[Congressional Record Volume 158, Number 22 (Thursday, February 9, 2012)]
[Senate]
[Pages S496-S503]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. HELLER:
S. 2080. A bill to authorize depository institutions, depository
institution holding companies, Fannie Mae, and Freddie Mac to lease
foreclosed property held by such entities for up to 5 years, and for
other purposes; to the Committee on Banking, Housing, and Urban
Affairs.
Mr. HELLER. Mr. President, when our Nation's economy was thriving,
Nevada was at the heart of the construction boom. Buildings and homes
were going up across the State. Neighborhoods were growing, schools
were being built at record rates, and the construction industry was
flourishing. All of this activity drove investments into other areas of
the economy, and for many life was good in Nevada. But when the crisis
hit, the highs that my State experienced were matched by the lows that
followed.
Nevada now leads the Nation in unemployment with more than 160,000
Nevadans looking for a job. Many can no longer afford their homes.
Nevadans are being forced into bankruptcy and facing foreclosure. While
Nevada is home to some of the most resilient, hard-working people in
the country, almost one-quarter of Nevadans are so frustrated that they
have simply given up hope for better employment.
Much of the difficulty Nevadans are experiencing can be traced back
to the crisis in my State. The ill effects of the depressed housing
market are widespread. High rates of foreclosures are devastating to
families, neighborhoods, and entire communities. Families who have been
foreclosed upon are already having a hard time paying their bills. Add
to those difficulties the time spent finding a new place and the costs
of moving and their problems are compounded. Time spent fighting the
bank to avoid foreclosure and relocating would likely be better used to
find a job or better paying employment.
One of the biggest problems distressed home owners are facing is the
programs that have been put into place to help keep people in their
homes that have not lived up to expectations. My office spends a great
deal of time with Nevadans on the cusp of losing their homes, looking
for help, and trying to keep families in their homes. It is truly heart
wrenching to hear some of these stories. These homeowners do not want
to foreclose, and obviously they do not want to lose their homes.
I recently received this e-mail from a constituent in Reno who is
fighting to keep their home. I would like to share that with you.
We hoped for a win-win situation but in the end all we got
was a nightmare in which everyone loses: my sister and I
obviously lose, our neighborhood loses as another house sits
vacant with a rusting metal sign in the front, our State
loses as the housing plight increases again, the bank loses
because they lose a customer who just needed another chance
and, most importantly, democracy loses as the plutocrats roll
over another family.
When families move, their children often have to change schools. So
now not only are children forced to move from their homes, they are
also leaving behind their schools and their neighborhoods. This kind of
destabilization is harmful for families who are already struggling.
Consider the effects of foreclosures on neighborhoods and
communities. The widespread availability of housing is flooding the
real estate inventory in Nevada. This is forcing down home values and
making it difficult for other people to sell their homes as well. In
February 2006 the average home in Nevada was valued at $309,000. Today
the home values have dropped to $120,000.
Homes left vacant and uncared for can quickly become an eyesore,
pushing low home values even lower. This means others in the
neighborhood can have a difficult time selling their homes if they want
to move. If they find a better job elsewhere, for example, they may not
be able to take it because they cannot sell their homes for a
reasonable price, if they are able to sell them at all.
Today I am introducing legislation to help reverse these
destabilizing forces. The bill I am introducing today, the Keeping
Families in their Home Act, will help address large unsold housing
inventories and give families a chance to stay in their homes. This
bill would allow banks, Fannie Mae and Freddie Mac, to enter into long-
term leases, including an option to purchase properties acquired
through foreclosure with the prior homeowner or any individual.
By providing an opportunity for the homeowner to stay in their home,
the bank is giving families a chance to regain sound financial footing.
This commonsense solution helps provide some much needed stability is
available for all families.
While I believe this bill is a good step in the right direction, let
me be clear: much more needs to be done to help the housing problems
facing Nevada. The programs already in place simply have not done
enough and have not lived up to expectations.
I was pleased to see reports of growth in our economy, but people in
my State continue to suffer. Back home Nevadans still believe there are
no jobs. Small businesses are trying to survive while gridlock in
Washington is making it harder for employers to know what is expected
in the coming year. Crushing regulations are bringing Nevada's growth
industries to a halt. In order for Nevada to experience real long-term
recovery, Washington needs to fundamentally change the way it works.
Congress needs to stop overspending. Republicans and Democrats should
come together to close unfair loopholes and make the Tax Code easier
for businesses to understand and to follow. This bill is just one
solution to help turn around this housing crisis. It is also an idea
that both Republicans and Democrats can support.
I look forward to working with my colleagues to pass this bill and
others into law so that we can help families dealing with foreclosures
across the country. As I have said before, moving forward I welcome any
and all ideas on how to fix the housing crisis in this country.
Nevadans cannot afford to wait any longer.
In the meantime, I urge my colleagues to seriously consider
supporting this bill. This legislation can go a long way toward helping
families, stabilizing neighborhoods, and stem
[[Page S497]]
any further reduction in home prices. I hope Senators will join me in
this endeavor so the President can sign this bill into law and help
families who badly need it.
______
By Mr. ROCKEFELLER:
S. 2088. A bill to amend the Internal Revenue Code of 1986 to
permanently double the amount of start-up expenses entrepreneurs can
deduct from their taxes; to the Committee on Finance.
Mr. ROCKEFELLER. Mr. President, today I am introducing the Small
Business Start-up Support Act of 2012, legislation that will promote
small business growth in my home state of West Virginia, and around the
country.
Since the recession, I have met with countless business owners, as
well as those who dream of starting a small business. One of the common
themes of these conversations is the difficulty these individuals have
raising capital, particularly when a business is in its infancy.
This legislation helps those individuals out, by expanding a
successful provision of the tax code that allows business owners to
deduct up to $5,000 of start-up costs. These start-up costs are things
like legal and marketing costs that are necessary to get a business up
and running, but put a strain on an already tight budget. My bill would
expand this deduction so that individuals can deduct up to $10,000 of
start-up costs.
For a business to survive, and thrive, its owner has to do their
homework during its infancy. They have to study things like supply
chains and distribution models. They have to develop marketing plans.
Each of these things has a cost that is incurred before a business
makes dollar one. That is when a business owner is most in need of
assistance and that is why this credit was first enacted.
A temporary expansion of the start-up deduction was enacted in 2008,
and it was one of many actions this Congress took to help business
owners weather the recession and keep their doors open. President Obama
included a permanent extension of this provision in his ``Startup
America'' legislative agenda and I am committed to seeing it become
law.
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. ENZI:
S. 2091. A bill to amend the Internal Revenue Code of 1986 to reform
the international tax system of the United States, and for other
purposes; to the Committee on Finance.
Mr. ENZI. Mr. President, I rise to speak about a bill I am
introducing today, the United States Job Creation and International Tax
Reform Act of 2012. The name says it all. This is a bill that would
incentivize American companies to create jobs in the United States
while at the same time leveling the playing field for U.S. companies in
the global marketplace. This bill would reform and modernize the rules
for taxing the global operations of American companies and would help
America become a more attractive location to base a business that
serves customers all over the world.
Unfortunately, our current tax rules do just the opposite. In fact,
many businesses could be better off if they were headquartered outside
the United States. That is not right, and Congress should fix it. This
bill would do that.
I wish to thank Senator Hatch and members of his staff who have been
helpful in working through the complexities of this international tax.
I also wish to mention Eric Oman, a member of my staff and a CPA, who
worked with me in developing this legislation. He has lived overseas
and worked with the U.S. tax laws overseas. That is the kind of
expertise we need to reform international tax law.
I wish to thank all who testified before the Finance Committee,
especially Scott Naatjes, who is the vice president and general tax
counsel of Cargill. This man has dealt with the complex accounting of
foreign earnings and the money to be repatriated to the United States,
an actual practitioner whom we relied on. He gave us insight into years
of records that have to be reviewed for a single item in the complex
web of the current international tax system in order to bring the money
back to the United States.
Finally, I wish to thank Dave Camp, the chairman of the House, Ways,
and Means Committee, who kick-started the discussion on tax reform when
he released his discussion draft last October.
Enacted in the 1960s, our current international tax rules have passed
their expiration date. Many of the U.S. major trading partners,
including Canada, Japan, the United Kingdom, and most of Europe have
moved to what are called territorial tax systems. That is actually a
word for a global tax system. These types of tax systems tax the income
generated within their borders and exempt foreign earnings from tax.
The United States, on the other hand, taxes the worldwide income of
U.S. companies and provides deferral of the U.S. tax until the foreign
earnings are brought home. Deferral of the tax until the earnings are
brought home encourages them not to bring the money home. It actually
incentivizes them to leave their money abroad and to expand over there.
Because the United States has nearly the highest corporate tax rate in
the world, companies don't bring those earnings back and, as I said,
reinvest outside the United States. That certainly is not a recipe for
U.S. growth and U.S. job creation.
The dominance of U.S.-headquartered companies in the global
marketplace is waning. Thirty-six percent of the Fortune Global 500
companies were headquartered in the United States in 2000. In 2009,
that number dropped to 28 percent. That is from 36 percent to 28
percent among the Fortune Global 500 companies headquartered in the
United States. Clearly, America is losing ground and our current
international tax rules are a big part of the problem.
The bill I am introducing would help to right the ship by pulling our
international tax rules into the 21st century so U.S. companies are not
at a competitive disadvantage with foreign companies because of
American tax rules that are outdated by changes most other countries
have already made. The bill would give U.S. companies incentives to
create jobs in the United States and undertake activities in the United
States in order to win globally.
First, if the foreign earnings have already been subject to a tax in
a foreign country, this bill would provide a 95-percent exemption from
the U.S. tax on those foreign earnings. This would allow for American-
managed capital to be put to the most productive use and help stabilize
our economy.
Second, this bill would allow foreign earnings that are currently
sitting overseas to be brought back to America at a reduced rate--not a
zero tax rate but a greatly reduced rate--and with the ability to pay
that, the taxes that are owed in installments. That gets the cash back
now and still gets some taxation for us instead of leaving it all
overseas. This provision would serve as a transition to the new
territorial system by allowing U.S. companies to unlock a significant
amount of capital currently being held offshore and quickly move into
the new territorial system, and that means more jobs and a better
economy. It also emphasizes one of the things I talk about with any of
the tax changes--as one of the few accountants--we have to transition
into these things if we want the companies stable enough that they can
exist through the change in the Tax Code, and that provides for a
transition as well.
Third, this bill would reduce the U.S. tax burden on income generated
by American companies from ideas and innovations. This bill would
encourage companies to develop and keep rights to ideas and inventions
in the United States. When families tune in to ``60 Minutes'' on Sunday
evenings, they would hear fewer stories about how U.S. companies are
moving their profits to tax haven countries and avoiding U.S. tax on
those earnings. Families would hear fewer stories about how the U.S.
multinational companies set up post office boxes in the Cayman Islands
and Switzerland without a single employee or officer of the company
anywhere on site and attribute a significant portion of their foreign
earnings to those jurisdictions.
Instead, families would hear more stories about how U.S. companies
are generating the ideas and inventions of tomorrow right here in
America.
[[Page S498]]
This bill can be a first step in tax reform. We have a lot of work to
do in many other areas of tax law in order to make it simpler, fairer,
and more transparent. We need to be looking at the individual tax
system, the corporate tax system, and particularly how we tax the
passthrough entities such as partnerships and S corporations that have
to pay the tax on the money when it is still invested in the business.
I also recognize, as we move forward in these other areas, it may be
appropriate to make changes to this bill. This is exactly how the
legislative process should work, and I look forward to getting back to
conducting the Senate's business in regular order, where we work
through the issues in the committee first and offer amendments to
improve the bills that ultimately come to the Senate floor, where there
is a shot for everybody else to make amendments.
But today with the introduction of this bill, we move from discussion
to action with respect to a single piece of the tax reform. The
Simpson-Bowles deficit commission recommended a move to a territorial
system, and I am glad to be moving the conversation forward on this
recommendation with the introduction of this bill. I hope this bill
will begin a discussion, a discussion of fairness that needs to begin
yesterday.
I hope Members and their staff will review the bill and the detailed
explanation we have prepared. I also ask that all interested
stakeholders review the bill and reach out to my staff and the staff of
the Finance Committee to discuss what they like, what they don't like,
and their suggestions for improvements. That is the way bills are
supposed to work.
The international tax rules are not easy or simple and reforming them
will be a heavy lift. But those things are worth doing, and when they
are worth doing, they are rarely easy or simple.
I look forward to joining with my colleagues to pass international
tax reforms that our American companies and our country desperately
need.
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. 2091
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF
CONTENTS.
(a) Short Title.--This Act may be cited as the ``United
States Job Creation and International Tax Reform Act of
2012''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--The table of contents of this Act
is as follows:
Sec. 1. Short title; amendment of 1986 Code; table of contents.
TITLE I--PARTICIPATION EXEMPTION SYSTEM FOR TAXATION OF FOREIGN INCOME
Sec. 101. Deduction for dividends received by domestic corporations
from certain foreign corporations.
Sec. 102. Application of dividends received deduction to certain sales
and exchanges of stock.
Sec. 103. Deduction for foreign intangible income derived from trade or
business within the United States.
Sec. 104. Treatment of deferred foreign income upon transition to
participation exemption system of taxation.
TITLE II--OTHER INTERNATIONAL TAX REFORMS
Subtitle A--Modifications of Subpart F
Sec. 201. Treatment of low-taxed foreign income as subpart F income.
Sec. 202. Permanent extension of look-thru rule for controlled foreign
corporations.
Sec. 203. Permanent extension of exceptions for active financing
income.
Sec. 204. Foreign base company income not to include sales or services
income.
Subtitle B--Modifications Related to Foreign Tax Credit
Sec. 211. Modification of application of sections 902 and 960 with
respect to post-2012 earnings.
Sec. 212. Separate foreign tax credit basket for foreign intangible
income.
Sec. 213. Inventory property sales source rule exceptions not to apply
for foreign tax credit limitation.
Subtitle C--Allocation of Interest on Worldwide Basis
Sec. 221. Acceleration of election to allocate interest on a worldwide
basis.
TITLE I--PARTICIPATION EXEMPTION SYSTEM FOR TAXATION OF FOREIGN INCOME
SEC. 101. DEDUCTION FOR DIVIDENDS RECEIVED BY DOMESTIC
CORPORATIONS FROM CERTAIN FOREIGN CORPORATIONS.
(a) Allowance of Deduction.--Part VIII of subchapter B of
chapter 1 is amended by inserting after section 245 the
following new section:
``SEC. 245A. DIVIDENDS RECEIVED BY DOMESTIC CORPORATIONS FROM
CERTAIN FOREIGN CORPORATIONS.
``(a) In General.--In the case of any dividend received
from a controlled foreign corporation by a domestic
corporation which is a United States shareholder with respect
to such controlled foreign corporation, there shall be
allowed as a deduction an amount equal to 95 percent of the
qualified foreign-source portion of the dividend.
``(b) Treatment of Electing Noncontrolled Section 902
Corporations as Controlled Foreign Corporations.--
``(1) In general.--If a domestic corporation elects the
application of this subsection for any noncontrolled section
902 corporation with respect to the domestic corporation,
then, for purposes of this title--
``(A) the noncontrolled section 902 corporation shall be
treated as a controlled foreign corporation with respect to
the domestic corporation, and
``(B) the domestic corporation shall be treated as a United
States shareholder with respect to the noncontrolled section
902 corporation.
``(2) Election.--
``(A) Time of election.--Any election under this subsection
with respect to any noncontrolled section 902 corporation
shall be made not later than the due date for filing the
return of tax for the first taxable year of the taxpayer with
respect to which the foreign corporation is a noncontrolled
section 902 corporation with respect to the taxpayer (or, if
later, the first taxable year of the taxpayer for which this
section is in effect).
``(B) Revocation of election.--Any election under this
subsection, once made, may be revoked only with the consent
of the Secretary.
``(C) Controlled groups.--If a domestic corporation making
an election under this subsection with respect to any
noncontrolled section 902 corporation is a member of a
controlled group of corporations (within the meaning of
section 1563(a), except that `more than 50 percent' shall be
substituted for `at least 80 percent' each place it appears
therein), then, except as otherwise provided by the
Secretary, such election shall apply to all members of such
group.
``(c) Qualified Foreign-source Portion of Dividends.--For
purposes of this section--
``(1) Qualified foreign-source portion.--
``(A) In general.--The qualified foreign-source portion of
any dividend is an amount which bears the same ratio to such
dividend as--
``(i) the post-2012 undistributed qualified foreign
earnings, bears to
``(ii) the total post-2012 undistributed earnings.
``(B) Post-2012 undistributed earnings.--The term `post-
2012 undistributed earnings' means the amount of the earnings
and profits of a controlled foreign corporation (computed in
accordance with sections 964(a) and 986) accumulated in
taxable years beginning after December 31, 2012--
``(i) as of the close of the taxable year of the controlled
foreign corporation in which the dividend is distributed, and
``(ii) without diminution by reason of dividends
distributed during such taxable years.
``(C) Post-2012 undistributed qualified foreign earnings.--
The term `post-2012 undistributed qualified foreign earnings'
means the portion of the post-2012 undistributed earnings
which is attributable to income other than--
``(i) income described in section 245(a)(5)(A), or
``(ii) dividends described in section 245(a)(5)(B).
``(2) Ordering rule for distributions of earnings and
profits.--Distributions shall be treated as first made out of
earnings and profits of a controlled foreign corporation
which are not post-2012 undistributed earnings and then out
of post-2012 undistributed earnings.
``(d) Disallowance of Foreign Tax Credit, etc.--
``(1) In general.--No credit shall be allowed under section
901 for any taxes paid or accrued (or treated as paid or
accrued) with respect to the qualified foreign-source portion
of any dividend.
``(2) Denial of deduction.--No deduction shall be allowed
under this chapter for any tax for which credit is not
allowable under section 901 by reason of paragraph (1).
``(3) Coordination with section 78.--Section 78 shall not
apply to any tax for which credit is not allowable under
section 901 by reason of paragraph (1).
``(4) Treatment of nondeductible portion in applying
foreign tax credit limit.--For purposes of applying the
limitation under section 904(a), the remaining 5 percent of
the qualified foreign-source portion of any dividend with
respect to which a deduction is not allowable to the domestic
corporation under subsection (a) shall be treated as income
from sources within the United States.
[[Page S499]]
``(e) Special Rules for Hybrid Dividends.--
``(1) In general.--Subsection (a) shall not apply to any
dividend received by a United States shareholder from a
controlled foreign corporation if the dividend is a hybrid
dividend.
``(2) Hybrid dividends of tiered controlled foreign
corporations.--If a controlled foreign corporation with
respect to which a domestic corporation is a United States
shareholder receives a hybrid dividend from any other
controlled foreign corporation with respect to which such
domestic corporation is also a United States shareholder,
then, notwithstanding any other provision of this title--
``(A) the hybrid dividend shall be treated for purposes of
section 951(a)(1)(A) as subpart F income of the receiving
controlled foreign corporation for the taxable year of the
controlled foreign corporation in which the dividend was
received, and
``(B) the United States shareholder shall include in gross
income an amount equal to the shareholder's pro rata share
(determined in the same manner as under section 951(a)(2)) of
the subpart F income described in subparagraph (A) .
``(3) Denial of foreign tax credit, etc.--The rules of
subsection (d) shall apply to any hybrid dividend received
by, or any amount included under paragraph (2) in the gross
income of, a United States shareholder, except that, for
purposes of applying subsection (d)(4), all of such dividend
or amount shall be treated as income from sources within the
United States.
``(4) Hybrid dividend.--The term `hybrid dividend' means an
amount received from a controlled foreign corporation--
``(A) which is treated as a dividend for purposes of this
title, and
``(B) for which the controlled foreign corporation received
a deduction (or similar tax benefit) under the laws of the
country in which the controlled foreign corporation was
created or organized.
``(f) Definitions.--For purposes of this section--
``(1) United states shareholder.--The term `United States
shareholder' has the meaning given such term in section
951(b).
``(2) Controlled foreign corporation.--The term `controlled
foreign corporation' has the meaning given such term in
section 957(a).
``(3) Noncontrolled section 902 corporation.--The term
`noncontrolled section 902 corporation' has the meaning given
such term in section 904(d)(2)(E)(i).
``(g) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the provisions of this section.''.
(b) Application of Holding Period Requirement.--Subsection
(c) of section 246 is amended--
(1) by striking ``or 245'' in paragraph (1) and inserting
``245, or 245A'', and
(2) by adding at the end the following new paragraph:
``(5) Special rules for qualified foreign-source portion of
dividends received from controlled foreign corporations.--
``(A) 1-year holding period requirement.--For purposes of
section 245A--
``(i) paragraph (1)(A) shall be applied--
``(I) by substituting `365 days' for `45 days' each place
it appears, and
``(II) by substituting `731-day period' for `91-day
period', and
``(ii) paragraph (2) shall not apply.
``(B) Status must be maintained during holding period.--For
purposes of section 245A, the holding period requirement of
this subsection shall be treated as met only if--
``(i) the controlled foreign corporation referred to in
section 245A(a) is a controlled foreign corporation at all
times during such period, and
``(ii) the taxpayer is a United States shareholder (as
defined in section 951) with respect to such controlled
foreign corporation at all times during such period.
``(C) Special rules for electing noncontrolled section 902
corporations.--In the case of an election under section
245A(b) to treat a noncontrolled section 902 corporation as a
controlled foreign corporation, the requirements of
subparagraph (B) shall be treated as met for any continuous
period ending on the day before the effective date of the
election for which the taxpayer met the ownership
requirements of section 904(d)(2)(E) with respect to such
corporation.''.
(c) Application of Rules Generally Applicable to Deductions
for Dividends Received.--
(1) Treatment of dividends from tax-exempt corporations.--
Paragraph (1) of section 246(a) is amended by striking ``and
245'' and inserting ``245, and 245A''.
(2) Assets generating tax-exempt portion of dividend not
taken into account in allocating and apportioning deductible
expenses.--Paragraph (3) of section 864(e) is amended by
striking ``or 245(a)'' and inserting ``, 245(a), or 245A''.
(3) Coordination with section 1059.--Subparagraph (B) of
section 1059(b)(2) is amended by striking ``or 245'' and
inserting ``245, or 245A''.
(d) Conforming Amendments.--
(1) Clause (vi) of section 56(g)(4)(C) is amended by
inserting ``245A or'' before ``965''.
(2) Subsection (b) of section 951 is amended--
(A) by striking ``subpart'' and inserting ``title'', and
(B) by adding at the end the following: ``Such term shall
include, with respect to any entity treated as a controlled
foreign corporation under section 245A(b), any domestic
corporation treated as a United States shareholder with
respect to such entity under such section.''.
(3) Subsection (a) of section 957 is amended--
(A) by striking ``subpart'' in the matter preceding
paragraph (1) and inserting ``title'', and
(B) by adding at the end the following: ``Such term shall
include any entity treated as a controlled foreign
corporation under section 245A(b).''.
(4) The table of sections for part VIII of subchapter B of
chapter 1 is amended by inserting after the item relating to
section 245 the following new item:
``Sec. 245A. Dividends received by domestic corporations from certain
foreign corporations.''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2012, and to taxable years of
United States shareholders with or within which such taxable
years of foreign corporations end.
SEC. 102. APPLICATION OF DIVIDENDS RECEIVED DEDUCTION TO
CERTAIN SALES AND EXCHANGES OF STOCK.
(a) Sales by United States Persons of Stock in CFC.--
Section 1248 is amended by redesignating subsection (j) as
subsection (k) and by inserting after subsection (i) the
following new subsection:
``(j) Coordination With Dividends Received Deduction.--
``(1) In general.--In the case of the sale or exchange by a
domestic corporation of stock in a foreign corporation held
for 1 year or more, any amount received by the domestic
corporation which is treated as a dividend by reason of this
section shall be treated as a dividend for purposes of
applying section 245A.
``(2) Losses disallowed.--If a domestic corporation--
``(A) sells or exchanges stock in a foreign corporation in
a taxable year of the domestic corporation with or within
which a taxable year of the foreign corporation beginning
after December 31, 2012, ends, and
``(B) met the ownership requirements of subsection (a)(2)
with respect to such stock,
no deduction shall be allowed to the domestic corporation
with respect to any loss from the sale or exchange.''.
(b) Sale by a CFC of a Lower Tier CFC.--Section 964(e) is
amended by adding at the end the following new paragraph:
``(4) Coordination with dividends received deduction.--
``(A) In general.--If, for any taxable year of a controlled
foreign corporation beginning after December 31, 2012, any
amount is treated as a dividend under paragraph (1) by reason
of a sale or exchange by the controlled foreign corporation
of stock in another foreign corporation held for 1 year or
more, then, notwithstanding any other provision of this
title--
``(i) the qualified foreign-source portion of such dividend
shall be treated for purposes of section 951(a)(1)(A) as
subpart F income of the selling controlled foreign
corporation for such taxable year,
``(ii) a United States shareholder with respect to the
selling controlled foreign corporation shall include in gross
income for the taxable year of the shareholder with or within
which such taxable year of the controlled foreign corporation
ends an amount equal to the shareholder's pro rata share
(determined in the same manner as under section 951(a)(2)) of
the amount treated as subpart F income under clause (i), and
``(iii) the deduction under section 245A(a) shall be
allowable to the United States shareholder with respect to
the subpart F income included in gross income under clause
(ii) in the same manner as if such subpart F income were a
dividend received by the shareholder from the selling
controlled foreign corporation.
``(B) Effect of loss on earnings and profits.--For purposes
of this title, in the case of a sale or exchange by a
controlled foreign corporation of stock in another foreign
corporation in a taxable year of the selling controlled
foreign corporation beginning after December 31, 2012, to
which this paragraph would apply if gain were recognized, the
earnings and profits of the selling controlled foreign
corporation shall not be reduced by reason of any loss from
such sale or exchange.
``(C) Qualified foreign-source portion.--For purposes of
this paragraph, the qualified foreign-source portion of any
amount treated as a dividend under paragraph (1) shall be
determined in the same manner as under section 245A(c).''.
SEC. 103. DEDUCTION FOR FOREIGN INTANGIBLE INCOME DERIVED
FROM TRADE OR BUSINESS WITHIN THE UNITED
STATES.
(a) In General.--Part VIII of subchapter B of chapter 1 is
amended by adding at the end the following new section:
``SEC. 250. FOREIGN INTANGIBLE INCOME DERIVED FROM TRADE OR
BUSINESS WITHIN THE UNITED STATES.
``(a) In General.--In the case of a domestic corporation,
there shall be allowed as a deduction an amount equal to 50
percent of the qualified foreign intangible income of such
domestic corporation for the taxable year.
``(b) Qualified Foreign Intangible Income.--
[[Page S500]]
``(1) In general.--The term `qualified foreign intangible
income' means, with respect to any domestic corporation,
foreign intangible income which is derived by the domestic
corporation from the active conduct of a trade or business
within the United States with respect to the intangible
property giving rise to the income.
``(2) Requirements relating to trade or business within the
united states.--For purposes of this section, foreign
intangible income shall be treated as derived by a domestic
corporation from the active conduct of a trade or business
within the United States only if--
``(A) the domestic corporation developed, created, or
produced within the United States the intangible property
giving rise to the income, or
``(B) in any case in which the domestic corporation
acquired such intangible property, the domestic corporation
added substantial value to the property through the active
conduct of such trade or business within the United States.
``(c) Foreign Intangible Income.--For purposes of this
section--
``(1) In general.--The term `foreign intangible income'
means any intangible income which is derived in connection
with--
``(A) property which is sold, leased, licensed, or
otherwise disposed of for use, consumption, or disposition
outside the United States, or
``(B) services provided with respect to persons or property
located outside the United States.
``(2) Exceptions for certain income.--The following amounts
shall not be taken into account in computing foreign
intangible income:
``(A) Any amount treated as received by the domestic
corporation under section 367(d)(2) with respect to any
intangible property.
``(B) Any payment under a cost-sharing arrangement entered
into under section 482.
``(C) Any amount received from a controlled foreign
corporation with respect to which the domestic corporation is
a United States shareholder to the extent such amount is
attributable or properly allocable to income which is--
``(i) effectively connected with the conduct of a trade or
business within the United States and subject to tax under
this chapter, or
``(ii) subpart F income.
For purposes of clause (ii), amounts not otherwise treated as
subpart F income shall be so treated if the amount creates
(or increases) a deficit which under section 952(c) may
reduce the subpart F income of the payor or any other
controlled foreign corporation.
``(3) Intangible income.--The term `intangible income'
means gross income from--
``(A) the sale, lease, license, or other disposition of
property in which intangible property is used directly or
indirectly, or
``(B) the provision of services related to intangible
property or in connection with property in which intangible
property is used directly or indirectly,
to the extent that such gross income is properly attributable
to such intangible property.
``(4) Deductions to be taken into account.--The gross
income of a domestic corporation taken into account under
this subsection shall be reduced, under regulations
prescribed by the Secretary, so as to take into account
deductions properly allocable to such income.
``(5) Intangible property.--The term `intangible property'
has the meaning given such term by section 936(h)(3)(B).
``(d) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the provisions of this section.''.
(b) Conforming Amendment.--The table of sections for part
VIII of subchapter B of chapter 1 is amended by adding at the
end the following new item:
``Sec. 250. Foreign intangible income derived from trade or business
within the United States.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years of domestic corporations
beginning after December 31, 2012.
SEC. 104. TREATMENT OF DEFERRED FOREIGN INCOME UPON
TRANSITION TO PARTICIPATION EXEMPTION SYSTEM OF
TAXATION.
(a) In General.--Section 965 is amended to read as follows:
``SEC. 965. TREATMENT OF DEFERRED FOREIGN INCOME UPON
TRANSITION TO PARTICIPATION EXEMPTION SYSTEM OF
TAXATION.
``(a) Deduction Allowed.--In the case of a domestic
corporation which elects the application of this section to
any controlled foreign corporation with respect to which it
is a United States shareholder, there shall be allowed as a
deduction for the taxable year of the United States
shareholder with or within which the first taxable year of
the controlled foreign corporation beginning after December
31, 2012, ends an amount equal to 70 percent of the amount
determined under subsection (b) for the taxable year.
``(b) Eligible Amount.--For purposes of subsection (a)--
``(1) In general.--The amount determined under this
subsection for a United States shareholder with respect to
any controlled foreign corporation for the taxable year of
the shareholder described in subsection (a) is the lesser
of--
``(A) the shareholder's pro rata share of the earnings and
profits of the controlled foreign corporation described in
section 959(c)(3) as of the close of the taxable year
preceding the first taxable year of the controlled foreign
corporation beginning after December 31, 2012, or
``(B) an amount equal to the sum of--
``(i) the dividends received by the shareholder during such
taxable year from the controlled foreign corporation which
are attributable to the earnings and profits described in
subparagraph (A), plus
``(ii) the increase in subpart F income required to be
included in gross income of the shareholder for the taxable
year by reason of the election under paragraph (2).
``(2) Election of deemed subpart f inclusion.--A United
States shareholder may elect for purposes of paragraph
(1)(B)(ii) to treat all (or any portion) of the shareholder's
pro rata share of the earnings and profits of a controlled
foreign corporation described in paragraph (1)(A) as subpart
F income includible in the gross income of the shareholder
for the taxable year of the shareholder described in
subsection (a).
``(3) Ordering rule.--For purposes of paragraph (1)(B)(i),
distributions shall be treated as first made out of earnings
and profits of a controlled foreign corporation described in
paragraph (1)(A).
``(4) Dividend.--The term `dividend' shall not include
amounts includible in gross income as a dividend under
section 78.
``(c) Disallowance of Foreign Tax Credit, etc.--In the case
of a domestic corporation making an election under subsection
(a) with respect to any controlled foreign corporation--
``(1) In general.--No credit shall be allowed under section
901 for any taxes paid or accrued (or treated as paid or
accrued) with respect to the earnings and profits taken into
account in determining the amount under subsection (b).
``(2) Denial of deduction.--No deduction shall be allowed
under this chapter for any tax for which credit is not
allowable under section 901 by reason of paragraph (1).
``(3) Coordination with section 78.--Section 78 shall not
apply to any tax for which credit is not allowable under
section 901 by reason of paragraph (1).
``(4) Treatment of nondeductible portion in applying
foreign tax credit limit.--For purposes of applying the
limitation under section 904(a), the remaining 30 percent of
the amount determined under subsection (b) with respect to
which a deduction is not allowable under subsection (a) shall
be treated as income from sources within the United States.
``(d) Election to Pay Liability for Deemed Subpart F Income
in Installments.--
``(1) In general.--In the case of a United States
shareholder with respect to 1 or more controlled foreign
corporations to which elections under subsections (a) and
(b)(2) apply, such United States shareholder may elect to pay
the net tax liability determined with respect to its deemed
subpart F inclusions with respect to such corporations under
subsection (b)(2) for the taxable year described in
subsection (a) in 2 or more (but not exceeding 8) equal
installments.
``(2) Date for payment of installments.--If an election is
made under paragraph (1), the first installment shall be paid
on the due date (determined without regard to any extension
of time for filing the return) for the return of tax for the
taxable year for which the election was made and each
succeeding installment shall be paid on the due date (as so
determined) for the return of tax for the taxable year
following the taxable year with respect to which the
preceding installment was made.
``(3) Acceleration of payment.--If there is an addition to
tax for failure to pay timely assessed with respect to any
installment required under this subsection, a liquidation or
sale of substantially all the assets of the taxpayer
(including in a title 11 or similar case), a cessation of
business by the taxpayer, or any similar circumstance, then
the unpaid portion of all remaining installments shall be due
on the date of such event (or in the case of a title 11 or
similar case, the day before the petition is filed).
``(4) Proration of deficiency to installments.--If an
election is made under paragraph (1) to pay the net tax
liability described in paragraph (1) in installments and a
deficiency has been assessed which increases such net tax
liability, the increase shall be prorated to the installments
payable under paragraph (1). The part of the increase so
prorated to any installment the date for payment of which has
not arrived shall be collected at the same time as, and as a
part of, such installment. The part of the increase so
prorated to any installment the date for payment of which has
arrived shall be paid upon notice and demand from the
Secretary. This subsection shall not apply if the deficiency
is due to negligence, to intentional disregard of rules and
regulations, or to fraud with intent to evade tax.
``(5) Time for payment of interest.--Interest payable under
section 6601 on the unpaid portion of any amount of tax the
time for payment of which as been extended under this
subsection shall be paid annually at the same time as, and as
part of, each installment payment of such tax. In the case of
a deficiency to which paragraph (4) applies, interest with
respect to such deficiency which is assigned under the
preceding sentence to
[[Page S501]]
any installment the date for payment of which has arrived on
or before the date of the assessment of the deficiency, shall
be paid upon notice and demand from the Secretary.
``(6) Net tax liability for deemed subpart f inclusions.--
For purposes of this subsection--
``(A) In general.--The net tax liability described in
paragraph (1) with respect to any United States shareholder
for any taxable year is the excess (if any) of--
``(i) such taxpayer's net income tax for the taxable year,
over
``(ii) such taxpayer's net income tax for such taxable year
determined as if the elections under subsection (b)(2) with
respect to 1 or more controlled foreign corporations had not
been made.
``(B) Net income tax.--The term `net income tax' means the
net income tax (as defined in section 38(c)(1)) reduced by
the credit allowed under section 38.
``(e) Special Rules.--For purposes of this section--
``(1) Elections.--Any election under subsection (a),
(b)(2), or (d)(1) shall be made not later than the due date
(including extensions) for the return of tax for the taxable
year for which made and shall be made in such manner as the
Secretary may provide.
``(2) Section not to apply to noncontrolled section 902
corporations treated as cfcs.--No election may be made under
subsection (a) with respect to a controlled foreign
corporation which was a noncontrolled section 902 corporation
which a United States shareholder elected under section
245A(b) to treat as a controlled foreign corporation.
``(3) Pro rata share.--A shareholder's pro rata share of
any earnings and profits shall be determined in the same
manner as under section 951(a)(2).''
(b) Conforming Amendments.--
(1) Clause (vi) of section 56(g)(4)(C), as amended by this
Act, is amended--
(A) by striking ``965'' and inserting ``965(b)'', and
(B) by inserting ``and inclusions'' after ``certain
distributions'' in the heading thereof.
(2) Paragraph (2) of section 6601(b) is amended--
(A) by striking ``section 6156(a)'' in the matter preceding
subparagraph (A) and inserting ``section 965(d)(1) or
6156(a)'', and
(B) by striking ``section 6156(b)'' in subparagraph (A) and
inserting ``section 965(d)(2) or 6156(b), as the case may
be''.
(3) The table of section for subpart F of part III of
subchapter N of chapter 1 is amended by striking the item
relating to section 965 and inserting the following:
``Sec. 965. Treatment of deferred foreign income upon transition to
participation exemption system of taxation.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2012, and to taxable years of
United States shareholders with or within which such taxable
years of foreign corporations end.
TITLE II--OTHER INTERNATIONAL TAX REFORMS
Subtitle A--Modifications of Subpart F
SEC. 201. TREATMENT OF LOW-TAXED FOREIGN INCOME AS SUBPART F
INCOME.
(a) In General.--Subsection (a) of section 952 is amended
by redesignating paragraphs (3), (4), and (5) as paragraphs
(4), (5), and (6), respectively, and by inserting after
paragraph (2) the following new paragraph:
``(3) low-taxed income (as defined under subsection
(e)),''.
(b) Low-taxed Income.--Section 952 is amended by adding at
the end the following new subsection:
``(e) Low-taxed Income.--
``(1) In general.--For purposes of subsection (a), except
as provided in paragraph (2), the term `low-taxed income'
means, with respect to any taxable year of a controlled
foreign corporation, the entire gross income of the
controlled foreign corporation unless the taxpayer
establishes to the satisfaction of the Secretary that such
income was subject to an effective rate of income tax
(determined under rules similar to the rules of section
954(b)(4)) imposed by a foreign country in excess of one-half
of the highest rate of tax under section 11(b) for taxable
years of United States corporations beginning in the same
calendar year as the taxable year of the controlled foreign
corporation begins.
``(2) Exception for qualified business income.--For
purposes of paragraph (1), qualified business income--
``(A) shall be taken into account in determining the
effective rate of income tax at which the entire gross income
of the controlled foreign corporation is taxed, but
``(B) the amount of gross income treated as low-taxed
income under paragraph (1) shall be reduced by the amount of
the qualified business income.
``(3) Qualified business income.--For purposes of this
subsection--
``(A) In general.--The term `qualified business income'
means, with respect to any controlled foreign corporation,
income derived by the controlled foreign corporation in a
foreign country but only if--
``(i) such income is attributable to the active conduct of
a trade or business of such corporation in such foreign
country,
``(ii) the corporation maintains an office or fixed place
of business in such foreign country, and
``(iii) officers and employees of the corporation
physically located at such office or place of business in
such foreign country conducted (or significantly contributed
to the conduct of) activities within the foreign country
which are substantial in relation to the activities necessary
for the active conduct of the trade or business to which such
income is attributable.
``(B) Exception for intangible income.--For purposes of
subparagraph (A), qualified business income of a controlled
foreign corporation shall not include intangible income (as
defined in section 250(c)(3)).
``(4) Determination of effective rate of foreign income tax
and qualified business income.--
``(A) Country-by-country determination.--For purposes of
determining the effective rate of income tax imposed by any
foreign country under paragraph (1) and qualified business
income under paragraph (3), each such paragraph shall be
applied separately with respect to--
``(i) each foreign country in which a controlled foreign
corporation conducts any trade or business, and
``(ii) the entire gross income and qualified business
income derived with respect to such foreign country.
``(B) Treatment of losses.--For purposes of determining the
effective rate of income tax imposed by any foreign country
under paragraph (1)--
``(i) such effective rate shall be determined without
regard to any losses carried to the relevant taxable year,
and
``(ii) to the extent the income of the controlled foreign
corporation reduces losses in the relevant taxable year, such
effective rate shall be treated as being the effective rate
which would have been imposed on such income without regard
to such losses.
``(5) Deductions to be taken into account.--The gross
income of a controlled foreign corporation taken into account
under this subsection shall be reduced, under regulations
prescribed by the Secretary, so as to take into account
deductions (including taxes) properly allocable to such
income.''.
(c) Conforming Amendments.--
(1) Subsection (a) of section 952 is amended--
(A) by striking ``paragraph (4)'' in the next to last
sentence and inserting ``paragraph (5)'', and
(B) by striking ``paragraph (5)'' in the last sentence and
inserting ``paragraph (6)''.
(2) Subsection (d) of section 952 is amended by striking
``subsection (a)(5)'' and inserting ``subsection (a)(6)''.
(3) Paragraphs (1) and (2) of section 999(c) are each
amended by striking ``section 952(a)(3)'' and inserting
``section 952(a)(4)''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2012, and to taxable years of
United States shareholders with or within which such taxable
years of foreign corporations end.
SEC. 202. PERMANENT EXTENSION OF LOOK-THRU RULE FOR
CONTROLLED FOREIGN CORPORATIONS.
(a) In General.--Section 954(c)(6)(C) is amended by
striking ``and before January 1, 2012,''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2011, and to taxable years of
United States shareholders with or within which such taxable
years of foreign corporations end.
SEC. 203. PERMANENT EXTENSION OF EXCEPTIONS FOR ACTIVE
FINANCING INCOME.
(a) Exception From Insurance Income.--Section 953(e)(10) is
amended--
(1) by striking ``and before January 1, 2012,'', and
(2) by striking the last sentence.
(b) Exception From Foreign Personal Holding Company
Income.--Section 954(h)(9) is amended by striking ``and
before January 1, 2012,''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2011, and to taxable years of
United States shareholders with or within which such taxable
years of foreign corporations end.
SEC. 204. FOREIGN BASE COMPANY INCOME NOT TO INCLUDE SALES OR
SERVICES INCOME.
(a) Repeal.--Paragraphs (2) and (3) of section 954(a) are
repealed.
(b) Conforming Amendments.--
(1) Section 954(d) is amended by adding at the end the
following new paragraph:
``(5) Termination.--This subsection shall not apply to
taxable years of foreign corporations beginning after
December 31, 2012, and to taxable years of United States
shareholders with or within which such taxable years of
foreign corporations end.''.
(2) Section 954(e) is amended by adding at the end the
following new paragraph:
``(3) Termination.--This subsection shall not apply to
taxable years of foreign corporations beginning after
December 31, 2012, and to taxable years of United States
shareholders with or within which such taxable years of
foreign corporations end.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 2012, and to taxable years of
United States shareholders with or within which such taxable
years of foreign corporations end.
[[Page S502]]
Subtitle B--Modifications Related to Foreign Tax Credit
SEC. 211. MODIFICATION OF APPLICATION OF SECTIONS 902 AND 960
WITH RESPECT TO POST-2012 EARNINGS.
(a) Section 902 Not to Apply to Dividends From Post-2012
Earnings.--Section 902 is amended by redesignating subsection
(d) as subsection (e) and by inserting after subsection (c)
the following new subsection:
``(d) Section Not to Apply to Dividends From Post-2012
Earnings.--
``(1) In general.--This section shall not apply to the
portion of any dividend paid by a foreign corporation to the
extent such portion is made out of earnings and profits of
the foreign corporation (computed in accordance with sections
964(a) and 986) accumulated in taxable years beginning after
December 31, 2012.
``(2) Coordination with distributions from pre-2013
earnings and profits.--For purposes of this section--
``(A) Ordering rule.--Any distribution in a taxable year
beginning after December 31, 2012, shall be treated as first
made out of earnings and profits of the foreign corporation
(computed in accordance with sections 964(a) and 986)
accumulated in taxable years beginning before January 1,
2013.
``(B) Post-1986 undistributed earnings.--Post-1986
undistributed earnings shall not include earnings and profits
described in paragraph (1).''
(b) Determination of Section 960 Credit on Current Year
Basis.--Section 960 is amended by adding at the end the
following new subsection:
``(d) Deemed Paid Credit for Subpart F Inclusions
Attributable to Post-2012 Earnings.--
``(1) In general.--For purposes of this subpart, if there
is included in the gross income of a domestic corporation any
amount under section 951(a)--
``(A) with respect to any controlled foreign corporation
with respect to which such domestic corporation is a United
States shareholder, and
``(B) which is attributable to the earnings and profits of
the controlled foreign corporation (computed in accordance
with sections 964(a) and 986) accumulated in taxable years
beginning after December 31, 2012,
then subsections (a), (b), and (c) shall not apply and such
domestic corporation shall be deemed to have paid so much of
such foreign corporation's foreign income taxes as are
properly attributable to the amount so included.
``(2) Foreign income taxes.--For purposes of this
subsection, the term `foreign income taxes' means any income,
war profits, or excess profits taxes paid or accrued by the
controlled foreign corporation to any foreign country or
possession of the United States.
``(3) Regulations.--The Secretary shall provide such
regulations as may be necessary or appropriate to carry out
the provisions of this subsection.''.
SEC. 212. SEPARATE FOREIGN TAX CREDIT BASKET FOR FOREIGN
INTANGIBLE INCOME.
(a) In General.--Paragraph (1) of section 904(d) is amended
by striking ``and'' at the end of subparagraph (A), by
striking the period at the end of subparagraph (B) and
inserting ``, and'', and by adding at the end the following:
``(C) foreign intangible income (as defined in paragraph
(2)(J)).''.
(b) Foreign Intangible Income.--
(1) In general.--Section 904(d)(2) is amended by
redesignating subparagraphs (J) and (K) as subparagraphs (K)
and (L) and by inserting after subparagraph (I) the
following:
``(J) Foreign intangible income.--For purposes of this
section--
``(i) In general.--The term `foreign intangible income' has
the meaning given such term by section 250(c).
``(ii) Coordination.--Passive category income and general
category income shall not include foreign intangible
income.''
(2) General category income.--Section 904(d)(2)(A)(ii) is
amended by inserting ``or foreign intangible income'' after
``passive category income''.
(c) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2012.
(2) Transitional rule.--For purposes of section 904(d)(1)
of the Internal Revenue Code of 1986 (as amended by this
Act)--
(A) taxes carried from any taxable year beginning before
January 1, 2013, to any taxable year beginning on or after
such date, with respect to any item of income, shall be
treated as described in the subparagraph of such section
904(d)(1) in which such income would be described without
regard to the amendments made by this section, and
(B) any carryback of taxes with respect to foreign
intangible income from a taxable year beginning on or after
January 1, 2013, to a taxable year beginning before such date
shall be allocated to the general income category.
SEC. 213. INVENTORY PROPERTY SALES SOURCE RULE EXCEPTIONS NOT
TO APPLY FOR FOREIGN TAX CREDIT LIMITATION.
(a) In General.--Section 904 is amended by redesignating
subsection (l) as subsection (m) and by inserting after
subsection (k) the following new subsection:
``(l) Inventory Property Sales Source Rule Exceptions Not
to Apply.--Any amount which would be treated as derived from
sources without the United States by reason of the
application of section 862(a)(6) or 863(b)(2) for any taxable
year shall be treated as derived from sources within the
United States for purposes of this section.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2012.
Subtitle C--Allocation of Interest on Worldwide Basis
SEC. 221. ACCELERATION OF ELECTION TO ALLOCATE INTEREST ON A
WORLDWIDE BASIS.
Section 864(f)(6) is amended by striking ``December 31,
2020'' and inserting ``December 31,
______
By Mr. WYDEN:
S. 2098. A bill to support statewide individual-level integrated
postsecondary education data systems, and for other purposes; to the
Committee on Health, Education, Labor, and Pensions.
Mr. WYDEN. Mr. President, when we went to college, usually things
were different. Often a student took out a loan, but those loans were
manageable, and usually there were jobs waiting. Today, too often that
is not the case. In fact, the students today who take out loans will
leave school weighed down, on average, with $25,000 worth of debt. They
are going to be trying to get into a labor market where there are more
than four unemployed Americans for every available job.
It has been noted that for the first time student loan debt exceeds
credit card debt, and that now totals over $100 billion. Now, clearly,
investment in higher education is an economic imperative. Education is
the great equalizer. It enables upward economic mobility, and it breaks
down class structures that impair many countries' ability to grow their
economies. A highly-skilled and educated workforce is the basis for a
healthy economy, and it is the linchpin to our economic future.
=========================== NOTE ===========================
On page S502, February 9, 2012, the Record reads: . . . now
totals over $1 billion.
The online Record has been corrected to read: . . . now totals
over $100 billion.
========================= END NOTE =========================
In every major economic decision our people make, they try to
evaluate the value of that decision. Like prospective homeowners who
inspect and assess the potential value of their future home, in my view
future students should be able to comparison shop and choose a school
and a program based on what their return on investment will be.
Our capital markets work best when we can accurately measure the
value of the things we choose to invest in. We saw what happens when
this is not the case when the housing bubble burst, and our economy is
still struggling to recover from the mortgage meltdown. In many
instances, consumers who didn't have all the facts bought a product
based on misleading information and fell victim to predatory lenders
looking to make a profit off that growing bubble.
Consumers must know what they can expect from their investments, and
students are entitled to know the value of their education before they
go out and borrow tens of thousands of dollars from the banks and from
the government to finance their choices. Right now, consumers don't
have this information, though the information exists. It is unavailable
to students and families too often when they are making perhaps the
most important decisions that affect their future--both their financial
future and their career.
That is why today I am introducing the Student Right to Know Before
You Go Act, which would help college students get the information they
need about their education. This proposal would ensure that future
students and their families can make well-informed decisions by having
access to information on their expected average annual earnings after
graduation; rates of remedial enrollment, credit accumulation, and
graduation; the average cost, both before and after financial aid, of
the program, and average debt upon graduation; and, finally, the
effects of remedial education and financial aid on credential
attainment and a greater understanding of what student success can
mean.
For markets to work, there has to be good information available, and
until now it has been extremely hard for students and families to
collect this data in a cost-effective way while at the same time
ensuring student privacy. However, the States, as we have seen so
often--the Presiding Officer of the Senate and I have talked about this
from time to time--the States have piloted their own programs and
proved that the technology exists to enable our ability to generate and
share this information in a way that students and consumers can use
while at the same time protecting their privacy.
[[Page S503]]
This technology, in my view, makes it possible to ensure a return on
their investment for students, for parents, for policymakers, and
taxpayers. It is going to help us create a workforce that meets the
demands of the businesses that employ it and ensures that our workers
can successfully compete in the global economy.
One last point, if I might. I think it is clear that access to higher
education is an integral part of the step ladder to success and
particularly success for the middle class who built this country.
Chairman Harkin, of course, the chairman of our committee who deals
with these issues, has probably done more than any other Member in the
Senate to put a focus on this issue and how important it is to grow the
middle class and address the big concerns they have faced.
Middle-class people haven't had a pay raise in a full decade. It
seems to me as part of the agenda--and Chairman Harkin has had some
excellent hearings on these higher education issues--one of the best
ways we can come together on a bipartisan basis is to empower students
and empower families to be in the best possible position to make the
college choices that are going to pay off in the years ahead.
That is what this legislation, the Right to Know Before You Go Act,
would do. I hope my colleagues will consider it in the days ahead.
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