail's allegations about how Mr. Morales 
     picked the other five attorneys reportedly have been seconded 
     by two other witnesses before a grand jury. Virtually 
     overlooked has been the role of lawyer Walter Umphrey, one of 
     the biggest beneficiaries of the tobacco settlement, in 
     naming the supposedly ``independent'' chairman of the 
     national arbitration panel that is still awarding millions of 
     dollars in fees.
       A shameful episode, the tobacco settlement essentially 
     enacted a national sales tax outside any legislature and 
     awarded a big chunk of the proceeds to private campaign 
     contributors of the attorneys general who brought the suit. 
     So vast have been the rewards, in publicity and money, that 
     the AGs have now turned themselves into full-time buccaneers-
     in-arms of the private tort bar, preying on one industry 
     after another in search of more such triumphs.
       Belated accountability is better than none. We just hope 
     prosecutors and grand juries won't stop with the Murr case.
                                  ____

  Mr. CORNYN. Mr. President, I am pleased to join my colleague, Senator 
Kyl, to introduce today this landmark legislation to clean up our civil 
justice system. This legislation would enact a badly needed reform to 
the way in which attorneys are paid in some of the Nation's largest 
cases. It is designed to address some of the worst abuses of our civil 
justice system that I have witnessed in my nearly thirty years in the 
legal profession as a lawyer in private practice, as a state trial and 
appellate judge, and as state attorney general.
  This legislation, the Intermediate Sanctions Compensatory Revenue 
Adjustment Act of 2003, ISCRAA, will combat the gross abuse of attorney 
contingent fee agreements, abuses which we have been witnessing at an 
increasing rate in recent years. The legislation will enforce 
attorneys' fiduciary duties to their clients in a small but important 
category of cases--those resulting in judgments greater than $100 
million.
  Contingent fee agreements can have an important role to play in our 
civil justice system. Sometimes, when people are injured but cannot 
afford to hire lawyers out of their own pockets, attorneys will accept 
the case with the expectation that, if their clients prevail, the 
attorney will be paid for his or her services out of the judgment or 
settlement that the attorney is able to secure for the client. Such 
agreements between attorneys and their clients are called contingent 
fee agreements, because the attorney's fee is contingent on the client 
obtaining a money judgment or settlement. Contingent fee agreements, 
properly understood and utilized, reward attorneys for their work in 
obtaining monetary recovery for their clients, and the risk that they 
take that, despite their hard work and best efforts, they are unable to 
obtain any recovery for the client at all.
  Contingent fees can thus help ensure that plaintiffs with legitimate 
claims have the opportunity to obtain justice from our courts through 
the assistance of counsel. But contingent fees also present serious 
ethical problems for our legal system--particularly in cases in which 
the dollar amounts at stake are extraordinary, and result in a 
contingent fee award that overwhelmingly exceeds the relatively light 
or even negligible effort and risk actually undertaken by the 
attorneys.
  Under the time-tested traditions of our legal system, clients hire 
attorneys with the understanding and expectation that the attorney is 
ethically, legally, and morally obliged to represent their best 
interests, and that the attorney will use his or her legal skills in 
order to produce the best possible result--not for the attorney, but 
for the client.
  Thus, as my colleague has noted, contingent fee agreements are no 
ordinary agreements between consumers and businesses. It is a bedrock 
principle and well-established tenet of our Anglo-American system of 
justice that attorneys are not ordinary businessmen who can engage in 
hard bargaining with their customers, as courts have made clear on 
countless occasions. Rather, attorneys are officers of the court who 
bear a fiduciary duty to their clients. As fiduciaries, attorneys 
occupy a position of trust in their dealings with their clients, a 
trust which attorneys may not lawfully abuse.
  One obligation that flows from this status as a fiduciary is the 
attorney's obligation not to charge an unreasonable or excessive fee. 
This obligation is a fundamental part of an attorney's ethical duties, 
universally recognized in the ethics rules of all 50 States. Courts 
have made clear, time and time again, that every attorney fee contract 
automatically and necessarily includes the requirement that the fee be 
a reasonable one, a fundamental and basic duty of all attorneys, and 
one that no provision of such agreements may abrogate.
  ISCRAA affirms and reinforces the longstanding substantive law of 
attorneys' fiduciary duties, by providing a special mechanism to 
enforce those duties in a particularly high risk category of cases--a 
category that the courts themselves have singled out as posing special 
risks of unethical, windfall fees. Courts have noted that allowing 
standard contingency fee agreements in cases involving judgments of

[[Page S5245]]

$100 million or more have a distinct tendency of grossly 
overcompensating attorneys for their actual services rendered.
  ISCRAA prevents attorneys from evading their obligation to charge a 
reasonable fee in extraordinarily large recovery cases, by effectively 
limiting awards to a generous multiple of reasonable hourly fees. State 
courts, Federal courts, and even trial lawyers' themselves have all 
recognized that a reasonable fee must be proportional to the attorney's 
actual efforts. ISCRAA codifies and enforces this principle, while 
continuing to guarantee lawyers ample and generous compensation for 
their efforts--using fee multipliers that are as generous as the most 
liberal limits adopted by state courts, and which are considerably more 
generous than the limits set by federal courts in $100 million cases.
  This legislation thus promises to clean up our civil justice system 
and to repudiate the grossest abuses of our legal system. Make no 
mistake: Although all attorneys are supposed to uphold a strict ethical 
code, under which they are strictly forbidden from charging their 
clients unreasonable or excessive attorney fees, the temptation to 
abuse contingent fee agreements is a strong one, and even more so when 
the dollar amounts are truly extraordinary--such as in the $100 million 
cases that would be covered by this legislation. And make no mistake: 
the victim of such attorney fee abuse, and the beneficiary of this 
legislation, is not the defendant who pays the judgment--after all, the 
defendant pays the same total amount whether the money goes to the 
attorney or to the client. Rather, the real victim of this abuse, and 
the real beneficiary of this legislation, is the injured client, whose 
money is being taken away from the lawyer through an abusive contingent 
fee arrangement.
  As my colleague has also noted, ISCRAA is unquestionably an 
appropriate exercise of Congress's power to regulate and protect 
interstate commerce, considering the large size of the litigations to 
which it applies. $100 million is a standard threshold used by the 
federal government to determine whether an economic transaction 
significantly affects interstate commerce.

  But the most important reason for federal intervention in this area I 
have not yet mentioned, and I would like to take a moment to discuss it 
here: the gross abuses that we have already witnessed in large 
litigation fee awards. Recent experience amply demonstrates that, if 
the Federal Government does not act to prevent unethical and grossly 
abusive fee awards in massive, nationwide lawsuits, no one will. 
Moreover, recent experience further demonstrates that unreasonable fee 
payments in such suits threaten not just the attorneys' fiduciary 
obligations; they also place at risk the integrity of our governmental 
institutions. The unwholesome incentives created by windfall, unethical 
fee awards in large-scale litigations have induced some public 
officials to abandon their civic obligations.
  The textbook example of the types of abuses that make ISCRAA 
necessary is the attorney fee arrangement awarded in the State lawsuits 
to recover tobacco-related Medicaid expenses. Individual law firms that 
represented the States in that litigation have been given hundreds of 
millions and sometimes even billions of dollars in fees. To date, 
approximately $15 billion in fees has been awarded to the tobacco 
settlement lawyers, to be paid out in $500-million-a-year increments. 
Attorneys representing just three of the States--Mississippi, Texas, 
and Florida--were awarded $8.2 billion in fees. In many cases, such 
fees were paid to attorneys who filed duplicate, copycat lawsuits at a 
time when settlement negotiations had already begun and the risk that 
the states would not recover any money was negligible. Yet these 
lawyers nevertheless received massive contingency fees, for suits that 
involved no real contingency. And for most of the tobacco settlement 
lawyers, the size of the fee awards bears no reasonable relation to the 
actual effort expended or risk involved.
  There is widespread agreement that the fees awarded in the tobacco 
settlement are excessive and unreasonable. Perhaps the most damning 
indictments come from those who took the plaintiffs' side in this 
litigation--including from plaintiff lawyers themselves. For example, 
Michael Ciresi, a pioneer in the tobacco litigation who represented the 
state of Minnesota in its lawsuit, and who is no doubt familiar with 
what these lawsuits actually require, has said that the Texas, Florida, 
and Mississippi lawyers' fee awards ``are far in excess of these 
lawyers' contribution to any of the state results.'' Similarly, former 
Food and Drug Administration Commissioner David Kessler, another leader 
in the fight against tobacco, has said that the states' private lawyers 
``did a real service, but I think the fee is outrageous. All the legal 
fees are out control.'' Washington, D.C. lawyer and tobacco-industry 
opponent John Coale has denounced the fee awards as ``beyond human 
comprehension'' and stated that ``the work does not justify them.'' 
Even the Association of American Trial Lawyers, the nation's premier 
representative of the plaintiffs bar, has condemned attorney fees 
requested in the state tobacco settlement. The President of ATLA has 
noted: ``Common sense suggests that a one billion dollar fee is 
excessive and unreasonable and certainly should invite the scrutiny, of 
the courts. ATLA generally refrains from expressing an institutional 
opinion regarding a particular fee in a particular case, but we have a 
strong negative reaction to reports that at least one attorney on 
behalf of the plaintiffs in the Florida case is seeking a fee in excess 
of one billion dollars.''
  This letter, written in 1997, only concerned one of the Florida 
lawyers' request for attorney fees. Ultimately, Florida's private 
counsel was awarded a total of $3.4 billion in fees. These statements 
demonstrate beyond all doubt that there is real abuse going on here, 
and that the victim of this abuse is the client, the plaintiff--and not 
the defendant.
  Perhaps the best gloss on the tobacco fee awards is that provided by 
Professor Lester Brickman, a professor of law at Cardozo Law School and 
noted authority on legal ethics and attorney fees. Professor Brickman 
has stated:
  ``Under the rules of legal ethics, promulgated partly as a 
justification for the legal profession's self-governance, fees cannot 
be `clearly excessive.' Indeed, that standard has now been superseded 
in most States by an even more rigorous standard: fees have to be 
`reasonable.' Are these fees, which in many cases amount to effective 
hourly rates of return of tens of thousands--and even hundreds of 
thousands--of dollars an hour, reasonable? I think to ask the question 
is to answer it.''
  The attorney fees awarded in the state tobacco settlement are simply 
indefensible. And the process by which the fees were awarded partly 
explains how they came to be so. Outside counsel fees were determined 
by a private arbitration panel established by the Master Settlement 
Agreement, MSA, that resolved 46 of the states' litigation. Four other 
states had settled their suits earlier. Their lawyers, however, also 
were paid out of the accounts created by the MSA. Amazingly, the 
settlement agreement explicitly immunized all fee awards from judicial 
review. Even more amazingly, one of the three arbitrators who made the 
awards had a clear conflict of interests: he was the father of a South 
Carolina lawyer whose law firm has received the largest fee awards of 
all, believed to amount to over $2 billion. Another one of the 
arbitrators had no background in fee arbitrations or any related 
matter, and simply ignored the law in order to make outrageous awards, 
using the salaries of sports stars and entertainers as a basis of 
measure. Revealingly, the third arbitrator, a retired Federal judge 
appointed by President Carter, dissented from the key fee decisions.
  As incredible as the MSA fee awards and the arbitration procedures 
may seem, even more dubious is the process by which many of the law 
firms that participated in this lucrative litigation were selected in 
the first place to represent the states.
  In my home State of Texas, trial lawyers have accused the then-state 
attorney general of demanding $1 million in campaign contributions in 
exchange for their being hired to represent the state in the tobacco 
litigation. One prominent lawyer--a former president of the Texas Trial 
Lawyers Association--has since said that the attorney general's 
solicitation was so blatant that ``I knew th[at] instant . . . that I

[[Page S5246]]

could not be involved in the matter.'' He even later wondered if the 
meeting had been a ``sting operation.'' Another lawyer simply 
characterized his encounter with the attorney general as a bribery 
solicitation.
  This former Texas attorney general was recently indicted on Federal 
charges of attempting to fraudulently divert $260 million in tobacco-
settlement legal fees to one of his personal friends. He had given a 
sworn affidavit that this lawyer had served as Texas' ``primary 
adviser'' in its tobacco lawsuit--despite the apparent fact that the 
lawyer had attended no court hearings, depositions, or strategy 
meetings, wrote no memos or legal briefs about the case, and apparently 
never even spoke to any of the other attorneys. The attorney general 
even went so far as to forge and fraudulently backdate documents in 
order to win his friend a share of the tobacco settlement fee.

  As for the five law firms that actually did represent Texas in the 
tobacco litigation, they filed relatively late lawsuits that were based 
on other lawyers' work--and yet, despite the minimal energy expended on 
those suits, were awarded $3.3 billion in attorney fees. This award 
amounts to compensation that, even assuming that the attorneys worked 
all day every day during the entire period of the litigation, remains 
well in excess of $100,000 an hour. As one newspaper editorial has 
noted, for the amount of money that these lawyers were awarded, Texas 
could hire 10,000 additional teachers or policemen for ten years. 
Instead, four of these firms gave the attorney general $150,000 in 
campaign contributions in recent years.
  Texas' experience is not an isolated example. In other states as 
well, lawyers' participation in the tobacco litigation appears to have 
been the product of political favoritism--and to have resulted in 
unfathomable fees that bear no reasonable relation to the services 
provided. For example: New Jersey: The private in-state lawyers who 
represented this state in the tobacco litigation have admitted that 
they had no mass-tort litigation experience and played no role in the 
state settlement talks. They have also admitted that all the key work 
in the state's lawsuit was done by out-of-state firms--the in-state 
firms' principal work was drafting pro hac vice motions to have these 
outside lawyers admitted in New Jersey courts. Any work that the New 
Jersey lawyers did was submitted to the outside lawyers, who made all 
of the substantive arguments. Result: these in-state lawyers were 
awarded $350 million in the MSA fee arbitration. Connections: the New 
Jersey lawyers were an inside group of past presidents of the New 
Jersey trial lawyers' association. The State refused to even consider 
hiring a nonprofit firm to conduct the New Jersey lawsuit.
  Pennsylvania: Settlement talks had already begun, the states' tobacco 
litigation was being resolved, and all of the legal theories already 
had been developed long before the Pennsylvania state suit was filed. 
Result: Pennsylvania's private lawyers were awarded $50 million in the 
MSA arbitration--equivalent to 1000 percent of a reasonable hourly 
rate. As one expert has noted, ``there's not $50 million of work in 
there.'' Connections: the two law firms that the state Attorney General 
selected to conduct the litigation were among his top campaign 
contributors. The firms were awarded no-bid contracts. As one 
Pennsylvania commentator has noted, ``obviously, it was a political 
kind of thing.''
  Maryland: Billionaire tort lawyer Peter Angelos demanded a one 
billion dollar fee for his work on that State's case, even though, 
according to the State Senate President, the State legislature had 
retroactively ``changed centuries of precedent to ensure [Angelos] a 
win in the case.'' Angelos ultimately received an accelerated $150 
million payment for this no-risk lawsuit.
  Louisiana: The private law firms that represented the State in the 
tobacco litigation were awarded $575 million. The MSA arbitration panel 
actually increased this award on the ground that the State government--
the lawyers' supposed client--was opposed to suing tobacco companies. 
The Louisiana fee award amounts to almost $7,000 an hour, based on the 
lawyers' estimate that they worked a total 85,000 hours. Moreover, this 
estimate is unverifiable, because the state's private lawyers kept no 
billing records--as the attorney general explained, ``I wasn't that big 
on hourly or written reports.'' The dissenting member of the 
arbitration panel simply noted that the Louisiana fee award ``shocks 
the conscience'' The single biggest beneficiary of this largesse--
receiving $115 million in attorney fees--was a law firm based in Lake 
Charles, the hometown of the state's attorney general. This firm and 
the next largest fee recipient had donated over $42,000 to the attorney 
general's political campaigns. Together, all of the firms that 
represented Louisiana gave more than $100,000 to the attorney general 
in the years before they were selected to participate in the state's 
tobacco team.
  Ohio: The lawyers representing this State received fees estimated to 
exceed $50,000 per hour, despite the fact that, according to 
independent observers, ``all of the legal issues were resolved long 
before these Ohio lawyers stepped up to the plate.'' The state's 
outside counsel had donated $26,000 in campaign contributions to the 
State attorney general prior to their appointment to the state's 
tobacco team. After the attorney general chose one private lawyer to 
serve as the state's ``lead special counsel,'' that lawyer hired one of 
the attorney general's top aides for an undisclosed sum in order to--in 
the lawyer's own words--``help me get acquainted with a technique 
called PowerPoint.'' When told that ``there were many people in Ohio 
capable of doing a PowerPoint presentation,'' the state's outside 
counsel responded that this particular attorney general's aide ``was 
the only one I knew of.''
  Massachusetts: According to other tobacco plaintiffs' lawyers, 
Massachusetts's suit piggybacked on the work of other lawyers and was 
not pivotal to the outcome of the tobacco litigation. Result: $775 
million was awarded to the Massachusetts lawyers in the MSA 
arbitration.
  New York: When this State's then-attorney general hired private 
counsel to represent the State in its tobacco lawsuit, tobacco 
companies already had paid $15 billion to Florida and Mississippi for 
identical claims and a national settlement agreement already was under 
discussion. As one local anti-tobacco leader has noted, ``these were 
copycat lawsuits, there wasn't all that much work to do.'' The firms' 
primary job was to collect New York-specific data in order to calculate 
damages. Ultimately, the New York firms represented the State for just 
13 months. And they received a fee award of $625 million. This amounts 
to at least $14,000 an hour, for a lawsuit that by all accounts 
involved no risk. The dissenting member of the arbitration panel has 
denounced the award as ``an astronomical sum unrelated to, the 
attorneys', efforts or achievements.'' The New York firms had 
contributed more than $250,000 to New York politicians and their 
campaign organizations in the years preceding their selection - and 
another $200,000 after the State settlement.
  Wisconsin: The Wisconsin lawyers' tobacco litigation work has been 
described as chiefly consisting of media and public relations efforts 
on their own behalf. Their billing records included time spent 
selecting office space and buying furniture. One lawyer effectively 
billed $3,000 to the State for reading an article in a Madison 
newspaper. The lawyers also billed the State for limousine rides around 
the state, trips on private jets, and stays at luxury hotels. Result: 
$75 million was awarded to the Wisconsin lawyers. Based on the law 
firms' records of the total number of hours they devoted to the case--
including work by paralegals--this fee amounts to $3,000 per hour.
  Missouri: A State supreme court justice in Missouri resigned his post 
in order to join one of the private law firms expected to receive a 
portion of the MSA arbitrators' fee award. Ultimately, the firms 
representing the State spent just 5 months on the state's lawsuit. They 
received a fee award of $111 million. One State leader has described 
the award as ``the biggest rip-off in the 180-year history of the 
state.'' The law firms receiving these fees had donated more than 
$500,000 to State politicians and parties in the years leading up to 
their selection as the State's outside counsel.

[[Page S5247]]

  These examples are too numerous to dismiss. In State after State, the 
temptations created by the massive, windfall fees awarded in the 
Medicaid tobacco settlement corrupted not only lawyers involved, but 
the government as well. The fee awards poisoned everything that they 
touched. No one who examines these events closely--who surveys the 
obscene fee awards, and the political cronyism that determined who 
benefited--can disagree that this must never be allowed to happen 
again.
  As a final point, I would like to address a question that has been 
raised with regard to remedy. Some have argued that nothing can be done 
to correct the excesses of the tobacco settlement fee awards--even with 
regard to fees that are still being or have yet to be paid. On several 
occasions, State judges who were called upon to approve their State's 
tobacco settlement have also, on their own initiative, inquired into 
the apparent unreasonableness of the fees awarded. In each case, both 
the plaintiffs' lawyers--and in some cases, even State officials--have 
challenged the State courts' authority to act. They have argued that 
these courts lack jurisdiction to review a national settlement, and 
that excessive fees cannot be restored to the State. One state's 
attorney general implicated in these events has argued that it is a 
``misconception'' that the tobacco settlement ``attorneys' fees are 
coming out of the public's pocket. That is not the case. They [sic] 
defendants have agreed to pay these fees.''
  Because of the way that the MSA fee payments are structured, no 
lawyer's award comes out of any one particular, identifiable State's 
recovery. Instead, all of the lawyers are being paid from one of two 
separate accounts, each of which is funded by the tobacco companies.
  It is a mistake, however, to contend that, because the MSA fee 
payments are made directly from defendants to plaintiffs' lawyers--
without ever formally or actually passing through the plaintiffs' 
hands--they are immunized against ethical scrutiny or correction. It is 
well and long established in our law that fee awards originate as the 
property of the client regardless of how the fee agreements are 
structured. The courts have been very clear on this point. As they have 
stated: ``The allowance of attorney fees in a judgment gives the 
attorneys no interest and ownership in the judgment to the extent of 
the amount of the fee allowed, but the judgment in its entirety is the 
property of the client. The award for fees is for the client, not the 
attorney.''
  ``[A]ttorneys' fee provisions exist for the benefit of parties and 
not the attorneys. . . . Several jurisdictions have noted that the real 
party in interest with regard to fees is the client and not the 
attorney.''
  ``A judgment for costs is a judgment in favor of the party, and not 
of his attorney, and the money represented by the costs is the property 
of the party.''
  ``[T]he award of attorney fees [is] made not to the attorneys but to 
the litigant who was personally liable to the attorneys. This is also 
the view in other states when the courts award attorney fees.''
  ``An award of attorney's fees belongs to the client and not the 
attorney.''
  Indeed, an award of attorney fees is generally taxable as income to 
the client. In a recent case, the U.S. Court of Appeals for the Ninth 
Circuit noted that a plaintiff's obligation to compensate the law firm 
that represented him ``was satisfied by [the defendant]. The payment 
was therefore to [the client]. The discharge by a third person of an 
obligation to him is equivalent to receipt by the person taxed.'' The 
Ninth Circuit emphasized that the fact ``[t]hat [the client] never laid 
hands on the money paid to the lawyers does not obliterate their 
constructive receipt.'' In other words, the fee award belongs to the 
client, regardless of how the award is made.
  The rule that fee awards belong to the client is strongly supported 
by important policy considerations. It is necessary because any other 
rule would be an invitation to collusion and self-dealing between 
plaintiffs' lawyers and defendants. Again, the courts have been very 
clear on this point. As the Third Circuit has noted: ``[A] defendant is 
interested only in disposing of the total claims asserted against it, 
and the allocation between the [plaintiff's] payment and the attorneys' 
fees is of little or no interest to the defense. Moreover, the 
divergence in class members' and class counsel's financial incentives 
creates the danger that the lawyers might urge a class settlement at a 
low figure or on a less-than-optimal basis in exchange for red-carpet 
treatment for fees.''
  The Second Circuit has made the same point, noting: ``Defendants, 
once the settlement amount has been agreed to, have little interest in 
how it is distributed and thus no incentive to oppose the [attorneys] 
fee. Indeed, the same dynamic creates incentives for collusion--the 
temptation for lawyers to agree to a less than optimal settlement in 
exchange for [generous fees].''
  The Ninth Circuit has also addressed the question of ``whether a 
class member has standing to appeal class counsel's attorney fee and 
cost award when that award is payable by the defendant independently, 
and not out of the class settlement.'' The court concluded that 
``[e]ven if class counsel's attorney fees are not to be paid from the 
class settlement . . . , the aggregate amount of the attorney fees and 
the class settlement payments may be viewed as ``a constructive common 
fund.'' The court reasoned that ``[i]f . . . class counsel agreed to 
accept excessive fees and costs to the detriment of class plaintiffs, 
then class counsel breached their fiduciary duty to the class. If that 
were the case, any excessive award could be considered property of the 
class plaintiffs, and any injury they suffered could be at least 
partially redressed by allocating to them a portion of that award.''
  As several commentators have noted, the policy considerations 
underpinning the rule that fee awards belong to the client apply with 
full force to the State tobacco settlement. Indeed, that settlement 
could serve as a textbook example for why this rule exists. As 
Professor Brickman has noted: ``To the tobacco companies, dollars are 
dollars, whether paid to States or paid to lawyers. So the real amount 
on the bargaining table was not the $246 billion that the states 
settled for, but a larger sum, including the amount to be paid to the 
attorneys. . . . Stated simply, because dollars are fungible, the fees 
are coming out of the settlements.''
  Even foreign commentators have noted that the State tobacco 
settlement's ``arbitration is a mere figleaf. The money going to the 
lawyers was clearly part of the overall amount that the tobacco 
companies were willing to pay to settle the case. Whatever the lawyers 
get, the states do not.''
  And this point has not been lost upon members of Congress. 
Representative Chris Cox, R-CA, has testified on the matter: ``It is 
specious to argue that, billions of dollars, in fees are not being 
diverted out of funds available for public health and taxpayers. The 
tobacco industry is willing to pay a certain sum to get rid of these 
cases. That sum is the total cost of the payment to the plaintiffs and 
their lawyers. It is a matter of indifference to the industry how that 
sum is divided--75 percent for the plaintiffs and 25 percent for their 
lawyers, or vice versa. That means that every penny paid to the 
plaintiffs' lawyers--whether it is technically ``in'' the settlement or 
not--is money that the industry could have paid to the state or the 
private plaintiffs. Excessive attorneys' fees in this case will not be 
a victimless crime.''
  These authorities and their reasoning should be more than sufficient 
to permanently dispel the notion that an attorney fee agreement can be 
structured so as to evade the ethical obligation to charge only a 
reasonable fee. The defenders of the MSA fee payments are simply 
misleading the public and this distinguished body when they assert that 
a particular lawyer's award under the settlement does not come out of a 
particular state's recovery. That fee comes out of all of the State's 
recoveries. All excessive or unreasonable fees should be restored to 
all 50 of the States.
  Senator Kyl has already presented estimates of the monetary recovery 
each State can expect if ISCRAA is enacted. I would simply point out 
here that, according to those estimates, Texas has been charged 
excessive and unreasonable attorney fees in the amount of $667 million, 
and therefore would recover those funds if this legislation is adopted.
  ISCRAA's return of unethical tobacco-settlement fee awards to the

[[Page S5248]]

states is manifestly proper in light of the fact that all fee awards 
are the property of the client, and the attorney is entitled only to a 
reasonable fee. No attorney is above these ethical rules and 
obligations. They cannot be waived or ignored. And in light of our 
experience with the State tobacco settlement fee awards, and their 
effect on our public officials, these ethical duties must be carried 
out and enforced strictly and fully.
  Our Federal and State courts generally do a good job of protecting 
consumers and enforcing the rights of all Americans. But there are 
problems in our courts that require attention and significant reform. 
Class action abuse not only threatens the integrity and the perception 
of rationality in our nation's courts, it also strongly hinders 
economic and job growth. Tort reform is badly needed to rescue many 
industries, especially our health care industry, from abuses of our 
legal system. The judicial confirmation process at the federal level 
has become bitter, severe and destructive, and that broken process 
poses a serious threat to judicial independence and the quality and 
efficiency of our courts. And abusive attorney fee arrangements make a 
mockery of our civil justice system, all while enriching a small band 
of unscrupulous litigators at the expense of the real victims, their 
clients.
  To enforce the longstanding fiduciary duty of all attorneys to charge 
only a reasonable fee, in a class of cases that poses heightened risks 
of abuse and special significance to the national economy, I urge that 
this Senate consider expediently, and approve quickly, this important 
measure, the Intermediate Sanctions Compensatory Revenue Adjustment Act 
of 2003.

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