[Congressional Record Volume 150, Number 65 (Tuesday, May 11, 2004)]
[Senate]
[Pages S5191-S5220]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
JUMPSTART OUR BUSINESS STRENGTH (JOBS) ACT--Continued
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. I yield 5 minutes to the senior Senator from New Mexico.
The PRESIDING OFFICER. The Senator from New Mexico.
Mr. DOMENICI. First, I thank the chairman and the ranking member for
their kindness and generosity as we work on this bill. I am speaking
now of the energy tax parts of this bill. The rest of it is the
jurisdiction of the Finance Committee, and they essentially have done
that. We have helped with the energy provisions because we were trying
to put together a comprehensive energy package.
It is good that in the Senate, after one Senator talks and states his
position, there is an opportunity for somebody else to state their
position, and I want to do that because actually earlier today the
distinguished Senator from Arizona talked about a bill that I do not
even recognize, talked about things wrong with this bill that I am not
even sure are in this bill, but certainly failed to mention anything
that is good about it. So I would like to talk about some of the good
parts.
It is estimated that this part of the bill will create 650,000 jobs.
Those jobs will be in construction and the operation of infrastructure
vital to the energy security of this country. Tax provisions will allow
us to build an Alaska pipeline, which is supported by the Senate and
will bring us American-owned gas all the way from Alaska. It will not
do any environmental damage, and in the next 5 years we will add
substantially to our inventory of natural gas.
The package provides incentives for electricity produced from clean
coal. If there is anything that we need in America, it is a vital,
growing, prospering energy grid in the United States. We have to have a
stronger energy grid if we are going to have a stronger America.
Everybody says that. This bill provides for incentives so that will
happen.
Third, this package puts incentives in for biomass, geothermal, and
solar.
Last, but not least, we have the renewables. We have wind energy that
is to break and come through in large quantity. It is all stopped now
until this bill passes and the incentives in this bill are adopted.
If you have a major solar energy facility, construction is stopped
until this bill is produced. Then that will grow faster than any
renewable we have ever had. In addition, clean coal technology is
applied so that we can have other alternatives for the production of
electricity. If there is anything we need, it is alternatives. Clean
coal will be an alternative.
If we tell the world we are producing alternatives, they will believe
we are worried and they will believe we can do something for ourselves,
instead of continuing to put our hands out and rely upon foreign
sources of energy.
There are tax provisions related to the restructuring of the
electricity industry that are being imposed by the Federal Energy
Regulatory Commission. It is absolutely imperative that if the
Government forces utilities to sell assets as part of deregulation, it
will not also turn around and punish utilities for those sales through
the Tax Code.
Some of the critical incentives in this package that will encourage
domestic oil and gas production are in this bill. We know it. Everybody
who has studied it knows it. There may be some provisions that Senators
do not like because when you put a package together you just cannot
have everybody liking everything. But I submit, to come here with a
Time magazine that was talking about a different bill and a different
time--there are things that are alluded to that are not in this bill--
is truly not something the Senate should bank on with reference to
whether they vote for this. They ought to vote for this. It is half an
energy package and it is better than none.
I yield the floor.
The PRESIDING OFFICER (Mr. Crapo). The Senator from Montana.
Mr. BAUCUS. Mr. President, I yield 5 minutes to the Senator from
Wyoming.
The PRESIDING OFFICER. The Senator from Wyoming is recognized for 5
minutes.
Mr. THOMAS. Mr. President, we are dealing with an issue that is
probably the most important that we have before us, in terms of jobs,
in terms of meeting the needs in this country. We are dealing with an
issue we have talked about for 2 years or more. We have finally come up
with some solutions. This is an issue that has already been on the
floor that passed with 58 positive votes. The Senator from Arizona
indicated it hasn't been discussed or talked about or voted on. That is
absolutely not the case. It has been, and that is where we are.
There are two major issues involved. I am not going to get into the
details. We are creating a policy for our future energy needs. As we
look around at our families and our businesses and everything we do,
there is nothing that affects our lives all day long more than energy.
Whether it is lights, whether it is air-conditioning, whether it is
heat, whether it is cars, whether it is receiving goods in your
community, that all takes energy. So we are developing a policy, not
necessarily for what is going to happen next week or next year, but
down the road, where are we going to be?
The second portion deals with some of the issues that are troublesome
now: The price of fuel, and the idea we are going to run short on some
of the kinds of fuel we are using. All those things are there. This was
part of an energy bill. It is not all of it, but it is a good part of
it that we have worked on for a very long time. It is backed up by the
facts. Unfortunately, to say we talked about no facts, here that is not
true. This is a broad policy, for one thing, that deals with
alternative sources of energy. It deals with renewables, the
cleanliness of coal, with pipelines. It deals with all those things
that are so important to do this job.
One thing that always strikes me, probably because we in Wyoming are
the largest coal producer in the country, is that coal is the largest
fossil fuel resource that we have available to us. At the same time,
some other things have been easier. All the electric-generating plants
over the last 15 years use natural gas. Natural gas can be used for
many things where coal really is only available for this purpose, coal
and nuclear. But we want to make coal energy clean so the air will be
clean. This is what this bill does. It allows us to use that fuel most
available to us and have it for the future.
We have been taking a look at energy usage, and what strikes us is
that consumption continues to go up at a rather fast rate. We are using
more in our cars; we have bigger homes; we are doing things so that
consumption of energy goes up. But the production level is going down.
If that doesn't create some kind of crisis in the future, I don't know
what possibly could.
It was mentioned, and it should be mentioned again, that this is a
jobs bill. That is really what we are trying to do. We can create more
jobs in this particular provision, not only immediate jobs for the
development of nuclear powerplants or power lines or coal mines or
whatever, but the jobs created for other industries, of course, have to
have energy available for them.
The amendment proposed here certainly would do away with one of the
most important things we have done for a good long time, something we
have worked on for a good long time,
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something that not only deals immediately with problems but addresses
the future of our families, yours and ours, and jobs. So we ought not
pass this amendment. I urge my colleagues to vote against it.
I yield the floor.
Mr. GRASSLEY. Mr. President, the press and some in this body have
unfairly defined this legislation as a ``porky'' tax bill. There have
been articles in all the major papers following that line of attack.
One Member of the leadership on the other side said on April 20 he is
worried that the sheer amount of tax breaks in the bill could end up
impeding its progress. ``They've loaded this truck up and the tires are
about to explode,'' he said, calling the efforts to pile sweeteners
onto the bill ``haphazard.''
That Member went on and cautioned, ``any time you load it up as
vigorously as they have, you create as many problems as you solve.''
Well, let's talk about the so-called ``porky'' provisions in this
bill. It is a bit irritating that the complaints come from folks who
say they support the bill. Every provision in the bill is the result of
a joint recommendation of myself and Senator Baucus. We responded to
requests from every Senator, including those who are critical of the
bill.
I guess I would ask anyone, including the critics a question. That
question would be, ``Are you willing to throw aside the provision you
asked us to put in the bill?'' Are you willing to go back to your
constituents and tell them you don't think their interest has merit?
I don't think I will hear any of the critics respond yes. I haven't
had any takers yet and don't think I will by the time the bill's done.
Let's look at the bigger picture.
This bill has about $60 billion dedicated to the replacement of the
FSC/ETI benefit. This bill has another $40 billion dedicated to
international tax reforms to make our domestic manufacturers more
competitive overseas.
There is another roughly $20 billion in domestic manufacturing
incentives, including the research and development tax credit.
Some of that package deals with issues such as the unfair tax on bows
and arrows which has a domestic job impact. There's another $8 billion
dealing with the extenders, including a permanent tax credit directed
at hiring hard-to-place workers. There's another $10 billion dealing
with housing, rural areas, hard hit urban areas, Indian tribes, and
other sectors of our economy. We're directing resources at economic
development, plain and simple.
Finally, there's another almost $20 billion for the bipartisan
Finance Committee energy incentives package which has passed the Senate
twice.
All of this is offset with corporate loophole closers and measures
aimed at curtailing tax shelters. The dollars involved in the much-
criticized provisions are very small--perhaps less than 3 percent of
the total cost of the bill. Members and the ``big city'' press need to
keep their eyes on the ball: ending the euro tax and helping domestic
manufacturers.
Senator Daniel Patrick Moynihan responded to the New York Times
regarding the 1997 bipartisan tax relief bill. The press had made much
of a few narrow provisions, such as a provision to provide tax relief
for parachuter trainees. There is an excise tax on air travel. The tax
is meant to apply to commercial travel. Read literally, the tax applied
to parachute training flights even though those flights are not
commercial transportation.
Senator Moynihan described the Finance Committee provisions that
were designed to deal with these inequities this way: ``You will never
see representative government more specific than in the Senate Finance
Committee . . . It's a form of accommodation, and in between you think
about the national interest, because there are things we all share.''
Like the 1997 tax relief bill, the bill before us includes a number
of provisions that, at face value, may seem to be trivial. It is
important to keep in mind, however, that each of these provisions was
added in response to specific requests from fellow Senators who are
looking out for the vital interests of their constituents. That is what
representative government is all about.
The Federal tax system is vast. It touches virtually every aspect of
life. From birth to grave. There are excise taxes to fund our airports
and highways. There is a corporate and individual income tax to fund
defense and general welfare. There are payroll taxes to fund Social
Security and Medicare benefits. There is an unemployment payroll tax to
fund unemployment benefits.
Now, when you go through this bill, you can find some provisions
that involve animal manure or windmills. If you don't look beyond the
superficial humor of the subject matter, you can have a lot of fun. Of
course, big city papers like to make fun of these rural provisions. I
always have to remind these folks that food doesn't grow in
supermarkets. It grows on farms. The byproducts of those farms can give
us clean energy. What's so bad about that?
Part of what we hear out in the heartland is get us some insurance
that jobs are coming back. Especially, they say, in the area of
manufacturing. The economy is coming back. The U.S. economy, the
mightiest in the history of the planet, is adding jobs at a healthy
rate. The people want an insurance policy.
Growing jobs in our diverse economy is not a cookie cutter exercise.
This bill has general policies for the most part. Some are proactive,
like the manufacturing deduction. Others are reactive, like responding
to the Euro tax. Still others are particular. They may relate to small
isolated communities or a single industry. When you take a look you'll
find a common thread through nearly all of them: job creation.
That is what this bill is all about. Creating jobs, plain and
simple.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. How much time remains on our side?
The PRESIDING OFFICER. The opposition has 6 minutes 44 seconds, and
the proponents have 8 minutes 30 seconds.
Mr. BAUCUS. I yield 3 minutes 22 seconds to the Senator from
Delaware, and 3 minutes 22 seconds to the Senator from Alaska following
the Senator from Delaware.
The PRESIDING OFFICER. The Senator from Delaware is recognized for 3
minutes 22 seconds.
Mr. CARPER. I thank the Senator for yielding me 3 minutes 22 seconds.
Mr. President, as we gather for this debate, about 60 percent of the
oil we use in this country comes from other places. We are importing
all that oil. It adds to a huge trade deficit, about $500 billion and
growing. About a third of that trade deficit is related to the
importation of oil.
We have the opportunity with the energy provisions that are part of
this bill to do some good things with respect to energy independence in
this country. We have the opportunity to urge people to buy more
energy-efficient cars, trucks, and vans. We have the opportunity to
nurture an automotive industry which will provide fuel-cell-powered
vehicles that will provide for vehicles that are powered by a
combination of electric and internal combustion--maybe a combination of
diesel and electric. We have the opportunity to provide incentives for
people to use solar energy more frequently and more effectively, to use
geothermal energy more effectively, more broadly. We have the
opportunity to encourage people to use wind power as a source of
electricity, and other forms of energy, through this bill.
Some would say we ought to have a comprehensive energy bill, and
these elements ought to be part of the comprehensive energy bill. I
will tell you I don't know if we are going to have a chance to debate a
comprehensive energy bill. We do have the opportunity today to
encourage solar energy, wind power, fuel cells, hybrid vehicles, and we
have a chance to do this today.
About 100 miles from here there are fields on the Delmarva
Peninsula--in Delaware, Maryland, and Virginia--where we are growing
soybeans. We use soybeans in my part of America to feed the chickens.
We take the hull and we feed the chickens and raise more chickens in
Delaware, I think, than anyplace in the country. We use the corn we
raise to feed the chickens. We have a lot of soybean oil we don't know
what to do with, and one of the things we figured out to do is take
soybean oil and mix it with diesel fuel--80-percent
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diesel, 20-percent soybean oil--and we use it to power our DelDOT
vehicles in the State of Delaware. We use it to power more farm
equipment in the State of Delaware that is diesel power.
It works, it is energy efficient, and it is environmentally friendly.
People tell me it smells like french fries.
That is one of the things we are more likely do with this bill. The
intent and encouragement of this bill is to reduce our dependence on
foreign oil and move to biofuels, including soy diesel. Good results
come out of using soybeans for this purpose. It reduces our reliance on
foreign oil, it is environmentally friendly, and it gives the folks who
are raising soybeans--whether it is Delaware, Idaho, or any other
place--the opportunity to have another market for their commodity. That
is good for farmers, actually paying them to grow a commodity rather
than paying them not to do that. This makes a whole lot of sense.
I wish the Senator from Arizona in offering his amendment had focused
on section 29. That is a more narrowly crafted amendment. My hope is
this will be defeated and we may reconsider it and come back to address
that.
I thank the Chair.
The PRESIDING OFFICER. The Senator from Alaska.
Ms. MURKOWSKI. Mr. President, we talk about energy all the time.
There is a certain, not confusion but a real consternation about what
is going on in the Senate right now and why we can't get specific
provisions of the Energy bill through the Senate.
We understand energy in Alaska, whether it is gas or whether it is
oil, whether it is renewable energy or thermal. What we have before us
is an opportunity to make some of the energy policy a reality in the
country.
Last week I had the opportunity to testify before the House
Subcommittee on Energy and Air Quality about the proposed Alaskan
natural gas pipeline. I talked about the role which this pipeline can
play in meeting the needs of some very critical areas in the country--
specifically, our national security, the health of our economy, job
creation, and achieving and maintaining a healthy environment for
ourselves and our families.
Whether we are talking about the creation of hundreds of thousands of
jobs across the Nation from this project or providing a secure and
stable domestic supply of energy, whether it is providing the critical
feedstock we have heard about on the floor here today at a reasonable
price for the chemical, agricultural, and other important sectors of
the economy or providing an abundance of clean-burning, environmentally
friendly fuel, there is no doubt about it, this project is not only in
the best interests of Alaska, my State, but across the entire country.
As we talk about the project in Alaska, it has been suggested with
the price of natural gas as it is, we don't need to have the incentives
that are included in this legislation before us right now. With the
specific proposals which are pending, why do we need the incentive?
Yes, in fact, the proposals are out there, but they will tell you we
need the assistance. They have stressed the necessity of Congress
enacting the fiscal incentives contained in this bill in order for
construction of the pipeline to go forward.
We need these provisions to achieve all of the positives a gas
pipeline has to offer. It is essentially a futures contract with the
American people. We provide the incentive to build the pipeline and you
will receive all the benefits the gas pipeline has to offer. The Alaska
natural gas pipeline is one of those rare examples of a project that is
a win from every perspective. It helps us achieve our environmental
goals, it helps the economy by creating a great number of good-paying
jobs, and it enhances our national security. But if the McCain
amendment is adopted and the energy tax provisions are stripped from
this bill, the relief Alaska's natural gas can provide remains stuck in
the ground.
I urge my colleagues to oppose the McCain amendment and retain the
financial incentives needed to construct the Alaska natural gas
pipeline.
I thank the Chair. I yield the floor.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that all time be
yielded.
The PRESIDING OFFICER. Without objection, it is so ordered. All time
is yielded.
Mr. GRASSLEY. I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second? There is a
sufficient second. The question is on agreeing to the amendment. The
clerk will call the roll.
The legislative clerk called the roll.
Mr. REID. I announce that the Senator from North Carolina (Mr.
Edwards) and the Senator from Massachusetts (Mr. Kerry) are necessarily
absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The results was announced--yeas 13, nays 85, as follows:
[Rollcall Vote No. 89 Leg.]
YEAS--13
Biden
Boxer
Corzine
Dodd
Feingold
Graham (FL)
Gregg
Hollings
Kennedy
Kyl
Lautenberg
McCain
Sununu
NAYS--85
Akaka
Alexander
Allard
Allen
Baucus
Bayh
Bennett
Bingaman
Bond
Breaux
Brownback
Bunning
Burns
Byrd
Campbell
Cantwell
Carper
Chafee
Chambliss
Clinton
Cochran
Coleman
Collins
Conrad
Cornyn
Craig
Crapo
Daschle
Dayton
DeWine
Dole
Domenici
Dorgan
Durbin
Ensign
Enzi
Feinstein
Fitzgerald
Frist
Graham (SC)
Grassley
Hagel
Harkin
Hatch
Hutchison
Inhofe
Inouye
Jeffords
Johnson
Kohl
Landrieu
Leahy
Levin
Lieberman
Lincoln
Lott
Lugar
McConnell
Mikulski
Miller
Murkowski
Murray
Nelson (FL)
Nelson (NE)
Nickles
Pryor
Reed
Reid
Roberts
Rockefeller
Santorum
Sarbanes
Schumer
Sessions
Shelby
Smith
Snowe
Specter
Stabenow
Stevens
Talent
Thomas
Voinovich
Warner
Wyden
NOT VOTING--2
Edwards
Kerry
The amendment (No. 3129) was rejected.
Mr. DOMENICI. Mr. President, I move to reconsider the vote.
Mr. BAUCUS. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that following
the disposition of the Hollings amendment, the next amendments to be
offered are the following in the order provided: Senator Kyl, No. 3127,
60 minutes equally divided; Senator Landrieu, 60 minutes equally
divided; Senator Levin, 20 minutes equally divided; further, that there
be no second-degree amendments in order to the amendments prior to the
vote.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Montana is recognized.
Mr. BAUCUS. Mr. President, as has been ordered, after the Hollings
amendment, there are three more. I am not sure any votes are needed on
the three amendments the chairman just mentioned, by Senators Kyl,
Landrieu, and Levin. We have times, but we are trying to work with the
Senators. For example, it is my understanding that the Kyl amendment
will be offered and withdrawn. We may be able to work out the others as
well. Nevertheless, that is the order.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that the
Senators from Pennsylvania, the senior and the junior Senators, have 5
minutes apiece to discuss something very personal to their State.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Pennsylvania, Mr. Santorum, is recognized.
Murder in Iraq
Mr. SANTORUM. Mr. President, I rise today to talk about a death in
Iraq. There has been a lot of death in Iraq. We can all come to the
floor and give a story about a brave man or woman who sacrificed their
life for freedom in that country. Today I rise to talk about not a
soldier who has bravely fought in battle over there but a civilian who
was brutally murdered by a group of al-Qaida terrorists. We are now
seeing this displayed on our television screens across America.
This civilian's name is Berg, Nicholas Berg. He is 26 years old, from
West
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Chester, PA, outside of Philadelphia. As described by an AP article
that came across my desk, a group of five al-Qaida terrorists, one of
them purporting to be Abu Musab al-Zarqawi, the No. 2 man of the
Islamic terrorist group, wearing ski masks and scarfs, standing over
Mr. Berg, who had just given a statement as to who he was and where he
was from. They read a statement and then proceeded to push this man on
his side and to cut off his head with a large knife, and then they held
the head out before the camera.
If anybody wants to know what we are fighting and why we are fighting
this war on terror, this is a very good example of it. Those who have
seen the tape on television have described it as revolting and
sickening, and I will describe it as an outrage to the civilized world,
and one to which we must strongly condemn and respond. We must continue
to respond as aggressively as possible in rooting out these terrorist
cells and going after them where they are. Where they are, in this
case, is in Iraq. This occurred in Iraq. He was a civilian contractor
working in Iraq. His body was found a couple of days ago on a bridge in
Iraq.
First and foremost, I express my sympathy to his parents, Michael and
Suzanne, who I know have gone through a very harrowing experience over
the past couple of months when they didn't know where their son was on
more than one occasion. They did not know his whereabouts for the past
month. And to find out about this tragedy, the loss of their son, in
such a violent and horrific way and to not know until, I am sure,
seeing it on television and hearing it described, is a nightmare for
any parent.
The Bergs certainly have my prayers and I know all in this Chamber
share the sorrow.
The PRESIDING OFFICER. The Senator from Pennsylvania, Mr. Specter, is
recognized.
Mr. SPECTER. Mr. President, I join my colleague, Senator Santorum, in
expressing sympathy for the parents and family of Mr. Nick Berg, who
was the victim of a brutal assassination. Actually, it was a
decapitation.
It is hard to express the shock of this kind of barbaric conduct. It
is subhuman what they did--taking a video of this man, who identifies
himself, identifies his mother, his father, his siblings, and then, in
view of the video, they decapitate him, with the anguish of a man being
brutally murdered. It is just subhuman conduct.
We ought to put on notice these murderers, assassins, that whatever
it takes, the civilized world will bring them to justice. The news
reports are that they were wearing masks and hoods to conceal their
identities. I have seen investigations succeed even where people were
wearing masks and hoods. They will talk about it, or someone will talk
about it. In a cruel, barbaric world, this conduct descends to new
levels.
This incident will unleash as intensive a manhunt as has ever been
witnessed, with the United States leading the way--obviously, because
it is an American citizen from a Philadelphia suburban town. We will be
joined by all of the civilized world in bringing these malefactors,
these perpetrators to justice. Just because they are wearing hoods,
because their identities are disguised, doesn't mean they cannot be
identified and apprehended. I know every last thing will be done to
bring them to justice.
And then, beyond the identification of these specific assassins,
these specific terrorists will renew our determination, which is
already at the 100-percent level, to bring the terrorists to justice.
They already murdered thousands of Americans on September 11, 2001, and
Iraq is a magnet for terrorists from all over the area.
This underscores the necessity to confront the terrorists in Iraq. If
we don't confront them there, we will be doing it again in the United
States.
This is an incident which will receive enormous attention to try to
determine the perpetrators and to bring them to justice.
There are some other matters which have been suggested as to Mr. Nick
Berg's being in custody, one report taken into custody by the Iraqis
and held by U.S. military personnel. I am advised a lawsuit was
started, and then Mr. Berg was released. We are now making an effort to
identify the attorneys in the matter to try to get some background
before we talk to the parents and the relatives of the victim of this
atrocious conduct.
There is also a question of bringing back the remains of Mr. Berg. We
shall do our best to facilitate that and to help the family.
This atrocity is obviously going to receive widespread attention. In
a cruel, brutal world, this descends to new depths.
Again, our sympathy to the parents. We will pursue the matter to
bring these specific perpetrators to justice and to bring the
terrorists to justice, generally.
I yield the floor.
The PRESIDING OFFICER. The Senator from South Carolina.
Amendment No. 3134
(Purpose: To strike the international tax provisions that are unrelated
to the FSC/ETI repeal and eliminate the phase-in of the deduction for
qualified production activities income)
Mr. HOLLINGS. Mr. President, I call up my amendment No. 3134 and ask
the clerk to report.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from South Carolina [Mr. Hollings] proposes an
amendment numbered 3134.
Mr. HOLLINGS. Mr. President, I ask unanimous consent that the reading
of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The amendment is printed in today's Record under ``Text of
Amendments.'')
The PRESIDING OFFICER. There are 40 minutes to each side.
Mr. HOLLINGS. I thank the distinguished Chair.
Mr. President, the underlying bill gives a 5-percent domestic
manufacturing deduction to the manufacturing industry. Of course, that
is woefully insufficient. My amendment would provide a full 9-percent
domestic manufacturing deduction.
The underlying bill slowly phases in the domestic manufacturing
provision over a 5-year period, but instantly it gets the full effect
of the overseas industry, the outsourcing. They immediately get some
tax breaks over the period of the bill covering some 39, almost 40
billion bucks.
Can you imagine that? Here is a bill entitled--this is the committee
report--the Jump-Start Our Business Strength, JOBS, Act. It jump-starts
the jobs in Shanghai and Guadalajara and not in Philadelphia, PA, I can
tell you that right now.
What my amendment does is provide the right incentives. It eliminates
the tax breaks for corporations that have moved American jobs offshore
and gives those tax breaks to the employers of jobs in America today.
I wish to thank, first, the distinguished ranking member, Senator
Baucus, of our Finance Committee and his outstanding staff. They have
been very helpful in trying to make this amendment not only relevant
but budget neutral. I am not sure about its budget neutrality, but I am
told now we do have a relevant amendment. If we have to get into the
arcane discussion with respect to budget neutrality, I will be glad to
join it.
I want to get to the point. We are still in a post-World War II
culture, what they call up here an environment or pedigree. What
happened was, after World War II, we had our finest hour with the
Marshall plan. We sent money overseas. We sent expertise overseas. We
sent equipment overseas. In the cold war, capitalism defeated
communism. It worked. All during that almost 50-year period since World
War II, we all enjoyed it because we fudged when it came to trade. We
treated fair trade more or less as foreign aid, but we knew what we
were doing. We had to sacrifice a certain amount of our industry, our
jobs, our economic strength to prevail in this cold war.
Now what has occurred is the competition has regeared, they have
rebuilt, they have industrialized, and they have become outlandishly
competitive. And here amidst a trade war, we hear those in the national
Congress running around and saying: Woo, we might start a trade war;
free trade, free trade, I am for free trade, when they know free trade
is like dry water. There is no such thing. If you trade, you are
trading something, you are
[[Page S5195]]
swapping an article with various countries, free trade, but we know
that is not going to come to pass.
The example we set of a capitalistic free market and our endeavor in
the last 50 years, the Japanese did not follow suit. They have the
financing, they have the subsidies, they have the nontariff barriers,
and we have yet to get into downtown Tokyo with American sales. Come
on, quit kidding each other. It worked that way for Japan. Korea
followed. And now China is following the same Japanese pattern of
restricted and competitive trade, not free trade.
Today we are in real trouble. We are losing jobs like gangbusters
overseas. We have lost 68,000 jobs in the little State of South
Carolina in the last 3 years, over 3 million jobs nationally. I can
tell you, 58,000 of those jobs are our textile jobs, and they are not
going to be replaced. You can put all this statistical information from
the Federal Reserve and Greenspan about how we are creating jobs, but
they are not coming to South Carolina.
As Abraham Lincoln said some years ago: The dogmas of the quiet path
are inadequate to the stormy present. As our case is new, we must think
anew, we must act anew, we must disenthrall ourselves, and then working
together we can save our Nation. That is the reason for this amendment.
One does not put up an amendment to this finance bill with hope. The
chairman of the Finance Committee knows there are not going to be any
amendments. But we might be able to disenthrall our colleagues because
the country has to develop a competitive trade policy in order to
subsist and survive.
I can point out survival in the very beginning of this Nation started
with Alexander Hamilton. Of course, I will not read the book--Ron
Chernow's ``Alexander Hamilton.'' They will not give me that much time,
but I recommend to everyone this particular edition. You will find the
mother country, England, prevented manufacture in the Colonies, later
the United States of America. In fact, they arrested and jailed anyone
with any manufacturing talent who would move from England to the
Colonies.
We had a veritable struggle in the earliest days, and we had just
barely 1 hour of freedom when the mother country said: Under this David
Ricardo doctrine of comparative advantage, we will trade with you what
you produce best and you trade back with us what we produce best.
As a result, Alexander Hamilton wrote his famous treatise, ``Report
on Manufacturers.'' I will not read that and put it in the Record, but
I will say in a phrase exactly what Hamilton told the Brits: Bug off.
He told the Brits, we are not going to remain your colony, shipping you
our timber, iron ore, rice, cotton, indigo, and natural resources, and
importing the manufactured articles and remaining a banana republic; we
are going to build up our own manufacturing.
It caused me to listen to our friend Akio Morita, the former head of
Sony. Some 20 years ago in Chicago, while lecturing third world
countries, he said you have to develop a strong manufacturing sector in
order to become a nation state. Then he pointed to me and said:
Senator, that world power that loses its manufacturing capacity will
cease to be a world power.
It is economic strength that counts in this terrorism war. It is
diplomacy. It is negotiation. It is not military strength. We have to
disenthrall ourselves and realize when we are going around talking
about we might start a trade war, it was Hamilton himself and the
United States of America some 228 years ago that started the trade war.
The very first bill--well, Pat Moynihan used to correct me on that.
He said the first was a resolution for the United States Seal. So let's
say the second bill that passed this Congress in its history on July 4,
1789, was a tariff bill, protectionism, a 50-percent tariff on 60
different articles. We started a trade war.
When Abraham Lincoln was President, they were going to build a
transcontinental railroad. They said, we are going to get the steel
from England. President Lincoln said, we are going to build our own
steel plants, and he put import restrictions on that British steel and
we built the steel plants.
When Franklin Roosevelt was President in the darkest days of the
Depression, we did not practice any comparative advantage. He put on
the most successful initiative ever with import quotas and subsidies
for America's agriculture. That farm crowd that is now heading up our
Finance Committee gets $180 billion worth of all kinds of subsidies.
Then they run around here and tell this poor little textile Senator,
protectionism, protectionism, you are going to start a trade war.
We do not get a subsidy. We do not have those things the farmers
have. I favor what the farmers have, I say in the same breath. I vote
for it because I think it is a very successful program.
President Eisenhower, in the mid-1950s, put on oil import quotas.
Yes, John F. Kennedy--I sat there with Andy Hatcher and we would grind
out the mimeograph machine--and we got the seven-point Kennedy textile
program of restrictions on textile imports in 1961.
Who else other than Ronald Reagan, the best of the best, he put
import quotas on steel, machine tools, semiconductors, motorcycles.
Last night, I was near Myrtle Beach and they told me there were 100,000
motorcyclists--I think I ran into 99,000 of them out on the highway--
but do my colleagues remember what old Ronnie Reagan did? He started a
trade war of motorcycles. He put a 50-percent import tariff on
motorcycles. Harley Davidson now has recovered its health and we have
them all running up and down the beach at Myrtle Beach, SC. So do not
come now and tell me about starting a trade war.
We have had that trade war and we know simply and clearly what
happens. I want to read starting on page 20 of ``Theodore Rex'' by
Edmund Morris, because this is so interesting. I will read what
protectionism did at the turn of the century, this is under Teddy
Roosevelt, when we did not have an income tax. For the first 100 and
some years, we financed this great United States of America with
protectionism. I am trying to get that through so this crowd will wake
up and quit pulling off this charade of the multinationals, because
that is who we are facing. We are facing the U.S. Chamber of Commerce,
the Business Roundtable, the National Association of Manufacturers, the
Conference Board, the United Federation of Independent Businesses. The
newspapers make a majority of their money on retail advertising and
grind out this free trade, free trade, do not let us start a trade war.
Well, here is what the trade war gave us:
This first year of the new century found her worth twenty-
five billion dollars more than her nearest rival, Great
Britain, with a gross national product more than twice that
of Germany and Russia. The United States was already so rich
in goods and services that she was more self-sustaining than
any industrial power in history. . . .
More than half of the world's cotton, corn, copper, and oil
flowed from the American cornucopia, and at least one-third
of all steel, iron, silver, and gold.
Here we are having trouble manufacturing steel. We were exporting
one-third of the world's steel.
Even if the United States were not so blessed with raw
materials, the excellence of her manufactured products
guaranteed her dominance of world markets. Current
advertisements in British magazines gave the impression that
the typical Englishman woke to the ring of an Ingersoll
alarm, shaved with a Gillette razor, combed his hair with
Vaseline tonic, buttoned his Arrow shirt, hurried downstairs
for Quaker Oats, California Figs and Maxwell House coffee,
commuted in a Westinghouse tram (body by Fisher), rose to his
office in an Otis elevator, and worked all day with his
Waterman pen under the efficient glare of Edison light bulbs.
``It only remains,'' one Fleet Street wag suggested, ``for
[us] to take American coal to Newcastle.'' Behind the joke
lay real concern: the United States was already supplying
beer to Germany, pottery to Bohemia, and oranges to Valencia.
As a result of this billowing surge in productivity, Wall
Street was awash with foreign capital. Carnegie calculated
that America could afford to buy the entire United Kingdom,
and settle Britain's national debt in the bargain. For the
first time in history, transatlantic money currents were
thrusting more powerfully westward than east. Even the Bank
of England had begun to borrow money on Wall Street. New York
City seemed destined to replace London as the world's
financial center.
Well, in the year 2004, we are broke. We have come from the greatest
creditor nation to the greatest debtor nation. The Japanese are
financing over $460 billion of my deficit. The Chinese are financing my
debt--not me financing any other country like we started
[[Page S5196]]
with protectionism. The Chinese have over $200 billion of my deficit.
We will end up this year in September, in a few short months, with a
deficit that will approximate $700 billion.
We are spending around $2 billion a day more than we are taking in.
Can you imagine that? In the early 1980s when I talked about budget
matters, I spoke about how it took us 200 years of our history to get
to $1 trillion in debt. The cost of the Revolution, the Civil War,
Spanish-American War, World War I, World War II, Korea War, Vietnam
War--it took us 200 years and the cost of all the wars to reach a $1
trillion debt.
In the last 3\1/2\ years--because we don't want to pay for our war
and want to give tax breaks instead--we have already piled up $2
trillion in debt; $2 trillion in the last 3\1/2\ years.
This crowd has to sober up. We have to get hold of ourselves. We have
to disenthrall ourselves and we have to start competing. Remember, it
is our standard of living. That is the most frustrating thing around
here. Here we add on these requirements: the minimum wage, Social
Security, Medicare, Medicaid, plant closing notice, parental leave,
safe working place, safe machinery, the old age act, the discrimination
act, and this act and that act--all of that goes into the cost of
production. It is not just the minimum wage; it is our high standard of
living. Every Republican and every Democrat favors clean air and clean
water. So we are not going back on our standard of living. So
fundamentally we have to protect, and that is the fundamental role of
Government.
I will never forget when we swore in President Ronald Reagan for his
second term. It was inclement weather and we did it in the Rotunda. He
raised his hand to preserve, protect, and defend. We came back and we
were debating trade, and we said: Oh, we don't want to protect, we
don't want to protect. The fundamental oath that we take as public
servants is to protect. We have the Army to protect us from enemies
without, the FBI to protect us from enemies within. We have Social
Security to protect us from old age, Medicare to protect us from ill-
health; clean air, clean water--antitrust laws to protect the freedom
of the market. We can go right on down the list. Are we going to pass a
wonderful high standard of living and then run around like ninnies
hollering: Wait a minute, wait a minute, free trade, free trade. We
don't want to start protectionism--they get that garbage from the
Business Roundtable and the U.S. Chamber of Commerce.
I talk as one having received all of their awards. In 1992, I was man
of the year of the National Chamber of Commerce. By 1998 they were
sending out leaflets against me. So I speak advisedly. That crowd is
not any longer interested in Main Street America. They are interested
in Main Street Beijing. That is where you make the money, and the
country can go to hell as far as they are concerned. So it is our duty
to protect the economy and open up the markets and everything else like
that.
Don't tell us more about retrain, retrain, retrain. I continually
hear that. Oh, we have to retrain. I went through another little town
yesterday, Andrews, SC. It brings to mind Oneida. I brought that plant
in. They make little T-shirts. They closed to go to Mexico. At the time
of closure they had 487 employees. The average age was 47 years.
We have done it, Senator, your way. We have retrained them and we
have 487 highly skilled computer operators. Are you going to hire the
47-year-old highly skilled computer operator or the 21-year-old highly
skilled computer operator? You are not going to take on the retirement,
the pension cost of the 47-year-old. You are not going to take on the
health cost of the 47-year-old. You are going to get the 21-year-old.
So don't tell me about retraining.
We have the most productive economy--that is what Alan Greenspan
says. He is sobering up himself. He came down here with this
administration saying we were paying down too much debt. ``We are
paying down too much debt.'' He sanctioned all these tax cuts. Now he
says debt and deficits matter, and he is worried about interest rates
now and everything else of that kind, and paying bills.
It is time we speak out as much as we can, early on, so we will know
exactly where we stand. Where we stand is that we have to reorganize--
begin to organize, I should say--our trade effort, not just the
Department of Commerce, but a Department of Trade and Commerce. I have
been serving for almost 38 years on what was originally the Committee
of Foreign and Interstate Commerce because article I section 8 says
that Congress--not the President, not the Supreme Court--but the
Congress of the United States shall regulate foreign commerce.
But, instead, it is over in the hands of a deep six group known as
the Finance Committee. What they do is they work out their little
deals. You might get a stadium, you might get a courthouse, you might
get any kind of visions of sugarplums dancing in their head.
Forget about trade. They put on fast track. After they make their
deal, the vote is fixed. Then it comes to the floor of the most
deliberative body that cannot, under fast track, deliberate. And we
enjoy it. We have tied our hands with fast track because we don't want
to take the responsibility. That is what the polls will tell you: Don't
say you are for or against, just say you are concerned.
So we say we are concerned and we keep getting reelected and the
country goes to hell in an economic hand pot. I can tell you right now
we are in real trouble, and we have to disenthrall.
What happens is that we need to organize a Department of Trade and
Commerce, take that special Trade Representative, put it under that
Secretary, do away with the International Trade Commission, which is a
fix. You can find the damage done by the International Trade
Administration over in Commerce. Then you go over to the Commission and
they find out--oh, there is never any injury because you have growth.
The GNP now is 3 or 4 percent, so there is no injury. So we keep
sending the jobs out of the country like gangbusters, and we ought to
do away with that particular fix of the Finance Committee. Then come in
and get an Attorney General--an assistant, let's say, to enforce the
trade laws.
Many a trade lawyer in this city has gone all the way to the Supreme
Court and found out that, well, politically it is set aside. It was
that way in the Zenith case, when they were gathered around the Cabinet
table and President Reagan walked in and he said: I have to take care
of Nakasone. We are going to have to reverse that decision, after 3
years and millions of dollars of legal costs.
So we ought to put in, like we have for antitrust, like we have for
equal employment--we have to put in an Assistant Attorney General to
enforce those laws, get the Customs agents, and finally when we get
right down to it, do like the others do, play their game. If you are
going to sell it here, you have to make it here. Isn't that wonderful?
That is exactly what China really controls.
They said, if you want to sell it here you have to make it here. I
haven't gotten them that far along, I am just trying to flex their
minds so we will get away from this trade war and protectionism
nonsense, so we can put in a competitive trade policy and save our
industrial backbone.
Mr. President, how much time do I have remaining? My distinguished
colleague from Florida, Mr. Bob Graham, wants to be heard.
The PRESIDING OFFICER (Mr. Chafee). There is 12 minutes.
Mr. HOLLINGS. Let me yield at this time to the proponents and the
distinguished leadership of our Finance Committee. I retain the
remainder of our time.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I yield myself such time as I might
consume.
Senator Hollings asks us to take $39 billion of international reforms
and put it towards more domestic manufacturing relief.
I have told my colleagues so many times I shouldn't have to repeat
it. But this bill is all about encouraging domestic manufacturing.
The level of spending in this bill is already over three to one in
favor of domestic issues. We dedicate over $75 billion to domestic
manufacturing relief.
FSC/ETI currently benefits manufacturing by $50 billion. Obviously,
you can see this bill is a much stronger
[[Page S5197]]
commitment to manufacturing than the old FSC/ETI bill we are replacing.
We have already accelerated the phase-in of the manufacturing tax rate.
That is thanks to a bipartisan amendment by Senator Bunning and Senator
Stabenow. We have modified the transition rules to provide stronger
relief in transition for manufacturing companies which presently get
the old FSC/ETI benefits this bill replaces.
I hope it is easy for my colleagues to conclude that there is very
little to be gained by the amendment proposed by the Senator from South
Carolina.
It is time we had our rational discussion of the international
reforms in this JOBS bill because we have been spending so much time on
nongermane amendments. The amendment before us is not one of those
nongermane amendments but it has kept us from discussing so much which
is very basic with this legislation. Maybe people think there is no
reason to discuss it because this bill was built from the ground up in
a bipartisan way, coming out of our committee on a very overwhelming
vote of 9 to 2.
I think Members will be surprised to learn that some of our
international tax rules actually harm the domestic operations of U.S.
companies. When foreign income is brought home, the United States
allows an offset against U.S. tax for any foreign taxes paid on that
income. That is why it is called the foreign tax credit. Foreign tax
credits ensure that we do not double tax foreign earnings. Accordingly,
the foreign tax credit plays a vital role in preserving the
international competitiveness of our companies.
In the Tax Reform Act of 1986, Congress enacted a provision that
causes foreign tax credits to expire every 5 years. That was done for a
reason that is not very well justified because it is often used around
here--to make that 1986 tax bill revenue neutral.
Some claim this is a good rule because it forces foreign earnings to
be repatriated within 5 years. But that conclusion does not comport
with reality. The reason companies don't bring back foreign earnings is
because of double taxation. That is what occurs with foreign tax
credits expiring.
I will give you an example. A U.S. company sets up new operations in
Poland to serve Eastern Europe at this time when Eastern Europe is
being integrated with the European Union. That happened last week. For
the next 8 years in this hypothetical--quite reasonably--it takes all
of the capital generated by the Polish subsidiary to expand the
company's presence in Eastern Europe. At the end of 8 years, it finally
has some extra cash which it can send home.
What happens? It discovers the taxes it paid to Poland from years 1
through 3 are no longer eligible for the foreign tax credit because
they are more than 5 years old. The Polish tax rate is 28 percent. This
means if a company repatriates those early earnings, it will pay
combined Polish and U.S. taxes of 63 percent. It is really almost
confiscatory. That means, of course, the money is not coming home for
reinvestment in the United States. We lose the benefit.
If those early tax credits had not expired, the United States would
actually pick up some tax revenues. The subsidiary would owe the
difference between the 28-percent Polish rate and the 35-percent U.S.
rate. That happens to be a gain of 7 percentage points of taxation into
our U.S. Treasury from that company.
To ensure that double taxation no longer occurs, our JOBS bill
extends the carry-forward period for foreign tax credits from 5 years
to 20 years. Twenty years is the amount of time companies have to
utilize net operating losses. It is only appropriate, then, that the
key mechanism for avoiding double taxation should have the same shelf
life.
Our JOBS bill mostly fixes problems in the foreign tax credit area.
The only time a company benefits from a foreign tax credit is when it
brings that money home.
To repeat a very elementary point, foreign tax credits are a benefit
to that company only when that company brings foreign earnings home for
reinvestment. When the credit expires, this impedes capital mobility
because of double taxation, and it blocks reinvestment of foreign
earnings in the United States.
Another example of guaranteed double taxation is our rule that only
allows 90 percent of a company's AMT to be offset with foreign tax
credits. This rule guarantees that the company will be double taxed on
10 percent of the alternative minimum tax. The JOBS bill allows what is
common sense--a 100-percent offset.
To give you a real-life example of how these two changes will help
U.S. operations make investments in America and create jobs in America,
the largest American manufacturer in this example of a particular
automobile part is bringing dividends back from its profitable foreign
operations to cover losses in its U.S. operations. Their U.S. losses,
when combined with the foreign dividends to fund the U.S. operations,
has created huge unused foreign tax credits with a 5-year expiration
period. Because of their ongoing U.S. losses, it is unlikely these
credits will be used within those 5 years.
This company also has a growing alternative minimum tax because their
foreign tax credits can only be offset by 95 percent of their AMT
liability.
The limit is creating an annual alternative minimum tax liability
because the additional 10 percent of the AMT cannot be offset with the
foreign taxes that have already been paid on that income. The company
is guaranteed to incur double tax on foreign earnings brought back to
support the U.S. operation. This may be unbelievable to anyone
listening, but this is actually happening under U.S. tax laws.
The company's foreign competitors in the United States are not
equally hindered in the same way by the 90-percent alternative minimum
tax, foreign tax credit limit. If a foreign competitor loses money,
they get a 20-year U.S. net operating loss compared to the 5-year
foreign tax credit carryforward. Our Tax Code, then, is harming a
company that has operations in all 50 States and employs 38,000 people
in 16 different manufacturing facilities.
This example shows why the 20-year foreign tax credit carryforward
and the repeal of the 90-percent AMT foreign tax credit limits are in
this very important jobs in manufacturing bill. The current rules harm
U.S. operations and we need to fix it.
I also have some comments on another provision, the interest
allocation provisions, to give another example of how our international
rules harm U.S. operations. As I said earlier, foreign tax credits can
only offset foreign income; they cannot offset income from U.S.
activities. In determining the amount of foreign income, certain U.S.
expenses, such as interest expense, are partially allocated to foreign
income. This is used in calculating the amount of foreign tax credit a
U.S. company is allowed to claim on its return. The United States
arbitrarily allocates U.S. interest expense to foreign earnings, but
the foreign government does not recognize that interest expense for its
tax purposes. It is as if the interest expense somehow disappears into
the clear air.
The interest allocation rules artificially reduce the foreign tax
credits that can be used, and when the credits cannot be used the
credits expire. It may surprise many Senators to hear that our interest
allocation rules create a competitive disadvantage for U.S.
multinationals that try to expand their operations into the United
States and maybe do not get expanded here.
A portion of the interest expense on debt incurred to invest in the
United States is allocated to foreign source income. A foreign
corporation making the same U.S. investment is not impacted by these
interest allocation rules. It gets to fully deduct the interest costs
within the United States and thereby has a lower cost of capital than a
U.S. company making that same investment. Therefore, the interest
allocation rules actually work against U.S. multinational companies
that invest in the United States. It has put some at a competitive
disadvantage with foreign companies operating in the United States. I
hope this is very clear, that this is not the right thing for the U.S.
Tax Code to do to foreign manufacturers. Why should we encourage
international competition in the United States against our own domestic
manufacturer?
We have Senators demonizing the JOBS bill international provisions.
This gives me an opportunity to emphasize once again how anything gets
done in the Senate--only in a bipartisan way. This is a bipartisan
bill.
[[Page S5198]]
Democrats and Republicans agree to everything in this bill, and the
international provisions we agreed to were provisions that actually
help U.S. job creation and help our own economic growth.
I ask the Senate to support Senator Baucus and this Senator in this
bipartisan bill. I hope Members will not buy the distortion. None of
the international changes caused jobs to go offshore. Just the
opposite. These were selected to bring the foreign money back for real
investment in the United States, creating jobs in the United States,
creating manufacturing jobs in the United States because this is a
manufacturing bill. These changes level the playing field between the
United States and foreign companies operating inside the United States.
They were specifically selected because they tend to help U.S.-based
manufacturers more than other sectors of our economy.
The entire JOBS bill is geared towards creating jobs in
manufacturing--jobs in the United States, not overseas--because
American manufacturing overseas does not benefit from this bill.
It is quite simple. These are the only kinds of international
provisions we could ever get bipartisan agreement on because it is so
obvious. It is so obvious, it came 19-2 out of our committee. We should
not allow international rules to remain in place if they harm U.S.
operation. Once again, we are talking about commonsense international
tax reform. In fact, if anyone wants to condemn this bill, it is that
maybe we do not do anything radical in this bill. We just fix problems.
We fix problems with current law. We fix problems with current law that
happens to be harming U.S. domestic interests.
So I ask Members to vote against the amendment of the distinguished
Senator from South Carolina.
I yield the floor.
Mr. HOLLINGS. Mr. President, I yield 8 minutes to the distinguished
Senator from Florida.
The PRESIDING OFFICER. The Senator from Florida.
Mr. GRAHAM of Florida. Mr. President, we are here for two fundamental
reasons. One, we are here to remove from our Tax Code a provision that
has been declared illegal by the World Trade Organization, and certain
industries in America are now being sanctioned for that illegal
provision.
We would not be here debating an international tax law change but for
the fact that the WTO declared illegal our system of encouraging U.S.
manufacturers to export. I don't think any Member would challenge that
statement. These international tax changes are totally being carried by
the need to eliminate this WTO-offending sanctions-creating provision.
There is a second step we ought to be taking. We ought to remove the
incentive for U.S. firms to take jobs from the United States overseas.
There are a lot of incentives that are already out there. There are
incentives of lower labor costs, lower environmental standards, lower
standards in terms of human rights. All of those are already in place.
However, we do not need to be giving a further economic incentive to
move jobs out of the United States.
Let me state briefly what I believe we ought to be thinking about as
we consider this matter. Just a couple of hours ago, as I was walking
to the Capitol, I ran into a large group of folks. I stopped and asked
them who they were. They were machinists from Wichita, KS. Do you know
what they told me? In Wichita, KS, machinists used to be 27,000 strong.
Do you know how many they have in Wichita today? Only 16,000. Eleven
thousand jobs have left Wichita from that one union. I asked, where did
the jobs go? Did they disappear? No longer producing airplanes? No, the
11,000 jobs are still in place, but they just happen to be in places
such as China, India, Brazil, and other countries which are now
building the airplanes that used to be built in Wichita.
When I told that group of Wichita machinists why, in part, those jobs
had left Wichita to go offshore, they were stunned. So let me tell the
Senate what I told the Wichita machinists. We have a fancy provision in
the international tax law called ``deferral.'' In fact, this Senate
voted about 20 years ago to repeal this deferral. But that effort
failed.
``Deferral'' basically means the income earned by the foreign
subsidiary of a U.S. multinational is not subject to tax. They do have
to pay whatever their local taxes are to China or India, but they do
not pay any tax to the U.S. Government.
Do you know what that costs us every year in lost revenue for our
Government? According to the Treasury Department, it costs us $11
billion a year. That is the incentive we are giving. That $11 billion,
incidentally, is about what it would take to do two things we debate a
lot around here: fully fund the No Child Left Behind law and fully fund
our veterans program.
Over the years, this benefit has produced substantial savings to
American corporations. Let me give you a few examples. Citigroup has
saved, on an accumulated basis, $6 billion as a result of this
provision; ExxonMobil, $22 billion; Hewlett-Packard, $14 billion; IBM,
$18 billion.
Aside from taking advantage of this extremely generous tax break,
which creates a positive incentive to move jobs from the United States
overseas, every one of those firms appears on Lou Dobbs' ``Exporting
America'' list. Every one of the firms that is getting this tremendous
benefit is doing what the benefit is designed to do, which is to
encourage the relocation of jobs outside the United States of America.
So in light of that, what are we doing in this bill to reduce or
eliminate the incentive for jobs to leave America? Do you know what we
are doing? We are increasing it by $3.7 billion per year.
I respect greatly and consider Senator Grassley to be one of my
friends who I most respect and admire in the Senate, but I wish he were
here to answer this question. If this bill does not give greater
incentives to American firms to leave America and move jobs offshore,
why does it cost us $3.7 billion? Why are we going to have an
additional revenue loss of that magnitude other than the fact that we
are encouraging jobs that would not otherwise have left America to do
so and, therefore, create more of this deferral tax benefit?
But it does not end there, as with my friends from Wichita. There is
a second provision. It has the fancy name ``repatriation.'' What does
that mean? That means after a company has deferred paying U.S. taxes on
the $18 or $14 or $22 billion they have accumulated, and they finally
decide, ``Well, I want to move some of it back to the United States,''
for whatever purpose, we are now going to say for 1 year they can do
that, not at the same tax rate they would have paid had they kept those
jobs in the United States--which is approximately 35 percent--they are
going to be able to move that money back to the United States at 5.25
percent, which is approximately an 85-percent benefit, tax gift over
what they would have paid had they kept those same jobs at home.
What is this going to cost us? What is the difference between a 35-
percent and a 5.25-percent tax rate? Well, the cost to the Federal
Treasury is going to be approximately $16 billion in the year this
window is opened.
Now the proponents of this window are going to say: Oh, this is a
temporary window. We are going to shut that thing tight after 1 year.
Friends, I would be willing to make a substantial wager of Florida
oranges that once this window gets in the tax law, it is going to be
like all those other tax practices that were supposed to be temporary.
I say to the Senator, do you remember when the President came down
here in 2001 and said: ``I want you to pass all these tax benefits, but
they are only going to be temporary so we can stimulate the economy''?
Now what is the President's tax plan? To make all those temporary taxes
permanent.
What do you think is going to be his tax plan when it gets to be
2005, if he is still the occupant of 1600 Pennsylvania Avenue? He will
be down here wanting to make this window a permanently open window.
I could not imagine, at a time when we are so concerned with the loss
of jobs, we would pass legislation that would create even additional
incentives for American jobs to pick up--maybe on aircraft made by
Americans in Wichita, KS--and fly away to other lands.
We should support Senator Hollings' amendment. And then we should
vote no on final passage of this bill.
The PRESIDING OFFICER. The Senator's time has expired.
[[Page S5199]]
The Senator from South Carolina.
Mr. HOLLINGS. Mr. President, how much time is remaining on this side?
The PRESIDING OFFICER. There is 3\1/2\ minutes.
Mr. HOLLINGS. Mr. President, I yield whatever time I have to the
distinguished Senator from North Dakota.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. DORGAN. Mr. President, I am going to support the amendment to
strike this section. I do that because the Senator from South Carolina
is absolutely right. So is the Senator from Florida. The fact is, there
are several provisions that incentivize the movement of U.S. jobs
overseas. At a time when we are trying to create new jobs in this
country, to say to companies--which, by the way, have moved their jobs
overseas already--``Repatriate your income to this country now, and we
will give you a 5.25-percent tax rate,'' how about a 5.25-percent tax
rate for every American? How about a 5.25-percent tax rate for those
who live in North Dakota or South Carolina or Florida?
Why should we provide incentives for companies that want to move
their jobs overseas? I have talked at length about Huffy bicycles. They
are gone. They are now made in China. They used to be made in the
United States. Radio Flyer, the little red wagons, they are gone. They
used to be made in the United States. Those little red wagons are now
made in China. The U.S. taxpayers provide an incentive for those
companies to close their U.S. plants, fire their workers, and move
their jobs overseas.
Now this bill comes to the floor of the Senate and says to those
companies that moved their jobs overseas: We will give you a good deal.
Repatriate some of that money, and we will lower your tax rate to 5.25
percent. Well, that sends a signal to everybody that when you decide
next to move your jobs overseas to access lower labor costs, at some
point in the future somebody will get behind a closed door and come up
with this goofy idea that they will reduce your tax rate again--maybe
to 5.25 percent, maybe to 1.25 percent. How about zero?
My question is this: If it is good enough for these companies, why is
a 5.25-percent tax rate not good enough for every American? Why is it
not good enough for working families?
But the Senator from South Carolina has it right. We ought not, in
any circumstance, provide any additional incentive to move more
American jobs overseas. They are moving overseas to access lower labor
costs and less restrictions with respect to safe plants and
environmental restrictions. Why on Earth would we want to give them a
tax benefit as they leave this country? This makes no sense to me.
There are some provisions in the international tax section which I
think are all right. But there are some that are, in my judgment, a
colossal waste of money and fundamentally the wrong incentive with
respect to American jobs. Because of that, because of this pernicious
provision that reduces the tax rate to 5.25 percent for the
repatriation of earnings for those that have already moved their jobs
overseas, I am going to support the amendment that is offered by the
Senator from South Carolina. He is right on track.
As you know, we had a vote a few days ago on my amendment that would
have done more than this amendment, essentially. My amendment was
taking out of existing law the provision that encourages companies to
move overseas. The Senator from South Carolina supported that. The
Senator from South Carolina now says they are creating a new piece of
legislation that, in the long run, will have even more incentive to
move American jobs overseas. He says: Let's stop that. Let's not do
that. I agree with him completely. I think the Senator from South
Carolina does a service to this Chamber by offering this amendment. I
intend to support his amendment.
I yield the floor.
The PRESIDING OFFICER. The Senator from South Carolina.
Mr. HOLLINGS. Mr. President, I ask for the yeas and nays on the
amendment.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I say to the Senator, if you do not have
any more time, then I will yield back my time and we can then vote.
Mr. HOLLINGS. Good.
Mr. GRASSLEY. Is that OK?
Mr. HOLLINGS. Yes.
Mr. GRASSLEY. Mr. President, I yield back all time on this side.
The PRESIDING OFFICER. All time has expired.
The question is on agreeing to amendment No. 3134. The yeas and nays
have been ordered. The clerk will call the roll.
The assistant legislative clerk called the roll.
Mr. McCONNELL. I announce that the Senator from Arizona (Mr. McCain)
is necessarily absent.
Mr. REID. I announce that the Senator from North Carolina (Mr.
Edwards) and the Senator from Massachusetts (Mr. Kerry) are necessarily
absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 23, nays 74, as follows:
[Rollcall Vote No. 90 Leg.]
YEAS--23
Akaka
Byrd
Clinton
Conrad
Dayton
Dodd
Dorgan
Durbin
Feingold
Graham (FL)
Harkin
Hollings
Inouye
Jeffords
Kennedy
Kohl
Leahy
Levin
Mikulski
Reed
Reid
Rockefeller
Sarbanes
NAYS--74
Alexander
Allard
Allen
Baucus
Bayh
Bennett
Biden
Bingaman
Bond
Boxer
Breaux
Brownback
Bunning
Burns
Campbell
Cantwell
Carper
Chafee
Chambliss
Cochran
Coleman
Collins
Cornyn
Corzine
Craig
Crapo
Daschle
DeWine
Dole
Domenici
Ensign
Enzi
Feinstein
Fitzgerald
Frist
Graham (SC)
Grassley
Gregg
Hagel
Hatch
Hutchison
Inhofe
Johnson
Kyl
Landrieu
Lautenberg
Lieberman
Lincoln
Lott
Lugar
McConnell
Miller
Murkowski
Murray
Nelson (FL)
Nelson (NE)
Nickles
Pryor
Roberts
Santorum
Schumer
Sessions
Shelby
Smith
Snowe
Specter
Stabenow
Stevens
Sununu
Talent
Thomas
Voinovich
Warner
Wyden
NOT VOTING--3
Edwards
Kerry
McCain
The amendment (No. 3134) was rejected.
Mr. GRASSLEY. Mr. President, I move to reconsider the vote.
Mr. BAUCUS. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, I have a unanimous consent request that
has been cleared on both sides. I ask unanimous consent the pending Kyl
amendment be recalled.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that the Senator
from Texas, Mrs. Hutchison, have 2 minutes for an amendment that she
wants to offer.
The PRESIDING OFFICER. The Senator from Texas.
Amendment No. 3138
Mrs. HUTCHISON. Mr. President, I call up amendment No. 3138 and ask
for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:
The Senator from Texas [Mrs. Hutchison] for herself, Mr.
Smith, and Ms. Landrieu, proposes an amendment numbered 3138.
Mrs. HUTCHISON. I ask unanimous consent the reading of the amendment
be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To make certain engineering and architectural services
eligible for the deduction relating to income attributable to United
States production activities and to limit an employer's deduction for
entertainment expenses of covered employees to the amount which the
employee includes in income)
On page 35, between lines 11 and 12, insert the following:
[[Page S5200]]
SEC. 103. DEDUCTION FOR UNITED STATES PRODUCTION ACTIVITIES
INCLUDES INCOME RELATED TO CERTAIN
ARCHITECTURAL AND ENGINEERING SERVICES.
(a) In General.--Paragraph (1) of section 199(e) (relating
to domestic production gross receipts), as added by section
102, is amended to read as follows:
``(1) In general.--
``(A) Receipts from qualifying production property.--The
term `domestic production gross receipts' means the gross
receipts of the taxpayer which are derived from--
``(i) any sale, exchange, or other disposition of, or
``(ii) any lease, rental, or license of,
qualifying production property which was manufactured,
produced, grown, or extracted in whole or in significant part
by the taxpayer within the United States.
``(B) Receipts from certain services.--
``(i) In general.--Such term also includes the applicable
percentage of gross receipts of the taxpayer which are
derived from any engineering or architectural services
performed in the United States for construction projects in
the United States.
``(ii) Applicable percentage.--For purposes of clause (i),
the applicable percentage shall be determined under the
following table:
``In the case of any taxable year beginniThe applicable percentage is--
2004, 2005, 2006, 2007, or 2008...............................25 ....
2009, 2010, 2011, or 2012.....................................50 ....
2013 or thereafter...........................................100.....
(b) Limitation of Employer Deduction for Certain
Entertainment Expenses With Respect to Covered Employees.--
Paragraph (2) of section 274(e) (relating to expenses treated
as compensation) is amended to read as follows:
``(2) Expenses treated as compensation.--Expenses for
goods, services, and facilities--
``(A) in the case of a covered employee (within the meaning
of section 162(m)(3)), to the extent that the expenses do not
exceed the amount of the expenses treated by the taxpayer,
with respect to the recipient of the entertainment,
amusement, or recreation, as compensation to such covered
employee on the taxpayer's return of tax under this chapter
and as wages to such covered employee for purposes of chapter
24 (relating to withholding of income tax at source on
wages), and
``(B) in the case of any other employee, to the extent that
the expenses are treated by the taxpayer, with respect to the
recipient of the entertainment, amusement, or recreation, as
compensation to such employee on the taxpayer's return of tax
under this chapter and as wages to such employee for purposes
of chapter 24 (relating to withholding of income tax at
source on wages).''.
(c) Effective Dates.--
(1) Subsection (a).--The amendment made by subsection (a)
shall apply to taxable years ending after the date of the
enactment of this Act, and section 15 of the Internal Revenue
Code of 1986 shall apply to the amendment made by this
subsection as if it were a change in the rate of tax.
(2) Subsection (b).--The amendment made by subsection (b)
shall apply to expenses incurred after the date of the
enactment of this Act and before January 1, 2006.
Mrs. HUTCHISON. Mr. President, this is an amendment that is a matter
of fairness and equity. It is cosponsored by Senator Landrieu, Senator
Smith, and myself. It is to put one sector that was in the original
FSC/ETI coverage back into the bill. It is architects and engineers. We
know there has been a huge outsourcing of professional jobs overseas.
This is becoming more common. Our architectural and engineering firms
are particularly vulnerable to foreign competition. This amendment is a
pared-down amendment that would give them some of the tax deduction
back. It is the only sector that was originally covered that is not
covered in the bill before us.
My amendment would phase in the coverage over a 10-year period. It is
offset, so there will be no cost. It is a matter of fairness. We should
not lose our engineering and architectural jobs in this country. They
have lost 31 percent of their margins in the last year.
I hope we will be able to agree to this amendment. It is a matter of
simple equity. I believe with this phased-in tax deduction we will have
an incentive to do our designing and engineering in our country, for
buildings that are in our country. This is not applied to buildings
built overseas, only buildings built in our country.
I urge the adoption of the amendment, but if it needs to be set aside
for further consideration----
The PRESIDING OFFICER. Is there further debate on the amendment?
Mr. BAUCUS. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mrs. HUTCHISON. Mr. President, I ask unanimous consent the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
The Senator from Montana.
Mr. BAUCUS. Mr. President, I ask unanimous consent the amendment by
the Senator from Texas be temporarily set aside so the Senator from
Louisiana may offer her amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 3123
(Purpose: To improve the credit for Ready Reserve-National Guard
employees, to provide a credit for replacement employees of Ready
Reserve-National Guard employees called to active military duty, and
for other purposes)
Ms. LANDRIEU. Mr. President, I appreciate the opportunity to speak
for just a few minutes on a very important amendment to this underlying
bill, an amendment I offer on behalf of Senator Murray, Senator
Johnson, Senator Cantwell, Senator Corzine, Senator Kerry, Senator
Durbin, and Senator Dodd. They offer this amendment with me. It is an
amendment I understand the chairman and ranking member have looked at
and both support. In just a moment, I want to ask each of them, if they
would, to make some comments about this amendment. We have to dispose
of it one way or the other in the next few minutes. We may not need a
rollcall vote. I understand their wishes to move through this bill, but
I am anxious to hear from the chairman and the ranking member about the
importance of making sure this amendment is carried through the
process.
This amendment has to do with the Guard and Reserve and the people
who employ them stateside. It has to do with our responsibility as a
government--or our obligation, if you will, our commitment to the
concept of a total force that relies, now, heavily on our Guard and
Reserve. This amendment provides some much-needed tax relief to
patriotic employers who try to help fill the pay gap between what a man
or a woman might earn when they are stateside at their regular job--and
then they put on the uniform to defend us and to fight this war that we
are engaged with today.
There are maybe 1,000, maybe 2,000, good, compelling stories I could
share with you about our current situation. But let me begin by saying
the underlying bill moves around about $120 billion. The underlying
bill doesn't cost the Treasury because we are raising some fees and
taxes and modifying others.
Amendment No. 3123
(Purpose: To improve the credit for Ready Reserve-National Guard
employees, to provide a credit for replacement employees of Ready
Reserve-National Guard employees called to active military duty, and
for other purposes)
Ms. LANDRIEU. Mr. President, I call up amendment No. 3123.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:
The Senator from Louisiana [Ms. Landrieu], for herself,
Mrs. Murray, Mr. Johnson, Ms. Cantwell, Mr. Corzine, Mr.
Kerry, Mr. Durbin, and Mr. Dodd, proposes an amendment
numbered 3123.
Ms. LANDRIEU. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The amendment is printed in today's Record under ``Text of
Amendments.'')
Ms. LANDRIEU. Mr. President, the underlying bill moves around about
$120 billion in tax relief, tax increases, changes in our Tax Code to
hopefully increase employment opportunities, increase and strengthen
employment across the board, and strengthen our economy here and
abroad. That is the intention of the underlying bill.
This amendment moves around only $2 billion of that $120 billion.
Every Senator could come here and argue that section A is more
important than section C or section D. But I can tell you that, to my
knowledge, this is the only section of $120 billion that deals
specifically with tax credits for guys and gals who are putting on the
uniforms, who are not working for the pay but are working because of
their patriotism, and working in some of the most horrific and very
difficult situations. The least we can do while we are debating a tax
bill is to provide some much needed relief.
[[Page S5201]]
I could give you 2,000 stories. Because time is short, let me give
you 2.
This is a family from Louisiana. It is the subject of an article.
There were hundreds of articles written. This one happens to be from
the Washington Post. Kathy Kiely did a beautiful job of writing this
article. She starts off:
Drastic pay cuts. Bankruptcy. Foreclosed homes. They aren't
exactly the kind of challenges that members of America's
military reserves sign up for when they volunteered to serve
their country.
But for many, the biggest threat to the home front isn't
Saddam Hussein or Osama bin Laden. It's the bill collector.
Janet Wright is from Louisiana.
Kathy Kiely writes:
Janet Wright says she ``sat down and cried'' when she
realized how little money she and her children, Adelia, 5,
and Carolyn, 2, would have to live on when her husband was
sent to the Mideast. In his civilian job with
an environmental cleanup company, Russell Wright makes
$60,000 a year--twice what he'll be paid as a sergeant in
the Marine Forces Reserve. Back in Hammond, LA, his wife,
who doesn't have a paying job, is pouring the kids more
water and less milk. She is trying to accelerate Carolyn's
potty training schedule to save on diapers.
Let me ask: Could we do a little better for our Guard and Reserve
members who have to take a cut in pay to serve in the military for us?
They knew the responsibilities when they signed on to the Guard and
Reserve. They understood their commitment to training. They understood
their commitment to their monthly responsibilities. And, yes, they
understood it wasn't going to be a ``paid vacation,'' but because our
policy in Congress is relying on their work and relying on them for
longer periods of time than either they or, I might add, at least
according to the generals who have testified before the Armed Services
Committee, we anticipated, the least we could do in a tax bill is to
give them some minimal relief.
This amendment helps families just like the Wright family in Hammond,
LA, by allowing the employer to pay the difference between the $30,000
that this Marine Reserve officer will earn when he is serving our
country and putting himself in harm's way, and if they pay that gap up
to $30,000--it is not mandatory; it is voluntary. Many of our
companies, but not all, are doing it for obvious reasons. There is a
strain particularly on small businesses. But for those employers that--
and I note Boeing is a good example of a very large employer with a
wonderful policy, and much better, I might add, than our own Government
which today has refused to adopt this policy. But at least there are
some employers out there that are doing more than hanging the flag and
saying the Pledge of Allegiance. They are actually taking out their
checkbook in a very patriotic manner and keeping their Guard and
Reserve families whole. The least we could do is give them a 50-percent
tax credit, which is what our amendment does.
Let me read another example. I have 2,000; I am only going to read 2.
This is a firefighter from the Pacific coast. He earned a decent
living before being called up in 2002, but active duty meant a $700 or
a $1,000 a month pay cut and some very painful choices. He said:
My wife said ``We cannot live here anymore. It is too
expensive.''
He said he rented a 12,100 square foot home. He moved the whole
family into a two-bedroom apartment where his wife has to sleep on a
couch.
I understand we all have to make sacrifices. Most certainly the men
and women who sign up for our All-Volunteer Force don't sign up because
they think they are going on vacation or for the pay or the benefits.
They sign up because they are patriotic. They believe in the ideals of
this country.
When we are passing a $120 billion bill, if we can't take $2 billion
or $3 billion or $4 billion and support the hundreds of thousands of
men and women who are away from their jobs stateside and away from
their businesses--not 3 months, not 12 months but 18 months under very
tough conditions--so their children don't have to drink more water in
their cereal in the morning and the wives have to sleep on couches, I
think we can do better.
That is why I have waited for several months actually to offer this
amendment and to have support from both sides of the aisle.
There is a cap on the credit. So the cost is very reasonable. We have
taken the necessary precautions to make sure this amendment is
affordable.
According to DOD, 98 percent of the reservists have a pay gap.
Sometimes it is only $1,000 a month. Sometimes it could be $500 a
month. But in some cases it is more than that. But 98 percent have pay
gaps under $30,000.
This amendment will cover almost the entire Guard and Reserve
population. Our Guard and Reserve on deployment would not have to worry
about their bills being paid and could focus on the job before them,
and do it well, as the vast majority of them do day in and day out,
night in and night out.
That basically is what amendment does.
There is also a replacement worker tax credit for small businesses,
many of which would be affected in the State of the Presiding Officer,
with 50 employees or less. It is not just helping to fill the pay gap
for employers that continue to pay the salaries, but it also gives some
help to small business owners that in many instances take the brunt
from their service, particularly when it is extended.
I will end my remarks. I see some of my colleagues on the floor who
may want to add some comments.
This affects thousands of people in all of our States. I am proud our
Guard and Reserve are right there stepping up on the front lines.
We have an outstanding Guard and Reserve unit. In about a month, we
will have over 5,000, almost 6,000, men and women serving in Iraq;
again, some of them for much longer periods of time than they were
initially told.
I understand the chairman is prepared to accept the amendment. But
before I waive my right to a recorded vote, I would like to have some
comments from the chairman, who has negotiated this bill beautifully
through this process. If he could, I would like for him to comment
about the importance of this amendment and the outlook for keeping this
amendment in the conference report as we move this bill to the
President's desk for his signature.
The PRESIDING OFFICER (Mrs. Dole). The Senator from Iowa.
Mr. GRASSLEY. Madam President, I can comment very positively about
the motivation behind the amendment, and the good policy of giving
equity to people who are called away from jobs and away from family to
go to a far-off land to defend America in a war against terrorism and
doing it in a way that has never been done for guardsmen and reservists
to this extent, I think going back to the Korean war. What we are doing
now has not been done for a long period of time.
The Senator from Louisiana needs to be complimented on her efforts to
recognize that and, particularly, to recognize that through employers
who show very patriotic fervor in cooperating in this whole program.
I can say that very positively about the amendment of the Senator
from Louisiana. She is asking me to predict what might happen in
conference. It is very difficult to do that. I have a reputation for
defending the position of the Senate and working as best I can to work
through this. Obviously, I cannot make any promises to the Senator from
Louisiana.
Ms. LANDRIEU. I can appreciate that. I appreciate the comments of the
chairman. He has shown himself to be a great leader, a man of his word.
I know he will uphold and fight for our position.
I think it would be a real shame to move a $120 billion tax bill
through this Congress at this time and have not a part of it
specifically directed to some of the men and women who are carrying the
greatest burden right now.
I know our businesspeople of all sizes and shapes are contributing to
the overall economy and creating jobs, but there would not be any
country to create jobs for if it were not for the men and women in
uniform who protect us here and abroad.
I appreciate the remarks of the chairman.
I ask unanimous consent to have printed in the Record three articles
involving enlisted reservists of the National Guard, and a letter from
the National Guard Association that represents thousands of current and
retired guardsmen and reservists.
[[Page S5202]]
There being no objection, the material was ordered to be printed in
the Record, as follows:
National Guard Association
of The United States,
Washington, DC, May 10, 2004.
Hon. Mary Landrieu,
U.S. Senator, Hart Senate Office Building, Washington, DC.
Dear Senator Landrieu: On behalf of the membership of the
National Guard Association of the United States (NGAUS),
thank you for your unwavering support of the men and women of
the National Guard. Today, there are more than 94,000
National Guard personnel serving on active duty in support of
the global war on terrorism. These men and women, who are
serving in harm's way, contribute over 40% of our fighting
force in the Global War on Terrorism. This number also
reflects those personnel serving abroad and away from their
families, communities, and employers.
Members of the National Guard must take time off from their
civilian employment to perform military duties. Increased
operational tempo dictates that National Guard and Reserve
Component members must be placed on active duty ever more
frequently. This increased operational tempo places
additional financial burdens on employers, to a much greater
extent than in past years. We at NGAUS believe employers
should not be expected to bear the increased financial
burdens that increased Guard deployments place on them.
Assisting employers with a tax credit provides them the
ability to inject those funds back into their businesses in
order to offset the effects of the temporary loss of their
National Guard employees.
The National Guard Association of the United States urges
the Members of the United States Senate to support your
efforts to recognize the civic duty of those employers who,
in the face of financial constraint, continue to support
their National Guard employees.
Sincerely,
Richard C. Alexander,
Major General (Ret.), AUS,
President.
____
[From the San Mateo County Times, Dec. 18, 2003]
War Carries a Hidden Cost; Reservists' ``Pay Gap'' Often Forces
Difficult Choices on Families
(By Justin Jouvenal)
Pacifica.--Scott Hellesto endured snipers and artillery
fire, but one of the most difficult battles during the Navy
reservist's service in Iraq came on the homefront--losing his
three-bedroom home.
The Pacifica firefighter had earned a decent living before
being called up in January 2002, but active duty meant a
$700- to $1,000-a-month pay cut--and some painful choices.
``My wife said, `We can't live here anymore, it's too
expensive,' '' Hellesto said of his rented 2,100-square-foot
home in Antioch. ``So we moved the whole family into a two-
bedroom apartment, where my wife had to sleep on the couch.''
This ``pay gap'' is a hidden cost of war that likely
affects thousands of the state's reservists and National
Guard troops as they transition from more lucrative civilian
jobs to active duty. It is an extra burden for families
already dealing with the pain of separation and the stress of
having a loved one in a combat zone.
``There's fewer Christmas gifts and other cuts,'' said Lt.
Col. Terry Knight, a California National Guard spokesman.
``Often you have a spouse left behind that ends up getting a
second job.''
The pay gap has become especially difficult for reservists
and National Guard troops since the 2001 terrorist attacks,
as more are serving and many are going for longer stints on
active duty.
About 10,000 California National Guard troops have been
deployed since 9/11--the largest mobilization since the
Korean War. About 4,000 are currently on active duty,
including 1,600 in Iraq. They earn between $1,700 and $2,800
a month.
Hellesto, who served with the 23rd Marines Echo Company,
swept into Iraq with the first wave of troops last March. He
made it to Nasariyah and helped secure a Baghdad neighborhood
on April 9, the day the statue of Saddam Hussein fell in
Iraq's capital.
``I saw the best and the worst of humanity,'' Hellesto
said.
He ran missions as a decoy to draw out Saddam's Fedayeen
soldiers and withstood SCUD missile alerts. Hellesto also
recalls with warmth the Iraqi soccer star who gave him his
gold medal from the Asian Games because Hellesto cared for
the man's son.
Hellesto said he doesn't want people to think he is bitter
about his service--he said he knew what he was getting into
and would do it again. Still, the financial strain was
difficult.
He said he could hear the edge in his wife Michelle's voice
when he would secretly call home on a satellite phone
supplied by a Fox News reporter.
``Sometimes, I wondered what I got my family into,''
Hellesto said.
Hellesto was able to get by with a little help from his
friends and family. He turned to fellow firefighters for help
when he was buying Christmas gifts for his three children
last year.
The apartment--he dubbed it the ``shoebox''--was in a rough
neighborhood, and someone slashed the tires and broke a
window on his truck last spring. Fortunately, a friend of
Hellesto's was able to pay to fix up the truck.
Scott Hellesto was called to active duty in January 2002.
He served at Camp Pendleton outside San Diego for a year,
before his tour of duty was extended and he was sent to Iraq.
Like many companies and local governments, the city of
Pacifica kept up Hellesto's regular salary and health
benefits for the first five months he was on active duty, but
after that, he was on his own.
Michelle Hellesto had to go on the Navy's health plan,
which meant giving up the family doctors. She also had to get
government assistance to pay for formula for her children.
``It put a strain on us; it was like supporting two
households when he was done at Camp Pendleton,'' she said.
``We couldn't have done it without the help of friends and
family.''
Hellesto estimated that about 30 to 40 percent of the
reserves he served with were in the same financial bind, but
the pay gap does not affect every soldier. Many earn more on
active duty than they do in their civilian jobs.
The National Guard Association estimates about a third of
the Guard earn less on active duty than in their civilian
jobs, while another third earn more.
Congressman Tom Lantos, D-San Mateo, introduced a bill in
March that would close the gap for some troops. Specifically,
the bill would entitle a reservist who is also a federal
employee and on active duty for more than 30 days to receive
the difference between his military and civilian pay.
The bill also would give state and local governments strong
incentives to make up the pay and give private companies tax
breaks if they continue to pay employees while they are on
active duty.
The bill is currently before the House Subcommittee on
Civil Service and Agency Organization. The U.S. Senate passed
a pay-gap provision for federal employees, but it was cut out
of the final version of a supplemental appropriations bill.
``It is a heavy enough sacrifice to pick up and go to
Iraq,'' Lantos said. ``There is no reason to have a financial
hardship as well.''
Fortunately for Hellesto, his financial burden has eased.
After returning home in July, he was able to work overtime to
get his family's finances back on track. He recently bought a
home in Antioch and has a fourth child on the way.
But he knows things could change quickly again.
``If they asked me to go back today, I would do it,''
Hellesto said. ``But if I didn't get my per diem allowance, I
would have to sell my house.''
____
[From the Silicon Valley/San Jose Business Journal, Apr. 26, 2004]
He Helped Rebuild Iraq, Now He Must Rebuild His Business
(By Timothy Roberts)
When Army Reservist Michael Malone left his new bride and
his home in San Jose for Iraq 16 months ago, his computer
business had seven employees and an office on Taylor Street.
Today the employees of Star Technologies are gone, and his
business partner and he have the furniture from their vacated
office stacked in their garages.
He's still in business, but struggling.
``The world came crashing down,'' says Mr. Malone, ``and he
(partner Erik Johnson) had to try to hold it up like Atlas.''
Says Mr. Johnson: ``First we had the tech bust, then the
impact from 9/11 and then Mike got call up. That was a whole
lot of blows one right after the other''.
Reservists know they may be called to action at any time,
but with military resources stretched thin in Iraq and
Afghanistan, the Pentagon is increasingly relying on the
reserves to make up for shortages in the regular, volunteer
forces. The 34-year-old Mr. Malone, who has served in the
reserves for 16 years and holds the rank of captain,
anticipated a short-term assignment.
``It's one of the challenges of being a small-business
owner,'' he said of his Army Reserve commitment. ``You plan
for it--just not for 16 months.''
Naval Reservist Frank Jewett, a small business consultant
with Compass Consulting Group in San Jose, is expecting to
head overseas for training soon, but wonders if he won't also
be deployed for something more than training.
``You have to have a plan,'' says Mr. Jewett, who is also
the vice president of the Board of Trustees of West Valley-
Mission College. ``You need to talk with your employer and
make sure they will support you.''
Some companies in the Valley have recently expanded their
support of reservists. Up until the war on terrorism, Intel
offered full salary to reservists for 30 days a year. Now it
offers 180 days a year of full pay. It also has expanded
child care benefits, says spokesman Mark Pettinger.
But the challenge to small businesses became apparent in
the late 1990s, when the military began to tap the reserves
for troop commitments in the Balkans. In 1999, Congress
created the Military Reservists Economic Injury Disaster Loan
to be offered by the U.S. Small Business Administration.
Business owners with essential employees returning from
active duty have 90 days from the reservist's discharge to
apply for up to $1.5 million offered at what is now 2.7
percent interest.
[[Page S5203]]
The first loans were made in Aaugust 2001. When reserve
units were called up for the war in Afghanistan, the loan
program was expanded to include reservists from that and
subsequent wars.
Since then the SBA has made $114.5 million in such loans,
although according to the SBA's Western District office only
$1.2 million in loans has been made to Californians. Only 11
loans have been issued to small businesses with California
addresses. The only address close to Silicon Valley is in
Watsonville.
``We've had this program since 2001, and frankly that's not
a whole lot of loans for three years,'' says SBA spokesman
Karl Whittington in the Sacramento office, which handles
disaster loans for the Western states.
Mr. Malone went to the University of Washington to earn a
degree in mathematics on a ROTC scholarship. He was committed
to at least eight years of reserve service. Liking the
camaraderie of what he describes as the ``entrepreneurs and
go-getters'' among the troops, he stayed in for twice that
long. He serves in the 1397 Terminal Transport Brigade, which
is based in Mare Island, although he was assigned to the 368
Engineer Battalion, based in Londenderry, N.H., in Iraq.
Mr. Malone started Star Technologies in 1995 with Mr.
Johnson. They began with tech support and later expanded to
include Web hosting, a move that helped give them a steady
source of revenue. In 2000, a client came to them and asked
them to solve a problem: keeping track of real estate
appraisals. With that inquiry, Star Technologies launched
into software development and created eAppraisal Flow.
Today, however, Mr. Malone is focused on just getting word
out that Star Technology is still around and looking for
customers. He just joined the San Jose Silicon Valley Chamber
of Commerce and has been making visits to small businesses to
offer his Web hosting and tech support services.
``You have to talk to people,'' he says. ``That's how you
get business.''
In his spare time he's giving thought to designing a
battle-ready lap-top computer that would allow officers to
connect to secure and standard networks at the same time and
provide position data with map overlays.
He still likes the Army, although with a new wife and three
children from a previous marriage and a business to rebuild,
he's not eager for any more overseas assignments.
``If Uncle Sam calls again, I'll go,'' says Capt. Malone.
``But it would be the last time--if it's any time soon--
because I have to rebuild my business.''
____
[From USA Today, Apr. 22, 2003]
Reservists Under Economic Fire
(By Kathy Kiely)
Washington.--Drastic pay cuts. Bankruptcy. Foreclosed
homes. They aren't exactly the kind of challenges that
members of America's military reserves signed up for when
they volunteered to serve their country.
But for many, the biggest threat to the home front isn't
Saddam Hussein or Osama bin Laden. It's the bill collector.
Four in 10 members of the National Guard or reserves lose
money when they leave their civilian jobs for active duty,
according to a Pentagon survey taken in 2000. Of 1.2 million
members, 223,000 are on active duty around the world.
Concern is growing in Congress, and several lawmakers in
both parties have introduced legislation to ease the
families' burden.
Janet Wright says she ``sat down and cried'' when she
realized how little money she and her children, Adelia, 5,
and Carolyn, 2, would have to live on when her husband was
sent to the Middle East. In his civilian job with an
environmental cleanup company, Russell Wright makes $60,000 a
year--twice what he'll be paid as a sergeant in the Marine
Forces Reserve. Back in Hammond, LA, his wife, who doesn't
have a paying job, is pouring the kids more water and less
milk. She is trying to accelerate Carolyn's potty training
schedule to save on diapers.
She doesn't know how long she'll have to pinch pennies.
Like his fellow reservists, Russell Wright has been called up
for one year. he could be sent home sooner, or the military
could exercise its option to extend his tour of duty for a
second year. Even so, Janet Wright considers her family
lucky: She can still pay the mortgage, and the children's
pediatrician accepts Tricare, the military health plan.
Ray Korizon, a 23-year veteran with the Air Force Reserve
and an employee of the Federal Aviation Administration, says
his income will also be cut in half if his unit ships out.
Korizon, who lives in Schaumburg, IL, knows the financial
costs of doing his patriotic duty from bitter experience.
Before the Persian Gulf War in 1991, he owned a Chicago
construction company with 26 employees. He was sent overseas
for six months and lost the business.
Still, he never considered leaving the reserve. Korizon
says he enjoys the work and the camaraderie. But he worries
about whether his two kids can continue to see the same
doctor when he shifts to military health coverage. ``It's
hard to go out and do the job you want to do when you're
worried about things back home,'' he says.
Once regarded as ``weekend warriors,'' they have become an
integral part of U.S. battle plans. Call-ups have been longer
and more frequent.
``The last time you'd see this type of mobilization
activity was during World War II,'' says Maj. Charles Kohler
of the Maryland National Guard. Of the Maryland Guard's 8,000
members, 3,500 are on active duty. Kohler knows several who
are in serious financial trouble. One had to file for
bankruptcy after a yearlong deployment, during which his
take-home pay fell by two-thirds.
Stories like that are the result of a shift in military
policy. Since the end of the Cold War, the ranks of the full-
time military have been reduced by one-third. The Pentagon
has increasingly relied on the nation's part-time soldiers.
More than 525,000 members of the Guard and reserves have been
mobilized in the 12 years since the Persian Gulf War. For the
previous 36 years, the figure was 199,877.
The end of fighting in Iraq isn't likely to lessen the
pressure on the Guard and reserves. They'll stay on with the
regular military in a peacekeeping role. Nobody knows how
long, but in Bosnia, Guard members and reservists are on duty
seven years after the mission began.
Korizon, who maintains avionics systems on C-130 cargo
planes, has been told his Milwaukee-based reserve unit may be
called up for humanitarian missions.
Some of the specialists who are in the greatest demand--
physicians and experts in biological and chemical agents--
command six-figure salaries in civilian life. The average pay
for a midlevel officer is $50,000 to $55,000.
``They were prepared to be called up. They were prepared to
serve their country,'' Sen. Barbara Mikulski, D-Md., says.
``They were not prepared to be part of a regular force and be
away from home 200 to 300 days a year.''
Concerns are growing on Capitol Hill. As the nation's
reliance on the Guard and reserves has increased, ``funding
for training and benefits simply have not kept up,'' says
Republican Sen. Saxby Chambliss of Georgia, a member of the
Armed Services Committee.
The General Accounting Office, Congress' auditing arm, is
studying pay and benefits for Guard members and reservists. A
report is due in September. Meanwhile, members of Congress
are pushing several bills to ease the burden:
Closing the pay gap. Some employers make up the difference
in salary for reservists on active duty. But many, including
the federal government do not. A bill sponsored by Democratic
Sens. Mikulski, Dick Durbin of Illinois and Mary Landrieu of
Louisiana would require the federal government to make up
lost pay. Landrieu is doing that for one legislative aide who
has been called up for active duty.
She has also introduced a bill to give private employers a
50% tax credit if they subsidize reservists' salaries.
Closing the health gap. Once on active duty, reservists,
Guard members and their families are covered by Tricare.
But for the 75% of reserve and guard families living more
than 50 miles from military treatment facilities, finding
physicians who participate in Tricare can be difficult.
A measure sponsored by Sen. Mike DeWine, a Republican from
Ohio, would give reservists and Guard members the option of
making Tricare their regular insurer or having the federal
government pay premiums for their civilian health insurance
while they are on active duty. Several senior Democrats,
including Senate Minority Leader Tom Daschle of South Dakota
and Sen. Edward Kennedy of Massachusetts, support the idea.
Keeping creditors at bay. The Soldiers and Sailors Relief
Act caps interest rates on mortgages, car payments and other
debts owed by military personnel at 6% while they are on
active duty. But Sen. Lindsey Graham, a South Carolina
Republican who is the Senate's only reservist, says the act
doesn't apply to debts that are held in the name of a spouse
who is not a member of the military. He plans to introduce
legislation to cover spouses.
Despite a groundswell of support for troops, none of the
bills is assured of passage. There's concern among some
administration officials about the cost of some of the
proposals. In addition, some at the Pentagon think morale
would be hurt if some reservists end up with higher incomes
than their counterparts in the regular ranks.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Madam President, I compliment the Senator from Louisiana.
This is a very important amendment. The reservists clearly,
particularly under the current circumstances, deserve at least the
provision suggested by the Senator from Louisiana. The Senator can be
assured this Senator will fight vigorously for her amendment in
conference. It is a very important amendment.
Madam President, I believe there is no more debate on this amendment.
The PRESIDING OFFICER. Do the parties yield back all time?
Mr. BAUCUS. All time is yielded back.
(At the request of Mr. Daschle, the following statement was ordered
to be printed in the Record.
Mr. KERRY. Mr. President, the continuing activation of
military reservists to serve in Iraq and the war on
[[Page S5204]]
terror has imposed a tremendous burden on many of our country's
businesses, especially our small businesses. Too many small businesses,
when their employees are asked to leave their jobs and serve the
Nation, are unable to continue operating successfully and face severe
financial difficulties, even bankruptcy. That is why I am pleased to
join Senator Landrieu to provide all American businesses with a tax
credit to help them continue to pay their employees who are called to
active duty and to help small businesses temporarily replace reservists
who are called up.
This amendment expands upon the Small Business Military Reservist Tax
Credit Act that I introduced last year which provides help to small
businesses in paying the difference in salary for their reservist
employees called up to active duty. My legislation, S. 1595, also
provided a tax credit to help small businesses cover the cost of
temporarily replacing that employee while he or she is serving our
Nation.
I worked with Senator Landrieu to develop this amendment which honors
all patriotic employers who continue to pay the salaries of their
employees who are members of the National Guard and Reserve and are
called up to active duty in the war on terror in Afghanistan, Iraq and
elsewhere. I believe this amendment will encourage all employers,
especially small businesses, to pay their reservist employees when they
face a reduction in salary due to their activation. Employers who
continue to pay their reservists will be eligible to receive a tax
credit up to $15,000 of the wages they pay to members of the Guard and
Reserve for as long as the reservist is on active duty status. The JOBS
Act, which we seek to amend, only provides a tax credit for reservists
on active duty status for 1 year and does not provide any assistance
for small businesses to help temporarily replace their reservists. I
believe this approach is insufficient and that our amendment is needed
to help reservists for each day of their service to our Nation and to
provide important assistance to small businesses.
I am very pleased that Senator Landrieu has included provision of my
bill to help small businesses cover the cost of temporarily replacing
the reservist employee while he or she is serving our Nation. Today,
many small employers are currently having a difficult time hiring
temporary workers to replace their employees who have been called up to
active duty in the national Guard or Reserve. The United Sates Chamber
of Commerce estimates that 70 percent of military reservists called to
active duty work in small- or medium-size companies. The Landrieu-Kerry
amendment will provide a tax credit of 50 percent up to $6,000 to help
small employers defray the costs of hiring a worker to replace a
guardsman or reservist who has been called up to active duty. Small
manufacturers will be eligible for a tax credit of 50 percent up to
$10,000 to assist in hiring a temporary worker.
To fight our wars and meet our military responsibilities, the United
States supplements its regular, standing military with reservists,
citizen soldiers who serve nobly. Not since World War II have so many
National Guard members been called to serve abroad. President Bush
authorized the activation of up to 1 million military reservists for up
to 2 years of active duty. Today, there are about 170,000 reserves on
active duty in the war against terrorism--nearly half of the more than
350,000 called to duty since the attacks of September 11, 2001. Many
are serving admirably around the world, performing critical wartime
functions in Iraq, Afghanistan, and elsewhere. Our Nation does not go
into battle without members of the National Guard and Reserve, and we
are all grateful for their service.
Just this week, the Bush administration authorized the activation of
an additional 47,000 reservists. The extension will cause significant
economic difficulties for the reservists, their families and their
employers that are left behind. Beyond the hardship of leaving their
families, their homes and their regular employment, more than 41
percent of military reservists and National Guard members face a pay
cut when they are called for active duty in our Armed Forces. Many if
these reservists have families who depend upon that paycheck to survive
and can least afford a substantial reduction in pay.
The large number of reservists being called up to active duty has
hurt many small businesses across the Nation and may impact the number
who are willing to re-enlist in the National Guard and Reserve in the
future. In January, the Commission of the Army Reserve, Lt. General
James R. Helmly, warned of a recruiting-retention crisis in the future
for the National Guard and Reserve. A recent U.S. military
questionnaire of returning Army National Guard soldiers projected a
resignation rate of double what it was back in November 2001. From
October to December 2003, almost one-quarter of the Guard members who
have had the opportunity to re-enlist have opted not to do so.
Recently, the U.S. Army developed a plan to pay reservists up to
$10,000 to re-enlist to stop a developing problem.
That is why the Federal Government must take action to help
businesses weather the loss of an employee to active duty and protect
employees and their families from suffering a pay cut to serve our
Nation. It is imperative that we help families of reservists maintain
their standard of living while their loved one serves our Nation. We
must also ensure that the cost of that service does not force
businesses into financial ruin. We must ensure that our great tradition
of citizen soldiers does not fade or cease because of the effect that
service has on work and family. The Landrieu-Kerry amendment will help
achieve their important goals and I urge my colleagues to vote in favor
of this amendment.
Mr. McCAIN. Mr. President, we continue to be increasingly reliant on
the men and women of our Reserve forces and National Guard. In fact, 40
percent of all the ground troops in Iraq and Afghanistan are composed
of National Guard and Reserve forces as well as nearly all of the
ground forces in Kosovo, Bosnia, and the Sinai. Many of these soldiers,
sailors, airmen, and marines leave behind friends, families, and
careers to defend our Nation. Accordingly, it is the responsibility of
policy makers to ensure we look after the needs of our patriots.
Many reservists that are called to active duty end up making less
money with the military than they did in their civilian job. This drop
in pay has placed a hardship on many of the men and women serving in
the Reserve components who are called to active duty. When the military
calls reservists and guardsmen to active duty, the last thing our
Nation wants is to hurt the reservist's families as a result. This
amendment is designed to address this problem by allowing private
companies to pay the difference between the servicemember's Reserve pay
and his civilian pay. If the employer chooses to pay this benefit, the
Federal Government will give the company a tax credit of 50 percent of
the difference in pay, up to $3,000.
Our Nation's reservists and guardsmen are an amazing resource of
experience, knowledge and dedication. If we are going to continue to
rely on our citizen soldiers, we must make sure that they receive their
fair share of benefits and that their families are provided for in
their absence. I will always support responsible legislation that
accomplishes this important goal.
The PRESIDING OFFICER. The question is on agreeing to the Landrieu
amendment.
The amendment (No. 3123) was agreed to.
Amendment No. 3138
Mr. BAUCUS. I call for regular order with regard to the Hutchison
amendment.
The PRESIDING OFFICER. That is the regular order. Is there further
debate on the amendment?
Mr. BAUCUS. I believe there is no further debate.
The PRESIDING OFFICER. The question is on agreeing to the Hutchison
amendment.
The amendment (No. 3138) was agreed to.
Mr. GRASSLEY. I ask unanimous consent Senators Hatch and Pryor be
added as cosponsors to the Hutchison amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BAUCUS. Madam President, I move to reconsider the vote on the
previous two amendments en bloc.
Mr. GRASSLEY. I move to lay the motions on the table en bloc.
[[Page S5205]]
The motions to lay on the table en bloc were agreed to.
Mr. GRASSLEY. I promised the Senator from South Carolina we would
have a little colloquy on an issue he was concerned about. Could we do
that right now?
Mr. NICKLES. Sure.
Mr. GRASSLEY. I ask the Senator from South Carolina be recognized.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GRAHAM of South Carolina. I thank Senator Grassley.
chinese currency
I rise today to express my deep concern about the Chinese
government's continued manipulation of its currency. In my mind, the
Chinese government's adherence to a currency valuation system that does
not rest on market-based principles is wrong and constitutes an unfair
competitive advantage. It is time for the unfair valuation of the yuan
to stop. I understand the administration has taken steps to address the
problem and some progress has been made. But this is a serious problem.
Clearly more needs to be done.
Mr. GRASSLEY. As Chairman of the Senate Finance Committee, I join my
colleague from South Carolina in expressing concern about the way in
which the Chinese currency is valued. I certainly agree that it is a
serious problem that needs to be taken seriously. A fairly valued
currency is in China's own long-term interests, and is key for moving
to a market driven economy. I was pleased to hear that Secretary Snow
was assured that interim steps are being taken and that progress in
this area will continue.
Mr. GRAHAM. I appreciate the fact that the Chairman recognizes the
serious nature of this problem. Unfair manipulation of currency cannot
be tolerated. I would like to see additional progress on this issue in
the next 60 to 90 days. If progress is not forthcoming, I hope the
Chairman would join me in supporting Senate hearings. However, these
hearings should only be the first step. Should China fail to make
substantial progress and the Senate fail to address this issue
substantively, appropriate and responsible legislation may then be
necessary, and I reserve the right to attach our China currency
amendment to any available legislation that comes before the Senate.
Mr. GRASSLEY. I do appreciate the importance of this issue. If we do
not see substantial progress toward adoption of a market-based currency
valuation system, I would support Senate hearings at the appropriate
time.
Mr. GRAHAM. I thank the Senator from Iowa, and look forward to
working with him to continue to pressure the Chinese government to
adopt a market-based currency valuation system.
section 29
Mr. SANTORUM. Mr. President, my amendment, cosponsored by Senators
Voinovich and DeWine, extends the Section 29 credit to new coke
facilities to encourage the construction of new facilities. This
provision is important because the U.S. currently produces below the
domestic demand for coke, and the situation will likely worsen in the
future. Much of the country's coke capacity is over 20 years old, and
most existing ovens are near the end of their useful lives. I
understand that the Finance Committee chairman, Senator Grassley,
prefers to address this issue during conference and not at this time. I
thank the chairman for his commitment to this provision and urge his
strong support for extending the Section 29 credit to new coke
facilities in conference.
Mr. GRASSLEY. Mr. President, I would like to thank the Senator from
Pennsylvania for his commitment to the Section 29 extension to new coke
facilities. Although I am supportive of the provision, the most
appropriate time to address it is during the conference. I look forward
to working with Senator Santorum and the two Senators from Ohio to
include this amendment in the conference report.
privacy
Mr. BAUCUS. Mr. President, my colleague from New York and my
colleague from Minnesota have filed a noteworthy amendment to the
Jumpstart Our Business Strength Act, S. 1637. The amendment raises the
very important issue of how in this global economy we can protect the
privacy of personally identifiable information that is transmitted
abroad. Senator Clinton and her staff have worked diligently with me
and my staff to find a way for the Senate to address these issues. The
amendment raises significant issues that I believe will benefit from
being made part of any appropriate hearing this session in the Finance
Committee. They have graciously recognized the importance of moving
forward on the JOBS bill. That is why I have agreed to invite Senators
Clinton and Dayton to testify on this issue during the Senate Finance
Committee's hearing on offshoring. My hope is that we will schedule
that hearing soon.
Mrs. CLINTON. Mr. President, I compliment my colleague from Montana
for his legislative skill and determination in managing the JOBS bill
on this side of the aisle. I also thank him for the patience and
consideration he and his staff have shown in working with me on the
Clinton-Dayton privacy amendment. I and my colleague Senator Dayton
look forward to testifying on this issue in front of the Finance
Committee because it is vitally important to maintain the privacy of
our constituents and Americans throughout the Nation.
New Markets Tax Credit and Economic Substance Doctrine
Mr. ROCKEFELLER. Mr. President, I would like to enter into a colloquy
with my good friend, Senator Baucus, regarding the economic substance
provision of the Jumpstart Our Business Strength, JOBS Act, S. 1637.
I ask my colleague to explain what, if any, impact the codification
of economic substance doctrine would have on the new markets tax
credit.
As my colleague knows, the new markets tax credit, NMTC, was signed
into law in 2000 and is the largest Federal economic development
initiative to be authorized in 15 years. The credit promises to spur
some $15 billion in new private sector investment in economic
development activity in poor communities throughout the country.
The idea behind the credit is that there are good viable business and
economic development opportunities in poor communities that lack access
to capital. The NMTC is designed to address this capital gap by
providing the incentive of a Federal tax credit to individuals or
corporations that invest in Community Development Entities, CDEs,
working in these communities.
While many of the businesses that receive financing through the
credit will present good business opportunities, it is possible that
some projects, because of their market, will present only limited
economic return on top of the credit. In many cases, the investor's
chief incentive will be the tax benefit available through the new
markets tax credit.
There is some concern among investors and potential NMTC investors
that legislation crafted to codify the economic substance doctrine and
curtail transactions that are simply motivated by tax incentives would
apply to and have negative impact on the NMTC.
With $2.5 billion in new markets tax credits having been allocated to
CDEs around the country and another $3.5 billion expected to be awarded
within the next several months, it is critical that the investor
markets get some clarification on this issue.
The NMTC holds great promise for communities throughout West Virginia
where economic revitalization and business development are sorely
needed. It is my understanding that the economic substance doctrine
contained in S. 1637 does not apply and I would appreciate my
colleague's comments on this issue.
Mr. BAUCUS. I appreciate the comments of the Senator and share his
commitment to the new markets tax credit.
The Senator is correct. The intent of the economic substance
provision in the JOBS bill is clearly to uphold and protect
congressionally mandated tax benefits while curtailing unintended
abuses of the tax code. I assure the Senator that the new markets tax
credit would not be adversely affected by this provision.
As the Senator knows, our intent in codifying the economic substance
doctrine is to curtail the use of abusive tax shelters that have no
economic substance or business purpose other than reducing the Federal
tax liability of the taxpayer. This is clearly not the case of the new
markets tax credit.
[[Page S5206]]
We attempted to clarify the intent of this provision in the Finance
Committee report, 108-192, in a footnote that states:
If tax benefits are clearly contemplated and expected by
the language and purpose of the relevant authority it is not
intended that the tax benefit be disallowed if the only
reason for the disallowance is that the transaction fails to
meet the economic substance doctrine as defined in this
provision.
The report also specifically identifies the low income housing tax
credit and the historic rehabilitation credit as examples of tax
benefits that would not be taken into account in measuring potential
tax benefits. These credits were noted as examples of the types of tax
benefits that would not be considered in applying the economic
substance doctrine.
The new markets tax credit was authorized with the clear intent of
using a tax subsidy to attract private investors to business and
economic development opportunities in poor communities--investment
opportunities that otherwise might not be able to secure such
investment capital. It is our intent that the NMTC be treated like the
LIHTC and the HRTC and protected as a congressionally mandated tax
benefit.
canadian softwood lumber dispute
Mr. SMITH. I came to the floor today to introduce an amendment to the
FSC/ETI bill relating to the U.S. approval of NAFTA panel decisions.
The handling of the current case before the NAFTA panel regarding
Canadian softwood lumber imports gives me cause for concern. There are
substantial allegations that one panelist judging the case is, at the
same time, appearing as a private lawyer in two other antidumping cases
before the International Trade Commission which involve similar issues
as the Canadian lumber case. This creates at the very least the
appearance of impropriety and a conflict of interest. Indeed, the USTR
has taken the position that the panelist is in violation of the code
established to prevent conflicts of interest involving panelists.
However, it seems that Canada has been able to block any action to
remove this panelist from the case.
This situation is unacceptable and indicates that fundamental reform
of the NAFTA panel process is required. We cannot allow NAFTA panelists
with a conflict of interest to rule in these cases, especially since
their rulings are equivalent to a Federal Court order. At the very
least, such panel decisions should be subject to Presidential review
before being implemented. I have an amendment that would implement such
a review procedure. However, while this is an urgent matter that
affects the outcome of the largest trade case in U.S. history, I
recognize that the Senate is close to completing the FSC/ETI bill. I do
not want to beleaguer that eventuality, so I am willing to withdraw
this amendment, and agree instead to work with my colleagues,
particularly on the Senate Finance Committee, to have this issue firmly
addressed by the Senate in the near future.
Mr. BAUCUS. I want to join my colleague from Oregon in support of
this amendment, which cannot be considered for inclusion in the
legislation at hand. I concur that action must be taken to ensure the
integrity of the Chapter 19 Panel Process. There is a clear breakdown
of due process with respect to Chapter 19. The decision by the NAFTA
Panel to reject the UTC's injury analysis in the softwood lumber
dispute between the U.S. and Canada proves to me that the credibility
of the NAFTA Panel process is in serious jeopardy. By imposing an
impossible standard for proving ``material injury'', this NAFTA Panel
seems to be saying that it will reject any antidumping or
counterveiling duty in any circumstance. If the ANFTA dispute panel
process wants to maintain its credibility, the panelists themselves
must respect the limits of their responsibility. No country will allow
the dispute panel process to undermine the integrity of perfectly valid
trade remedies. Action must be taken to address this situation, and I
can give my colleague my assurance that I will work to find an
opportunity for the Senate to consider his amendment in the near
future.
Mr. CRAIG. I want to echo the concerns my colleagues from Oregon and
Montana have on this issue. Resolution of the Canadian softwood lumber
dispute has gone on far too long. Meanwhile our domestic industry
continues to suffer from subsidized and dumped Canadian lumber.
Mr. CHAMBLISS. The forestry industry is important to the State of
Georgia. Let's take a look at the facts: Georgia's total land area
covers 36.8 million acres of which 66 percent of that is forested; my
home State has the sixth largest percentage of forested lands in the
country which is twice the national average; and, commercial forest
land in Georgia covers approximately 23.8 million acres, more than any
other state. Georgia's forest industry generates 177,000 jobs where
employees directly or indirectly work in industries supporting forest
products manufacturing.
This is why I sponsored a resolution in the House of Representatives
in 2001 that highlighted the problems associated with the importation
of unfairly subsidized Canadian lumber and urged the administration to
vigorously enforce U.S. trade laws with regard to the importation of
Canadian lumber. One of my highest priorities has been to see this
trade issue resolved and limit the injuries caused to the U.S. timber
and lumber industries by the importation of unfairly traded lumber.
Today, Georgia's forestry industry is in serious jeopardy. That is
why I echo the comments of my colleagues regarding the conflict of
interest involving a NAFTA Panelist who will be hearing the Canadian
Softwood Lumber case. This case is very important to the future of
Georgia's forestry industry. This issue and the need to reform the
NAFTA panel process must be handled in an expedient manner. I urge my
colleagues to address this issue as soon as possible.
Mr. SMITH. I thank my colleagues. This is a critical matter that the
Senate needs to exercise its oversight responsibilities upon. If this
issue cannot be addressed in the very near future, my colleagues and I
will have no choice but to bring this amendment back to the floor on
another bill to have an forthright discussion about ensuring the
constitutionally afforded due process U.S. citizens and interests must
have in NAFTA disputes. I also want to applaud the administration in
particular the U.S. Trade Representative, as well as the International
Trade Commission, for acting steadfastly to enforce U.S. trade law. But
their efforts are being thwarted by the current NAFTA Panel rules. This
must be changed.
Mr. SMITH. I would like to engage the Senator from Iowa in a colloquy
regarding section 102 of the bill in order to clarify the Senator's
intentions.
Mr. GRASSLEY. I would be pleased to engage in a colloquy with the
Senator from Oregon.
Mr. SMITH. I want to thank you for your strong leadership on this
very important piece of legislation and call your attention to one
specific provision in S. 1637 known as the domestic production
activities deduction. As you know, your bill includes a provision that
allows for a deduction for income from manufacturing done in the United
States. However, as I understand, the provisions phases in the
deduction much more slowly for companies that also manufacture abroad.
At a time when American manufacturing jobs are leaving our country in
record numbers, we need to support all companies that employ Americans,
not penalize them. I know that we agree that multinational companies
should not be penalized merely because they also manufacture abroad.
Thus, I would like to clarify that it is your intent to urge your
colleagues during the Senate/House conference deliberations on this
bill to eliminate this penalty in the final bill that is sent to the
President for his signature.
Mr. GRASSLEY. The Senator is correct. It is my intent to urge my
colleagues to minimize this penalty in the final bill that is sent to
the President for his signature.
income forecast method provision
Mr. BREAUX. Mr. President, I would like to engage in a brief colloquy
with the distinguished chairman and ranking member of the Finance
Committee, Senator Grassley and Senator Baucus, regarding a provision
in the bill that provides needed clarification and helps to insure an
accurate reflection of taxpayers' income.
[[Page S5207]]
The provision I refer to resolves certain uncertainties that have
arisen recently regarding the proper application of the income forecast
method, which is the predominant cost recovery method for films,
videotapes, and sound recordings. The provision merely reinforces the
continued efficacy of existing case law and longstanding industry
practice. For example, the provision clarifies that, for purposes of
the income forecast method, the anticipated costs of participations and
residuals may be included in a property's cost basis at the beginning
of the property's depreciable life. This was the holding of the Ninth
Circuit in Transamerica Corporation v. U.S. (1993). The provision also
clarifies that the Tax Court's holding in Associated Patentees v.
Comm., 4 TC 979 (1945), remains valid law. Thus, taxpayers may elect to
deduct participations and residuals as they are paid. Finally, the
provision clarifies that the income forecast formula is calculated
using gross income, without reduction for distribution costs.
I would like to confirm my understanding with Senator Grassley and
Senator Baucus that by providing these clarifications and eliminating
uncertainty the provision was intended to put to reset needless and
costly disputes.
Mr. GRASSLEY. I am happy to confirm the understanding of the
distinguished Senator from Louisiana. The provision was adopted to
provide needed clarifications in order to eliminate the uncertainties
that have arisen regarding the proper application of the income
forecast method. I believe the disputes that have arisen regarding the
mechanics of the income forecast formula are extremely unproductive and
an inefficient use of both taxpayer and limited tax administration
resources. By adopting these clarifications, I believe the committee
intended to end any disputes and prevent any further waste of both
taxpayer and Government resources in resolving these disputes. Any
existing disputes should be resolved expeditiously in a manner
consistent with the clarifications included in the bill.
Mr. BAUCUS. I agree with the distinguished chairman of the Finance
Committee, Senator Grassley. The disputes resulting from any
uncertainty regarding the proper application of the income forecast
method are extremely unproductive and wasteful. To avoid further waste,
resolution of any disputes must be resolved in a manner consistent with
the clarifications contained in the bill.
Mr. BREAUX. I thank both of my distinguished colleagues for this
important clarification. I hope this puts to rest any uncertainty and
wasteful disputes regarding the proper application of the income
forecast method.
kiddie tax
Mr. FRIST. In February of this year, a constituent wrote me to
express his concerns about the negative impact expansion of the
``kiddie tax'' would have upon his family, and more specifically his
quadriplegic daughter. His daughter's assets are in a trust
administered by an independent third party trust department of an
investment firm. The assets were awarded to his daughter by a court by
law pursuant to a settlement agreement after she suffered from injuries
at birth. The assets in his daughter's trust are to be used to provide
her income after she should have been able to move into the work force.
The funds will help pay for medical care and personal caregiver
services.
The situation is described in more detail in a letter to me from my
constituent, Mr. Gary Domm. At this time, I ask unanimous consent this
letter be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Gary W. Domm, CFP,
Germantown, TN, February 10, 2004.
Subject: The planned continuation of the U.S. ``Kiddie Tax'' laws until
age 18. How Tennessee Individual Income Tax is more fair. Enough is
Enough!
Attention: Legislative Staff.
Dr. Bill Frist, MD,
Memphis, TN
Dear Dr. Frist: As you are surely aware, the Internal
Revenue Code has a provision taxing unearned income of
children under age 14 at their parents upper tax rates. This
regulation is often referred to as the ``Kiddie Tax.''
Obviously, the whole theory behind this law is to stop
investments from being transferred to the children at a lower
tax rate by the parents or maybe grandparents. Fair enough.
However, the law as interpreted in a court case in 1992, said
that it did not matter what the source or the purpose of
those assets were. This is a court ruling that needs to be
overturned by legislation. If the ``Kiddie Tax'' is suppose
to be a tax on assets transferred from relatives, then it
should be administered in that way but not applied to all
unearned income owned by children.
My quadriplegic daughter, who can not speak and will always
be dependent on full time care, is subject to the ``Kiddie
Tax'' law. My wife and I would be considered to have above
average income, both earned and unearned. Therefore my
daughter's unearned income is taxed at a much higher tax rate
than if she was the child of lower income parents. My
daughter's assets are in a trust administered by an
independent third party trust department of an investment
firm. These assets were awarded to my daughter by a court of
law. My daughter's assets were never mine or under the
control of relatives. I probably need not mention that the
federal trust tax rates are even higher so there is no
benefit to these assets being taxed instead in a trust tax
return.
In my case, the assets in my daughter's trust are to
provide her income after she should have been able to move
into the work force under normal circumstances. They will pay
for her medical care, personal caregiver services, and other
expenses that most people do not have to endure until late in
life but certainly not for their entire life. My wife and I
rarely request reimbursement of expenses from these assets
for the extra care that our daughter requires. Our plan is to
financially provide for our daughter until she is at least 21
years old. Yet, my daughter's assets are not allowed to grow
based on their own tax level. They are instead subjected to
usurious tax rates rather than progressively higher tax rates
as the income increases.
The State of Tennessee has had an exemption to state income
tax since the mid 1990's on unearned income derived from
assets for a quadriplegic person. Apparently, the state
recognized that people that are disabled and incapable of
ever working, need a tax break in order not to be more
dependent on government and its agencies.
It is my understanding that Congress is now considering
extending the age for the ``Kiddie Tax Law'' until age 18.
Enough is enough. I have waited patiently for my daughter to
reach the age of 14. She will be 14 this year and will no
longer be subject to being taxed at a rate higher than her
income level. That is, unless Congress changes the laws.
In my case, leaving the ``Kiddie Tax'' regulations alone
would solve my problem, but that would avoid collecting the
extra tax dollars for four more years on families that have
transferred wealth to their children. My problem can also be
solved by removing the ``Kiddie Tax'' in the case of
quadriplegics and other people that will never be able to
work and support themselves. The federal tax laws need to
consider the Tennessee tax regulations and provide exemptions
where needed. I have no doubt that if my daughter could, she
would gladly give away her investments in exchange for a
normal life. Instead the government is subjecting her
investment income to highest taxes just because of her
parents.
Correcting this injustice will not gain many votes
politically, but I am sure you can see that it is the right
thing to do. I am more than willing to discuss this by
telephone with anyone who wishes more specific information.
Being a Tennessee resident and senator, I am sure you can
obtain copies of the exemption regulations for the state. It
is item 3, under the exemption section in the rules mailed
with the Tennessee tax forms. Also the exemption box is
clearly shown on the first page of the Tennessee Tax Return.
Sincerely,
Gary Domm.
Mr. FRIST. According to Mr. Domm, current tax law permits taxation of
this unearned trust income in excess of $1,600 at the child's tax rate
upon the child's 14th birthday. Up until the age of 14, the income was
taxed at the parent's rate of taxation. This year, Mr. Domm's daughter
will turn 14 and will no longer be subject to a tax rate higher than
her income level.
Unfortunately, however, a proposed change in S. 1637 would call for
taxing any unearned income in excess of $1,600 at the parent's income
tax rate until the age of 18 instead of 14. I ask my colleague from
Iowa, is that accurate?
Mr. GRASSLEY. Yes.
Mr. FRIST. Thank you for confirming that, Mr. Chairman. I believe
that it would be good policy to provide some type of exemption to this
so called ``kiddie tax'' for Mr. Domm's daughter and others like her.
That way, we encourage independence and self-sufficiency and do not
penalize individuals who have already had to overcome tremendous
obstacles. Based on that assumption, Mr. Chairman, would you be willing
to work with me and my staff to create an exemption from this tax for
Mr. Domm's daughter and others similarly situated?
Mr. GRASSLEY. I agree with the Senator from Tennessee that such an
exception to the ``kiddie tax'' would be
[[Page S5208]]
good public policy. I commit to you that my staff will work with the
Treasury Department, the Social Security Administration and your staff
during conference negotiations to craft language that addresses Mr.
Domm's concerns but also contains solid anti-abuse language. My hope is
that we could place such language in the final version of S. 1637 or
another appropriate tax bill.
Mr. FRIST. I thank the Chairman for that commitment both personally
and on behalf of my constituent.
Brownfield Revitalization
Mr. LAUTENBERG. Mr. President, I rise to engage several of my
colleagues in a colloquy regarding an important provision in the
manager's substitute amendment to S. 1637. Section 641 of the manager's
amendment was filed by me as an amendment to S. 1637, and it was co-
sponsored by Senators Chafee, Dole and Lieberman.
The language of my amendment is based on S. 1936, the Brownfield
Revitalization Act of 2003, a bipartisan bill that was introduced last
year by Senator Baucus and cosponsored by Senators Inhofe, Dole and
Rockefeller. However, the version of my amendment that is included in
the manager's substitute contains several modifications which improve
it.
My amendment relieves tax-exempt entities that invest in, clean up,
and then re-sell certain brownfield properties from an obscure but
significant provision in the Internal Revenue Code.
First, what is a ``brownfield?'' There are various definitions of
this term. In the Federal Superfund law, a ``brownfield'' is defined as
``real property, the expansion, redevelopment, or reuse of which may be
complicated by the presence or potential presence of a hazardous
substance, pollutant, or contaminant.''
My own State of New Jersey uses a different definition. It defines a
``brownfield'' as ``any former or current commercial or industrial site
that is currently vacant or underutilized and on which there has been,
or there is suspected to have been, a discharge of a contaminant.''
Brownfields are not necessarily highly contaminated sites. Often,
they are moderately or lightly contaminated industrial and commercial
sites that could be productively re-used if they were cleaned up. In
fact, the perception of contamination might be the only thing holding
back a brownfield site from redevelopment.
Reuse of a brownfield site is desirable because it preserves an open
``greenfield'' and can provide an economic stimulus to an inner city or
close-in suburban area.
Our colleague, Senator Dole, is fully aware of how serious the
problem of brownfields is across the nation.
Mrs. DOLE. Mr. President, the North Carolina Department of
Environment and Natural Resources estimates that there are tens of
thousands of potential brownfield sites in North Carolina. To date 44
of these sites have $600 million in committed private investment which
was raised with less than $500,000 in Federal funds. These 44 sites
represent a good step forward to address this issue; however, there are
many more steps necessary before we can declare victory. The critical
component to this equation is the greater availability of private
capital. Currently, the State of North Carolina has 55 more brownfield
sites in the pipeline for remediation and the availability of private
capital will be essential to this effort.
The Nation's mayors have estimated that there are half a million
brownfield sites in the United States. Others have said that there may
be as many as a million such sites. EPA, in an analysis conducted with
George Washington University, has estimated that remediation costs for
all brownfield sites in the country exceed $650 billion. The Chamber of
Commerce estimates that, at the current rate of cleanup, it could take
ten thousand years to clean up all these sites.
According to Environmental Defense, a leading environmental group,
New York City alone has over 4000 acres of vacant industrial lands, the
equivalent of almost four Central Parks' worth of land lying unused in
the core of our largest metropolitan area.
That is why I am a strong supporter of legislation to make available
greater sums of private capital to brownfield remediation efforts. This
is why I am proud to join with my colleagues, especially Senators
Lautenberg, Chafee, Lieberman and Jeffords to support this proposal to
allow non-profits to invest in brownfield remediation efforts. I yield
back to Senator Lautenberg.
Mr. LAUTENBERG. In fact, in my own State of New Jersey, the
Department of Environmental Protection oversees ten thousand potential
brownfield sites, but admits that many more sites may exist in the
State that have not yet been identified.
I ask Senator Lieberman if he is aware of any barriers in our Tax
Code that may be hindering the remediation of brownfields sites.
Mr. LIEBERMAN. As my colleagues know, much has been done at both the
national and State levels, including our own States, to help clean up
contaminated brownfield properties. However, the Federal Tax Code
contains a potential roadblock.
Section 512 of the Internal Revenue Code establishes an unrelated
business income tax, or UBIT, on the income that a tax-exempt entity
derives from a trade or business that is not substantially related to
its exempt purpose.
The UBIT applies to gains from the sale or exchange of property held
primarily for sale to customers in the ordinary course of such a trade
or business. The UBIT also applies to gains from the sale or exchange
of any debt-financed property.
These UBIT provisions have reduced the economic attractiveness of
investments in remediation and redevelopment of the nation's brownfield
sites by tax-exempt entities like university endowments and private
pension funds.
According to the Chamber of Commerce, tax-exempt entities hold about
$7 trillion in financial assets. This is a very large pot of money that
could be tapped for brownfield cleanups.
Mr. LAUTENBERG. This large potential funding source for brownfields
remediation is what my amendment will address by removing one barrier
to brownfields redevelopment.
My amendment allows tax-exempt entities to invest in brownfield sites
without the risk of incurring UBIT liability, provided that certain
conditions are met.
First, the appropriate State environmental agency must certify that
the property is a brownfield site within the meaning of the Federal
Superfund definition.
The amendment does not set up a new certification procedure for this
purpose, but rather piggybacks on a process already in place under
section 198 of the Tax Code to provide tax incentives for commercial
brownfield developers. In fact, another provision of the manager's
substitute amendment extends section 198 through the end of 2005.
Second, the remediation effort must be a significant one. It must
cost more than $550,000, or 12 percent of the fair market value of the
site, determined as if the site were not contaminated. By establishing
relatively high thresholds for eligibility, the amendment excludes
incidentally contaminated property and focuses new capital investment
at sites that are most in need of assistance.
Third, the site must be cleaned up to comply with all environmental
laws and regulations.
Finally, after the cleanup the state environmental agency or EPA must
certify that the property is no longer a brownfield site. In requesting
such a certification, the tax-exempt entity must attest that the
anticipated future uses of the property are more economically
productive or environmentally beneficial than the previous use of the
property. The tax-exempt entity must also attest that it has given
public notice of its request for certification.
Senator Jeffords, the ranking member on the Environment and Public
Works Committee, has been very helpful in developing modifications to
this amendment. Could the Senator from Vermont describe the
modifications we have made that are designed to prevent abuse?
Mr. JEFFORDS. I am happy to fully support this amendment, as
modified. There are three significant modifications:
First, a savings clause has been added to make clear that this
amendment to the Tax Code has no impact on anyone's liability under the
Superfund statute or any other Federal or State environmental law. Just
because a tax-
[[Page S5209]]
entity receives a tax certification signifying that it is not subject
to the UBIT tax does not mean that it can avoid environmental
liability.
Second, the amendment has been modified to include a definition of
``substantially complete.'' An entity is eligible for a tax
certification if its remedial actions at a brownfield site are complete
or substantially complete. As originally drafted, the amendment did not
include a definition of the key term ``substantially complete.'' This
could have created a loophole that allowed entities to get a tax
advantage without fully cleaning up a property. The modification we
have made fixes this problem by borrowing EPA's definition of
``construction complete'' from the Superfund program to define this
term.
The third modification expands the public notice provision that was
already in the amendment. It makes clear that not only must there be
public notice, there must also be a meaningful opportunity for public
comment. In addition, it makes clear the agency that makes the tax
certification, whether EPA or a State agency, must respond to any
significant public comments.
In addition, the amendment has been carefully drafted to prevent
abuse. For example, the taxpayer cannot be the party that caused the
pollution and cannot be otherwise related to the polluter. In addition,
all transactions, such as purchase and sale of the property, must be
made at arms-length with parties unrelated to the taxpayer.
Mr. LAUTENBERG. I thank the Senator for that explanation and for his
help in crafting the amendment. As I mentioned earlier, my amendment is
based on S. 1936, a bipartisan bill introduced by Senator Baucus last
year. That legislation was endorsed by groups as diverse as the Chamber
of Commerce, Environmental Defense, the National Taxpayers Union, and
the U.S. Conference of Mayors. I yield the floor.
energy tax incentives
Mrs. LINCOLN. Mr. President, I want to congratulate Chairman Grassley
and Senator Baucus on their decision to include a package of energy tax
incentives in this bill. These tax incentives will promote the future
development and production of renewable fuels, which we hope one day
will lessen our dependency on foreign oil.
The package of energy tax incentives now before us was first reported
by the Finance Committee last year as part of H.R. 6, the Energy Tax
Policy Act of 2003, and the Senate considered H.R. 6 in July of 2003.
During floor debate of that legislation, I raised two concerns that I
hoped would be addressed in the House-Senate conference of the energy
bill. Chairman Grassley agreed with my points and assured me he would
use his best efforts to resolve these matters. True to his word, as
always, the chairman addressed my concerns in the conference version of
H.R. 6. But as we all know, the conference version of H.R. 6 failed to
gain enough votes to pass the Senate.
Now, the chairman has decided to move a text that is essentially the
same finance Committee package of energy tax incentives, not the
conference version of the bill, as part of the FSC/ETI bill. One of my
concerns, relating to the definition of a landfill gas facility, has
been resolved by virtue of the fact that the provision in the Finance
Committee package has been dropped. But the other concern remains. So
now again, I feel compelled to raise this concern, and once again,
request the chairman's assistance to address it in a House-Senate
conference. So please bear with me again while I explain my concerns
for the record.
On February 11 of 2003, I introduced S. 358, the Capturing Landfill
Gas for Energy Act of 2003. The bill is cosponsored by Senators
Santorum and Hatch and would provide a credit under either Section 29
or 45 of the tax code for the production of energy from landfill gas,
or LFG.
In the past, Congress recognized the importance of LFG for energy
diversity and national security by providing a Section 29 credit in
1980 and extending it for nearly two decades. However, the Finance
Committee bill before us fails to recognize the importance of LFG in
its creation of a new Section 45 credit. In contrast, the President
proposed a generous Section 29 credit for LFG, and the House has passed
a Section 45 credit for LFG as part of its energy bill. Both of these
proposals would provide meaningful tax incentives to encourage the
collection and use of LFG. Thus, this version of energy tax incentives
falls well short of recognizing the importance of dealing with LFG, and
I urge the chairman to address this shortfall in the House-Senate
conference by affording the same incentive for LFG that other renewable
energy sources are given under the final legislation.
The potential energy and environmental benefits of future LFG
projects are substantial, but they will be lost if we do not provide
adequate provisions to support project development. I want to thank
Chairman Grassley and Senator Baucus for their past work and support in
addressing these important concerns. Further, I hope and request that
they once again work with me to make sure Americans garner all of these
important benefits.
Mr. GRASSLEY. Mr. President, I want to assure Senator Lincoln that I
will continue to work with her to make sure adequate incentives for LFG
are included in any final package from the upcoming House-Senate
conference. Her concerns are my concerns as well. She has stated them
well and I will devote my best efforts to resolving them as we move
forward on discussions and deliberations with the House of
Representatives.
car provision
Mr. BAUCUS. Mr. President, I raise an issue with regard to the car
donation provision included in the JOBS bill. Under the provision
donors are limited to deducting the actual sale price of the vehicle
that is donated to charity, unless the charity uses the car, in which
case donors a get fair market value deduction. This is a good rule. It
will cut out abuse of this charitable giving device, and make it easier
for donors to comply with the tax law. However, I am also concerned
about the potential for charities that intentionally sell/transfer
donated vehicles at a low or no cost to low-income recipients as part
of a charitable program to be unintentionally hampered from doing so. I
believe the law is written in such a way that if the car is given by
the charity to a low income family, or used for parts to repair a
different car, there is no sale that triggers the sales proceeds limit,
and the donor gets a fair market value deduction. I agree with some
folks' suggestions that the sales to needy families case does not fit
within the ``use by the charity'' rules as presently drafted. But
trying to modify the proposal to move away from the sale bright line
rule can be tricky, and I fear we would be opening up the proposal to
abuse. I pledge to charities that do sell cars to low-income or needy
individuals at reduced prices as part of a charitable program, that we
will expand regulatory authority during conference or a preconference
period with the House to permit Treasury to issue rules excepting
certain sales from the sales proceeds limit and certain reporting rules
if the sale furthers a charitable purpose.
Mr. GRASSLEY. I agree with your concerns, Senator Baucus, and I also
am in favor of giving Treasury this expanded authority.
Mr. BURNS. Mr. President, I rise today to discuss one small piece of
this legislation which will make a big difference in rural States such
as Montana. I am talking about the broadband expensing provision, which
would encourage broadband providers to extend their networks to
underserved areas, and to upgrade their networks to ``next-generation''
speeds so that they can deliver a full complement of voice, video and
data services. We have been working on this legislation since 2000--
Senator Rockefeller, Senator Baucus, Senator Grassley, Senator Clinton.
There are a lot of us who feel strongly about this issue. It has passed
the Senate twice now, but, unfortunately, we have been unable to
persuade our friends on the other side of the Capitol to support it. So
I want to thank the Finance Committee for including it again in this
bill, and I am going to push my colleagues on the House side to get
behind it this time because it is very important. It is important for
rural areas, for underserved inner city areas, for education, for
health care, for energy savings, for a
[[Page S5210]]
whole list of reasons. And I want to say this. It is fitting for this
broadband incentive to be included in the FSC/ETI bill because this
provision will have a big effect on international competitiveness. We
are hearing a lot about ``offshore outsourcing'' these days, and
broadband is a response to that. If we have a robust high-speed network
all over this country, companies will not need to send jobs to India--
we can do them in Montana, and in Iowa, and in West Virginia, and in
communities all across the nation where costs are lower. So this is
about providing an infrastructure that makes us more productive, just
as the Interstate highway system, and rural electrification, and the
transcontinental railroad all made the Nation more productive.
Broadband is a key infrastructure of the 21st century, and we need to
construct it as quickly as possible. I believe this provision will help
do that, and I look forward to working with my colleagues to ensure its
enactment this year.
Mr. ROCKEFELLER. Mr. President, I am extremely pleased at the
progress that the Senate has made this week on the legislation before
us, known as the JOBS Act. Like most of my colleagues, I support this
bill, because I believe that Congress must respond to the increasingly
difficult competitive position of our manufacturing industry. I urge my
colleagues to continue working on this bill, debate and vote on the
relatively few remaining amendments, and then pass this bill.
For generations, American manufacturing has been a tremendous source
of pride and a ladder to the middle class. Unfortunately, over the last
3 years, the manufacturing sector of our economy has suffered
disproportionately and millions of good jobs have been lost. Tomorrow
the Labor Department will announce new statistics on employment for the
month of April. I understand that many experts expect tomorrow's news
to be positive. And certainly, we were all very glad to hear that
308,000 jobs had been created in March.
A couple months of strong job growth should not lull this Congress
into believing that the manufacturing sector is enjoying a healthy
recovery. Indeed, in March no new manufacturing jobs were created at
all. Nationwide almost 3 million manufacturing jobs have been lost
since January 2001. In my home State of West Virginia, more than 10,000
manufacturing jobs have disappeared in that time.
Regardless of tomorrow's news, this Congress must stay focused on the
task at hand. We must eliminate the European tariffs that are currently
imposed on many of our goods, and we must enact a fair tax policy that
will shore up our manufacturing base. The JOBS Act is accomplishes
these goals.
The JOBS Act repeals the foreign sales corporation/extraterritorial
income provisions in our current tax code in order to comply with the
ruling of the World Trade Organization. Regardless of whether I agree
with the obligations that the WTO has ascribed to the U.S., I believe
that Congress must act quickly to resolve this impasse and restore good
trade relations with Europe. Because repealing these provisions would
impose a new tax burden on American manufacturers just at a time when
they are already struggling to compete globally, the JOBS Act would
create a new deduction for our manufacturers to reduce the cost of
doing business in the U.S. In that regard, this legislation is very
similar to a bill I introduced last year, the Security America's
Factory Employment Act. I know that many of the CEOs in my home state
find it difficult to offer good wages, provide health insurance and
retirement benefits, pay taxes, and still make a reasonable profit.
Passing the JOBS Act will dramatically reduce the tax burden these
businesses face, helping them succeed and grow.
Indeed, while the name of this legislation is certainly awkward, the
Jumpstart Our Business Strengths Act, the acronym JOBS is fitting.
There are a number of very promising provisions in this bill that can
offer hope to struggling businesses and the millions of Americans
looking for work. In addition to lowering the tax rate on domestic
manufacturing operations, this bill extends valuable tax provisions on
which American companies depend.
For example, this legislation would improve and extend the research
and development tax credit. By spurring investment in innovation this
tax credit helps our companies stay competitive and helps keep
exciting, well paid jobs in the U.S. The bill also extends tax
incentives for the hiring of those who might otherwise depend on public
assistance. The work opportunities tax credit and the welfare to work
tax credit have been extraordinarily successful, and Congress should
ensure that businesses can continue to use them.
I am also very pleased to have worked with my colleagues to provide
assistance to companies that are subject to alternative minimum tax
obligations by enabling them to take advantage of the legitimate tax
benefits of bonus depreciation and general business credits even if
their AMT liability would otherwise prevent such benefits. While I wish
we could have made this provision even more substantial, this
assistance creates incentives for companies to invest in new projects
and purchase new equipment in--other words, it helps those companies
contribute to our economic recovery.
Another key to our Nation's economic vitality is technological
development and deployment. When the Senate Finance Committee
considered the JOBS Act last fall, I was very pleased that the
committee accepted my amendment to provide tax incentives for the
deployment of cutting edge broadband technology. The United States
currently ranks eleventh in the world in broadband availability.
Millions of Americans, especially in rural areas, do not have access to
broadband. We must remedy this situation so that everyone can benefit
from activities such as telemedicine, telecommuting, and distance
learning. Widespread broadband technology is critical to increasing our
productivity and keeping America competitive with nations that offer
technology-savvy workforces. I thank my colleagues who have worked with
me to include the broadband tax incentives in this legislation, and I
look forward to getting these provisions enacted this year.
I am gratified also that the managers of this bill and the leaders on
both sides of the aisle have seen their way to including the energy tax
provisions that many of us in the Senate have been working to enact for
many years. In particular, I am happy to see the Senate working to
pass, once again, meaningful incentives to promote the development of
clean coal technologies and the expanded development of oil and gas
from nonconventional sources. These particular incentives are crucial
to meeting our Nation's future energy needs, and I cannot emphasize
adequately how important they are to my state of West Virginia.
As the high price of gasoline at the pump continues to set new
records, the inclusion of new incentives for the use of alternative
fuels and the vehicles that use them are especially timely. I am proud
to have worked for many years with a bipartisan group of Senators on
these provisions, and I join them in hoping our action on the JOBS Act
will lead, finally, to their enactment.
I have been a long-time advocate for a responsible energy policy for
this nation. I am frustrated that the current political mindset of some
in the House leadership prevents us from getting a final comprehensive
bill that can pass the Senate. Still, I am pleased that the Senate has
again demonstrated with these tax provisions, including important
incentives for energy efficiency and conservation, the genuine
bipartisan consensus the country needs to secure our energy supply and
lessen our dependence on foreign sources of energy.
Because of the many important provisions I have described, I am
looking forward to supporting this bill. As can be said about almost
all legislation, this bill is not perfect. Rather it is the result of
compromises. I was very disappointed that my colleagues did not agree
to add Trade Adjustment Assistance for service workers or to improve
the health care tax credit available to workers who lose their job as a
result of our trade policies. In addition, I do not believe it is good
policy to allow companies who have deliberately avoided U.S. taxes by
keeping their profits overseas to now enjoy a tax break on repatriated
income. Yet, on balance, this legislation will be beneficial for our
manufacturing companies and our economy as a whole.
[[Page S5211]]
We have made substantial progress this week. I look forward to voting
on the few remaining amendments, including a very worthy proposal to
extend unemployment benefits for those workers who have been hardest
hit in this economy. I urge my colleagues to continue to make progress
on this legislation and work with our counterparts in the House of
Representatives so that we can send this to the President.
Mr. FEINGOLD. Mr. President, while I strongly supported a timely
finish to debate on this measure, I voted against the motion to invoke
cloture on S. 1637. The debate over the past few days leading up to
this vote has made it clear that the total time needed to consider the
amendments remaining on this measure totaled less than 2 hours. So
there was no need to invoke cloture on this legislation. Unfortunately,
cloture does mean that critical amendments, including my own amendment
to strengthen our Buy American law, would no longer be in order.
To be clear, I do not support delaying consideration of the
underlying bill. As I indicated to both leaders, I was willing to enter
into a short time agreement for consideration of my amendment, and I
understand that others who were offering amendments were also willing
to limit the time on their amendments. But cloture not only limits the
time available to debate this bill, it also means that the Senate will
not be able to consider my amendment, as well as other worthy proposals
that relate directly to the loss of manufacturing jobs that has wracked
so many communities in Wisconsin and across the country.
Mr. KENNEDY. Mr. President, all of us are pleased by Department of
Labor reports showing that the economy has finally had two months of
good job growth. It is welcome news. However, that news must be viewed
as part of the overall economic picture. Job growth is still far behind
what President Bush predicted when his tax cuts were enacted last
summer--two million jobs behind. Employment in the manufacturing sector
is still anemic. The pace at which American jobs are being shifted
overseas is still accelerating.
Working men and women in America are facing an economic crisis which
threatens their job security and their families' well-being. Since the
beginning of 2001, there has been a net loss of nearly two and a half
million private sector jobs. In prior economic downturns, most of the
job loss was the result of temporary layoffs. As the economy picked up,
workers returned to their old jobs. Unfortunately, that is no longer
the case. Economists tell us that most of the millions of jobs lost in
the last three years are gone for good. With each job lost, a family is
placed in jeopardy. We must look behind the statistics to the people
who, through no fault of their own, are now facing hardship and
uncertainty.
Unfortunately, the Bush administration's response to these people has
been weak and ineffective. Huge tax cuts heavily skewed to the wealthy,
and rosy predictions that have consistently proven false. Long term
unemployment has nearly tripled under President Bush. Unemployed
workers remain without jobs longer than at any time in the last 20
years. Nor is there any basis to conclude that the hemorrhaging of jobs
in the manufacturing sector is at an end. And the relatively small
number of new jobs that are being created pay, on average, 21 percent
less than the jobs that have been lost. The Republican strategy of tax
breaks for the rich and platitudes for the public will not solve the
ongoing economic crisis. We need new leaders who will give us a new
economic plan.
The so-called JOBS bill which the Senate is finally considering does
not provide that new economic plan. Rather, it is a hodge-podge of
unrelated and sometimes inconsistent provisions. Some of them--
principally the new deduction for domestic manufacturing and the
extension of the research and development tax credit--will help to
create jobs. However, there are many other provisions in the bill which
could actually make the job loss worse.
This legislation is really schizophrenic. On the one hand, it creates
over $65 billion in new tax benefits for domestic manufacturers to help
them maintain, and hopefully add, jobs here at home. On the other hand,
it provides nearly $40 billion in new and expanded tax breaks for
companies doing business abroad. Many of these international provisions
will actually make the exporting of American jobs more financially
attractive to multinational corporations.
Providing assistance to domestic manufacturers is the right thing to
do. We have lost more manufacturing jobs in the last three years than
in the preceding twenty years--a net loss of nearly 3 million jobs
since 2000. This is a genuine crisis for working families across
America. They are looking to us for help, and we owe them a strong,
unambiguous response.
Unfortunately, the legislation as reported from the Finance Committee
does not provide that strong, unambiguous response that American
workers are looking for. It contains deep internal contradictions which
will seriously hamper its effectiveness in preserving domestic
manufacturing jobs.
Providing more tax breaks for multinational corporations is the wrong
thing to do. It's more than the loss of $40 billion in tax revenue that
could be used for many better purposes that is troubling. What is most
disturbing is the fact that many of these international provisions will
actually encourage companies to shift even more American jobs to low
wage countries.
The international provisions should be removed from the bill, and the
tax dollars saved should be used to increase the tax benefits for
domestic manufacturing.
It is outrageous that this bill proposes to expand the value of the
foreign tax credits which multinational corporations receive. Under the
legislation, these companies would pay even less in U.S. taxes on the
profits they earn from their business abroad than they do today--$40
billion less. This will create further incentives for them to move jobs
abroad, undermining the intent of the legislation.
From the perspective of preserving American jobs, one of the worst
features of corporate tax law is a special tax subsidy for
multinationals known as ``deferral.'' If a U.S. company moves its
operations abroad, it can defer paying U.S. taxes on the profits it
makes overseas until the company chooses to send those profits back to
America.
In essence, it allows the corporation to decide when it will pay the
taxes it owes to the U.S. Government. That is a luxury that companies
making products and providing services here at home do not have. This
is an enormous competitive advantage which the tax code gives to
companies doing the wrong thing--eliminating American jobs--over
companies doing the right thing--preserving jobs in the United States.
We should be eliminating this special tax break for multinationals.
Instead, this bill proposes to expand it. It makes changes in the
deferral rules which will actually encourage companies to keep profits
earned on foreign transactions abroad longer. As a result, the return
of working capital to the U.S. will be delayed even further, and the
payment of corporate taxes owed to the public Treasury will be
postponed even longer.
This legislation would extend from 5 years to 20 years the amount of
time which a foreign tax credit can be carried forward. Often it is
concern about losing foreign tax credits which leads a corporation to
return foreign earned profits to the United States. By extending the
carry forward period to 20 years, corporations will lose one of the
strongest incentives to bring the money home. The bill also narrows
what is known as Subpart F, which currently prevents the deferral of
American taxation on the profits from certain types of passive
investment income. It would change Subpart F to allow deferral of
income from investment activities, such as commodity hedging
transactions and aircraft and vessel leasing. The location of these
activities can be easily manipulated for tax avoidance purposes. The
bill also removes limitations on the use of foreign tax credits against
the corporate alternative minimum tax, and allows companies to take
advantage of foreign interest payments to make their foreign tax
credits even larger. All of these provisions move the tax code further
in the wrong direction, increasing the profitability of shifting jobs
abroad.
If enacted, these provisions greatly enhancing the value of foreign
tax credits will inevitably lead to the export of more American jobs.
That is
[[Page S5212]]
not just my opinion. Let me cite a statement from the Finance Committee
Democratic staff's analysis of the bill:
[A] dollar of taxes paid today is more costly than a dollar
paid next year. Thus, on a present value basis, deferral
represents significant tax savings--and the savings are
greater the longer taxes are deferred. Accordingly, as a
general matter, the tax burden on investment abroad is lower
than on identical investment in the United States in any case
where the tax rate imposed by the foreign host government is
lower than the U.S. tax rate on identical investment. As a
consequence, deferral poses an incentive for U.S. firms to
invest abroad in low-tax countries.
Creating ``an incentive for U.S. firms to invest abroad in low-tax
countries''--worth billions of dollars--just what we should not be
doing, making an already bad situation for American workers worse!
Not surprisingly, the proponents of this legislation all want to talk
about the tax benefits it will provide for domestic manufacturers,
helping them pressure American jobs. However, the multi-national tax
breaks in Title II will seriously undercut that goal. They will cost
jobs, reducing the net benefit that American workers receive from this
bill. Our corporate tax laws should be rewritten to increase the cost
of exporting jobs and decrease the cost of maintaining jobs in America.
Title II does the opposite. These international provisions should be
removed from the bill, and the tax dollars saved should be used to make
the tax benefits for domestic manufacturing more robust. That would
truly make this legislation a JOBS bill we could all be proud of.
The PRESIDING OFFICER. The Senator from Oklahoma.
Mr. NICKLES. Madam President, I wish to make a few comments regarding
the bill.
First, I compliment my colleagues, Senator Grassley and Senator
Baucus. We will be successful in passing a bill today. I compliment
them for it. I believe we have been on this bill for about 14 days,
maybe 15 days. They have considered hundreds of amendments. In my
opinion, this bill has gotten pretty expensive and I want to talk about
it a little bit.
Senator Kyl and I voted against the bill reported out of the Finance
Committee primarily because the committee-reported bill had a
differential rate for manufacturers than other corporations. It said
manufacturers should have a rate of 32 percent and other corporations
have a rate of 35 percent.
Prior to my coming to the Senate, I ran a manufacturing company. I
should be saying, Thank you very much. I may be going back to a
manufacturing company. So maybe I should say, Thank you very much. But
this is terrible tax policy. The Senate and the Congress, if it becomes
law, will regret it.
Members might say, Why is that? First, who is a manufacturer? You
would think it would be very obvious who is a manufacturer but,
frankly, it is not. The only thing that is certain out of this bill,
there will be lots and lots of lobbyists lining up to be defined as
manufacturers because if you are defined as a manufacturer, you get a
10-percent lower rate than all the other corporations. As a matter of
fact, the bill defines manufacturers as, obviously, manufacturers, but
also agriculture. So I have a lot of wheat farmers in Oklahoma who will
now be manufacturers--software producers, movie producers. Now
architects and engineers are going to have a lot of people asking they
be defined as manufacturers.
Maybe manufacturing employment will rise as a result of people
redefining themselves as manufacturing, but other than that, I am not
sure it makes sense.
We also have a lot of large corporations that do a lot of things.
They may have a manufacturing division but they also have services or
they also have financials. Probably one of the biggest beneficiaries
dollarwise in this bill, it is my guess, would be a company such as
General Electric or maybe it would be a company such as Boeing or a big
manufacturer. But General Electric, I would guess their financial
services are bigger than their manufacturing.
We will say for part of your corporation you get a corporate rate of
32 percent, but the rest of your corporation gets 35 percent. Guess
what. Where you allocate those expenses will make a difference in your
bottom line. You could have an enormous amount of internal complexity
trying to decide, Should this be allocated to manufacturing? Should it
be allocated to our financial services? Should it be allocated to our
maintenance services? And if you make a mistake, you cannot only be
audited, but you can be fined. But there is a great incentive to crowd
as much income, as much profit into the manufacturing sector, and as
much expenses into the nonmanufacturing sector.
With the complexity of it--albeit we are all trying to help
manufacturers, and I think maybe this is very well intended--I think it
is faulty economic policy.
Canada tried a differential rate, a lower rate, for manufacturers
than other corporations, and they did it in 1982. They repealed it in
2001. I will make a statement on the floor: If this becomes law, we
will repeal it. Congress will repeal it at some point, because our
colleagues are going to hear from people in the field that it does not
work, or that they have been audited and the complexity is too much.
The Treasury Department made these comments:
Taxpayers will be required to devote substantial additional
resources to meeting their tax responsibilities. . . .The
resulting costs will reduce significantly the benefits of the
proposal. . . .
It will be difficult, if not impossible, for the IRS to
craft simplified provisions tailored to small businesses. . .
.
Significant additional IRS resources will be needed to
administer the [manufacturing deduction] provision. . . .
By distinguishing ``production'' from other activities, the
provision places considerable tension on defining terms and
designing anti-abuse rules.
In other words, I have heard lots and lots of people say they are for
tax simplicity. This is just the opposite, and we are going to regret
it. I want people to know that. I would like for them to know it before
it becomes law so we do not make a mistake, because I believe it will
be a mistake.
I asked the Congressional Budget Office for the economic analysis of
this. I would love for the sponsors of the amendment to know this. CBO
estimates the efficiency gains to the economy are $4 to $7 billion per
year from an across-the-board rate cut. In other words, if we are going
to cut corporate taxes, let's cut all corporate taxes the same. You
could probably do that to a rate of about 33 percent or maybe 33.5
percent or something. But all corporations would be taxed the same.
We have always taxed all corporations the same. To have a
differential rate for manufacturing is a mistake. CBO says the cost--
well, I will finish that. They say: The gains to the economy are $4 to
$7 billion per year from an across-the-board rate cut. That is $40 to
$70 billion over the next 10 years. That is a significant amount, given
the fact the entire bill was $110 billion. Now that was $110 billion
when we reported it out of committee. The bill now moves around not
$110 billion, not $120 billion, but $170 billion. It is a big bill. It
adds a lot of miscellaneous provisions. A lot of them, in this
Senator's opinion, should not be in the bill.
I hope and expect to be a conferee, and I will tell our conferees, I
will always work with my colleague from Iowa because I have great
respect for him. I think the differential rate is a mistake. I also
think there are a lot of extraneous provisions that were put into the
bill that should not be that are bad tax policy, and maybe they need to
be reviewed very closely before they become law.
I plan on being pretty active in the conference, to try to accept
amendments that make sense, to try to make us more competitive, to try
to avoid the fines and the penalties and the tariffs that are being
imposed by the EU. I very much agree with the objective of the bill.
Let's avoid those penalties. Let's not get in a trade war. Let's not
have countervailing tariffs. But let's not add a bunch of junk to the
tax policy.
The table of contents, when the bill passed the Finance Committee,
was about 5\1/2\ pages. The table of contents usually has about 15 or
maybe 20 amendments on a page. There are now about 11 or 12 pages on
the table of contents. In other words, this bill has hundreds of
provisions and a lot of them have nothing to do with manufacturing. A
lot of them have nothing to do with being compliant with WTO,
[[Page S5213]]
being compliant with trying to eliminate trade tariffs that are imposed
on the United States.
So again, I regret I could not support the bill when it came out of
the Finance Committee. I know it is going to pass by a big margin
today. I compliment the sponsors of the amendment, Senator Grassley and
Senator Baucus. I compliment them for their work and patience and
tenacity in getting us here. I look forward to working with them in
conference to hopefully make a better bill, compliant with WTO,
something we can afford, and something that will not add 1,000 pages to
the IRS Code.
I yield the floor.
Mr. GRASSLEY. Madam President, Senators Kyl and Nickles say that a
lower rate just for manufacturing is ``bad tax policy and is virtually
without precedent in our history.''
Well, this is just wrong and the evidence is staring them in the
face. FSC/ETI itself is a tax cut for manufacturing. FSC/ETI keeps U.S.
manufacturing competitive by lowering tax rates on exports.
Manufacturers could lower their rates by 3 to 8 points.
The Joint Committee on Taxation says that 89 percent of all FSC/ETI
benefits go to manufacturing companies. The Kyl-Nickles Treasury
proposal would take money from FSC/ETI and spread it to other industry
sectors.
Kyl-Nickles will be a $50 billion tax increase on manufacturing. It
will not send the FSC/ETI repeal money back to manufacturing. It is
mathematically impossible for their proposal to work any other way.
We know that tax increases do not create jobs. So why would Senator
Kyl and Nickles increase manufacturing taxes by $50 billion?
There are other reasons why we did not go the route of the Kyl-
Nickles approach. First, their top-level rate cut would only go to the
biggest corporations in America. It would not go to family-held S
corporations, partnerships, or smaller corporations.
Under the Finance Committee bill, all manufacturers in America,
regardless of size, get a 3-point rate cut, including S corporations
and partnerships.
S corporations and partnerships benefit under current FSC/ETI law, so
the Kyl-Nickles bill takes a benefit away from them and gives it to
large corporations.
Kyl-Nickles claim that a manufacturing tax cut ``penalizes all other
U.S. businesses.'' I think just the opposite is true. The manufacturing
sector should not be a revenue offset to give investment bankers a tax
cut. Kyl-Nickles claim that our definition of manufacturing is too
difficult to understand. But the definition we use in the JOBS Act is
the same definition used for both FSC and ETI. It covers property that
is manufactured, produced, grown or extracted within the United States.
This definition is 20 years old, but suddenly no one understands what
it means. We did confirm that manufacturing includes computer software,
films, and processed agricultural goods. Kyl-Nickles claim that these
are special interest definitions of manufacturing. However, all of
these activities qualified as manufacturing under the FSC/ETI rules,
which have been in place for 20 years.
We also ensured that farm co-ops get the same benefit that they do
under current law.
In response to our energy crisis, we provided that refining oil
pulled from American wells would qualify as manufacturing.
They claim it is too difficult to allocate income and expenses in
determining the amount of manufacturing income. But for 20 years,
Treasury has had administrative pricing rules on its books that tell
taxpayers how to allocate expenses in figuring FSCETI benefits. Our
JOBS bill grants Treasury broad latitude to revise the cost allocation
rules, based on existing tax principles.
Kyl-Nickles also claims that Canada recently gave up a similar
manufacturing rate cut because it did not work. This is not correct.
For many years, Canada had a special lower rate for their manufacturing
sector. Canada created their manufacturing rate cut in reaction to the
U.S. creating FSC back in 1982. They reduced their rate on
manufacturing so they could stay competitive with the U.S. Canada
recently repealed that provision because they reduced all their
corporate rates to the lower manufacturing rate.
Canada did not repeal their manufacturing rate cut because of its
complications. Canada ended their manufacturing regime because it
worked so well, that they extended it to all sectors. But when Canada
reduced their overall tax rates, they did not do so at the expense of
their manufacturing sector.
We put together a strong bipartisan bill, with a 19-to-2 vote out of
committee, that will cut our manufacturing tax rate this very year.
There is no purpose in blocking such a strong bipartisan bill. These
days, is it rare that we can reach such strong agreement on anything.
Mr. President, the CBO report says the flat corporate rate cut would
yield slightly more long-term growth than the JOBS bill. But the reason
has nothing to do with our manufacturing tax cut.
CBO says the antitax shelter provisions and Senator Smith's and
Senator Ensign's homeland reinvestment provisions are the cause.
CBO says that because we shut down shelters, corporations' taxes
won't be as low and, therefore, their long-term growth is not as high.
CBO also concludes that Senators Smith's and Ensign's temporary 1-
year rate cut won't help in the long-term.
The CBO concludes that a flat rate cut could be more ``efficient''
than a manufacturing rate cut. So what do they mean by ``efficient''?
They said it means that a manufacturing rate cut would cause more
capital to flow into the manufacturing sector.
So I have to ask, what is the problem?
I thought tax cuts were designed to increase capital investment.
Isn't that what we want for manufacturing?
If we increase taxes on manufacturing, then capital should flow out
of the manufacturing sector. Is that what we want?
The PRESIDING OFFICER. The Senator from Michigan.
Amendment No. 3120, As Modified
Mr. LEVIN. Madam President, I ask unanimous consent that our
amendment No. 3120 at the desk be modified and called up.
The PRESIDING OFFICER. Is there objection to the amendment being
modified?
Without objection, it is so ordered.
The clerk will report the amendment.
The legislative clerk read as follows:
The Senator from Michigan [Mr. Levin], for himself, Mr.
Coleman, and Mr. Harkin, proposes an amendment numbered 3120,
as modified.
Mr. LEVIN. Madam President, I ask unanimous consent that further
reading of the amendment, as modified, be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment, as modified, is as follows:
(Purpose: To restrict the use of abusive tax shelters to
inappropriately avoid Federal taxation, and for other purposes)
On page 204, strike lines 3 through 15, and insert the
following:
SEC. 415. PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS.
(a) Penalty for Promoting Abusive Tax Shelters.--Section
6700 (relating to promoting abusive tax shelters, etc.) is
amended--
(1) by redesignating subsections (b) and (c) as subsections
(d) and (e), respectively,
(2) by striking ``a penalty'' and all that follows through
the period in the first sentence of subsection (a) and
inserting ``a penalty determined under subsection (b)'', and
(3) by inserting after subsection (a) the following new
subsections:
``(b) Amount of Penalty; Calculation of Penalty; Liability
for Penalty.--
``(1) Amount of penalty.--The amount of the penalty imposed
by subsection (a) shall not exceed 100 percent of the gross
income derived (or to be derived) from such activity by the
person or persons subject to such penalty.
``(2) Calculation of penalty.--The penalty amount
determined under paragraph (1) shall be calculated with
respect to each instance of an activity described in
subsection (a), each instance in which income was derived by
the person or persons subject to such penalty, and each
person who participated in such an activity.
``(3) Liability for penalty.--If more than 1 person is
liable under subsection (a) with respect to such activity,
all such persons shall be jointly and severally liable for
the penalty under such subsection.
``(c) Penalty Not Deductible.--The payment of any penalty
imposed under this section or the payment of any amount to
settle or avoid the imposition of such penalty shall
[[Page S5214]]
not be deductible by the person who is subject to such
penalty or who makes such payment.''.
(b) Effective Date.--The amendments made by this section
shall apply to activities after the date of the enactment of
this Act.
On page 207, strike lines 1 through 18, and insert the
following:
SEC. 419. PENALTY FOR AIDING AND ABETTING THE UNDERSTATEMENT
OF TAX LIABILITY.
(a) In General.--Section 6701(a) (relating to imposition of
penalty) is amended--
(1) by inserting ``the tax liability or'' after ``respect
to,'' in paragraph (1),
(2) by inserting ``aid, assistance, procurement, or advice
with respect to such'' before ``portion'' both places it
appears in paragraphs (2) and (3), and
(3) by inserting ``instance of aid, assistance,
procurement, or advice or each such'' before ``document'' in
the matter following paragraph (3).
(b) Amount of Penalty.--Subsection (b) of section 6701
(relating to penalties for aiding and abetting understatement
of tax liability) is amended to read as follows:
``(b) Amount of Penalty; Calculation of Penalty; Liability
for Penalty.--
``(1) Amount of penalty.--The amount of the penalty imposed
by subsection (a) shall not exceed 100 percent of the gross
income derived (or to be derived) from such aid, assistance,
procurement, or advice provided by the person or persons
subject to such penalty.
``(2) Calculation of penalty.--The penalty amount
determined under paragraph (1) shall be calculated with
respect to each instance of aid, assistance, procurement, or
advice described in subsection (a), each instance in which
income was derived by the person or persons subject to such
penalty, and each person who made such an understatement of
the liability for tax.
``(3) Liability for penalty.--If more than 1 person is
liable under subsection (a) with respect to providing such
aid, assistance, procurement, or advice, all such persons
shall be jointly and severally liable for the penalty under
such subsection.''.
(c) Penalty Not Deductible.--Section 6701 is amended by
adding at the end the following new subsection:
``(g) Penalty Not Deductible.--The payment of any penalty
imposed under this section or the payment of any amount to
settle or avoid the imposition of such penalty shall not be
deductible by the person who is subject to such penalty or
who makes such payment.''.
(d) Effective Date.--The amendments made by this section
shall apply to activities after the date of the enactment of
this Act.
Mr. LEVIN. Madam President, I am offering this amendment along with
our colleague, Senator Coleman. I understand the amendment has been
cleared now on both sides of the aisle. I very much appreciate the
effort that has been put into this matter by Senator Grassley and
Senator Baucus. They have been battling abusive tax shelters for years
now, and it is a privilege to join them in this fight by providing the
IRS with stronger enforcement tools.
Abusive tax shelters are undermining the integrity of our tax system,
robbing the Treasury of tens of billions of dollars each year, and
shifting the tax burden from high income corporations and individuals
onto the backs of the middle class.
The bill before us contains a host of important reforms to combat
abusive tax shelters, including codifying and strengthening the
definition of when a shelter has ``economic substance.'' But there is
an area where the underlying bill falls short and unnecessarily so.
That's on the penalties for the people who design and sell the abusive
shelters. The bill sets the penalty at 50 percent of the fees earned by
these promoters, meaning they get to keep half of their ill-gotten
gains.
That is the provision that our amendment addresses, but we
significantly toughen this provision in a way which I think this body
will totally approve.
The amendment I originally filed proposed raising the penalty on
abusive tax shelter promoters and those who aid or abet tax evasion to
150 percent. Today we have reached a compromise, agreeing to set the
penalty at 100 percent, which will ensure that those who peddle abusive
tax shelters will not get to keep a single penny of their ill-gotten
gains.
The issue is whether when you have an abusive tax shelter, one which
robs the Treasury of millions of dollars, the people who cook up those
tax shelters are going to be penalized in any significant way. Will the
accountants or the lawyers or the investment bankers--the people who
design these deceptive and sham tax shelters, which are abusive and
have no economic purpose, except to avoid taxes--will they be deterred
from doing this? And if they do it, will they be penalized, at least to
the extent of having their ill-gotten gains being taken back from them?
That is the issue.
The current law is like a slap on the wrist. It is like a parking
ticket. These abusive tax shelters, which have been designed by the
banks and the accounting firms, and which have made them millions of
dollars, result in a maximum fine of $1,000 under current law.
What our amendment does is say, if you design and promote an abusive
tax shelter which has no economic substance and you are found
responsible for doing that, the IRS can get all of your fee that is
ill-gotten and wrongfully obtained for cooking up that tax shelter--not
$1,000 of the fee, not half of the fee, as was originally proposed in
the bill, but the entire fee is going to be recoverable by the IRS.
We can take a quick look at one of these tax shelters. This is called
Flagstaff. I am not going to try to explain what that tax shelter you
are looking at does. It is obviously inexplicable. It has all of this
mumbo jumbo, all of these boxes and arrows that were intended by JP
Morgan Chase to create an impression of economic activity when there
was none. That is what this bowl of spaghetti is all about: to create a
sham impression that there was some economic substance to these
transactions when, in fact, there was no economic substance. They were
cooked up in order to create the appearance of economic substance and,
thereby, obtain a tax deduction for them.
The question is, when that happens, whether we are going to say to
these firms that design these tax shelters for Enron, or for whoever:
We are not going to let you, the designers, the perpetrators--who are
called aiders and abettors in the law, but are really the promoters of
the tax shelters--we are not going to let you keep those ill-gotten
fees. We are going to recover those for the Treasury of the United
States.
That is the only real deterrent we have.
I want to quickly show how some of these firms analyze these fees
they get. Again, we are talking about millions of dollars in fees.
These are cookie-cutter tax shelters that are designed and sold by the
hundreds to people who can use a tax deduction for, usually, their
capital gains, but are not engaged in economic activity which would
justify the non-payment of tax on these capital gains.
This is what KPMG did when analyzing one of their phony tax shelters:
First, they look at the financial exposure to the firm. It is minimal.
So what they are saying is: Hey, we can engage in this. We can get away
with it because there is no financial exposure.
. . . we conclude that the penalties would be no greater
than $14,000 per $100,000 in KPMG fees. . . . For example,
our average deal would result in KPMG fees of $360,000 with a
maximum penalty exposure of only $31,000.
They do a cost-benefit analysis.
They cook up and design an abusive tax shelter and then say: Now
should we really go with this? Shall we peddle this, promote it, look
for people who can benefit from it, sell it for hundreds of thousands
of dollars and take the risk that we will be caught? Because what
happens if we are caught? We are going to be paying a few thousand
dollars in penalties and making $100,000. Our maximum exposure, our
financial exposure, is minimal.
That is what this amendment changes.
Last November, the Permanent Subcommittee on Investigations, on which
Senator Coleman is the chairman and I am the ranking member, held
hearings that provided an inside look at how respected accounting
firms, banks, investment advisors, and lawyers have become high-powered
engines behind the design and sale of abusive tax shelters.
These hearings were the culmination of a year-long investigation into
abusive tax shelters, which first began by pulling the curtain away
from one of Enron's sham tax transactions. At the November hearings, we
released a report by my subcommittee staff on four case histories of
abusive tax shelters developed and marketed by KPMG. At the hearings
themselves, we heard from a number of accounting firms, banks,
investment firms, and others.
One of the key findings of the subcommittee investigation was that it
was not taxpayers visiting their tax advisors that provided the engine
for the
[[Page S5215]]
creation of abusive tax shelters, but rather hordes of tax advisors
cooking up one complex scheme after another, and then peddling them to
potential customers. There are legitimate tax shelters and abusive
ones. The abusive shelters are marked by one characteristic: there is
no real economic or business rationale other than a tax reduction. We
found the abusive shelters being packaged up as generic ``tax
products'' with boiler-plate legal and tax opinions, followed by
elaborate marketing schemes to peddle these products to literally
thousands of taxpayers across the country.
It is the insight gained during our close look at these shelters that
led me and Senator Coleman to introduce the Tax Shelter and Tax Haven
Reform Act, S. 2210. While the Levin-Coleman bill addresses a wide
range of tax shelter issues, our amendment focuses on one key issue:
the woefully inadequate penalties that are now on the books for the tax
shelter promoters who concoct and peddle abusive shelters.
Existing tax shelter penalties are a joke. They provide no deterrent
at all. The story begins with Enron, and I think the Enron scandal has
shown us one reason this amendment is so important. The Flagstaff
example I talked about earlier was designed to save Enron more than $60
million in taxes. The whole scam was built around a sham $1 billion
loan that was issued to Enron but was repaid in nanoseconds, and then
used to claim various tax benefits as well as creating a false
impression of profits on the balance sheet. JP Morgan Chase designed
and sold this concoction to Enron for more than $5 million. After Enron
collapsed and this scam came to light, we learned that JP Morgan had
sold the same abusive tax shelter to at least one other company as
well.
Under Section 6700 of the tax code prohibiting the promotion of
abusive tax shelters, JP Morgan was subject to a whopping $1,000
penalty. Let me repeat: For one tax shelter which was abusive because
it was a sham and a deception, JP Morgan Chase's ill-gotten gain from
one company, Enron, was $5 million. Its penalty exposure to the IRS
under current law was $1,000.
As IRS Commissioner Mark Everson said when he testified at our tax
shelter hearings, the current tax shelter promoter penalty is ``chump
change.'' To continue quoting Commissioner Everson: ``We need
significantly increased penalties to hit the promoters who don't get
the message where it counts, in their wallets.''
Our tax shelter investigation found some fascinating documents as
well, including one I have shown here today in the KPMG memo that shows
a particular tax shelter promoter performing a specific cost-benefit
analysis when deciding whether or not to take the risk of peddling an
abusive shelter. The third paragraph of this KPMG memo says:
First, the financial exposure to the Firm is minimal. Based
upon our analysis of the applicable penalty sections, we
conclude that the penalties would be no greater than $14,000
per $100,000 in KPMG fees. . . . For example, our average
deal would result in KPMG fees of $360,000 with a maximum
penalty exposure of only $31,000.
The fact that all KPMG could lose if caught was a small part of its
fee was a driving consideration in KPMG's decision to take the risk.
This memo is proof that weak penalties encourage tax shelters and that
tough penalties would deter them. Congress needs to enact meaningful,
tough penalties to deter promoters from pocketing any gains from
designing and peddling abusive tax shelters. We need to deter folks
from making a cost-benefit analysis that encourages the promotion of a
tax shelter they know is not likely to withstand scrutiny.
Our amendment would do just that by strengthening penalties for
promoting abusive tax shelters.
Our amendment focuses on two key penalties. The first is the penalty
for promoting an abusive tax shelter under Tax Code section 6700. The
second is the penalty for aiding and abetting tax evasion under Tax
Code section 6701. It would increase the penalty for both types of
misconduct.
Currently, the penalty under section 6700 of the Tax Code is the
lesser of $1,000 or 100 percent of the promoter's gross income derived
from the prohibited tax shelter. That means in most cases, the maximum
fine is $1,000. That figure is laughable, when many abusive tax
shelters are selling for $100,000 or $250,000 apiece. Our investigation
uncovered tax shelters that were sold for millions each. The Enron tax
avoidance scam sold for more than $5 million. We also saw instances in
which the same so-called tax product was sold to more than 100 clients.
A $1,000 fine is like a parking ticket for raking in millions
illegally.
The bill before us is an improvement over the status quo, but an
unnecessarily modest one. It would increase the penalty for promoting
an abusive tax shelter to 50 percent of the promoters' gross income
from the prohibited tax shelter. Why should anyone who pushes an
abusive tax shelter--an illegal tax shelter that robs our Treasury of
much needed revenues--get to keep half of his ill-gotten gains? And
what deterrent effect is created by a penalty that allows promoters to
keep half of their fees if caught, and all of them if they are not?
That half-hearted penalty is not tough enough to do the job that needs
to be done.
At the very least, a meaningful penalty for those who peddle abusive
tax shelters must ensure that the tax shelter promoter does not profit
from its wrongdoing. It must require the wrongdoer to disgorge every
penny of the income obtained from selling the shelter. Our amendment
would do just that.
My original amendment would have gone further. It would have created
a maximum penalty equal to 150 percent of the promoter's gross income
from the prohibited tax shelter. Under that penalty, the first 100
percent would have forced the disgorgement of the ill-begotten gains,
and the remaining 50 percent would have imposed what I consider to be
an actual penalty on top of that. But today, our amendment does not go
that far. It stops at 100 percent. While that is not as tough as called
for in the Levin-Coleman bill, it is a reasonable compromise and will
ensure that those who promote abusive tax shelters will lose 100
percent of their ill-gotten gains.
The underlying bill has the same problem in the way it addresses many
professional firms the accountants, law firms, banks, and investment
advisors that aid and abet the use of abusive tax shelters and enable
taxpayers to carry out abusive tax schemes. The underlying bill takes
the same half-hearted approach of denying only 50 percent of the gross
income obtained by the aider and abettor, and allowing the wrongdoer to
keep half of its ill-gotten gains. Just as we do with tax shelter
promoters, our amendment would raise the penalty under tax code section
6701 to 100 percent of the aider or abettor's gross income, thereby
denying them 100 percent of their ill-gotten gains. In addition, our
amendment would make an important change to section 6701 itself by
eliminating a provision which limits the penalty to persons who prepare
tax returns. Instead, our amendment would apply the penalty to all
wrongdoers who knowingly aid and abet the understatement of tax
liability, not just tax return preparers.
Finally, while I am pleased that today we have reached agreement to
accept a 100 percent penalty, I would like to take this opportunity to
observe that penalties that cause wrongdoers to not only disgorge their
ill-gotten gains, but also pay a monetary fine on top of that are fair
and provide a meaningful deterrent.
There is no reason why those who concoct and peddle these shenanigans
should get off any easier than the taxpayers who use them. Just last
week the IRS came out with an initiative to allow taxpayers who used a
tax shelter known as ``Son of Boss'' to come clean. This tax shelter
was marketed beginning in the late 1990s and was one of the tax
shelters we looked at during our investigation. Under the terms of the
IRS initiative, taxpayers are required to come forward and pay 100
percent of the tax they tried to escape. On top of that, the IRS can
impose a penalty that ranges up to an additional 40 percent. That means
the taxpayer faces up to a 140 percent penalty.
Son of Boss is a hellaciously complicated tax shelter that was
dreamed up and carried out by tax shelter promoters and other
professionals. The taxpayers who bought this shelter have to cough up
100 percent plus. It is only fair that the tax shelter promoters who
made so many millions of dollars in profit on these schemes should do
no less.
[[Page S5216]]
It is also important to realize that Congress has frequently set
penalties for corporate misconduct and financial crimes that require
wrongdoers to disgorge 100 percent of their ill-gotten gains plus pay a
penalty on top of that, and courts have upheld those penalties as both
constitutional and enforceable. For example, under current law,
violation of the federal securities laws results in 100% disgorgement
plus a civil fine of up to 100 percent, for a total civil penalty equal
to 200 percent. In the special case of insider trading, violations
result in 100 percent disgorgement plus a civil fine of up to 300
percent, for a total civil penalty equal to 400 percent. Manipulation
of commodity markets results in a civil fine of up to 300 percent.
False claims submitted to the Federal Government result in a civil fine
of up to 300 percent. Even the tax code has penalties of this
magnitude; for example, personally profiting from a charity results in
a civil fine of up to 200 percent.
Men and women in our military are putting their lives on the line
every day for our nation. To make sure we can provide them with the
resources they need, all Americans need to contribute their fair share
in taxes. While the bill before us improves the tax shelter penalties
over current law, we can and should do much better. We need penalties
that truly deter those who make a profit from peddling abusive tax
shelters and aiding and abetting tax evasion, not penalties that would
allow the promoters to keep half of their ill-gotten gains.
It is long past time to stop in their tracks the shelter abusers and
the promoters who push them. This amendment would send the message to
promoters that their tax schemes are unfair and unpatriotic. Again, I
appreciate the bill managers accepting it into the bill.
I also thank Senator Coleman for being such a strong advocate of this
approach, putting in the law a real deterrent to end these abusive tax
shelters which have cost the Treasury and the average taxpayers of this
country, who have to share the burden, so many tens of billions of
dollars. That is now hopefully going to end.
Again, I thank the chairman and ranking member of the Finance
Committee for the way they have worked with us to adopt this amendment.
The PRESIDING OFFICER (Mr. Alexander). Who yields time?
Mr. LEVIN. I yield the balance of my time to my friend from
Minnesota.
The PRESIDING OFFICER. The Senator from Minnesota.
Mr. COLEMAN. Mr. President, I commend my friend, the Senator from
Michigan, for his leadership in protecting the interests of all
taxpayers by originally bringing to light the nature of these abusive
tax shelters. I had the opportunity to work with him to make a
difference, to help shape this amendment.
I also thank Chairman Grassley and Senator Baucus for accepting this
amendment and for their leadership on this issue. I am glad the Senator
from Michigan didn't try to explain and walk through all the details of
his chart of these sham tax shelters. The bottom line is very clear:
The Government gets ripped off. The taxpayers get ripped off. These
abusive tax shelters were established for the purpose of avoiding tax
liability. Those who suffer are all the taxpayers. By this amendment,
by substantially increasing the penalties, by putting some real
deterrent in place, I believe public trust in our laws will be
restored.
In November, as chairman of Permanent Subcommittee on Investigations,
I held two hearings on abusive tax shelters. The permanent subcommittee
spent one year investigating the tax shelter industry. It became clear
to the subcommittee that some tax avoidance schemes are clearly
abusive. These abusive shelters relied on sham transactions with no
financial or economic utility other than to manufacture tax benefits.
According to GAO, abusive tax shelters robbed the Treasury of $85
billion over 6 years. The use of these tax shelters exploded during the
high flying 1990s, when many firms were awash in cash and more
concerned with generating fees than being compliant with the Code. The
lure of millions of dollars in fees clearly played a role in
the decision on the part of tax professionals to drive a Brinks truck
through any purported tax loophole.
Abusive tax shelters require accountants and financial advisors who
develop and structure transactions to take advantage of loopholes in
the tax law. Lawyers provide the cookie-cutter tax opinions deeming the
transactions to be legal. Bankers provide loans with little or no risk.
Yet the amount of the loan creates a multimillion-dollar tax loss.
This became a game. Otherwise reputable professionals were able to
earn huge profits by providing services that offered a veneer of
legitimacy to the transactions. The parties were careful to hide the
transaction from IRS detection by failing to register and failing to
provide lists of clients who used the transactions to the IRS.
It was clear to the subcommittee that the promoters of these tax
shelters failed to register with the IRS partly because the penalties
for failing to register were so low compared to expected profits. As my
colleague from Michigan noted, with the risk-benefit ratio, it was
worth avoiding the law because if you got caught it didn't matter; you
made so much money. The penalties were so little that you took the risk
of avoiding the law. In fact, the benefits were great.
This amendment changes that. Current provisions of the JOBS bill
provide for increased penalties to address abusive tax shelters.
However, I agree with Senator Levin that even stronger penalties are
needed. The provision to substantially increase penalties to promoters
who manufacture these sham transactions so they must give back all of
their ill-gotten gains is vital to restoring the integrity of our tax
laws and deterring future avoidance.
This amendment also increases the amount of penalties for persons who
knowingly aid and abet a taxpayer in understating their tax liability.
Current law and the JOBS bill only apply this penalty to tax return
preparers. We now get the aiders and abettors. However, the close
collaboration between the lawyers, accountants, financial advisors, and
banks requires us to apply penalties to all material aiders and
abettors, not just those who prepare the tax returns.
This is not a victimless crime. It is not the Government that loses
the money. It is the people of America, average working families who
will bear the brunt of lost revenue so that a handful of lawyers and
accountants and their clients can manipulate legitimate business
practices to make a profit. Abusive transactions are used to avoid
detection by the IRS. This amendment sends a clear message that this
Congress intends to put an end to abusive sham transactions.
With the passage of this amendment, the price to be paid for
participating and for promoting abuse will be very steep indeed--all of
your profits.
I am appreciative that the managers have joined me in supporting this
amendment.
I yield the floor.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. I urge adoption of the Levin-Coleman modified
amendment.
The PRESIDING OFFICER. Is there further debate? If not, the question
is on agreeing to amendment No. 3120, as modified.
The amendment (No. 3120) was agreed to.
Mr. GRASSLEY. Mr. President, I move to reconsider the vote.
Mr. BAUCUS. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. GRASSLEY. I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. REID. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Ambassadorial Appointments
Mr. REID. Mr. President, I was in the Chamber this morning when the
distinguished Senator from Tennessee, the majority leader, complained
about our holding up--the Democrats, the minority--appointments to our
ambassadorial corps. I thought that doesn't sound right, but I wanted
to make sure I had my facts right, even though I had a tremendous
impulse to say: Mr. Leader, you are just wrong.
[[Page S5217]]
After having looked at the facts, I can say now: Mr. Leader, you were
wrong this morning.
This is an important issue. I have been fortunate to have started off
in the House of Representatives, and being on the Foreign Affairs
Committee, one of my assignments was to travel. I have had the good
fortune of being able to travel, in the more than two decades I have
been in Congress, all over the world. I am tremendously impressed with
the places I go, where we have young men and women who serve, as
Senator Dodd did. I think he went to the Dominican Republic. We have
had other examples, but that is the only one I know of people who
served in the Peace Corps. This is a wonderful organization. They do
wonderful things for the country. I admire so much what they do.
But there is no one I admire as much as our career Foreign Service
officers, our diplomatic corps. They do such wonderful work, without
any notoriety at all. So any time we talk about our State Department,
our diplomatic corps, I want to defend them. So I know this is an
important issue raised by the majority leader this morning. But I
thought it would be important for me to respond to some of the current
concerns I have heard expressed this morning.
I was on the Senate floor last Thursday, and I was pleased that the
Senate confirmed 20 Ambassadors that day, including the Ambassador to
Iraq, Ambassador Negroponte, whose assignment will begin after June 30
of this year. His nomination was completed with near record speed,
given that he was confirmed 1 week after he was nominated by the
President of the United States. The other 19 Ambassadors confirmed that
day were confirmed less than a week after they were reported out of the
Foreign Relations Committee. That is remarkably good work.
By confirming these 19, the Senate filled 3 vacant U.S. Embassies. We
had hoped to confirm other career Foreign Service officers that day.
For example, Nepal--I have been there. There are very important events
going on in that country now that we have an Ambassador there. As we
know, this has been a site of considerable violence.
Unfortunately, I have been advised that the objection to the
confirmation of James Frances Moriarity, of Virginia, a career Foreign
Service officer, doesn't come from us; it comes from the majority,
meaning this Embassy will continue to be vacant for the foreseeable
future.
At the moment, I am told by the State Department that out of the
nearly 170 Embassies we have around the world, 8 are vacant. So that
means 162 of the 170 are filled. Eight are vacant, meaning they have no
confirmed Ambassador. The President has chosen not to fill two of them.
So now we are down to six. We have two that are too dangerous to
fill, for reasons that are apparent--what is going on in the world.
That knocks us down to four. One is awaiting action in the Foreign
Relations Committee. The Republicans objected to filling another. The
last two, Sweden and Finland, are vacant because President Bush's
political appointees--not career Foreign Service officers, which I have
no objection to because we need a mix--his political appointees decided
they could not stand being there much longer and they left.
So my dear friend, for whom I have so much respect, the majority
leader, better have his staff give him better facts because he is
absolutely, totally wrong, for the reasons I have just indicated.
Last week, some of our friends on the majority side noted that the
vacancies send a negative signal to these countries. Let the President
move with dispatch to fill them then.
I also hope the President will work out another problem. We have
Ambassadors who have been confirmed by the Senate to posts around the
world, but they are not doing their work in the countries to which they
were sent. They have been sent to Iraq. Ambassadors assigned to the
Philippines, Kuwait, and Bahrain are in Iraq, not in the countries to
which they were assigned. I know it is important that they help out in
Iraq, but that is not the way it should be. At least, it should not be
that people are complaining about these Ambassadors not having jobs and
the ambassadorial corps being empty and that we are holding it up.
I recognize the jobs these men are doing in Iraq are important. The
things they are performing in Iraq are obviously important or they
would not have been sent there. But don't complain about the minority
holding up Ambassadors because we are not, for the simple math I have
given you. So I hope we can consider the whole picture and not come to
the floor and complain and cry and whine about the Ambassadors not
being confirmed because of us. It is simply not true.
If there is other business to come before the Senate, I will withhold
suggesting the absence of a quorum.
The PRESIDING OFFICER. The Senator from Iowa is recognized.
Amendment No. 3133
Mr. GRASSLEY. Mr. President, I ask unanimous consent to call up
amendment No. 3133 and ask for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:
The Senator from Iowa [Mr. Grassley] proposes an amendment
numbered 3133.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that further
reading of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The amendment is printed in today's Record under ``Text of
Amendments.'')
The PRESIDING OFFICER. Is there further debate on the amendment?
If there is no further debate, without objection, the amendment is
agreed to.
The amendment (No. 3133) was agreed to.
Mr. GRASSLEY. Mr. President, I move to reconsider the vote.
Mr. REID. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. GRASSLEY. Mr. President, I think this is going pretty well now.
We expect a vote around 6:30.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 3040, As Modified
Mr. GRASSLEY. Mr. President, on behalf of Senator Nickles, I call up
amendment No. 3040 and send a modification to the desk.
The PRESIDING OFFICER. Without objection, the clerk will report.
The legislative clerk read as follows:
The Senator from Iowa [Mr. Grassley], for Mr. Nickles,
proposes an amendment numbered 3040, as modified.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that the reading
of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
(Purpose: To treat electric transmission property as 15-year property)
At the end of title VIII, add the following:
SEC. __. ELECTRIC TRANSMISSION PROPERTY TREATED AS 15-YEAR
PROPERTY.
(a) In General.--Subparagraph (E) of section 168(e)(3)
(relating to classification of certain property), as amended
by this Act, is amended by striking ``and'' at the end of
clause (iii), by striking the period at the end of clause
(iv) and by inserting ``, and'', and by adding at the end the
following new clause:
``(v) any section 1245 property (as defined in section
1245(a)(3)) used in the transmission at 69 or more kilovolts
of electricity for sale the original use of which commences
with the taxpayer after the date of the enactment of this
clause.''.
(b) Alternative System.--The table contained in section
168(g)(3)(B) is amended by inserting after the item relating
to subparagraph (E)(iv) the following:
``(E)(v)..........................................................30''.
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service after the date of
the enactment of this Act and prior to July 1, 2006.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, we have looked at this amendment on this
side, and we are agreeable that this amendment should be adopted.
Mr. GRASSLEY. On this side, too.
The PRESIDING OFFICER. Without objection, the amendment is agreed to.
The amendment (No. 3040), as modified, was agreed to.
Mr. BAUCUS. I move to reconsider the vote.
[[Page S5218]]
Mr. GRASSLEY. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. BAUCUS. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 3143
Mr. GRASSLEY. Mr. President, I send an amendment to the desk and ask
for its immediate consideration.
The PRESIDING OFFICER. Without objection, the clerk will report.
The legislative clerk read as follows:
The Senator from Iowa [Mr. Grassley] proposes an amendment
numbered 3143.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that the reading
of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The amendment is printed in today's Record under ``Text of
Amendments.'')
Mr. GRASSLEY. I ask for consideration of the amendment.
The PRESIDING OFFICER. If there is no further debate, without
objection, the amendment is agreed to.
The amendment (No. 3143) was agreed to.
Mr. BAUCUS. Mr. President, I ask for the yeas and nays on the bill.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The question is on the engrossment and third
reading of the bill.
The bill was ordered to be engrossed for a third reading and was read
the third time.
The PRESIDING OFFICER. The bill having been read the third time, the
question is, Shall the bill, as amended, pass? The clerk will call the
roll.
Mr. McCONNELL. I announce that the Senator from Arizona (Mr. McCain)
is necessarily absent.
Mr. REID. I announce that the Senator from North Carolina (Mr.
Edwards) and the Senator from Massachusetts (Mr. Kerry) are necessarily
absent.
The result was announced--yeas 92, nays 5, as follows:
[Rollcall Vote No. 91 Leg.]
YEAS--92
Akaka
Alexander
Allard
Allen
Baucus
Bayh
Bennett
Biden
Bingaman
Bond
Boxer
Breaux
Brownback
Bunning
Burns
Byrd
Campbell
Cantwell
Carper
Chafee
Chambliss
Clinton
Cochran
Coleman
Collins
Conrad
Cornyn
Corzine
Craig
Crapo
Daschle
Dayton
DeWine
Dodd
Dole
Domenici
Dorgan
Durbin
Ensign
Enzi
Feingold
Feinstein
Fitzgerald
Frist
Graham (SC)
Grassley
Hagel
Harkin
Hatch
Hutchison
Inhofe
Inouye
Jeffords
Johnson
Kennedy
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Lott
Lugar
McConnell
Mikulski
Miller
Murkowski
Murray
Nelson (FL)
Nelson (NE)
Nickles
Pryor
Reed (RI)
Reid (NV)
Roberts
Rockefeller
Santorum
Sarbanes
Schumer
Sessions
Shelby
Smith
Snowe
Specter
Stabenow
Stevens
Talent
Thomas
Voinovich
Warner
Wyden
NAYS--5
Graham (FL)
Gregg
Hollings
Kyl
Sununu
NOT VOTING--3
Edwards
Kerry
McCain
The bill (S. 1637), as amended, was passed, as follows:
(The bill will be printed in a future edition of the Record.)
Mr. GRASSLEY. I move to reconsider the vote.
Mr. WARNER. I move to lay that motion on the table.
The PRESIDING OFFICER (Mr. Talent). The Senator from Iowa.
Mr. GRASSLEY. Mr. President, now that this bill has finally passed
the Senate, I take the opportunity to thank several people.
First and foremost, I thank Senator Baucus. I am very certain we
would not be here without his good work and his cooperation. In fact,
as I have said so many times in speeches, this whole effort started
when Senator Baucus was chairman of the committee in the last Congress.
He held hearings and started this process going. He has not only
cooperated and put in good work during this Congress, but it all
started under his leadership.
I also need to thank all the other members of the Finance Committee
for their time and energy in making this bill a reality. I thank my
staff on the Finance Committee: Mark Prater, chief tax counsel, and the
other tax counsels, Ed McClellan, Elizabeth Paris, Dean Zerbe, Christy
Mistr, and John O'Neill as well as John's predecessor, Diann Howland.
These individuals, along with Adam Freed, the staff assistant for the
tax team, have been real workhorses for the committee, keeping the
lights burning long into the night to make this bill possible.
For the record, as evidence of the work effort, this bill was
introduced on the day Hurricane Isabel blew into town. Because of hard
work, the markup of the bill occurred in a calm environment.
I also thank the trade staff, particularly Everett Eissenstat, chief
Trade Counsel, and his team of David Johanson, Stephen Schaefer, Daniel
Shepherdson, and Zach Paulsen. I also thank Carrie Clark who recently
left our trade staff. Thanks also needs to be paid to our
administrative staff, including Carla Martin, Amber Williams, Geoff
Burrell, and Mark Blair. From my personal staff, I thank Sherry Kuntz
and Leah Shimp. Also helpful were our Finance Committee press team of
Jill Kozeny and Jill Gerber, known around the committee as the
``Jills.'' Lastly, on my side, I thank Kolan Davis and Ted Totman, the
Committee's staff director and deputy staff director for riding herd on
all this work.
In addition, this bipartisan bill would not have been possible
without close work and cooperation at the staff level. I appreciate and
thank the minority staff for their good work. I particularly note Russ
Sullivan, Democratic Staff Director, as well as Pat Heck, Democratic
Chief Tax Counsel, Matt Stokes, Matt Jones, Matt Genasci, Judy Miller,
Jon Selib, Liz Leibschutz, Matt Stanton, Dawn Levy, and Anita Horn
Rizek. In addition, I thank Tim Punke and his trade team, along with
John Angell, Bill Dauster, and Mike Evans, former Deputy Staff
Director, for their time and energy.
I extend my thanks also to George Yin and his staff at the Joint
Committee on Taxation for providing their extensive knowledge and
guidance to this effort. I particularly point out the good work of Ray
Beeman, David Noren, and Brian Meighan. Brian recently left Joint Tax
for the private sector.
I also thank Acting Assistant Secretary for Tax Policy, Gregory
Jenner, and his staff for their assistance on the so-called SILOs tax
shelter provision of this bill.
I thank the majority leader, Senator Bill Frist, and his leadership
staff for all their assistance. The majority leader backed me and
Senator Baucus all the way on this bill. We would not have the result
today but for the majority leader's patience, determination, and
dedication. It was tough going at times, but he and I knew we would get
the right result. From Senator Frist's staff, I thank Lee Rawls, Eric
Ueland, Rohit Kumar, and Libby Jarvis.
I also thank our Senate leadership team and their staffs, especially
our able whip, Senator McConnell.
Finally, my thanks go to Jim Fransen, Mark Mathiesen, Mark McGunagle,
and their capable staff at Legislative Counsel for taking our ideas and
drafting them into statutory language.
I would like to tell them all to go home and get a good night's rest
because the bill has been a very long time working its way through the
Senate.
Now, I urge our friends in the other body to pass a companion bill.
Hopefully, when that bill passes the House, our friends in the Senate
Democratic leadership will not resist our efforts to go to conference.
Every month of delay is another month where the Euro tax ratchets up
another percentage point on our products going to Europe.
I thank everyone for their cooperation in allowing us to get to this
point this evening. This, of course, is not the final step in the
process. The House has
[[Page S5219]]
not passed their version of the FSC legislation. I anticipate the House
will send a bill to the Senate at some point. When that happens, I hope
we will be able to proceed to conference so that we are able to get a
final product.
I appreciate the assistance of Senator Baucus throughout this process
and hope we will be able to send a bill to committee.
Order Of Procedure
Mr. President, following Senator Baucus's remarks, I ask unanimous
consent that the Senate proceed to a period of morning business, with
Senators permitted to speak for up to 10 minutes each.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
Mr. GRASSLEY. I yield the floor.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, I am very proud of the Senate. The Senate
worked its will through a very involved and complex tax bill. I might
add--I don't have the final figures here, but in the case of first
impression, this probably is one of the largest tax bills the Senate
has taken up and passed, outside of reconciliation--we don't know yet--
in maybe a decade, or maybe close to two decades.
I say that because of the importance of protecting Senators' rights.
I know this sounds like a little inside baseball, but when I say
``outside reconciliation,'' all of us in the Senate know this means the
bill was taken up under the usual Senate process, which means Senators
have the right to offer amendments, have the right to speak as long as
they can stand on their own two feet, and have the rights Senators
usually have in taking up bills. Whereas, if this were to be taken up
under the process we call ``reconciliation,'' then amendments would
have to be passed very easily; that is, there is no right for extended
debate. Germaneness rules do not apply; that is, unless cloture is
invoked.
So the main point I want to make is that the Senate has done a good
job. The Senate has taken up a very complicated, very large tax bill,
and done it the way the Senate should ordinarily do business; that is,
outside of reconciliation. We are responsible. We can do it. We did it.
I very much thank my good friend and colleague, the chairman of the
Finance Committee, who led us in a way to help make that happen. He
basically did it by being so gracious, by being so fair. He has a
reputation, we all know, of being one of the most honest and fair
persons you would ever have the privilege to meet, not only in the
Senate but in life. His credibility is unquestioned. That is a
substantial reason why we were able to pass such a messy bill outside
reconciliation. I thank my friend for his leadership, for his
friendship, and for all he has done.
I also especially thank Senator Reid of Nevada. We all know Senator
Reid is probably one of the masters of the floor. He knows procedure,
and his main goal is to get things done. He, too, is a man whose word
is his bond. He is invaluable here. If not for the efforts of not only
the chairman but Senator Reid, I am not so sure we would be here today.
He has done a super job.
It is also very appropriate to thank a lot of my staff, and Senator
Grassley's staff, and many others, which I will do. But before I do
that, I would like to do something a little bit differently and thank
some people who helped me with this bill; that is, the people I talked
with back home who provided ideas on how to structure the FSC/ETI
replacement bill in a way that made the most sense for our
manufacturers, not only throughout the country but in my home State of
Montana.
This was a great chance for me to learn even more about manufacturing
in my State, by going to manufacturers in my State and saying: What do
we need? What can we do to help make this happen?
Let me give you a few examples.
The timber industry, for example, has faced very tough economic times
during the last several years. In the years 2000 and before, many of
these businesses paid very high taxes on solid profits.
So a provision in this bill will permit businesses in industries with
cyclical profits to smooth out their tax rates. This is accomplished by
permitting a loss to be carried back for up to 5 years. That will help
a lot.
I thank Jim Hurst at Owens & Hurst, a small timber company located in
Eureka, MT, for helping us better understand the economics of the
timber business. The JOBS bill will help this company and many other
companies that have very cyclical incomes.
I might add, too, that the people at Mountain Harvest Pizza Crust
Company, from Billings--that does not sound like a huge American
manufacturing company but they are extremely important to Montana, to
Billings, and to me--helped educate me about the challenges of rising
costs facing small businesses, and about how the cost of health care
was getting to be too much to handle.
I might say, too, not all exporters are large corporations. We
learned this from Sun Mountain Sports in Missoula. They are an S
corporation. They export golf bags and other sports equipment. They are
just the kind of company we want to stay strong so they can keep those
manufacturing jobs here in the U.S. and so they can continue to export
overseas.
Because of discussions with many small businesses such as Mountain
Harvest Pizza Crust and Sun Mountain Sports, I made sure that every
manufacturer would get this deduction. So we in the Finance Committee
produced a bill that gives a deduction not only to C corporations but
to S corporations, to partnerships, and to sole proprietorships so they
all could have help and not be left behind by this legislation. The tax
relief they are getting in this bill will help defray those and other
rising costs.
Again, by consulting with the people at home, we were able to realize
what the FSC/ETI replacement bill should be. It should not be just for
big C corporations--those are large, publicly held corporations--but,
rather, for any organization that manufactures, including
proprietorships, small businesses, et cetera.
I also thank the people at CHS--that is Central Harvest--who showed
us the role that cooperatives play in rural America and helped us
better understand the importance of making this tax deduction pass
through to the members of cooperatives. Agricultural cooperatives are a
crucial part of the economy of my State and a lot of the West, and, I
might add, a lot of other rural parts of America.
CHS helped to make sure their important contributions were not
overlooked in this bill. I wanted, as I said, the bill to include all
American manufacturers, and I have made sure the bill includes the
agricultural cooperatives that are so important to so many States.
Also, I thank Elvie Miller at Mountain Meadow Log Homes, who talked
to us about how integral good research and design is to their business.
Frankly, with the addition of the amendment by the Senator from Texas,
we were able to add that provision.
I also want to thank Leland Griffin and the good folks at Montana
Refining Company in Great Falls. They pointed out that under the export
credit this bill will repeal, oil refining operations are not eligible
for tax benefits. But Montana Refining pointed out that if we are
converting the laws to a manufacturing deduction, then it should cover
oil and gas refining operations. Those operations are manufacturing.
They take raw material, crude oil, and convert it to a usable product--
gasoline and other petroleum products. I offered an amendment in
committee to include refining operations in the definition of
manufacturing.
All of these companies, and many more, were invaluable in passing
such a strong bill in the Senate. I thank them. I thank them very much
for adding their part to this bill. Were it not for their very valuable
contributions, this legislation would not be as good.
I also thank a lot of people from my office. I don't have the whole
list. There are so many of them. If we turned the camera over, we could
see them lined up against the wall over there. Starting with Brian
Pomper on the far right, he does a very good job, handles a lot of
trade work. We have Pat Heck over there; Russ Sullivan; Matt Genasci;
Liz Liebschutz, Matt Stokes, Jon Selib. We have Scott Landes there in
the corner, Simon Chabel, many others. Wendy Carrey is there; Mac
Campbell. They are our folks. They do the work. My guess is
[[Page S5220]]
that if I talk much longer, they are going to fall asleep, they are so
tired. We all very much appreciate, deeply appreciate what they do.
I have often said that the most noble human endeavor is service--
service to church, to community, to mankind, service to whatever makes
the most sense to us as human beings. A lot of us who run for public
office get some of the psychic rewards of service. We see our names in
newspapers and on TV. Usually that is good, not always but usually.
However, the folks who work in the Senate, on Joint Tax and
elsewhere, work harder. And they don't get public recognition for what
they do. They are the real servants. They are the ones who really
provide the most noble kind of service. I know I speak for everyone
listening, for everyone else who stops and thinks about these things if
only for a nanosecond, when I say how true that last statement is. They
are the most wonderful folks. I take my hat off to all of them.
I yield the floor.
Mr. GRASSLEY. I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. McCONNELL. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. McCONNELL. Mr. President, I, too, congratulate Chairman Grassley
and Senator Baucus for their great work in moving this JOBS bill to
completion. I certainly express the hope that once the House acts, we
will be able to go to conference in the normal way that legislation is
handled and get this important piece of legislation on the President's
desk at the earliest possible time to prevent further penalties from
being levied against our companies here in the United States.
Amendment No. 3143, As Modified
Mr. GRASSLEY. Mr. President, I ask unanimous consent, notwithstanding
the adoption of amendment No. 3143, that the modification which is at
the desk be agreed to.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment (No. 3143), as modified, was agreed to, as follows:
``(ii) there shall be disregarded any item of income or
gain from a transaction or series of transactions a principal
purpose of which is the qualification of a person as a person
described in this paragraph.
``(C) Related person.--For purposes of this paragraph, the
term `related person' has the meaning given such term by
section 954(d)(3).''.
(c) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
On page 335, strike lines 4 through 10, and insert the
following:
(2) Leases to foreign entities.--In the case of tax-exempt
use property leased to a tax-exempt entity which is a foreign
person or entity, the amendments made by this section shall
apply to taxable years beginning after January 31, 2004, with
respect to leases entered into on or before November 18,
2003.
Mr. SMITH. Mr. President, I rise today to praise the Senate for its
passage of S. 1637, the Jumpstart Our Business Strength Act, which
includes my provision lowering the corporate tax rate on repatriated
profits. In one short year, this provision will bring $400 billion into
our economy. This money is going to create over 650,000 new jobs and
get our economy moving again. At the same time, it's going to help
reduce the federal deficit.
I believe this is one of the most important provisions of the JOBS
Act regarding job growth and strengthening our economy. This provision
would require that repatriated funds be reinvested in the United States
for hiring workers and worker training, infrastructure, R&D, capital
investment, or financial stabilization for the purposes of job
retention or creation. It is my understanding that the concept of
financial stabilization, for this purpose, encompasses use of the
repatriated funds to repay debt of the U.S. parent corporation. Use of
these funds to pay down debt is a qualified use for purposes of the
provision. In fact, debt repayment will strengthen U.S. corporate
balance sheets, which will improve a company's ability to employ and
hire workers.
I thank the chairman for his strong support of this repatriation
provision and look forward to swift action by the House.
____________________