Congressional Record, Volume 157 Issue 105 (Thursday, July 14, 2011)

[Congressional Record Volume 157, Number 105 (Thursday, July 14, 2011)]
[Senate]
[Pages S4609-S4620]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

By Mr. ROBERTS (for himself and Mr. Nelson of Nebraska):
S. 1368. A bill to amend the Patient Protection and Affordable Care
Act to repeal distributions for medicine qualified only if for
prescribed drug or insulin; to the Committee on Finance.
Mr. ROBERTS. Mr. President, I rise today to introduce a bipartisan
bill, the Restoring Access to Medication Act of 2011. This bill would
repeal the portion of the Patient Protection and Affordable Care Act
which requires individuals to have a prescription to spend the money
they have saved in their Flexible Spending Accounts.
Flexible Spending Accounts, FSAs, Health Savings Accounts, HSAs, and
other medical savings arrangements provide plan participants with an
affordable, convenient and accessible means to manage their health care
expenses.
More than 35 million Americans participate in FSAs and more than 10
million Americans participate in a HSA. These accounts allow plan
participants to set aside their own dollars on a pre-tax basis to pay
for health care expenses, giving individuals control over health care
decisions and how to pay for that care.
A key benefit of these plans prior to enactment of the Patient
Protection

[[Page S4610]]

and Affordable Care Act, PPACA, was the ability for participants to use
the dollars they set aside in these plans to pay for the cost of over-
the-counter medications.
However, under PPACA, plan participants may no longer use funds from
these accounts to purchase over-the-counter medications, unless they
have a prescription for the medication.
This prohibition takes away choice from individuals about how to
manage their health care expenses and adds yet another burden to
physicians, as some plan participants will seek a prescription for
over-the-counter medications. And, worst of all, it injects increased
costs into our health care system.
Rather than promoting cost-effectiveness and accessibility, this
provision instead directs participants to potentially more costly, less
convenient, and more time-consuming alternatives. Further, it injects
unnecessary confusion and complexity into a system that was previously
straightforward and easy for consumers to utilize.
This bill repeals Sec. 9003 of the PPACA and restores the ability of
plan participants to use the funds in their FSA, HRA, HSA or Archers
MSA to purchase OTC medications, allowing them to better manage the
cost of their health care expenses.
A family physician from Leawood, Kansas told me, ``I am pleased that
legislation is being introduced to reverse this policy. Many of my
patients face undue burdens purchasing needed medications that are
essential to their health maintenance and overall wellbeing. Reversal
of this policy will allow my patients to continue to purchase the
numerous beneficial over-the-counter products that are so important in
our daily lives and will eliminate a substantial administrative burden
on my practice.''
In Kansas, and throughout the U.S., a broad coalition of groups
support this legislation, including the U.S. Chamber, NFIB, pharmacist
groups, drug store organizations and consumer groups.
I would invite my colleagues to join me in this effort by
cosponsoring this legislation.
______

By Mr. CRAPO (for himself, Mr. Wyden, Mr. Risch, and Mr. Begich):
S. 1369. A bill to amend the Federal Water Pollution Control Act to
exempt the conduct of silvicultural activities from national pollutant
discharge elimination system permitting requirements; to the Committee
on Environment and Public Works.
Mr. CRAPO. Mr. President, over the last several months, this body has
been focused on issues pertaining to our economy, such as the ailing
jobs market and our debt and deficits. That is as it should be.
However, while these important issues have commanded most of our
attention here in the United States Senate, that is not to say that
other matters and conflicts have suddenly taken a back seat to them.
Even as we vigorously debate our economic future, home-state and
regional issues continue to command our attention. It is one of those
regional issues that brings me to the floor today.
Two months ago, a three judge panel of the U.S. Court of Appeals for
the 9th Circuit handed down a final decision that could have far
reaching negative impacts on public and private forests, and the
communities that rely on them, throughout the United States. In the
case of Northwest Environmental Defense Center v. Brown, the Court
ruled that logging road runoff when managed with a system of ditches
and culverts and deposited into rivers and streams qualifies under the
Clean Water Act as point source pollution. This means that storm water
when mixed with dirt and rocks will now be subject to some of the most
stringent environmental protection laws in the United States. America's
Federal forests are already heavily litigated, but with one fell swoop,
this decision threw out over 35 years of precedent, opening the door
for even more litigation on Federal forest lands, and subjecting
private and state forest lands to the same specter.
There was a time when forest jobs supported millions of Americans and
their communities. But a lot has changed since then. Endless
litigation, cheap imports, disease and a general shift in Federal
forest management policy have drastically changed the landscape for
forest jobs and the families and communities that rely on them. Working
on the forests used to make up a considerable amount of the tax base in
many rural communities, particularly in my State of Idaho. However,
that has shrunk dramatically in recent decades.
Forest communities that were once prosperous now find themselves in a
state of perpetual economic jeopardy, with young people searching for
employment elsewhere and tax bases that can barely cover the cost of
basic public services. This has become so dire that in 2000, Congress
had to pass legislation to provide funding to rural communities with
Federal public lands to make up for lost revenues from timber harvests
on those lands.
Given all of this, I am disappointed that another impediment is being
added to the economic survival of our forest communities.
This decision will impact both public and private forests. In the
case of Federal forests, we have millions upon millions of acres that
are in need of active management and restoration. Our Federal forests
have suffered from under management, disease, wild fires and other
factors, and to address these problems, the U.S. Forest Service needs
to be able to get to work on much needed fuels reduction, thinning and
other forest health projects. But litigation has made that very
difficult, and this decision is only going to make it worse.
Then, there are private forests. The people who own, manage and work
on these private forests need roads to have access to them. But, this
judicially-mandated permit requirement will inevitably lead to
increased costs for businesses that are already operating on the
margins. Furthermore, this decision will impose the Federal Government
into the management of private lands as these permits, even if issued
by a State agency, will be subject to Environmental Protection Agency
oversight under the Federal Clean Water Act, as well as citizen suits
that are intended to further reduce timber harvests.
We need to do something about this unfortunate and unwise decision
out of the Ninth Circuit Court of Appeals. As such, I am introducing
legislation along with my friends Senator Wyden, Senator Risch and
Senator Begich to overturn it. This legislation is entitled the
Silviculture Regulatory Consistency Act of 2011. Our forests and the
communities that they have long supported are already in considerable
jeopardy, and we need to do everything in our power to help these rural
communities. Passing this legislation is only one step in that process,
but it is a very necessary one.
I hope that the Senate can pass this bipartisan legislation as soon
as possible.
Mr. WYDEN. Mr. President, today I am joining with my colleagues from
Idaho, Senator Crapo and Senator Risch, and my colleague from Alaska,
Senator Begich, to correct a regulatory problem that left uncorrected
will bury private, State and tribal forest lands in a wave of
litigation. If we have learned anything from the court battles that
have contributed to the widespread gridlock and mismanagement of our
Federal forests, it is that this is not the best path to ensure our
forests' future and should be considered only as a last resort. Now
those battles threaten to spill over onto private forest lands.
Since the advent of the Clean Water Act, Democratic and Republican
administrations have held that most silviculture activities were
nonpoint sources for purposes of the act and would be best regulated at
the State level, under the States' individual forest practices laws.
Under this rule, known as the ``silviculture rule, `` silvicultural
activities, such as nursery operations, site preparation, reforestation
and subsequent treatment, thinning, prescribed burning, pest and fire
control, harvesting operations, surface drainage, or road construction
and maintenance, from which there is natural runoff, were regulated
through the Clean Water Act by States best management practices.
This rule for forest roads has now been explicitly invalidated by the
Ninth Circuit Court of Appeals, which--in a series of two decisions--
implicitly undermined the long-held ``silvicultural rule,'' stemming
from

[[Page S4611]]

litigation over the use of forest roads in Oregon State-owned forests.
According to the Ninth Circuit, stormwater runoff collected and
directed by a system of ditches and culverts creates a discrete point
source and therefore, must be regulated as industrial stormwater
runoff. This judicial interpretation of the Clean Water Act means that
every source of runoff on forest roads will now require an industrial
stormwater runoff permit. Not only will new roads need to be permitted,
but the hundreds of thousands of miles of existing roads in Oregon and
around the country, on both public and private lands, will now need to
be reviewed and issued permits.
If this one court's decision to overturn 35 years of widely-accepted,
Environmental Protection Agency, EPA, policy is allowed to stand,
private, State, and tribal forest owners will also likely be subjected
to litigation as part of the permitting process or through lawsuits
under the citizen suit provisions of the Clean Water Act. The outcome
could well deny States the use of their forests which they depend on to
pay for schools and services, while significantly depressing the
investment required to sustain private forestry.
If this decision is allowed to stand, every use of forest roads will
require permitting and will therefore be subject to challenge by
citizen lawsuits. This will not only overburden landowners and managers
in the Ninth Circuit states by adding significant compliance and
permitting costs, it will create an opportunity for administrative
appeal and litigation every time a permit is approved.
Initially, the court's ruling will apply solely to my region of the
country, but we can expect lawyers to quickly beat a path to other
Federal courts and the EPA itself, seeking to extend the ruling to all
other forested regions of the country, and giving an immediate and
perhaps permanent competitive advantage to our foreign competitors who
have far lesser environmental standards and enforcement.
The fact of the matter is that forests and forest roads--even private
ones--have multiple economic and environmental uses and users--from
wildlife habitat to recreation to timber production--over decades long
growing and harvesting cycles. The ``silviculture rule'' existed
because forestry is different from other industries, even other
agricultural production. This is why, in this instance, I believe the
courts have gone too far in reinterpreting the law and why legislation
is needed to make the long-accepted ``silvicultural rule'' the legal
basis for Clean Water Act regulation of forestry practices.
The Clean Water Act is one of the cornerstones of environmental
protection. In the past two Congresses, I cosponsored the Clean Water
Restoration Act because I believed that the U.S. Supreme Court went too
far in reinterpreting decades of Clean Water Act law by excluding
wetlands and intermittent streams that had long been protected under
that law. Here too, I believe that the courts have gone too far in
reinterpreting what has been a longstanding understanding of how
silvicultural activities should be regulated. The Ninth Circuit
concluded that only Congress can authorize EPA's original reading of
the law. Senators Crapo, Risch, Begich and I are introducing
legislation today in response to that conclusion.
That is not to say that the persons who orchestrated this litigation
were not well-intentioned in their desire to address the water quality
issues that can arise from silviculture, as they can in virtually every
other agricultural activity. Rather, I believe they had the best of
intentions. In fact, I share their intentions. I have labored for
decades and will continue to work to address the poor condition of
forest roads on Federal lands. I will also be the first to argue that
the Federal Government has much to do in that regard. Efforts can also
be made on State and private lands. In many instances, what is needed
is simply more technical assistance and financial incentives to help
landowners and managers that are seeking to do the right thing. I
certainly care about keeping the pristine quality of our streams and
the impacts that sediment can have on salmon and aquatic creatures. It
is part of the reason why I have championed wilderness and wild and
scenic river legislation to protect Oregon's special places, including
its beautiful waterways.
But I can't agree with their decision to first fight this out in
court. Their litigation tries to impose an outcome on my region without
ever attempting to address the concerns and needs of the thousands of
people in my State who earn their living as responsible stewards of
private forest land. Oregon is still struggling to come back from the
economic crisis and many of our forested counties continue to suffer
from double digit unemployment. Where will the 120,000 people in Oregon
who make their living on private forest land go when private lands
experience the same gridlock as their Federal land counterparts? How
will small woodlot owners in Oregon--mostly mom and pop investments--
survive when subjected to Federal regulation and lawsuits for the first
time in our State's history? How many millions of acres of private,
shareholder-owned forest land will be converted to nonagricultural
purposes when companies are no longer able to carry out needed forest
management? To my knowledge, the litigants did not make a meaningful
effort to address any of those challenges before initiating the lawsuit
that now threatens to throw my State into a dangerous economic
trajectory.
I should point out that this issue transcends partisan concerns, as
evidenced by the prominent Democrats who have found common ground with
Republicans on this issue. Oregon's Governor, John Kitzhaber, one of
the most prominent environmental champions in the Nation, has
consistently fought against the Northwest Environmental Defense Center
ruling and continues to do so. Senator Begich, who is known for his
thoughtful and balanced approach to natural resource issues, joins me
as an original cosponsor. On the House side, I am joined by Democratic
Congressman Kurt Schrader, who knows better than most the unintended
consequences of well-intentioned, but poorly aimed efforts at
regulation.
To my friends in the environmental community who raise legitimate
concerns about a range of issues surrounding this policy I encourage
you to sit down with us in a dialogue, at both the Federal and State
levels. Bring your ideas for how we can monitor and protect water
without sacrificing what remains of Oregon's forest industry. You will
be heard and I stand ready to work with you. But it is not enough to
simply dictate outcomes. We have to first look for solutions that avoid
the epidemic of litigation and appeals that threaten the sustainability
and survival of our timber industry. You are, of course, right to
expect that we arrive at those solutions within a reasonable period of
time.
______

By Mrs. BOXER (for herself, Ms. Murkowski, and Mrs. Murray):
S. 1370. A bill to reauthorize 21st century community learning
centers, and for other purposes; to the Committee on Health, Education,
Labor, and Pensions.
Mrs. BOXER. Mr. President, I rise today to urge my colleagues to
cosponsor the Afterschool for America's Children Act, which I am
introducing today with Senators Murkowski and Murray.
Across the country, afterschool programs help keep children safe and
help them learn through hands-on academic enrichment activities that
are disappearing from the regular school day.
Numerous studies have shown that quality afterschool programs give
students the academic, social and professional skills they need to
succeed. Students who regularly attend have better grades and behavior
in school, and lower incidences of drug use, violence and unintended
pregnancy.
Over the past 10 years, the 21st Century Community Learning Centers,
CCLC, program has helped support afterschool programs for millions of
children from low-income backgrounds, including over 1.6 million
children last year.
Unfortunately, the demand for affordable, quality afterschool
experiences far exceeds the number of programs available. The 2009
report, America After 3PM, found that while afterschool programs are
serving more kids than ever, the number of unsupervised children in the
United States has increased. More than 18 million children have parents
who would like to enroll their child in an afterschool program but
can't find one available.
For over 10 years, federally funded afterschool programs have played
an important role in the lives of so many children and families. The
Afterschool for America's Children Act, AACA, would strengthen the 21st
CCLC program, leaving in place what works and

[[Page S4612]]

using what we have learned about what makes afterschool successful to
improve the program.
The AACA would modernize the 21st CCLC program to improve States'
ability to effectively support quality afterschool programs, run more
effective grant competitions and improve struggling programs. In
addition, this legislation helps improve local programs by fostering
better communication between local schools and programs, encouraging
parental engagement in student learning, and improving the tracking of
student progress.
Afterschool programs have such a diverse group of supporters, from
law enforcement to the business community, because these vital programs
help keep the children of working parents safe while enriching their
learning experience and preparing them for the real world.
I urge my colleagues to join me and Senators Murkowski and Murray in
supporting the Afterschool for America's Children Act to ensure that
21st CCLC dollars are invested most efficiently in successful
afterschool programs that keep children safe and help them learn.
______

By Mr. REED (for himself and Mr. Whitehouse):
S. 1371. A bill to amend the Magnuson-Stevens Fishery Conservation
and Management Act to add Rhode Island to the Mid-Atlantic Fishery
Management Council; to the Committee on Commerce, Science, and
Transportation.
Mr. REED. Mr. President, today, along with my colleague Senator
Whitehouse, I am introducing the Rhode Island Fishermen's Fairness Act
of 2011.
For nearly a decade, I have worked to correct a serious flaw in our
fisheries management system, which denies the fishermen of my state a
voice in the management of many of the stocks that they catch and rely
upon for their livelihoods.
The Magnuson-Stevens Fishery Conservation and Management Act
established eight regional fishery management councils to give
fishermen and other stakeholders the leading role in developing the
fishery management plans for federally regulated species. As such, the
councils have enormous significance on the lives and livelihoods of
fishermen. To ensure equitable representation, the statute sets out the
states from which appointees are to be drawn for each council.
Under the Magnuson-Stevens Act, the State of Rhode Island was granted
voting membership on the New England Fishery Management Council, NEFMC,
as NEFMC-managed stocks represent a significant percentage of landings
and revenue for the State. However, while Rhode Island has an even
larger stake in the Mid-Atlantic fishery it does not have voting
representation on the Mid-Atlantic Fishery Management Council, MAFMC,
which currently consists of representatives from New York, New Jersey,
Delaware, Pennsylvania, Maryland, Virginia, and North Carolina.
Rhode Island's stake in the Mid-Atlantic fishery is hardly
incidental. According to National Oceanic and Atmospheric
Administration, NOAA, data, Rhode Island accounts for approximately a
quarter of the catch from this fishery, and its landings are greater
than the combined total of landings for the States of New York,
Delaware, Pennsylvania, Maryland, Virginia, and North Carolina. In act,
only one State, New Jersey, lands more MAFMC regulated species than
Rhode Island.
This legislation offers a simple solution. Following current
practice, the Rhode Island Fishermen's Fairness Act would create two
seats on the MAFMC for Rhode Island: one seat appointed by the
Secretary of Commerce based on recommendations from the Governor of
Rhode Island, and a second seat filled by Rhode Island's principal
state official with marine fishery management responsibility. To
accommodate these new members, the MAFMC would increase in size from 21
voting members to 23.
Pursuant to a provision included in the Magnuson-Stevens
Reauthorization Act of 2006 at my request, the MAFMC reported to
Congress on this issue in 2007 and confirmed that there is a precedent
for this proposal. As the report notes, North Carolina's
representatives in Congress succeeded in adding that State to the MAFMC
through an amendment to the Sustainable Fisheries Act in 1996. Like
Rhode Island, a significant proportion of North Carolina's landed fish
species were managed by the MAFMC, yet the State had no vote on the
council.
With mounting economic, ecological, and regulatory challenges, it is
more important than ever that Rhode Island's fishermen have a voice in
the management of the fisheries they depend on. I look forward to
working with Senator Whitehouse and my other colleagues to restore a
measure of equity to the fisheries management process by passing the
Rhode Island Fishermen's Fairness Act.
Mr. President, I ask unanimous consent that the text of the bill be
printed in the Record.
There being no objection, the text of the bill was ordered to be
printed in the Record, as follows:

S. 1371

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

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Rhode Island Fishermen's
Fairness Act''.

SEC. 2. FINDINGS.

The findings are as follows:
(1) Rhode Island fishermen participate in fisheries managed
by the New England Fishery Management Council (NEFMC) and the
Mid-Atlantic Fishery Management Council (MAFMC).
(2) Rhode Island currently has voting membership on the
NEFMC under the Magnuson-Stevens Fishery Conservation and
Management Act but does not have voting membership on the
MAFMC.
(3) Rhode Island lands more MAFMC-managed stocks than any
other MAFMC member except the State of New Jersey.
(4) A higher percentage of Rhode Island's commercial
landings (by weight or value) traditionally have come from
species that are managed by the MAFMC as compared to species
managed by NEFMC.
(5) MAFMC has found that Rhode Island's circumstance
parallels that of Florida and North Carolina, which each have
voting membership on two different fishery management
councils.

SEC. 3. ADDITION OF RHODE ISLAND TO THE MID-ATLANTIC FISHERY
MANAGEMENT COUNCIL.

Section 302(a)(1)(B) of the Magnuson-Stevens Fishery
Conservation and Management Act (16 U.S.C. 1852(a)(1)(B)) is
amended--
(1) by inserting ``Rhode Island,'' after ``States of'';
(2) by inserting ``Rhode Island,'' after ``except North
Carolina,'';
(3) by striking ``21'' and inserting ``23''; and
(4) by striking ``13'' and inserting ``14''.
______

By Mr. REED (for himself, Mr. Kirk, Mr. Bingaman, Mr. Cardin, Mr.
Durbin, Mrs. Gillibrand, Mr. Kerry, Mr. Lautenberg, Ms.
Mikulski, Mrs. Murray, Mr. Sanders, and Mr. Whitehouse):
S. 1372. A bill to amend the Elementary and Secondary Education Act
of 1965 regarding environmental education, and for other purposes; to
the Committee on Health, Education, Labor, and Pensions.
Mr. REED. Mr. President, today I am introducing bipartisan
legislation to provide new support for environmental education in our
Nation's classrooms. I thank Senators Kirk, Bingaman, Cardin, Durbin,
Gillibrand, Kerry, Lautenberg, Mikulski, Murray, Sanders, and
Whitehouse for agreeing to be original cosponsors of the No Child Left
Inside Act of 2011. Given the major environmental challenges we face
today, our bill seeks to prioritize teaching our young people about
their natural world. For more than three decades, environmental
education has been a growing part of effective instruction in America's
schools. Responding to the need to improve student achievement and
prepare students for the 21st century economy, many schools throughout
the Nation now offer some form of environmental education.
Yet, environmental education is facing a significant challenge. Many
schools are being forced to scale back or eliminate environmental
programs. As a result, fewer and fewer students are able to take part
in related classroom instruction and field investigations, however
effective or popular. State and local administrators, teachers, and
environmental educators point to two factors behind this recent and
disturbing shift: the unintended consequences of the No Child Left
Behind Act and dwindling sources of funding for these critical
programs.
The legislation that we are introducing today would address these two

[[Page S4613]]

concerns. First, it would provide a new professional development
initiative to ensure that teachers possess the content knowledge and
pedagogical skills to effectively teach environmental education in the
classroom, including the use of innovative interdisciplinary and field-
based learning strategies. Second, the bill would create incentives for
states to develop a peer-reviewed comprehensive statewide environmental
literacy plan to make sure prekindergarten, elementary, and secondary
school students have a solid understanding of our planet and its
natural resources. Lastly, the No Child Left Inside Act provides
support for school districts to initiate, expand, or improve their
environmental education curriculum, and for replication and
dissemination of effective practices. This legislation has broad
support among national and state environmental groups and educational
groups.
The American public recognizes that the environment is already one of
the dominant issues of the 21st century. In 2003, a National Science
Foundation panel noted that ``in the coming decades, the public will
more frequently be called upon to understand complex environmental
issues, assess risk, evaluate proposed environmental plans and
understand how individual decisions affect the environment at local and
global scales. Creating a scientifically informed citizenry requires a
concerted, systemic approach to environmental education . . .''. In the
private sector, business leaders also increasingly believe that an
environmentally literate workforce is critical to their long-term
success. They recognize that better, more efficient environmental
practices improve the bottom line and help position their companies for
the future.
Environmental education is an important part of the solution to many
of the problems facing our country today. It helps prepare the next
generation with the skills and knowledge necessary to be competitive in
the global economy. Studies have shown that it enhances student
achievement in science and other core subjects and increases student
engagement and critical thinking skills. It promotes healthy lifestyles
by encouraging kids to get outside.
In Rhode Island, organizations such as the Rhode Island Environmental
Education Association, Roger Williams Park Zoo, Save the Bay, the
Nature Conservancy, and the Audubon Society as well as countless
schools and teachers, reach out to children to offer educational and
outdoor experiences that these children may never otherwise have,
helping to inspire them to learn. Partnering with the Rhode Island
Department of Education, these organizations have developed a statewide
environmental literacy plan.
Similar efforts are taking place across the Nation. According to the
National Association for Environmental Education, 40 states have taken
steps towards developing similar plans to integrate environmental
literacy into their statewide educational initiatives. Despite these
extraordinary efforts, environmental education remains out of reach for
too many kids.
That is why I look forward to working with my colleagues to enact the
No Child Left Inside Act of 2011.
Mr. President, I ask unanimous consent that the text of the bill be
printed in the Record.
There being no objection, the text of the bill was ordered to be
printed in the Record, as follows:

S. 1372

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title.--This Act may be cited as the ``No Child
Left Inside Act of 2011''.
(b) Table of Contents.--The table of contents for this Act
is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. References.
Sec. 3. Authorization of appropriations.

TITLE I--ENVIRONMENTAL LITERACY PLANS

Sec. 101. Development, approval, and implementation of State
environmental literacy plans.

TITLE II--ESTABLISHMENT OF ENVIRONMENTAL EDUCATION PROFESSIONAL
DEVELOPMENT GRANT PROGRAMS

Sec. 201. Environmental education professional development grant
programs.

TITLE III--ENVIRONMENTAL EDUCATION GRANT PROGRAM TO HELP BUILD NATIONAL
CAPACITY

Sec. 301. Environmental education grant program to help build national
capacity.

SEC. 2. REFERENCES.

Except as otherwise specifically provided, whenever in this
Act an amendment or repeal is expressed in terms of an
amendment to, or a repeal of, a section or other provision,
the reference shall be considered to be made to a section or
other provision of the Elementary and Secondary Education Act
of 1965 (20 U.S.C. 6301 et seq.).

SEC. 3. AUTHORIZATION OF APPROPRIATIONS.

(a) Authorization.--There are authorized to be appropriated
to carry out section 5622(g) and part E of title II of the
Elementary and Secondary Education Act of 1965, such sums as
may be necessary for fiscal year 2012 and each of the 4
succeeding fiscal years.
(b) Distribution.--With respect to any amount appropriated
under subsection (a) for a fiscal year--
(1) not more than 70 percent of such amount shall be used
to carry out section 5622(g) of the Elementary and Secondary
Education Act of 1965 for such fiscal year; and
(2) not less than 30 percent of such amount shall be used
to carry out part E of title II of such Act for such fiscal
year.
TITLE I--ENVIRONMENTAL LITERACY PLANS

SEC. 101. DEVELOPMENT, APPROVAL, AND IMPLEMENTATION OF STATE
ENVIRONMENTAL LITERACY PLANS.

Part D of title V (20 U.S.C. 7201 et seq.) is amended by
adding at the end the following:

``SUBPART 22--ENVIRONMENTAL LITERACY PLANS

``SEC. 5621. ENVIRONMENTAL LITERACY PLAN REQUIREMENTS.

``In order for any State educational agency, or a local
educational agency served by a State educational agency, to
receive grant funds, either directly or through participation
in a partnership with a recipient of grant funds, under this
subpart or part E of title II, the State educational agency
shall meet the requirements regarding an environmental
literacy plan under section 5622.

``SEC. 5622. STATE ENVIRONMENTAL LITERACY PLANS.

``(a) Submission of Plan.--
``(1) In general.--Not later than 1 year after the date of
enactment of the No Child Left Inside Act of 2011, a State
educational agency subject to the requirements of section
5621 shall, in consultation with State environmental agencies
and State natural resource agencies, and with input from the
public--
``(A) submit an environmental literacy plan for
prekindergarten through grade 12 to the Secretary for peer
review and approval that will ensure that elementary and
secondary school students in the State are environmentally
literate; and
``(B) begin the implementation of such plan in the State.
``(2) Existing plans.--A State may satisfy the requirement
of paragraph (1)(A) by submitting to the Secretary for peer
review an existing State plan that has been developed in
cooperation with a State environmental or natural resource
management agency, if such plan complies with this section.
``(b) Plan Objectives.--A State environmental literacy plan
shall meet the following objectives:
``(1) Prepare students to understand, analyze, and address
the major environmental challenges facing the students' State
and the United States.
``(2) Provide field experiences as part of the regular
school curriculum and create programs that contribute to
healthy lifestyles through outdoor recreation and sound
nutrition.
``(3) Create opportunities for enhanced and on-going
professional development for teachers that improves the
teachers'--
``(A) environmental subject matter knowledge; and
``(B) pedagogical skills in teaching about environmental
issues, including the use of--
``(i) interdisciplinary, field-based, and research-based
learning; and
``(ii) innovative technology in the classroom.
``(c) Contents of Plan.--A State environmental literacy
plan shall include each of the following:
``(1) A description of how the State educational agency
will measure the environmental literacy of students,
including--
``(A) relevant State academic content standards and content
areas regarding environmental education, and courses or
subjects where environmental education instruction will be
integrated throughout the prekindergarten to grade 12
curriculum; and
``(B) a description of the relationship of the plan to the
secondary school graduation requirements of the State.
``(2) A description of programs for professional
development for teachers to improve the teachers'--
``(A) environmental subject matter knowledge; and
``(B) pedagogical skills in teaching about environmental
issues, including the use of--
``(i) interdisciplinary, field-based, and research-based
learning; and
``(ii) innovative technology in the classroom.
``(3) A description of how the State educational agency
will implement the plan, including securing funding and other
necessary support.

[[Page S4614]]

``(d) Plan Update.--The State environmental literacy plan
shall be revised or updated by the State educational agency
and submitted to the Secretary not less often than every 5
years or as appropriate to reflect plan modifications.
``(e) Peer Review and Secretarial Approval.--The Secretary
shall--
``(1) establish a peer review process to assist in the
review of State environmental literacy plans;
``(2) appoint individuals to the peer review process who--
``(A) are representative of parents, teachers, State
educational agencies, State environmental agencies, State
natural resource agencies, local educational agencies, and
nongovernmental organizations; and
``(B) are familiar with national environmental issues and
the health and educational needs of students;
``(3) include, in the peer review process, appropriate
representatives from the Department of Commerce, Department
of Interior, Department of Energy, the Environmental
Protection Agency, and other appropriate Federal agencies, to
provide environmental expertise and background for evaluation
of the State environmental literacy plan;
``(4) approve a State environmental literacy plan not later
than 120 days after the plan's submission unless the
Secretary determines that the State environmental literacy
plan does not meet the requirements of this section;
``(5) immediately notify the State if the Secretary
determines that the State environmental literacy plan does
not meet the requirements of this section, and state the
reasons for such determination;
``(6) not decline to approve a State environmental literacy
plan before--
``(A) offering the State an opportunity to revise the State
environmental literacy plan;
``(B) providing technical assistance in order to assist the
State to meet the requirements of this section; and
``(C) providing notice and an opportunity for a hearing;
and
``(7) have the authority to decline to approve a State
environmental literacy plan for not meeting the requirements
of this part, but shall not have the authority to require a
State, as a condition of approval of the State environmental
literacy plan, to--
``(A) include in, or delete from, such State environmental
literacy plan 1 or more specific elements of the State
academic content standards under section 1111(b)(1); or
``(B) use specific academic assessment instruments or
items.
``(f) State Revisions.--The State educational agency shall
have the opportunity to revise a State environmental literacy
plan if such revision is necessary to satisfy the
requirements of this section.
``(g) Grants for Implementation.--
``(1) Program authorized.--From amounts appropriated for
this subsection, the Secretary shall award grants, through
allotments in accordance with the regulations described in
paragraph (2), to States to enable the States to award
subgrants, on a competitive basis, to local educational
agencies and eligible partnerships (as such term is defined
in section 2502) to support the implementation of the State
environmental literacy plan.
``(2) Regulations.--The Secretary shall promulgate
regulations implementing the grant program under paragraph
(1), which regulations shall include the development of an
allotment formula that best achieves the purposes of this
subpart.
``(3) Administrative expenses.--A State receiving a grant
under this subsection may use not more than 2.5 percent of
the grant funds for administrative expenses.
``(h) Reporting.--
``(1) In general.--Not later than 2 years after approval of
a State environmental literacy plan, and every 2 years
thereafter, the State educational agency shall submit to the
Secretary a report on the implementation of the State plan.
``(2) Report requirements.--The report required by this
subsection shall be--
``(A) in the form specified by the Secretary;
``(B) based on the State's ongoing evaluation activities;
and
``(C) made readily available to the public.''.
TITLE II--ESTABLISHMENT OF ENVIRONMENTAL EDUCATION PROFESSIONAL
DEVELOPMENT GRANT PROGRAMS

SEC. 201. ENVIRONMENTAL EDUCATION PROFESSIONAL DEVELOPMENT
GRANT PROGRAMS.

Title II (20 U.S.C. 6601 et seq.) is amended by adding at
the end the following:

``PART E--ENVIRONMENTAL EDUCATION PROFESSIONAL DEVELOPMENT
GRANT PROGRAMS

``SEC. 2501. PURPOSE.

``The purpose of this part is to ensure the academic
achievement of students in environmental literacy through the
professional development of teachers and educators.

``SEC. 2502. GRANTS FOR ENHANCING EDUCATION THROUGH
ENVIRONMENTAL EDUCATION.

``(a) Definition of Eligible Partnership.--In this section,
the term `eligible partnership' means a partnership that--
``(1) shall include a local educational agency; and
``(2) may include--
``(A) the teacher training department of an institution of
higher education;
``(B) the environmental department of an institution of
higher education;
``(C) another local educational agency, a public charter
school, a public elementary school or secondary school, or a
consortium of such schools;
``(D) a Federal, State, regional, or local environmental or
natural resource management agency that has demonstrated
effectiveness in improving the quality of environmental
education teachers; or
``(E) a nonprofit organization that has demonstrated
effectiveness in improving the quality of environmental
education teachers.
``(b) Grants Authorized.--
``(1) Program authorized.--From amounts appropriated for
this subsection, the Secretary shall award grants, through
allotments in accordance with the regulations described in
paragraph (2), to States whose State environmental literacy
plan has been approved under section 5622, to enable the
States to award subgrants under subsection (c).
``(2) Regulations.--The Secretary shall promulgate
regulations implementing the grant program under paragraph
(1), which regulations shall include the development of an
allotment formula that best achieves the purposes of this
subpart.
``(3) Administrative expenses.--A State receiving a grant
under this subsection may use not more than 2.5 percent of
the grant funds for administrative expenses.
``(c) Subgrants Authorized.--
``(1) Subgrants to eligible partnerships.--From amounts
made available to a State educational agency under subsection
(b)(1), the State educational agency shall award subgrants,
on a competitive basis, to eligible partnerships serving the
State, to enable the eligible partnerships to carry out the
authorized activities described in subsection (e) consistent
with the approved State environmental literacy plan.
``(2) Duration.--The State educational agency shall award
each subgrant under this part for a period of not more than 3
years beginning on the date of approval of the State's
environmental literacy plan under section 5622.
``(3) Supplement, not supplant.--Funds provided to an
eligible partnership under this part shall be used to
supplement, and not supplant, funds that would otherwise be
used for activities authorized under this part.
``(d) Application Requirements.--
``(1) In general.--Each eligible partnership desiring a
subgrant under this part shall submit an application to the
State educational agency, at such time, in such manner, and
accompanied by such information as the State educational
agency may require.
``(2) Contents.--Each application submitted under paragraph
(1) shall include--
``(A) the results of a comprehensive assessment of the
teacher quality and professional development needs, with
respect to the teaching and learning of environmental
content;
``(B) an explanation of how the activities to be carried
out by the eligible partnership are expected to improve
student academic achievement and strengthen the quality of
environmental instruction;
``(C) a description of how the activities to be carried out
by the eligible partnership--
``(i) will be aligned with challenging State academic
content standards and student academic achievement standards
in environmental education, to the extent such standards
exist, and with the State's environmental literacy plan under
section 5622; and
``(ii) will advance the teaching of interdisciplinary
courses that integrate the study of natural, social, and
economic systems and that include strong field components in
which students have the opportunity to directly experience
nature;
``(D) a description of how the activities to be carried out
by the eligible partnership will ensure that teachers are
trained in the use of field-based or service learning to
enable the teachers--
``(i) to use the local environment and community as a
resource; and
``(ii) to enhance student understanding of the environment
and academic achievement;
``(E) a description of--
``(i) how the eligible partnership will carry out the
authorized activities described in subsection (e); and
``(ii) the eligible partnership's evaluation and
accountability plan described in subsection (f); and
``(F) a description of how the eligible partnership will
continue the activities funded under this part after the
grant period has expired.
``(e) Authorized Activities.--An eligible partnership shall
use the subgrant funds provided under this part for 1 or more
of the following activities related to elementary schools or
secondary schools:
``(1) Creating opportunities for enhanced and ongoing
professional development of teachers that improves the
environmental subject matter knowledge of such teachers.
``(2) Creating opportunities for enhanced and ongoing
professional development of teachers that improves teachers'
pedagogical skills in teaching about the environment and
environmental issues, including in the use of--
``(A) interdisciplinary, research-based, and field-based
learning; and
``(B) innovative technology in the classroom.
``(3) Establishing and operating environmental education
summer workshops or institutes, including follow-up training,
for elementary and secondary school teachers to

[[Page S4615]]

improve their pedagogical skills and subject matter knowledge
for the teaching of environmental education.
``(4) Developing or redesigning more rigorous environmental
education curricula that--
``(A) are aligned with challenging State academic content
standards in environmental education, to the extent such
standards exist, and with the State environmental literacy
plan under section 5622; and
``(B) advance the teaching of interdisciplinary courses
that integrate the study of natural, social, and economic
systems and that include strong field components.
``(5) Designing programs to prepare teachers at a school to
provide mentoring and professional development to other
teachers at such school to improve teacher environmental
education subject matter and pedagogical skills.
``(6) Establishing and operating programs to bring teachers
into contact with working professionals in environmental
fields to expand such teachers' subject matter knowledge of,
and research in, environmental issues.
``(7) Creating initiatives that seek to incorporate
environmental education within teacher training programs or
accreditation standards consistent with the State
environmental literacy plan under section 5622.
``(8) Promoting outdoor environmental education activities
as part of the regular school curriculum and schedule in
order to further the knowledge and professional development
of teachers and help students directly experience nature.
``(f) Evaluation and Accountability Plan.--
``(1) In general.--Each eligible partnership receiving a
subgrant under this part shall develop an evaluation and
accountability plan for activities assisted under this part
that includes rigorous objectives that measure the impact of
the activities.
``(2) Contents.--The plan developed under paragraph (1)
shall include measurable objectives to increase the number of
teachers who participate in environmental education content-
based professional development activities.
``(g) Report.--Each eligible partnership receiving a
subgrant under this part shall report annually, for each year
of the subgrant, to the State educational agency regarding
the eligible partnership's progress in meeting the objectives
described in the accountability plan of the eligible
partnership under subsection (f).''.
TITLE III--ENVIRONMENTAL EDUCATION GRANT PROGRAM TO HELP BUILD NATIONAL
CAPACITY

SEC. 301. ENVIRONMENTAL EDUCATION GRANT PROGRAM TO HELP BUILD
NATIONAL CAPACITY.

Part D of title V (20 U.S.C. 7201 et seq.) (as amended by
section 101) is further amended by adding at the end the
following:

``SUBPART 23--ENVIRONMENTAL EDUCATION GRANT PROGRAM

``SEC. 5631. PURPOSES.

``The purposes of this subpart are--
``(1) to prepare children to understand and address major
environmental challenges facing the United States; and
``(2) to strengthen environmental education as an integral
part of the elementary school and secondary school
curriculum.

``SEC. 5632. GRANT PROGRAM AUTHORIZED.

``SEC. 5633. APPLICATIONS.

``Each eligible partnership desiring a grant under this
subpart shall submit to the Secretary an application that
contains--
``(1) a plan to initiate, expand, or improve environmental
education programs in order to make progress toward meeting--
``(A) challenging State academic content standards and
student academic achievement standards in environmental
education, to the extent such standards exist; and
``(B) academic standards that are aligned with the State's
environmental literacy plan under section 5622; and
``(2) an evaluation and accountability plan for activities
assisted under this subpart that includes rigorous objectives
that measure the impact of activities funded under this
subpart.

``SEC. 5634. USE OF FUNDS.

``Grant funds made available under this subpart shall be
used for 1 or more of the following:
``(1) Developing and implementing State curriculum
frameworks for environmental education that meet--
``(A) challenging State academic content standards and
student academic achievement standards for environmental
education, to the extent such standards exist; and
``(B) academic standards that are aligned with the State's
environmental literacy plan under section 5622.
``(2) Replicating or disseminating information about proven
and tested model environmental education programs that--
``(A) use the environment as an integrating theme or
content throughout the curriculum; or
``(B) provide integrated, interdisciplinary instruction
about natural, social, and economic systems along with field
experience that provides students with opportunities to
directly experience nature in ways designed to improve
students' overall academic performance, personal health
(including addressing child obesity issues), and
understanding of nature.
``(3) Developing and implementing new approaches to
advancing environmental education, and to advancing the
adoption and use of environmental education content
standards, at the State and local levels.

``SEC. 5635. REPORTS.

``(a) Eligible Partnership Report.--In order to continue
receiving grant funds under this subpart after the first year
of a multiyear grant under this subpart, the eligible
partnership shall submit to the Secretary an annual report
that--
``(1) describes the activities assisted under this subpart
that were conducted during the preceding year;
``(2) demonstrates that progress has been made in helping
schools to meet the State academic standards for
environmental education described in section 5634(1); and
``(3) describes the results of the eligible partnership's
evaluation and accountability plan.
``(b) Report to Congress.--Not later than 2 years after the
date of enactment of the No Child Left Inside Act of 2011 and
annually thereafter, the Secretary shall submit a report to
Congress that--
``(1) describes the programs assisted under this subpart;
``(2) documents the success of such programs in improving
national and State environmental education capacity; and
``(3) makes such recommendations as the Secretary
determines appropriate for the continuation and improvement
of the programs assisted under this subpart.

``SEC. 5636. ADMINISTRATIVE PROVISIONS.

``(a) Federal Share.--The Federal share of a grant under
this subpart shall not exceed--
``(1) 90 percent of the total costs of the activities
assisted under the grant for the first year for which the
program receives assistance under this subpart; and
``(2) 75 percent of such costs for each of the second and
third years.
``(b) Administrative Expenses.--Not more than 7.5 percent
of the grant funds made available to an eligible partnership
under this subpart for any fiscal year may be used for
administrative expenses.
``(c) Availability of Funds.--Amounts made available to the
Secretary to carry out this subpart shall remain available
until expended.

``SEC. 5637. SUPPLEMENT, NOT SUPPLANT.

``Funds made available under this subpart shall be used to
supplement, and not supplant, any other Federal, State, or
local funds available for environmental education
activities.''.
______

By Mr. ROCKEFELLER:
S. 1373. A bill to amend the Internal Revenue Code of 1986 to reduce
international tax avoidance and restore a level playing field for
American businesses; to the Committee on Finance.
Mr. ROCKEFELLER. Mr. President, today I am introducing the
International Tax Competitiveness Act, legislation that will protect
American businesses and workers by ensuring that they can compete on a
level playing field with competitors who are using tax evasion to boost
profits and ship jobs and dollars overseas.
This bill targets companies that cheat the Federal Government out of
billions of dollars a year in revenue by taking advantage of tax
loopholes. This legislation is designed to put an end to the practice
where American companies avoid domestic taxes by moving their
headquarters to a post office box overseas, while their executives and
much of their workforce remain here in the United States. If you
benefit from the protection of American laws and the talent of the
American workforce, you should also pay taxes here in the United
States.
In March, the television program 60 Minutes aired a story on tax
avoidance

[[Page S4616]]

that centered on Zug, a town in Switzerland. While Zug has only 26,000
residents, it is home to nearly 30,000 corporations, many of which
operate out of mailboxes. This is because the tax rates in Zug are low
and companies can create phony headquarters there that allow them to
avoid higher taxes in their home country.
The International Tax Competitiveness Act also discourages tax abuse
related to transfer pricing. Sometimes, a company will produce a
product here in the United States, taking advantage of generous
research and development subsidies, and then sell it to a foreign
subsidiary for pennies on the dollar. The royalty payments and profits
then flow to that foreign company in a low tax jurisdiction, cheating
the American government out of this revenue. This legislation would
recognize many of these transactions for what they are . . . blatant
abuse of the tax code, and treat profits as American-earned for tax
purposes.
At a time when members of Congress are working hard to balance the
budget and reduce our debt, everyone must contribute to the effort and
our laws must be obeyed. It is not fair to cut funding for valuable
healthcare and education programs in an effort to cut spending, while
allowing corporations to avoid paying billions of dollars in taxes.
I want to thank my counterpart from the House of Representatives,
Representative Lloyd Doggett, for his leadership in that body on this
legislation. I ask my colleagues to join me in supporting this
important legislation and thank the chair for allowing me to speak on
this issue.
______

By Mr. LEVIN (for himself and Mr. Brown of Ohio):
S. 1375. A bill to amend the Internal Revenue Code of 1986 to provide
that corporate tax benefits based upon stock option compensation
expenses be consistent with accounting expenses shown in corporate
financial statements for such compensation; to the Committee on
Finance.
Mr. LEVIN. Mr. President, today I am introducing a bill with my
colleague, Senator Sherrod Brown, to eliminate the federal tax break
that gives special tax treatment to corporations that pay their
executives with stock options. The bill is called the Ending Excessive
Corporate Deductions for Stock Options Act, and it has been endorsed by
the AFL-CIO, Citizens for Tax Justice, Consumer Federation of America,
OMB Watch, and Tax Justice Network-USA. According to the Joint
Committee on Taxation, eliminating this corporate tax break would bring
in almost $25 billion over 10 years.
The existing special treatment of corporate stock options forces
ordinary taxpayers to subsidize the salaries of corporate executives.
The subsidy is a consequence of the current mismatch between U.S.
accounting rules and tax rules for stock options, which have developed
along divergent paths and are now out of kilter. Today, U.S. accounting
rules require corporations to report stock option expenses on their
books when those stock options are granted, while federal tax rules
provide that they use another method to claim a different--and
typically much higher--deduction on their tax returns when the stock
options are exercised. The result is that corporations can claim larger
tax deductions for stock options on their tax returns than the actual
expense they show on their books, creating a tax windfall for those
corporations.
Stock options are the only type of compensation where the tax code
lets a corporation deduct more than the expense shown on their books.
For all other types of compensation--cash, stock, bonuses, and more--
the tax return deduction equals the book expense. In fact, if
corporations took tax deductions for compensation in excess of what
their books showed, it could constitute tax fraud. The sole exception
to that rule is stock options. It is an exception we can no longer
afford.
When corporate compensation committees learn that stock options can
generate tax deductions that are many times larger than their book
expense, it creates a huge temptation for corporations to pay their
executives with stock options instead of cash. Why? Because
compensating executives with stock options instead of cash can produce
a huge tax windfall for the corporation. By taking advantage of federal
tax laws that have not been updated for four decades, corporations can
claim tax deductions at rates that are often 2 to 10 times higher than
the stock option expense shown on their books.
Stock options are paid to virtually every chief executive officer,
CEO, in America and are a major contributor to sky-high executive pay.
Stock options give the recipients the right to buy company stock at a
set price for a specified period of time, typically 10 years.
Since the 1980s, CEO pay has increased at a torrid pace. In 2010,
according to Forbes magazine, executives at the 500 largest U.S.
companies received pay totaling $4.5 billion, averaging $9 million per
CEO. Thirty percent of that pay was comprised of exercised stock
options which were cashed in for an average gain of about $2.7 million,
bringing total pay to its highest level since before the recession. The
highest paid executive in 2010 was the CEO of United Health Group, who
received $102 million in total pay. Of that pay, almost all of it--$98
million--came from exercising stock options.
During the recession from 2007 to 2009, while many stock prices
dropped in value, 90 percent of corporations awarded stock options to
their executives. Because of the depressed stock prices at the time,
most of those stock options were recorded on the corporations' books as
a relatively small expense. Fast forward to 2010, and even in this
struggling economy, as stock prices have begun to increase, those same
stock options are seeing major jumps in their value, far above their
book expense.
For example, in a recent study conducted by the Wall Street Journal,
the CEO of Oracle Corporation was granted stock options in July 2009,
with an estimated value of $62 million. Two years later, those options
are estimated to be worth over $97 million, a gain of $35 million in
just two years. Other corporate executives have experienced similar
increases in their stock option holdings. For example, according to the
Wall Street Journal analysis, the CEOs of Abercrombie and Fitch Inc.,
Nabors Industries, Ltd., and Starbucks Corporation all saw jumps in the
value of stock options awarded during the financial crisis of more than
$60 million each. The former CEO of Occidental Petroleum, Ray R. Irani,
received a compensation package valued at $76.1 million, including
stock option awards valued at $40.3 million.
These huge increases in the dollar value of the stock option awards
mean skyrocketing tax deductions for corporations doing so well that
their stock prices have climbed. The deductions will reduce the taxes
being paid by these successful companies, depriving the U.S. treasury
of needed revenues.
The average worker, by the way, has not experienced any increase in
pay. From 2009 to 2010 alone, CEOs at the 500 biggest U.S. corporations
saw a 12 percent increase in compensation, but median income has been
stagnant. According to the Bureau of Labor Statistics, only 8 percent
of workers in private industry received stock options as part of their
compensation package. For CEOs, however, more than 90 percent of those
in the S&P 500 received stock options in the 12 months starting October
1, 2008.
The financial tycoon J.P. Morgan once said that executive pay should
not exceed 20 times average worker pay. But since 1990, CEO pay has
increased to a level that is now nearly 300 times greater than the
average worker's salary. The single biggest factor fueling that massive
pay gap is stock options which are, in turn, generating huge tax
deductions for the corporations that doled them out.
This bill would end the loophole that allows a corporation to deduct
on its taxes more than the stock option expense shown on its books.
Over a 5 year period, from 2005 to 2009, the latest year for which data
is available, IRS tax return data shows that corporate stock option tax
deductions have exceeded corporate book expenses by billions of dollars
every year, with the size of the excess tax deductions varying from $12
billion to $61 billion per year. These excessive deductions mean
billions of dollars in reduced taxes for

[[Page S4617]]

corporations wealthy enough to provide substantial stock option
compensation to their executives, all at the expense of ordinary
taxpayers.
We cannot afford to continue this multi-billion dollar loss to the
U.S. Treasury, and tax fairness means ordinary taxpayers should not
continue to be asked to subsidize corporate executive salaries. That is
why the bill I am introducing today would change the tax code so that
corporations can deduct only the stock option expense actually shown on
their books.
To get a better understanding of why this bill is needed, it helps to
have a clear understanding of how stock option accounting and tax rules
fell out of sync over time.
Calculating the cost of stock options may sound straightforward, but
for years, companies and their accountants engaged the Financial
Accounting Standards Board, or FASB, in an all-out, knock-down battle
over how companies should record stock option compensation expenses on
their books.
U.S. publicly traded corporations are required by law to follow
Generally Accepted Accounting Principles, or GAAP, which are issued by
FASB which is, in turn, overseen by the SEC. For many years, GAAP
allowed U.S. companies to issue stock options to employees and, unlike
any other type of compensation, report a zero compensation expense on
their books, so long as on the grant date, the stock option's exercise
price equaled the market price at which the stock could be sold.
Assigning a zero value to stock options that routinely produced huge
amounts of executive pay provoked deep disagreements within the
accounting community. In 1993, FASB proposed assigning a ``fair value''
to stock options on the date they were granted to an employee, using
mathematical valuation tools. FASB proposed further that companies
include that amount as a compensation expense on their financial
statements. A battle over stock option expensing followed, involving
the accounting profession, corporate executives, FASB, the SEC, and
Congress.
In the end, after years of fighting and negotiation, FASB issued a
new accounting standard, Financial Accounting Standard, or FAS, 123R,
which was endorsed by the SEC and became mandatory for all publicly
traded corporations in 2005. In essence, FAS 123R requires all
companies to record a compensation expense equal to the fair value on
grant date of all stock options provided to an employee in exchange for
the employee's services.
Opponents of the new accounting rule had predicted that, if
implemented, it would severely damage U.S. capital markets. They warned
that stock option expensing would eliminate corporate profits,
discourage investment, end stock option compensation, depress stock
prices, and stifle innovation. But none of that happened.
2006 was the first year in which all U.S. publicly traded companies
were required to expense stock options. Instead of tumbling, both the
New York Stock Exchange and NASDAQ turned in strong performances, as
did initial public offerings by new companies. The dire predictions
were wrong. Stock option expensing has been fully implemented without
any detrimental impact to the markets.
During the years the battle raged over stock option accounting,
relatively little attention was paid to the taxation of stock options.
Section 83 of the tax code, first enacted in 1969 and still in place
after four decades, is the key statutory provision. It essentially
provides that, when an employee exercises compensatory stock options,
the employee must report as income the difference between what the
employee paid to exercise the options and the market value of the stock
received. The corporation can then take a mirror deduction for whatever
amount of income the employee realized.
For example, suppose a company gave options to an executive to buy 1
million shares of the company stock at $10 per share. Suppose, 5 years
later, the executive exercised the options when the stock was selling
at $30 per share. The executive's income would be $20 per share for a
total of $20 million. The executive would declare $20 million as
ordinary income, and in the same year, the company could take a tax
deduction for $20 million.
The two main problems with this approach are, first, that the
deduction amount is out of sync--and usually significantly greater
than--the expense shown on the corporate books years earlier and,
second, the $20 million in ordinary income obtained by the executive
did not come from the corporation itself. In fact, rather than pay the
executive the $20 million, the corporation actually received money from
the executive who paid to exercise the option and purchase the related
stock.
In most cases, the $20 million was actually paid by unrelated parties
on the stock market who bought the stock from the executive. Yet the
tax code currently allows the corporation to declare the $20 million
paid by third parties as its own business expense and take it as a tax
deduction. The reasoning behind this approach has been that the
exercise date value was the only way to get certainty regarding the
value of the stock options for tax deduction purposes. That reasoning
lost its persuasive character, however, once consensus was reached on
how to calculate the value of stock option compensation on the date the
stock options are granted.
So U.S. stock option accounting and tax rules are now at odds with
each other. Accounting rules require companies to expense stock options
on their books on the grant date. Tax rules require companies to deduct
stock option expenses on the exercise date. Companies report the grant
date expense to investors on their financial statements, and the
exercise date expense on their tax returns. The financial statements
report on the stock options granted during the year, while the tax
returns report on the stock options exercised during the year. In
short, company financial statements and tax returns use different
valuation methods and value, resulting in widely divergent stock option
expenses for the same year.
To examine the nature and consequences of that stock option book-tax
difference, the Permanent Subcommittee on Investigations, which I
chair, initiated an investigation and held a hearing in June 2007. Here
is what we found.
To test just how far the book and tax figures for stock options
diverge, the Subcommittee contacted a number of companies to compare
the stock option expenses they reported for accounting and tax
purposes. The Subcommittee asked each company to identify stock options
that had been exercised by one or more of its executives from 2002 to
2006. The Subcommittee then asked each company to identify the
compensation expense they reported on their financial statements versus
the compensation expense on their tax returns. The Subcommittee very
much appreciated the cooperation and assistance provided by the nine
companies we worked with. At the hearing, we disclosed the resulting
stock option data for those companies, including three companies that
testified.
The data provided by the companies showed that, under then existing
rules, eight of the nine companies showed a zero expense on their books
for the stock options that had been awarded to their executives, but
claimed millions of dollars in tax deductions for the same
compensation. The ninth company, Occidental Petroleum, had begun
voluntarily expensing its stock options in 2005, but also reported
significantly greater tax deductions than the stock option expenses
shown on its books. When the Subcommittee asked the companies what
their book expense would have been if FAS 123R had been in effect, all
nine calculated book expenses that remained dramatically lower than
their tax deductions. Altogether, the nine companies calculated that
they would have claimed about $1 billion more in stock option tax
deductions than they would have shown as book expenses, even using the
tougher new accounting rule. Let me repeat that--just 9 companies
produced a stock option book-tax difference and excess tax deductions
of about $1 billion.

KB Home, for example, is a company that builds residential homes. Its
stock price had more than quadrupled over the 10 years leading up to
2006. Over the same time period, it had repeatedly granted stock
options to its then CEO. Company records show that, over 5 years, KB
Home gave him 5.5 million stock options of which, by 2006, he had
exercised more than 3 million.

[[Page S4618]]

With respect to those 3 million stock options, KB Home recorded a
zero expense on its books. Had the new accounting rule been in effect,
KB Home calculated that it would have reported on its books a
compensation expense of about $11.5 million. KB Home also disclosed
that the same 3 million stock options enabled it to claim compensation
expenses on its tax returns totaling about $143.7 million. In other
words, KB Home claimed a $143 million tax deduction for expenses that
on its books, under current accounting rules, would have totaled $11.5
million. That is a tax deduction 12 times bigger than the book expense.
Occidental Petroleum disclosed a similar book-tax discrepancy. That
company's stock price had also skyrocketed, dramatically increasing the
value of the 16 million stock options granted to its CEO since 1993. Of
the 12 million stock options the CEO actually exercised over a 5-year
period, Occidental Petroleum claimed a $353 million tax deduction for a
book expense that, under current accounting rules, would have totaled
just $29 million. That is a book-tax difference of more than 1200
percent.
Similar book-tax discrepancies applied to the other companies we
examined. Cisco System's CEO exercised nearly 19 million stock options
over 5 years, and provided the company with a $169 million tax
deduction for a book expense which, under current accounting rules,
would have totaled about $21 million. UnitedHealth's former CEO
exercised over 9 million stock options in 5 years, providing the
company with a $318 million tax deduction for a book expense which
would have totaled about $46 million. Safeway's CEO exercised over 2
million stock options, providing the company with a $39 million tax
deduction for a book expense which would have totaled about $6.5
million.
Altogether, these nine companies took stock option tax deductions
totaling about $1.2 billion, a figure nearly five times larger than the
$217 million that their combined stock option book expenses would have
been. The resulting $1 billion in excess tax deductions represents a
tax windfall for these companies simply because they issued lots of
stock options to their CEOs.
Tax rules that produce huge tax deductions that are many times larger
than the related stock option book expenses give companies an incentive
to issue massive stock option grants, because they know it is highly
likely the stock options will produce a relatively small hit to the
profits shown on their books, and are likely to produce a much larger
tax deduction that can dramatically lower their taxes.
The data we gathered for just nine companies found excess stock
option tax deductions of $1 billion. To gauge whether the same tax gap
applied to stock options across the country as a whole, the
Subcommittee asked the IRS to perform an analysis of what, back then,
was newly available stock option data.
The data is taken from tax Schedule M-3, which corporations were
required to file for the first time in 2004, with their tax returns.
The M-3 Schedule asks companies to identify differences in how they
report corporate income to investors versus what they report to Uncle
Sam, so that the IRS can track and analyze significant book-tax
differences.
The M-3 data showed that, for corporate tax returns filed from July
1, 2004 to June 30, 2005, the first full year in which it was
available, companies' stock option tax deductions totaled about $43
billion more than their stock options expenses on their books. Similar
data over the next 5 years, with the latest available data from tax
returns filed from July 1, 2008 to June 30, 2009, showed that corporate
stock option tax deductions as a whole exceeded their book expenses
every year by billions of dollars, with the size of the excess tax
deductions varying from $12 billion to $61 billion per year. These
excessive deductions meant billions of dollars in reduced taxes for the
relevant corporations each year.
In addition, the IRS data showed that the bulk of the stock option
deductions were taken by a relatively small number of corporations
nationwide. For example, in 2005, 56 percent of the excess tax
deductions were taken by only 100 corporations, while 76 percent were
taken by 250 corporations. In fact, over the 5 years of data, just 250
corporations took two thirds to three quarters of all of the stock
option deductions claimed in those years. That is just 250 corporations
out of the more than 5 million corporations that filed tax returns each
year. In other words, the IRS data proves that the corporate stock
option tax loophole actually benefits a very small number of
corporations.
Claiming massive stock option tax deductions enabled those
corporations, as a whole, to legally reduce payment of their taxes by
billions of dollars each year. Moreover, under current tax rules, if a
stock option deduction is not useful in the year it is first available,
the corporation is allowed to add the deduction to its net operating
losses and use the deduction to reduce its taxes for up to the next 20
years, an unbelievable windfall. It is a corporate loophole that just
keeps going.
There were other surprises in the stock option data as well. One set
of issues disclosed by the data involves what happens to unexercised
stock options. Under the current mismatched set of accounting and tax
rules, stock options which are granted, vested, but never exercised by
the option holder turn out to produce a corporate book expense but no
tax deduction.
Cisco Systems told the Subcommittee, for example, that in addition to
the 19 million exercised stock options previously mentioned, their CEO
held about 8 million options that, due to a stock price drop, would
likely expire without being exercised. Cisco calculated that, had FAS
123R been in effect at the time those options were granted, the company
would have had to show a $139 million book expense, but would never
have been able to claim a tax deduction for this expense since the
options would never have been exercised. Apple made a similar point. It
told the Subcommittee that, in 2003, it allowed its CEO to trade 17.5
million in underwater stock options for 5 million shares of restricted
stock. That trade meant the stock options would never be exercised and,
under current rules, would produce a book expense without ever
producing a tax deduction.
In both of these cases, under current accounting rules, it is
possible that the stock options given to a corporate executive would
have produced a reported book expense greater than the company's tax
deduction. While the M-3 data indicates that, overall, accounting
expenses lag far behind claimed tax deductions, the possible financial
impact on an individual company with a large number of unexercised
stock options is additional evidence that existing stock option
accounting and tax rules are out of kilter and should be brought into
alignment. Under our bill, if a company incurred a stock option
expense, it would always be able to claim a tax deduction for that
expense.
Another set of issues brought to light by the stock option data
focuses on the fact that the current stock option tax deduction is
typically claimed years later than the initial book expense. Normally,
a corporation dispenses compensation to an employee and takes a tax
deduction in the same year for the expense. The company controls the
timing and amount of the compensation expense and the corresponding tax
deduction. With respect to stock options, however, corporations may
have to wait years to see if, when, and how much of a deduction can be
taken. That's because the corporate tax deduction is wholly dependent
upon when an individual corporate executive decides to exercise his or
her stock options.
Our bill would require that, when the company gives away something of
value, it reflects that expense on its books and claims that same
expense in the same year on its tax return. The company, and the
government, would not have to wait to see if and when the stock options
given to executives were exercised. As with any other form of
compensation, the company would use the FASB accounting rules to
determine the value of what it is giving away, and take the equivalent
tax deduction in the year the compensation was provided.
UnitedHealth, for example, told the Subcommittee that it gave its
former CEO 8 million stock options in 1999, of which, by 2006, only
about 730,000 had been exercised. It did not know if or when its former
CEO would exercise the remaining 7 million options, and so could not
calculate when or how much

[[Page S4619]]

of a tax deduction it would be able to claim for this compensation
expense.
If the rules for stock option tax deductions were changed as provided
for in our bill, companies would typically take the deduction years
earlier than they do now, without waiting to see if and when particular
options are exercised. In addition, by requiring stock option expenses
to be deducted in the same year they appear on the company books, stock
options would become consistent with how other forms of compensation
are treated in the tax code.
Right now, U.S. stock option accounting and tax rules are mismatched,
misaligned, and out of kilter. They allow companies collectively to
deduct billions of dollars in stock option expenses in excess of the
expenses that actually appear on the company books. They disallow tax
deductions for stock options that are given as compensation but never
exercised. They often force companies to wait years to claim a tax
deduction for a compensation expense that could and should be claimed
in the same year it appears on the company books.
The bill being introduced today would cure those problems. It would
bring stock option accounting and tax rules into alignment, so that the
two sets of rules would apply in a consistent manner. It would
accomplish that goal simply by requiring the corporate stock option tax
deduction to reflect the stock option expenses as shown on the
corporate books each year.
Specifically, the bill would end use of the current stock option
deduction under Section 83 of the tax code, which allows corporations
to deduct stock option expenses when exercised in an amount equal to
the income declared by the individual exercising the option, replacing
it with a new Section 162(q), which would require companies to deduct
the stock option expenses as shown on their books each year.
The bill would apply only to corporate stock option deductions; it
would make no changes to the rules that apply to individuals who
receive stock options as part of their compensation. Those individuals
would still report their compensation in the year they exercise their
stock options. They would still report as income the difference between
what they paid to exercise the options and the fair market value of the
stock they received upon exercise. The gain would continue to be
treated as ordinary income rather than a capital gain, since the option
holder did not invest any capital in the stock prior to exercising the
stock option and the only reason the person obtained the stock was
because of the services they performed for the corporation.
The amount of income declared by an individual after exercising a
stock option will likely be greater than the stock option expense
booked and deducted by the corporation which employed that individual.
That's in part because the individual's gain often comes years after
the original stock option grant, during which time the underlying stock
will usually have gained in value. In addition, the individual will
typically exercise the option and immediately sell the stock and
therefore receive income, not just from the corporation that supplied
the stock options years earlier, but also from the third parties
purchasing the resulting shares.
Consider the same example discussed earlier of an executive who
exercised options to buy 1 million shares of stock at $10 per share,
obtained the shares from the corporation, and then immediately sold
them on the open market for $30 per share, making a total profit of $20
million. The individual's corporation didn't supply that $20 million.
Just the opposite. Rather than paying cash to its executive, the
corporation received a $10 million payment from the executive in
exchange for the 1 million shares. The $20 million profit from selling
the shares was paid, not by the corporation, but by third parties in
the marketplace who purchased the stock. That's why it makes no sense
for the company to declare as an expense the amount of profit that an
employee--often a former employee--obtained from unrelated parties in
the marketplace.
The executive who exercised the stock options must still treat any
resulting profit as ordinary income for the reasons given earlier: the
executive received the shares at a below market cost, solely because of
work that the executive performed for the corporation in return for the
stock option compensation.
The bill we are introducing today would put an end to the current
approach of allowing a corporation to take a mirror deduction equal to
the ordinary income declared by its executive. It would break that old
artificial illogical symmetry and replace it with a new logical
symmetry--one in which the corporation's stock option tax deduction
would match its book expense.
I call the current approach a case of artificial symmetry, because it
uses a construct in the tax code that, when first implemented 40 years
ago, enabled corporations to calculate their stock option expense on
the exercise date, when there was no consensus on how to calculate
stock option expenses on the grant date. The artificiality of the
approach is demonstrated by the fact that it allows corporations to
claim a deductible expense for money that comes not from company
coffers, but from third parties in the stock market. Now that an
accounting consensus determines how to calculate stock option expenses
on the grant date, however, there is no longer any need to rely on an
artificial construct that calculates corporate stock option expenses on
the exercise date using third party funds.
It is also important to note that the bill would not affect in any
way current tax provisions that provide favored tax treatment to so-
called Incentive Stock Options under Section 422 of the tax code. Under
that section, in certain circumstances, corporations can surrender
their stock option deductions in favor of allowing their employees with
stock option gains to be taxed at a capital gains rate instead of
ordinary income tax rates. Many start-up companies use these types of
stock options, because they don't yet have taxable profits and don't
need a stock option tax deduction. So they forfeit their stock option
corporate deduction in favor of giving their employees more favorable
treatment of their stock option income. Incentive Stock Options would
not be affected by our legislation and would remain available to any
corporation providing stock options to its employees.
The bill would make one other important change to the tax code as it
relates to corporate stock option tax deductions. In 1993, Congress
enacted a $1 million cap on the compensation that a corporation can
deduct from its taxes, so that other taxpayers wouldn't be forced to
subsidize corporate executive pay. That cap was not applied to stock
options, however, instead allowing companies to deduct any amount of
stock option compensation from their tax obligations, without limit.
By not applying the $1 million cap to stock option compensation, the
tax code created a significant tax incentive for corporations to pay
their executives with stock options. Indeed, it is common for
executives to have salaries of $1 million, while simultaneously
receiving millions of dollars more in stock options. History has
subsequently shown that the $1 million cap--established to stop
ordinary taxpayers from being forced to subsidize enormous paychecks
for corporate executives--is effectively meaningless without including
stock options.
Further, while corporate directors may be comfortable diluting their
shareholders' interests while doling out massive amounts of stock
options, that still does not mean that ordinary taxpayers should be
forced to subsidize the large amounts of stock option compensation
involved. The bill would eliminate this unwarranted, favored treatment
of executive stock options by making deductions for this type of
compensation subject to the same $1 million cap that applies to other
forms of compensation covered by Section 162(m). It is also worth
noting that, if the cap were applied to stock options, it would not
prevent stock option pay from exceeding $1 million--it would simply
ensure that those stock option awards were not made at the expense of
ordinary taxpayers.
The bill also contains several technical provisions. First, it would
make a conforming change to the research tax credit so that stock
option expenses claimed under that credit would match the stock option
deductions taken under the new tax code section 162(q).

[[Page S4620]]

Second, the bill would authorize the Secretary of the Treasury to adopt
regulations governing how to calculate the deduction for stock options
in unusual circumstances, such as when a parent corporation issues
options on its shares to the employee of a subsidiary or another
corporation in a consolidated group, or when one corporation issues
options on its shares to employees of a joint venture.
Finally, the bill contains a transition rule for applying the new
Section 162(q) stock option tax deduction to existing and future stock
option grants. Essentially, this transition rule would ensure that
stock options issued prior to the enactment date of the legislation
would remain tax deductible and ensure all corporations can start
deducting stock option expenses on a yearly schedule.
The transition rule has three parts. First, it would allow the old
Section 83 deduction rules to apply to any option which was vested
prior to the effective date of the new stock option accounting rule,
FAS 123R, and exercised after the date of enactment of the bill. The
effective date of FAS 123R is June 15, 2005 for most corporations, and
December 31, 2005 for most small businesses. Prior to the effective
date of FAS 123R, most corporations would have shown a zero expense on
their books for the stock options issued to their executives and, thus,
would be unable to claim a tax deduction under the new Section 162(q).
For that reason, the bill would allow these corporations to continue to
use Section 83 to claim stock option deductions on their tax returns.
For stock options that vested after the effective date of FAS 123R
and were exercised after the date of enactment, the bill takes another
tack. Under FAS 123R, these corporations would have had to show the
appropriate stock option expense on their books, but would have been
unable to take a tax deduction until the executive actually exercised
the option. For those options, the bill would allow corporations to
take an immediate tax deduction--in the first year that the bill is in
effect--for all of the expenses shown on their books with respect to
these options. This ``catch-up deduction'' in the first year after
enactment would enable corporations, in the following years, to begin
with a clean slate so that their tax returns the next year would
reflect their actual stock option book expenses for that same year.
After that catch-up year, all stock option expenses incurred by a
company each year would be reflected in their annual tax deductions
under the new Section 162(q).
This transition rule is a generous one, but even with it, the Joint
Committee on Taxation has estimated that closing the corporate stock
option tax deduction loophole would produce $24.6 billion in corporate
tax revenues over 10 years.
Over the last 5 years, the stock option book-tax gap has ranged from
$12 billion to $61 billion per year, generating deductions far in
excess of corporate expenses. Corporations have avoided paying their
fair share to Uncle Sam by simply giving their executives the right to
tap huge sums of money from the stock market. It is a tax policy that
forces ordinary taxpayers to subsidize outsized executive compensation
and that favors corporations doling out stock options over paying their
executives in cash.
Right now, stock options are the only compensation expense where the
tax code allows companies to deduct more than their book expense. In
these times of financial distress, we cannot afford this multi-billion
dollar loss to the Treasury, not only because of the need to reduce the
deficit, but also because the stock option tax deduction contributes to
the anger and social disruption caused by the ever deepening chasm
between the pay of executives and the pay of average workers.
The Obama administration has pledged itself to closing unfair
corporate tax loopholes and to returning sanity to executive pay. It
should start with supporting an end to excessive stock option corporate
deductions. I urge my colleagues to include this legislation in any
deficit reduction package this year, or to pass it separately.

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