[Congressional Record (Bound Edition), Volume 147 (2001), Part 7]
[Senate]
[Pages 9195-9205]
[From the U.S. Government Publishing Office, www.gpo.gov]



          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. BAUCUS:
  S. 935. A bill to authorize the negotiation of a Free Trade Agreement 
with the commonwealth of Australia, and to provide for expedited 
congressional consideration of such an agreement; to the Committee on 
Finance.
      By Mr. BAUCUS:
  S. 943. A bill to authorize the negotiation of a Free Trade Agreement 
with New Zealand, and to provide for expedited congressional 
consideration of such an agreement; to the Committee on Finance.
      By Mr. BAUCUS:
  S. 944. A bill to authorize the negotiation of a Free Trade Agreement 
with the Republic of Korea and to provide for expedited congressional 
consideration of such an agreement; to the Committee on Finance.
  Mr. BAUCUS. Mr. President, I rise to send three separate bills to the 
desk, S. 935, S. 943, and S. 944. The bills I am introducing provide 
authority to negotiate bilateral free trade agreements with three 
important trading partners: New Zealand, Australia, and the Republic of 
Korea.
  Over the next several months, the Senate will turn its attention to 
international trade. As we do so, we find ourselves under serious 
scrutiny. Will we be able to reach consensus? Will we be able to break 
the impasse?
  I don't know the answers to these questions. I have been working hard 
to find common ground on issues like labor and the environment, and on 
ensuring the strength of our trade laws. I will continue to do so. But 
we have a long way to go.
  As we think about these issues, though, there is another, more subtle 
logjam within the trade agenda. Right now, our vision of the future 
seems locked in on sweeping, multilateral agreements, Free Trade for 
the Americas, the launch of a new round of global trade negotiations 
under the WTO.
  These are enormous and complicated undertakings. These agreements are 
also major opportunities for trade liberalization, and we should 
continue to work hard to get agreements that are good for our workers, 
farmers, and companies.
  But it is interesting to listen to the rhetoric. Why can't we advance 
labor and environment issues in the WTO? Some say developing countries 
simply would not allow it. Why can't we agree that our fair trade laws 
are not for sale in FTAA negotiations? Some say Brazil will never 
relent.
  Indeed, our trade policy seems to have become so focused on sweeping 
multilateral agreements, that we ignore other avenues to trade 
liberalization--much to the detriment of U.S. competitiveness.
  Take a closer look at this so-called trade impasse: The U.S.-Jordan 
Free Trade Agreement contains extensive and enforceable provisions on 
labor and the environment. Our free trade agreement with Canada and 
Mexico also addresses labor and environmental issues, with potential 
recourse to trade sanctions. We are moving towards completing an 
agreement with Chile--a country we know is open to labor and 
environment issues because they just recently struck a free trade 
agreement with Canada that includes enforceable provisions on both.
  What's the moral of this story? It's simple. These agreements 
demonstrate we can break the impasse on trade.
  Indeed, we must move forward where we can, whenever we can. If not 
fast track for all, then fast-track for some, specifically, those 
countries where we have strategic commercial and political interests. 
Those countries that will share our commitment to open markets, and our 
values for environmental quality and labor rights.
  Today, I am introducing legislation that would authorize trade 
negotiations with Australia, New Zealand, and the Republic of Korea. It 
would grant fast track consideration for these agreements, while also 
establishing a general policy framework for future negotiations.
  Trade agreements must address the full range of issues, from 
guaranteeing

[[Page 9196]]

national treatment and market access, to protecting intellectual 
property. From promoting electronic commerce to ensuring that countries 
do not gain unfair advantage by lowering labor and environmental 
standards. And these agreements must not weaken our fair trade laws.
  I believe there are many countries ready to take that deal. Australia 
and New Zealand are two countries eager to negotiate free trade 
agreements. We must continue to build our economic alliances in the 
Asia-Pacific region, and both countries have been strong partners in 
trade. We must also be realistic. An FTA would present tremendous 
opportunities, but we must recognize where there are differences. One 
such difference is the operation of the Australian wheat board, which, 
despite recent reforms, still works to distort world markets. 
Agriculture negotiations with both countries would require careful 
treatment, but should allow us to better work together to reduce unfair 
trade barriers in other parts of the world.
  A trade agreement with Korea will take more time, as the issues are 
more difficult to resolve. For example, Korea maintains very high 
tariffs on beef, hurting ranchers in my home state of Montana. High 
tariffs, high taxes, and other trade-restrictive practices in Korea, 
reduce the competitiveness of American automobiles from Michigan and 
Ohio. Government subsidies in Korea undercut American semiconductor 
manufacturers in Idaho and Utah.
  But we must not wait to negotiate agreements until all these problems 
are solved. Rather, we should use FTA negotiations as part of the 
solution. And with Korea, there are benefits that extend well beyond 
trade. An FTA would help lock in Korea's economic and political 
progress, and would also be an important part of our strategic 
interests in Asia.
  The bottom line is this: while America hesitates on trade 
liberalization, and while many reject trying to reach a bipartisan 
consensus, the rest of the world continues to move forward. Regional 
trade arrangements in Europe, Latin America, and Asia put U.S. 
exporters at a competitive disadvantage. We lose overseas markets to 
foreign competitors who enjoy trade preferences for which our farmers, 
manufacturers, and service providers are ineligible.
  I hope this legislation will send a strong signal to the rest of the 
world: America intends to continue its leadership in the global trading 
system.
                                 ______
                                 
      By Mr. ALLARD (for himself, Mr. Johnson, and Mr. Thomas):
  S. 936. A bill to amend the Internal Revenue Code of 1986 to expand S 
corporation eligibility for banks, and for other purposes; to the 
Committee on Finance.
  Mr. ALLARD. Mr. President, today I am pleased to introduce 
legislation that will expand and improve Subchapter S of the Internal 
Revenue Code. I am joined in this effort by Senators Tim Johnson and 
Craig Thomas. I have introduced this legislation over the last few 
years and I am hopeful that this year we can get this important tax 
legislation enacted.
  The Subchapter S provision of the Internal Revenue Code reflect the 
desire of Congress to eliminate the double tax burden on small business 
corporations. Pursuant to that desire, Subchapter S has been 
liberalized a number of times, most recently in 1996. This legislation 
contains several provisions that will make the Subchapter S election 
more widely available to small businesses in all sectors. It also 
contains several provisions of particular benefit to community banks 
that may be contemplating a conversion to Subchapter S. Financial 
institutions were first made eligible for the Subchapter S election in 
1996. This legislation builds on and clarifies the Subchapter S 
provisions applicable to financial institutions.
  I ask unanimous consent that the text of the bill and an explanation 
of the provisions of the bill be printed in the Record.
  There being no objection, the additional material was ordered to be 
printed in the Record, as follows:

                                 S. 936

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Small Business and Financial 
     Institutions Tax Relief Act of 2001''.

     SEC. 2. EXPANSION OF S CORPORATION ELIGIBLE SHAREHOLDERS TO 
                   INCLUDE IRAS.

       (a) In General.--Section 1361(c)(2)(A) of the Internal 
     Revenue Code of 1986 (relating to certain trusts permitted as 
     shareholders) is amended by inserting after clause (v) the 
     following:
       ``(vi) A trust which constitutes an individual retirement 
     account under section 408(a), including one designated as a 
     Roth IRA under section 408A.''.
       (b) Treatment as Shareholder.--Section 1361(c)(2)(B) of the 
     Internal Revenue Code of 1986 (relating to treatment as 
     shareholders) is amended by adding at the end the following:
       ``(vi) In the case of a trust described in clause (vi) of 
     subparagraph (A), the individual for whose benefit the trust 
     was created shall be treated as a shareholder.''.
       (c) Sale of Stock in IRA Relating to S Corporation Election 
     Exempt From Prohibited Transaction Rules.--Section 4975(d) of 
     the Internal Revenue Code of 1986 (relating to exemptions) is 
     amended by striking ``or'' at the end of paragraph (14), by 
     striking the period at the end of paragraph (15) and 
     inserting ``; or'', and by adding at the end the following:
       ``(16) a sale of stock held by a trust which constitutes an 
     individual retirement account under section 408(a) to the 
     individual for whose benefit such account is established if 
     such sale is pursuant to an election under section 
     1362(a).''.
       (d) Conforming Amendment.--Section 512(e)(1) of the 
     Internal Revenue Code of 1986 is amended by inserting 
     ``1361(c)(2)(A)(vi) or'' before ``1361(c)(6)''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to trusts which constitute individual retirement 
     accounts on the date of the enactment of this Act in taxable 
     years beginning after December 31, 2001.

     SEC. 3. EXCLUSION OF INVESTMENT SECURITIES INCOME FROM 
                   PASSIVE INCOME TEST FOR BANK S CORPORATIONS.

       (a) In General.--Section 1362(d)(3)(C) of the Internal 
     Revenue Code of 1986 (defining passive investment income) is 
     amended by adding at the end the following:
       ``(v) Exception for banks; etc.--In the case of a bank (as 
     defined in section 581), a bank holding company (as defined 
     in section 246A(c)(3)(B)(ii)), or a qualified subchapter S 
     subsidiary bank, the term `passive investment income' shall 
     not include--

       ``(I) interest income earned by such bank, bank holding 
     company, or qualified subchapter S subsidiary bank, or
       ``(II) dividends on assets required to be held by such 
     bank, bank holding company, or qualified subchapter S 
     subsidiary bank to conduct a banking business, including 
     stock in the Federal Reserve Bank, the Federal Home Loan 
     Bank, or the Federal Agricultural Mortgage Bank or 
     participation certificates issued by a Federal Intermediate 
     Credit Bank.''.

       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1996.

     SEC. 4. INCREASE IN NUMBER OF ELIGIBLE SHAREHOLDERS TO 150.

       (a) In General.--Section 1361(b)(1)(A) of the Internal 
     Revenue Code of 1986 (defining small business corporation) is 
     amended by striking ``75'' and inserting ``150''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 5. TREATMENT OF QUALIFYING DIRECTOR SHARES.

       (a) In General.--Section 1361 of the Internal Revenue Code 
     of 1986 (defining s corporation) is amended by adding at the 
     end the following:
       ``(f) Treatment of Qualifying Director Shares.--
       ``(1) In general.--For purposes of this subchapter--
       ``(A) qualifying director shares shall not be treated as a 
     second class of stock, and
       ``(B) no person shall be treated as a shareholder of the 
     corporation by reason of holding qualifying director shares.
       ``(2) Qualifying director shares defined.--For purposes of 
     this subsection, the term `qualifying director shares' means 
     any shares of stock in a bank (as defined in section 581) or 
     in a bank holding company registered as such with the Federal 
     Reserve System--
       ``(i) which are held by an individual solely by reason of 
     status as a director of such bank or company or its 
     controlled subsidiary; and
       ``(ii) which are subject to an agreement pursuant to which 
     the holder is required to dispose of the shares of stock upon 
     termination of the holder's status as a director at the same 
     price as the individual acquired such shares of stock.
       ``(3) Distributions.--A distribution (not in part or full 
     payment in exchange for stock) made by the corporation with 
     respect to qualifying director shares shall be includible

[[Page 9197]]

     as ordinary income of the holder and deductible to the 
     corporation as an expense in computing taxable income under 
     section 1363(b) in the year such distribution is received.''.
       (b) Conforming Amendments.--
       (1) Section 1361(b)(1) of the Internal Revenue Code of 1986 
     is amended by inserting ``, except as provided in subsection 
     (f),'' before ``which does not''.
       (2) Section 1366(a) of such Code is amended by adding at 
     the end the following:
       ``(3) Allocation with respect to qualifying director 
     shares.--The holders of qualifying director shares (as 
     defined in section 1361(f)) shall not, with respect to such 
     shares of stock, be allocated any of the items described in 
     paragraph (1).''.
       (3) Section 1373(a) of such Code is amended by striking 
     ``and'' at the end of paragraph (1), by striking the period 
     at the end of paragraph (2) and inserting ``, and'', and 
     adding at the end the following:
       ``(3) no amount of an expense deductible under this 
     subchapter by reason of section 1361(f)(3) shall be 
     apportioned or allocated to such income.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1996.

     SEC. 6. BAD DEBT CHARGE OFFS IN YEARS AFTER ELECTION YEAR 
                   TREATED AS ITEMS OF BUILT-IN LOSS.

       The Secretary of the Treasury shall modify Regulation 
     1.1374-4(f) for S corporation elections made in taxable years 
     beginning after December 31, 1996, with respect to bad debt 
     deductions under section 166 of the Internal Revenue Code of 
     1986 to treat such deductions as built-in losses under 
     section 1374(d)(4) of such Code during the entire period 
     during which the bank recognizes built-in gains from changing 
     its accounting method for recognizing bad debts from the 
     reserve method under section 585 of such Code to the charge-
     off method under section 166 of such Code.

     SEC. 7. INCLUSION OF BANKS IN 3-YEAR S CORPORATION RULE FOR 
                   CORPORATE PREFERENCE ITEMS.

       (a) In General.--Section 1363(b) of the Internal Revenue 
     Code of 1986 (relating to computation of corporation's 
     taxable income) is amended by adding at the end the following 
     new flush sentence:

     ``Paragraph (4) shall apply to any bank whether such bank is 
     an S corporation or a qualified subchapter S subsidiary.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 8. C CORPORATION RULES TO APPLY FOR FRINGE BENEFIT 
                   PURPOSES.

       (a) In General.--Section 1372 of the Internal Revenue Code 
     of 1986 (relating to partnership rules to apply for fringe 
     benefit purposes) is repealed.
       (b) Partnership Rules To Apply for Health Insurance Costs 
     of Certain S Corporation Shareholders.--Paragraph (5) of 
     section 162(l) of the Internal Revenue Code of 1986 (relating 
     to special rules for health insurance costs of self-employed 
     individuals) is amended to read as follows:
       ``(5) Treatment of certain s corporation shareholders.--
       ``(A) In general.--This subsection shall apply in the case 
     of any 2-percent shareholder of an S corporation, except 
     that--
       ``(i) for purposes of this subsection, such shareholder's 
     wages (as defined in section 3121) from the S corporation 
     shall be treated as such shareholder's earned income (within 
     the meaning of section 401(c)(1)), and
       ``(ii) there shall be such adjustments in the application 
     of this subsection as the Secretary may by regulations 
     prescribe.
       ``(B) 2-percent shareholder defined.--For purposes of this 
     paragraph, the term `2-percent shareholder' means any person 
     who owns (or is considered as owning within the meaning of 
     section 318) on any day during the taxable year of the S 
     corporation more than 2 percent of the outstanding stock of 
     such corporation or stock possessing more than 2 percent of 
     the total combined voting power of all stock of such 
     corporation.''.
       (c) Conforming Amendment.--The table of sections for part 
     III of subchapter S of chapter 1 of the Internal Revenue Code 
     of 1986 is amended by striking the item relating to section 
     1372.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 9. EXPANSION OF S CORPORATION ELIGIBLE SHAREHOLDERS TO 
                   INCLUDE FAMILY LIMITED PARTNERSHIPS.

       (a) In General.--Section 1361(b)(1)(B) of the Internal 
     Revenue Code of 1986 (defining small business corporation) is 
     amended--
       (1) by striking ``or an organization'' and inserting ``an 
     organization'', and
       (2) by inserting ``, or a family partnership described in 
     subsection (c)(7)'' after ``subsection (c)(6)''.
       (b) Family Partnership.--Section 1361(c) of the Internal 
     Revenue Code of 1986 (relating to special rules for applying 
     subsection (b)) is amended by adding at the end the 
     following:
       ``(7) Family partnerships.--
       ``(A) In general.--For purposes of subsection (b)(1)(B), 
     any partnership or limited liability company may be a 
     shareholder in an S corporation if--
       ``(i) all partners or members are members of 1 family as 
     determined under section 704(e)(3), and
       ``(ii) all of the partners or members would otherwise be 
     eligible shareholders of an S corporation.
       ``(B) Treatment as shareholders.--For purposes of 
     subsection (b)(1)(A), in the case of a partnership or limited 
     liability company described in subparagraph (A), each partner 
     or member shall be treated as a shareholder.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 10. ISSUANCE OF PREFERRED STOCK PERMITTED.

       (a) In General.--Section 1361 of the Internal Revenue Code 
     of 1986 (defining s corporation), as amended by section 5(a), 
     is amended by adding at the end the following:
       ``(g) Treatment of Qualified Preferred Stock.--
       ``(1) In general.--For purposes of this subchapter--
       ``(A) qualified preferred stock shall not be treated as a 
     second class of stock, and
       ``(B) no person shall be treated as a shareholder of the 
     corporation by reason of holding qualified preferred stock.
       ``(2) Qualified preferred stock defined.--For purposes of 
     this subsection, the term `qualified preferred stock' means 
     stock which meets the requirements of subparagraphs (A), (B), 
     and (C) of section 1504(a)(4). Stock shall not fail to be 
     treated as qualified preferred stock solely because it is 
     convertible into other stock.
       ``(3) Distributions.--A distribution (not in part or full 
     payment in exchange for stock) made by the corporation with 
     respect to qualified preferred stock shall be includible as 
     ordinary income of the holder and deductible to the 
     corporation as an expense in computing taxable income under 
     section 1363(b) in the year such distribution is received.''.
       (b) Conforming Amendments.--
       (1) Section 1361(b)(1) of the Internal Revenue Code of 
     1986, as amended by section 5(b)(1), is amended by striking 
     ``subsection (f)'' and inserting ``subsections (f) and (g)''.
       (2) Section 1366(a) of such Code, as amended by section 
     5(b)(2), is amended by adding at the end the following:
       ``(4) Allocation with respect to qualified preferred 
     stock.--The holders of qualified preferred stock (as defined 
     in section 1361(g)) shall not, with respect to such stock, be 
     allocated any of the items described in paragraph (1).''.
       (3) Section 1373(a)(3) of such Code, as added by section 
     5(b)(3), is amended by inserting ``or 1361(g)(3)'' after 
     ``section 1361(f)(3)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 11. CHARITABLE CONTRIBUTIONS STOCK BASIS ADJUSTMENT.

       (a) Stock Basis Adjustment.--Paragraph (1) of section 
     1367(a) of the Internal Revenue Code of 1986 (relating to 
     adjustments to basis of stock of shareholders, etc.) is 
     amended by striking ``and'' at the end of subparagraph (B), 
     by striking the period at the end of subparagraph (C) and 
     inserting ``, and'', and by adding at the end the following:
       ``(D) the excess of the deductions for charitable 
     contributions over the basis of the property contributed.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 12. CONSENT TO ELECTIONS.

       (a) 90 Percent of Shares Required for Consent to 
     Election.--Section 1362(a)(2) of the Internal Revenue Code of 
     1986 (relating to all shareholders must consent to election) 
     is amended--
       (1) by striking ``all persons who are shareholders in'' and 
     inserting ``shareholders holding at least 90 percent of the 
     shares of'', and
       (2) by striking ``All shareholders'' in the heading and 
     inserting ``At least 90 percent of shares''.
       (b) Rules for Consent.--Section 1362(a) of the Internal 
     Revenue Code of 1986 (relating to election) is amended by 
     adding at the end the following:
       ``(3) Rules for consent.--For purposes of making any 
     consent required under paragraph (2) or subsection 
     (d)(1)(B)--
       ``(A) each joint owner of shares shall consent with respect 
     to such shares,
       ``(B) the personal representative or other fiduciary 
     authorized to act on behalf of the estate of a deceased 
     individual shall consent for the estate,
       ``(C) one parent, the custodian, the guardian, or the 
     conservator shall consent with respect to shares owned by a 
     minor or subject to a custodianship, guardianship, 
     conservatorship, or similar arrangement,
       ``(D) the trustee of a trust shall consent with respect to 
     shares owned in trust,
       ``(E) the trustee of the estate of a bankrupt individual 
     shall consent for shares owned by a bankruptcy estate,
       ``(F) an authorized officer or the trustee of an 
     organization described in subsection (c)(6) shall consent for 
     the shares owned by such organization, and
       ``(G) in the case of a partnership or limited liability 
     company described in subsection (c)(8)--
       ``(i) all general partners shall consent with respect to 
     shares owned by such partnership,
       ``(ii) all managers shall consent with respect to shares 
     owned by such company if management of such company is vested 
     in 1 or more managers, and

[[Page 9198]]

       ``(iii) all members shall consent with respect to shares 
     owned by such company if management of such company is vested 
     in the members.''.
       (c) Treatment of Nonconsenting Shareholder Stock.--
       (1) In general.--Section 1361 of the Internal Revenue Code 
     of 1986 (defining s corporation), as amended by section 
     10(a), is amended by adding at the end the following:
       ``(h) Treatment of Nonconsenting Shareholder Stock.--
       ``(1) In general.--For purposes of this subchapter--
       ``(A) nonconsenting shareholder stock shall not be treated 
     as a second class of stock,
       ``(B) such stock shall be treated as C corporation stock, 
     and
       ``(C) the shareholder's pro rata share under section 
     1366(a)(1) with respect to such stock shall be subject to tax 
     paid by the S corporation at the highest rate of tax 
     specified in section 11(b).
       ``(2) Nonconsenting shareholder stock defined.--For 
     purposes of this subsection, the term `nonconsenting 
     shareholder stock' means stock of an S corporation which is 
     held by a shareholder who did not consent to an election 
     under section 1362(a) with respect to such S corporation.
       ``(3) Distributions.--A distribution (not in part or full 
     payment in exchange for stock) made by the corporation with 
     respect to nonconsenting shareholder stock shall be 
     includible as ordinary income of the holder and deductible to 
     the corporation as an expense in computing taxable income 
     under section 1363(b) in the year such distribution is 
     received.''.
       (2) Conforming amendment.--Section 1361(b)(1) of the 
     Internal Revenue Code of 1986, as amended by section 
     10(b)(1), is amended by striking ``subsections (f) and (g)'' 
     and inserting ``subsections (f), (g), and (h)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to elections made in taxable years beginning 
     after December 31, 2001.

     SEC. 13. INFORMATION RETURNS FOR QUALIFIED SUBCHAPTER S 
                   SUBSIDIARIES.

       (a) In General.--Section 1361(b)(3)(A) of the Internal 
     Revenue Code of 1986 (relating to treatment of certain wholly 
     owned subsidiaries) is amended by inserting ``and in the case 
     of information returns required under part III of subchapter 
     A of chapter 61'' after ``Secretary''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.
                                  ____


   Small Business and Financial Institutions Tax Relief Act of 2001--
                                Summary

       This legislation expands Subchapter S of the IRS Code. 
     Subchapter S corporations do not pay corporate income taxes, 
     earnings are passed through to the shareholders where income 
     taxes are paid, eliminating the double taxation of 
     corporations. By contrast, Subchapter C corporations pay 
     corporate income taxes on earnings, and shareholders pay 
     income taxes again on those same earnings when they pass 
     through as dividends. Subchapter S of the IRS Code was 
     enacted in 1958 to reduce the tax burden on small business. 
     The Subchapter S provisions have been liberalized a number of 
     times over the last two decades, significantly in 1982, and 
     again in 1996. This reflects a desire on the part of Congress 
     to reduce taxes on small business.
       This S corporation legislation would benefit many small 
     businesses, but its provisions are particularly applicable to 
     banks. Congress made S corporation status available to small 
     banks for the first time in the 1996 ``Small Business Job 
     Protection Act'' but many banks are having trouble qualifying 
     under the current rules. The proposed legislation:
       Permits S corporation shares to be held as Individual 
     Retirement Accounts (IRAs), and permit IRA shareholders to 
     purchase their shares from the IRA in order to facilitate a 
     Subchapter S election.
       Clarifies that interest and dividends on investments 
     maintained by a bank for liquidity and safety and soundness 
     purposes shall not be ``passive'' income. This is necessary 
     because S corporations are restricted in the amount of 
     passive investment income they may generate.
       Increases the number of S corporation eligible shareholders 
     from 75 to 150.
       Provides that any stock that bank directors must hold under 
     banking regulations shall not be a disqualifying second class 
     of stock. This is necessary because S corporations are 
     permitted only one class of stock.
       Permits banks to treat bad debt charge offs as items of 
     built in loss over the same number of years that the 
     accumulated bad debt reserve must be recaptured (four years) 
     for built in gains tax purposes. This provision is necessary 
     to properly match built in gains and losses relating to 
     accounting for bad debts. Banks that are converting to S 
     corporations must convert from the reserve method of 
     accounting to the specific charge off method and the 
     recapture of the accumulated bad debt reserve is built in 
     gain. Presently the presumption that a bad debt charge off is 
     a built in loss applies only to the first S corporation year.
       Clarifies that the general 3 Year S corporation rule for 
     certain ``preference'' items applies to interest deductions 
     by S corporation banks, thereby providing equitable treatment 
     for S corporation banks. S corporations that convert from C 
     corporations are denied certain interest deductions 
     preference items for up to 3 years after the conversion, at 
     the end of 3 years the deductions are allowed.
       Provides that non-health care related fringe benefits such 
     as group-term life insurance will be excludable from wages 
     for ``more-than-two-percent'' shareholders. Current law taxes 
     the fringe benefits of these shareholders. Health care 
     related benefits are not included because their deductibility 
     would increase the revenue impact of the legislation.
       Permits Family Limited Partnerships to be shareholders in 
     subchapter S corporations. Many family owned small businesses 
     are organized as Family Limited Partnerships or controlled by 
     Family Limited Partnerships for a variety of reasons. A 
     number of small banks have Family Limited Partnership 
     shareholders, and this legislation would for the first time 
     permit those partnerships to be S corporation shareholders.
       Permits S corporations to issue preferred stock in addition 
     to common. Prohibited under current law which permits S 
     corporations to have only one class of stock. Because of 
     limitations on the number of common shareholders, banks need 
     to be able to issue preferred stock in order to have adequate 
     access to equity.
       Facilitates charitable giving by S corporation shareholders 
     by providing a basis increase for the excess of the 
     charitable contribution deduction over the basis of property 
     contributed. Current law penalizes a shareholder who makes a 
     charitable contribution through an S corporation by limiting 
     the charitable deduction that flows through to the 
     shareholder to the basis of the donated property. This means 
     that the shareholder is unable to benefit from the full fair 
     market value deduction when the basis does not reflect the 
     appreciation in the property. This differs from the full 
     value deduction afforded the taxpayer who donates property in 
     an individual capacity or through a partnership, instead of 
     through an S corporation.
       Reduces the required level of shareholder consent to 
     convert to an S corporation from unanimous to 90 percent of 
     shares.
       Clarifies that Qualified Subchapter S Subsidiaries (QSSS) 
     provide information returns under their own tax id number. 
     This can help avoid confusion by depositors and other parties 
     over the insurance of deposits and the payer of salaries and 
     interest.
                                 ______
                                 
      By Mr. CLELAND (for himself, Mr. Warner, Mr. Levin, Mr. Kennedy, 
        Mr. Reed, Ms. Landrieu, Mrs. Carnahan, Mr. Dayton, Mr. 
        Bingaman, and Mr. Lieberman):
  S. 937. A bill to amend title 38, United States Code, to permit the 
transfer of entitlement to educational assistance in the Montgomery GI 
bill by members of the Armed Forces, and for other purposes; to the 
Committee on Veterans' Affairs.
  Mr. CLELAND. Mr. President, I come before you today to introduce 
legislation that addresses the educational needs of our men and women 
in uniform and their families. I appreciate the support of my 
colleagues who have supported my provisions to enhance the GI bill, 
Senators Levin, Kennedy, Bingaman, Reed, Dayton, Landrieu, and 
Carnahan. I also like to recognize the Chairman of the Senate Armed 
Services Committee, Senator Warner, who himself went to school on the 
GI bill. I want to thank him for his cosponsorship, support and 
encouragement in improving the GI bill for military personnel and their 
families.
  I call this measure the HOPE, Help Our Professionals Educationally, 
Act.
  In 1999, Time magazine named the American GI as the Person of the 
Century. That alone is a statement about the value of our military 
personnel. They are recognized around the world for their dedication 
and commitment to fight for our country and for peace in the world. 
This past century has been filled with strife and conflict. During this 
period, the American GI has fought in the trenches during the first 
World War, the beaches at Normandy, in the jungles of Vietnam, in the 
deserts of the Persian Gulf, and most recently in the Balkans and 
Kosovo.
  The face of our military and the people who fight our wars has 
changed. The traditional image of the single, mostly male, drafted, and 
disposable soldier is gone. Today we are fielding the force for the 
21st century. This new force is a volunteer force, filled with men and 
women who are highly skilled, married, and definitely not disposable.

[[Page 9199]]

Gone are the days when quality of life for a GI included a beer in the 
barracks and a three-day pass. Now, we know we have to recruit a 
soldier and retain a family.
  We have won the cold war, this victory has changed the world and our 
military. The new world order has given us a new world disorder. The 
United States is responding to crises around the globe, whether it be 
strategic bombing or humanitarian assistance, and our military is the 
our most effective response. In order to meet these challenges, we are 
retooling our forces to be lighter, leaner and meaner. This is a 
positive move. Along with this lighter force, our military 
professionals must be highly educated and highly trained.
  Our Nation has recently experienced the longest running peacetime 
economic growth in history. This economic expansion has been a boom for 
our Nation. However, there is a negative impact of this growing 
economy. With the enticement of quick prosperity in the civilian sector 
it is more difficult than ever to recruit and retain our highly skilled 
force.
  The services have increased their budgets for advertising and 
refocused attention on recruiting. However, we still face problems in 
retaining some of the key skills that our service men and women 
possess--skills that our new economy is demanding. The highly trained 
technical skilled personnel are leaving the military to seek a better 
quality of life for their family outside of our military.
  As I have heard so often, the decision to stay in the military is 
made at the dinner table. It was the wisdom of a young enlisted soldier 
at Schofield Barracks who noted, when the choice is `stay in the 
military or stay married,' the soldier opts to stay married. In my 
travels across Georgia, around the country, and abroad, I have found 
that our men and women in uniform want to do what is right, for 
themselves and the country. However, our benefits systems have not kept 
pace and forcing our personnel to choose between family and service.
  In talking with our military personnel, we know that money alone is 
not enough. Education is the number one reason service members come 
into the military and the number one reason its members are leaving. In 
recent years the Senate began to address this issue by supporting 
improved education benefits for military members and their families.
  My amendment will improve and enhance the current educational 
benefits and create the GI bill for the 21st century and beyond.
  One of the most important provisions of my amendment would give the 
Service Secretaries the authority to authorize a service member to 
transfer half of his or her basic MGIB benefits to family members. Many 
service members tell us that they really want to stay in the service, 
but do not feel that they can stay and provide an education for their 
families. This will give them, in affect, an educational savings 
account, so that they can stay in the service and still provide an 
education for their spouses and children. This will give the 
Secretaries a very powerful retention tool.
  The measure would allow the Services to authorize transfer of unused 
basic GI bill benefits of a servicemember who has been in the military 
for 6 years. The spouse would be able to use these benefits immediately 
upon authorization by the services. This provision is designed to 
assist the spouse of a military member in pursuing their own education 
or assist them in gaining the necessary skills to prepare for an 
occupation in the new economy.
  The measure also includes language that permits a servicemember with 
ten years of service to transfer GI bill benefits to a dependent child. 
This provision is designed to help a servicemember with the expected 
costs of a child's education. It could be used to help with secondary 
expenses as well as with college costs.
  I believe that the Services can use this much like a reenlistment 
bonus to keep valuable service members in the service. It can be 
creatively combined with reenlistment bonuses to create a very powerful 
and cost effective incentive for highly skilled military personnel to 
stay in the Service. In talking with service members upon their 
departure from the military, we have found that the family plays a 
crucial role in the decision of a member to continue their military 
career. Reality dictates that we must address the needs of the family 
in order to retain our soldiers, sailors, airmen, and marines.
  Another enhancement to the current MGIB would extend the period in 
which the members of Reserve components can use this benefit. Currently 
they lose this benefit when they leave the service or after 10 years of 
service. They have no benefit when they leave service. My amendment 
will permit them to use the benefit up to 5 years after their 
separation. This will encourage them to stay in the Reserves for a full 
career.
  I believe that this is a necessary next step for improving our 
education benefits for our military members and their families. We must 
offer them credible choices. If we offer them choices, and treat the 
members and their families properly, we will show them our respect for 
their service and dedication. Maybe then we can turn around our current 
retention statistics. This GI bill is an important retention tool for 
the services. I believe that education begets education. We must 
continue to focus our resources in retaining our personnel based their 
needs.
                                 ______
                                 
      By Mr. JEFFORDS (for himself, Mr. Dodd, Mr. Fitzgerald, and Mr. 
        Brownback):
  S. 938. A bill to amend the Internal Revenue Code of 1986 to provide 
that the exclusion from gross income for foster care payments shall 
also apply to payments by qualifying placement agencies, and for other 
purposes; to the Committee on Finance.
  Mr. JEFFORDS. Mr. President, I am introducing today a bill that will 
simplify and make more fair the tax treatment of foster care payments. 
The bill will eliminate unnecessary distinctions drawn by the Internal 
Revenue Code in the treatment of payments received by people who open 
their homes to foster children and adults. I introduced this same bill 
in the 106th Congress, and it was passed by both Houses as part of a 
larger tax bill that was subsequently vetoed by the President. I am re-
introducing the bill now, as I believe that this issue should not be 
overlooked as we debate tax reform this year. This bill not only 
simplifies the tax treatment of foster care payments, it will also 
remove inequities and uncertainties inherent in current law.
  In my home State of Vermont, we are proud that we have been able to 
reduce our reliance on the institutional care of children and adults. 
We have accomplished this by developing an array of services that can 
be provided in typical family homes, in a cost-effective and fiscally 
responsible manner. I believe that this is not only good public policy, 
but that whenever possible we should encourage these alternatives. 
Equal tax treatment for all tax families that provide foster care 
services should provide some encouragement.
  Under current law, foster care families are required to include 
foster care payments in income. They can offset this income with 
deductions for the expenditures they incur. Families must maintain 
detailed records to substantiate these deductions. In lieu of detailed 
record keeping, Section 131 of the Internal Revenue Code allows certain 
foster care families to exclude from income the payments they receive 
for providing foster care. Eligibility for this exclusion depends upon 
a complicated analysis of three factors: the age of the person in 
foster care; the type of foster care placement agency; and the source 
of the foster care payments. For children under age 19 in foster care, 
Section 131 permits families to exclude payments when a State, or one 
of its political subdivisions, or a tax-exempt charitable placement 
agency places the individual in foster care and makes the foster care 
payments. For persons age 19 and older, Section 131 permits families to 
exclude foster care payments from income only when

[[Page 9200]]

a State, or one of its political subdivisions, places the individual 
and makes the payments.
  This bill is designed to provide tax fairness; it will simplify the 
anachronistic tax rules by amending the tax code's current exclusion to 
include foster care payments for all persons in foster care, regardless 
of age. The exclusion will also be available when the foster care 
placement is made by a private foster care placement agency and even 
when the foster care payments are received through a private foster 
care placement agency, rather than directly from a State. To ensure 
appropriate oversight, the bill requires that the placement agency be 
either licensed or certified by a State.
  A qualified foster care payment under this bill must be made pursuant 
to a foster care program run by a State or county. My intention is for 
this bill to cover the wide variety of foster care programs developed 
by States. Recognizing foster care as an effective approach to provide 
support within the community to people with mental retardation and 
other disabilities, these programs place children, and in some cases 
adults, in homes of unrelated families who provide foster care on a 
full-time basis. Families providing foster care give those in their 
care the daily support and supervision typically given to a family 
member. Like traditional families, foster care families ensure that 
foster children and adults have a healthy physical environment, get 
routine and emergency medical care, are adequately clothed and fed, and 
have satisfying leisure activities. Foster families provide those in 
their care with stimulation and emotional support all too often lacking 
in large congregate and institutional settings.
  In some State, the State itself administers both child and adult 
foster care programs. Many States, however, are increasingly entrusting 
administration of these programs to private placement agencies, 
approved through licensing or certification procedures, or to 
government-designated intermediary tax-exempt organizations. Through 
the approval process, private placement agencies are accountable for 
their use of funds and for the quality of services they provide. This 
bill is intended to cover governmental foster care programs funded 
solely by State or political subdivision monies, and, especially in the 
case of adult foster care, programs funded by the federal government, 
typical through a State's Medicaid Home and Community-Based Waiver 
program.
  While foster care for children has been in existence for decades, 
foster care for adults is a more recent phenomenon. Sometimes referred 
to as ``host homes'' or ``developmental homes,'' adult foster care 
facilities have proven to be an effective alternative to institutional 
care for adults with disabilities. In 1993, Vermont closed the State 
institution for people with developmental disabilities, choosing 
instead to rely on foster families. Under this approach, Vermonters 
with developmental disabilities can live in homes and participate in 
the routines of daily life that most of us take for granted. Vermont's 
approach has provided people with disabilities a cost-effective 
opportunity for successful lives in communities, with valued 
relationships with their foster families.
  Vermont authorizes local developmental disability service 
organizations to act as placement agencies and contract with families 
willing to provide foster care in their homes. The current tax law's 
disparate tax treatment of foster care payments impedes these types of 
arrangements. Persons providing foster care for individuals placed in 
their homes by the government can exclude foster care payments from 
income, while foster care families receiving the same payments through 
private agencies under contract with State or local governments are not 
eligible for this exclusion, unless the individual in foster care is 
under age 19 and the placement agency is a nonprofit organization. 
Because of the complexity of current law, families often receive 
conflicting advice from tax professionals regarding the proper tax 
treatment of foster care payments. In addition, the law's complex rules 
discourage willing families from providing foster care in their homes 
to persons placed by private agencies, reducing the availability of 
care alternatives.
  This bill will advance the development of family-based foster care 
services, a highly valued alternative to institutionalization. My home 
State of Vermont is proud of having closed its institutions and leading 
the nation in developing other support systems. The use of foster care 
services has facilitated this effort. I believe this represents good 
policy and is something to be encouraged. We should be removing 
disincentives and barriers to quality support for people with 
disabilities in our communities. I urge my colleagues to support this 
bill.
                                 ______
                                 
      By Mrs. HUTCHISON:
  S. 939. A bill amend the Immigration and Nationality Act to confer 
citizenship automatically on children residing abroad in the legal and 
physical custody of a citizen parent serving in a Government or 
military position abroad; to the Committee on the Judiciary.
  Mrs. HUTCHISON. Mr. President, I am pleased to offer legislation on 
an issue important to many of our military and government families 
assigned overseas. Currently, if one of these families adopts a child 
who is a citizen of the United States, that child is not automatically 
eligible for citizenship. Current law allows U.S. citizens residing in 
the United States to adopt children from overseas and to automatically 
confer citizenship on these children who are residing in the legal and 
physical custody of the citizen parent. My bill would allow U.S. 
military and government employees who are stationed overseas and adopt 
a child to enjoy the same ability to have citizenship automatically 
conferred.
  Today many of our service members and government employees are 
stationed overseas serving their country. Some of these families want 
to offer their home and their hearts to children needing a good, loving 
family. The opportunity is often missed by these families because of 
this oversight in the current law. This amendment will ensure that 
those who are serving our nation and our government overseas are not 
penalized when adopting children during their tour.
                                 ______
                                 
      By Mr. DODD (for himself, Mr. Kennedy, and Mr. Wellstone):
  S. 940. A bill to leave no child behind; to the Committee on Finance.
  Mr. DODD. Mr. President, on behalf of myself, Senator Kennedy, and 
Senator Wellstone, I rise today to introduce the Leave No Child Behind 
Act, legislation that will address the needs of our nation's children 
to deliver them from poverty, violence, abuse, neglect, and poor 
education.
  This measure combines the best public and private ideas, policies, 
and practices into a comprehensive measure to improve the lives of all 
children. Not just poor children. But all children.
  Many Members of Congress have contributed to this legislation, adding 
their ideas and their thoughts, including: Senator Kennedy, Senator 
Jeffords, Senator Rockefeller, Senator DeWine, Senator Harkin, Senator 
Stevens, Senator Biden, Senator Snowe, Senator Boxer, Senator Grassley, 
Senator Daschle, Senator Gordon Smith, Senator Reed, Senator Chafee, 
Senator Wellstone, Senator Kerry, Senator Durbin, Senator Feinstein, 
Senator Kohl, Senator Torricelli, Senator Schumer, and Senator Bayh. A 
number of Members of the House have also contributed to this 
legislation. It is without hesitation that I say that this bill would 
not have been possible without the help of so many of my colleagues.
  For the first time in more than a generation, our budget is in 
balance. Indeed, we have a surplus. At long last, we can talk about 
meeting the needs of the future, rather than paying off the debts of 
the past. For the first time in decades, we have an opportunity to put 
children first, to move them out of poverty, to end their hunger, to 
heal their wounds, to enrich and inform their minds.
  We are on the verge of doing what many of us have long dreamed of 
doing for America's young people.

[[Page 9201]]

  The legislation we are introducing today represents a vision for 
children in the 21st century.
  It's more than a bill. More than pages of legislative language. It's 
a covenant that we are entering into today. Not only with each other, 
but with those who will stand in this place long after we have gone.
  It's a declaration that we need to put children first, and that we 
intend to put children first. In doing so, we put America first.
  A question that we must all ask ourselves and ask this country, is, 
what should our highest priority be? When I ask this question, the 
response I most often receive is our children.
  Children are one-quarter of our population. But they are one hundred 
percent of our future.
  Despite that fact, they are getting a fraction of our attention and a 
fraction of our resources.
  Having languished in budget deficits for years, we now have the 
largest projected Federal budget surpluses in the history of this 
Nation. We have witnessed unprecedented prosperity. We are so lucky to 
live in this free and dynamic society, a Nation at peace, of such great 
wealth.
  But some are not so lucky. Some families struggle through each day. 
They live paycheck to paycheck. Their children are hungry. They're 
cold. They might have difficulty following the teacher's instructions 
on the blackboard because they can't see it clearly. But their parents 
haven't taken them to the doctor because they don't have health 
insurance.
  Over 12 million children live in poverty.
  Nearly 11 million children have no health coverage.
  About 7 million children go home alone each week after school.
  This is America, too.
  The legislation we are introducing today is called, ``An Act to Leave 
No Child Behind''. We are committed to one principle beyond all others. 
Not just as a slogan, but as a means to define an urgent national 
priority.
  Regrettably, however, for some those words are slogans, and nothing 
more. There are those who utter the words ``Leave No Child Behind'' in 
front of microphones and television cameras. They have adopted the 
words as a political mantra, repeating it endlessly during ``photo-
ops'' with children and in press conferences with reporters.
  We need to make sure that we not only talk about leaving no child 
behind, but that we actually take steps to do so. Introducing this bill 
is the first step.
  Every word on every page is focused on the same purpose--lifting our 
children up, giving each child an opportunity, helping each child to 
have a safe and rewarding life.
  Under the Act to Leave No Child Behind, every child in America would 
have health coverage. No child in America would go to bed at night 
aching from hunger. We would use our tax code to lift millions of 
children out of poverty.
  It's time to ensure that every American child has an opportunity to 
attend Head Start, Pre-K, or child care to begin a lifetime of 
learning. That every American child can read by 4th grade, and read at 
grade level. It's time to take dramatic new steps to address the needs 
of children who are abused and neglected every year.
  Those who are truly committed to leaving no child behind will support 
this bill. It's about priorities. It's about values.
  As we speak, Congress is considering how to spend our nation's 
surplus.
  Sadly, a disproportionate share of that surplus will not go to our 
nation's children, but to those who least need our help and attention.
  Most of the surplus will go to the tax cut. And, most of the tax cut 
will go to those who are doing the best in our society, those who least 
need a helping hand or a step up.
  Are those the values that we want to instill in our children? That as 
a Nation we care not for those who need our help most?
  It's time to take a stance for children.
  It's time to invest in the needs of our children. Not in a token way, 
but in a real way. A meaningful way that will make a difference in a 
child's life.
  We have the resources. The time is right.
  If we join together, we can transform this Nation and give each and 
every child his God-given right to grow and flourish to all he can be. 
To grow to his or her fullest potential. We want an America where all 
children can realize their dreams.
  I ask unanimous consent that a summary of the Act to Leave No Child 
Behind be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

    The Act To Leave No Child Behind--Detailed Summary, May 23, 2001


Title I. Healthy Start--Every uninsured child should have comprehensive 
                            health coverage.

                 Section A. Children's health insurance

       Create a new federal health program with comprehensive 
     benefits similar to Medicare for uninsured children, who are 
     not covered by existing programs.

   Section B. Children's health insurance eligibility expansion and 
                        enrollment improvements

       Expand existing federal children's health programs (CHIP/
     Medicaid) up to 300% of poverty through age 21 and require 
     states to allow families above 300% of poverty to buy into 
     the program for their uninsured children on a sliding scale 
     premium basis.
       Give states the option of providing coverage under CHIP and 
     Medicaid to legal immigrant children and legal immigrant 
     pregnant women.
       Give states the option to allow families with too much 
     income to qualify for Medicaid to purchase coverage for their 
     disabled children.
       Simplify outreach and enrollment for CHIP and Medicaid and 
     enroll all children at birth.

                  Section C. Improving access to care

       Establish Children's Access To Care Commission that shall 
     make recommendations for improving children's access to care, 
     removing barriers to care, and improving children's health 
     status.
       Strengthen the care of children under HMO's.
       Require DHHS to collect data from states participating in 
     the Medicaid program on the delivery of services to children 
     through the early and Periodic Screening, Diagnosis and 
     Treatment component of the program, in order to document the 
     delivery of services through all service delivery 
     arrangements.

          Section D. Reducing public health risks for children

       Appropriate $50 million per year for grants to state to 
     develop programs to prevent, treat and manage children 
     asthma.
       Implement an aggressive youth smoking cessation and 
     education program and provide the FDA authority to regulate 
     the marketing of tobacco products to children.
       Increase funding for HUD's Lead-Based Paint Hazard Control 
     grants and Healthy Homes grants.
       All private insurance policies would be required to pay for 
     immunizations as a benefit of coverage.

      Section E. Reducing environmental health risks for children.

       Require testing of chemicals to determine safe exposure 
     levels for children.
       Reduce the use of toxic chemicals in schools.


  Title II. Healthy Start--All Parents Deserve Help to Support Their 
                     Children's Healthy Development

       Promote State and Local Parenting Support and Education 
     Programs. Provide grants to state parenting support and 
     education councils to develop and expand local activities to 
     help parents appropriately care for and respond to their 
     children's needs, without having to wait until problems 
     develop.
       Extend Supports for Parents Caring for Children. Expand the 
     Family and Medical Leave Act to apply to employers with 25 or 
     more employees, rather than 50 as in current law.
       Paid Family Leave. Establish demonstration projects with 
     paid leave for new parents so that they are able to spend 
     time with a new infant or newly adopted child.
       Extend Health Care to Uninsured Parents. Expand the federal 
     children's health programs, CHIP and Medicaid, to cover 
     uninsured parents of children who are eligible for CHIP or 
     Medicaid and to pregnant women.
       Help Parents Reduce Environmental Health Risks for their 
     Children. Strengthen consumer right-to-know laws to ensure 
     that parents are fully aware of the presence of potentially 
     harmful substances in products to which their children are 
     exposed.
       Encourage Support from Non-Custodial Parents. Provide 
     grants to localities or non-profit providers for services to 
     low-income non-custodial parents so that they can contribute 
     financially, emotionally and in other positive ways to their 
     children's development.


title III. Head start--all children should enter school ready to learn 
           and reach their highest potential while in school

                    Section A. Infants and toddlers

       Increase the Early Head Start set-aside for infants and 
     toddlers from 10 percent to 40 percent.

[[Page 9202]]

       Allocate 5% of total CCDBG funds in FY 2003 to improve and 
     expand infant child care, rising to 10% in FY 2007.

                      Section B. Child care access

       Increase funding proportionately each year to ensure that 
     every child eligible for assistance under the Child Care and 
     Development Block Grant (CCDBG) receives assistance by 2011.
       Require that states make children in foster care an 
     eligible category for CCDBG.
       Require states to pay not less than the 100th percentile of 
     the market rate for child care, with higher rates for higher 
     quality care, hard-to-find care, care for children with 
     special needs, and care in low-income and rural communities. 
     States would also be required to adjust rates by inflation 
     between market surveys.
       Require that the CCDBG agency coordinate with the TANF 
     agency to ensure that child care assistance staff are located 
     on-site at TANF offices. Require that state CCDBG plans 
     describe how they will ensure that TANF and other low-income 
     working families are aware of their eligibility for child 
     care assistance as part of their consumer education strategy.
       Require no more than annual eligibility determination.

               Section C. Child care quality improvements

       Create a program to improve wages and skills of child care 
     staff.
       Improve child care quality by increasing the CCDBG quality 
     set aside from 4 to 12 percent.
       Require every state to have a state-based office that is 
     charged with developing a system of local resource and 
     referral agencies to provide parents with information and 
     support, collect data on the supply and demand of child care 
     in the community, develop linkages to businesses, and help to 
     build the supply of quality child care.
       Require child care centers operated on federal or 
     legislative property to comply with either state and local 
     child care operation and safety laws or similar safety rules 
     established by the General Services Administration.
       Provide $500 million per year to support the construction 
     of new child care facilities.
       Expand the existing national 1% CCDBG set-aside to 2%. This 
     set-aside will be used for training and technical assistance 
     to states, communities, and CCDBG grantees.
       Require all providers receiving CCDBG, or who work in 
     programs receiving CCDBG, to have training in early childhood 
     development.
       Require at a minimum two annual unannounced visits for each 
     facility accepting CCDBG funding.

           Section D. Head Start and Early Head Start access

       Increase funds proportionately each year to ensure that 
     every three and four-year-old eligible for Head Start may 
     participate by 2006 and 25% of eligible infants and toddlers 
     may participate in Early Head Start by 2011.
       Expand investments in the Early Learning Opportunities Act 
     to provide increased resources to communities for early 
     learning initiatives.

                   Section E. Education improvements

     Early learning
       Provide grants to states to ensure access to pre-
     kindergarten for families who choose to participate.
       Amend the Reading Excellence Act to require that states 
     support early literacy efforts in child care, pre-
     kindergarten, and Head Start programs.
       Create a book stamp program that would enable proceeds from 
     a children's literacy postage stamp to support a system to 
     expand books in the homes of low income children that are 
     enrolled in child care programs.
       Authorize $30 million in ESEA for the Education Excellence 
     Act, which would provide professional development for early 
     childhood educators in high poverty communities.
     Increased accountability
       Amend Title I of the Elementary and Secondary Education Act 
     (ESEA) to require states and local school districts to 
     establish specific goals and performance benchmarks aimed at 
     improving the performance of all students, to strengthen 
     requirements mandating corrective actions for failing schools 
     such as school reconstitution and transfers to other public 
     schools, and to require states to issue report cards 
     detailing the performance of individuals schools.
     Reduce class size
       Provide funding to help local school districts recruit, 
     train, and hire additional teachers to reduce class size in 
     grades K through 3.
     Quality teaching and leadership
       Provide incentives to teachers to obtain certification from 
     the National Board for Professional Teaching Standards.
       Improve student loan forgiveness program for aspiring 
     teachers.
       Provide support to recruit, prepare and place career-
     changing professionals as teachers.
       Award competitive grants to establish programs for teacher 
     quality improvement.
       Provide for professional development services to increase 
     leadership skills of school principals.
     School construction
       Provide new tax incentives for school construction/
     modernization bonds.
       Establish a grant program to assist LEA's to increase the 
     involvement of parents, teachers, students, and others in the 
     planning and design of new and renovated elementary and 
     secondary schools.
     Community schools
       Encourage communities to foster school-based or school-
     linked family centers.


 Title IV. Fair Start--Lifting All Children Out of Poverty--Tax Relief 
                 To Assist Low-Income Working Families

       Increase the child tax credit from $500 to $1000 and make 
     if fully refundable.
       Expand the EITC for families with three or more children 
     and reduce the marriage penalty for families eligible for the 
     EITC.
       Expand the Dependent Care Tax Credit to increase the slide 
     to 50%, make it refundable, and annually index income phase-
     outs and cost of care for inflation.


Title V. Fair Start--Ensure that Children and Families Receive Supports 
                   to Promote Work and Reduce Poverty

Section A. Ensure children and families receive all supports for which 
                           they are eligible

       Initiate a Gateways Program that provides grants to states, 
     localities, and/or community based organizations to (a) train 
     caseworkers about available support programs and their 
     eligibility requirements; (b) expand outreach about available 
     support assistance; (c) improve automation and application 
     procedures; and (d) track the extent to which low-income 
     families receive the benefits and services for which they are 
     eligible.

                  Section B. Support from both parents

       Improve child support collections and let families keep the 
     money collected for their children; provide federal 
     incentives for states to pass through payments collected for 
     families receiving Temporary Assistance for Needy Families 
     (TANF); and require families who have left TANF to receive 
     any support collected through IRS intercepts.
       Provide funding for child support assurance demonstration 
     projects.

            Section C. Fair wages and unemployment insurance

       Increase the federal minimum wage to $6.65 over three 
     installments and index it for inflation.
       Implement ``living wage'' policy for employees of federal 
     contractors or subcontractors.
       Make Unemployment Insurance more accessible to low income 
     families with children, including more favorable counting of 
     wages for the purpose of determining eligibility, expanding 
     benefits to part-time workers, and making domestic violence 
     and lack of child care causes for separation from employment.

  Section D. Helping low income parents get and keep jobs with above 
                             poverty income

       Add poverty reduction as a goal of the TANF program.
       For those families who are working and playing by the 
     rules, the TANF time limit is interrupted.
       Allow a broader range of education and training to count as 
     work activities under TANF.
       Initiate a TANF poverty reduction bonus for states.
       Require state and local TANF officials to participate in 
     the Workforce Investment Boards.

       Section E. Create incentives to serve families effectively

       The Secretary of Health and Human Services shall develop 
     model training materials for caseworkers.
       TANF funds used by states to provide caseworker bonuses and 
     new state initiatives to break down barriers to work shall 
     not count towards the 15 percent administrative cap.
       Strengthen Individual Responsibility Plans.

                  Section F. Addressing work barriers

       Expand funding for the Department of Transportation's 
     Access to Jobs program to allow parents better access to jobs 
     and child care.
       Require caseworkers with adequate training to identify work 
     barriers of TANF recipients, including domestic violence, 
     mental health, drug or alcohol problems, homelessness, or 
     disability and to provide appropriate services to address 
     these barriers.
       Allow states to exempt families with severe barriers to 
     employment from TANF time limits, even if the total exempted 
     exceeds 20 percent of the current caseload.

              Section G. Protections for families in need

       Earn back months of TANF assistance for months worked.
       Hold agencies accountable for ensuring that families who 
     are unable to comply with complex TANF rules are afforded a 
     real conciliation process.

                    Section H. TANF reauthorization

       Reauthorize TANF.
       Prohibit supplantation of state funding for programs 
     serving needy families with children with federal TANF funds.


  title vi. fair start--all families with children should receive the 
           support they need to live above poverty--nutrition

                    Section A. Child care nutrition

       Allow for-profit child care centers to participate in the 
     Child and Adult Care Food

[[Page 9203]]

     Program (CACFP) if 25 percent of their enrolled children are 
     eligible for free and reduced-priced lunch.
       Allow youth in after-school programs up to age 19 to 
     participate in CACFP if they are enrolled in community-based 
     programs including those outside of low-income areas.
       Provide a dinner for after-school programs.
       Standardize the categorical eligibility requirements for 
     income determination in the family child care portion of 
     CACFP.
       Increase the CACFP sponsors' administrative reimbursement 
     rate to reflect the increased administrative burden of the 
     means test system.

                     Section B. Food stamp program

       Restore Food Stamp eligibility to legal immigrants.
       Provide six months of transitional food stamp benefits to 
     those who leave TANF.
       Index the standard deduction for family size and inflation.
       Eliminate the cap on excess shelter costs for families with 
     children.
       Include child support in earnings disregard.
       Increase funding for The Emergency Food Assistance Program 
     (TEFAP).
       Reduce burden on eligible families in renewing benefits.
       Improve incentives for states to serve low-income working 
     families better.


 title vii. fair start--all families should receive the supports they 
                  need to live above poverty--housing

       Provide 1 million new Section 8 vouchers over 10 years.
       Establish a Voucher Success program for communities 
     experiencing problems utilizing Section 8 vouchers.
       Redirect surplus generated by federal housing programs into 
     National Affordable Housing Trust to help alleviate the 
     housing crisis by funding new construction of affordable 
     rental housing.
       Promote preservation of affordable housing units by 
     providing matching grants to states that have developed and 
     funded programs for preservation of privately owned housing 
     that is affordable to low-income families.


  title viii. safe start--ensuring every child a safe, nurturing, and 
                            permanent family

              Section A. Promoting permanency for children

       Enhance the likelihood that the goals for children in the 
     Adoption and Safe Families Act will be met by offering states 
     funding for preventive, protective, and crisis services for 
     children and parents who come to the attention of the child 
     welfare system, permanency services for families whose 
     children end up in foster care, independent living services 
     for young people transitioning from foster care, and post-
     permanency services for children who are reunited with their 
     families, adopted, or placed permanently with relatives or 
     other legal guardians.
       Improve the quality of services for children by extending 
     funding for training of staff of private child welfare 
     agencies, judges and other court staff, and other children's 
     service providers that serve abused and neglected children.
       Offer kinship guardianship assistance payments to 
     grandparents and other relatives who commit to care 
     permanently for children for whom they have legal 
     guardianship and that they have cared for in foster care.
       Eliminate current federal disincentives to ensure that 
     children who have been abused or neglected or are at risk of 
     maltreatment receive the services and supports they need.
       Eliminate current federal disincentives to promote adoption 
     for children with special needs.
       Support young people aging out of foster care by offering 
     them increased opportunities for supervised living 
     arrangements and tuition assistance to help them pursue a 
     range of educational opportunities.
       Increase accountability within the child welfare system to 
     improve outcomes for children and services available to 
     children and families.
       Expand opportunities for Indian tribes to offer foster care 
     and adoption assistance to Indian children.

             Section B. Promoting safe and stable families

       Reauthorize and increase funding for the Promoting Safe and 
     Stable Families Program.

                 Section C. Social services block grant

       Restore funding for the Social Services Block Grant, which 
     supports a range of services for abused, neglected and other 
     children, and also provides help for persons with 
     disabilities, senior citizens, and other special populations.

     Section D. Child protection and alcohol and drug partnerships

       Address the treatment needs of families with alcohol and 
     drug problems who come to the attention of the child welfare 
     system by giving state child protection and alcohol and drug 
     agencies incentives to offer joint screening, assessment, 
     comprehensive treatment and after care services, and 
     training.

                 Section E. One-time permanency grants

       Offer one-time assistance to state child welfare agencies 
     to help move children who were in foster care when the 
     Adoption and Safe Families Act was passed, and will not be 
     returning home, into adoptive families or other permanent 
     placements with kin.

        Section F. Helping children exposed to domestic violence

       Promote multi-system partnerships to respond to the needs 
     of children who have been exposed to domestic violence.
       Promote cross-training for staff of child welfare agencies 
     and domestic violence service providers about domestic 
     violence and its impact on children and relevant child 
     welfare policies.
       Enhance research and data collection on the impact of 
     domestic violence on children.
       Offer grants to elementary and secondary schools and early 
     care and education programs to help prevent domestic violence 
     and its impact on its adult and child victims.
       Support training for law enforcement and court personnel 
     about domestic violence and its impact on children.

  Section G. Enhancing healthy emotional development in young children

       Assist networks of early childhood, child welfare, 
     substance abuse, and/or domestic violence programs to promote 
     the mental health and healthy emotional development of the 
     young children they serve.


    title ix. successful transitions to adulthood--youth development

  Section A. Youth development: Strengthening 21st Century Community 
                            Learning Centers

       Increase funding for the 21st Century Community Learning 
     Centers Program.
       Allow community-based organizations to apply for 21st 
     Century funds.
       Create a 3 percent set-aside for training and technical 
     assistance.

    Section B. Youth development: Promoting positive activities for 
                            America's youth

       Creation of a comprehensive program (the proposed Younger 
     Americans Act) to mobilize and support communities in 
     carrying out youth development activities.
       Increase funding for Americorps, Youthbuild, Job Corps, and 
     the Workforce Investment Act youth employment programs to 
     open up more employment opportunities for teens.


  Title X. Safe Start--Every Child Should Have A Safe Environment In 
              Which To Learn And To Live--Juvenile Justice

       Amend the Juvenile Justice and Delinquency Prevention Act 
     (JJDPA) by adding the definition of a ``juvenile'' as an 
     individual less than 18 years of age.
       Amend the JJDPA to mandate that not less than 75 percent of 
     title V funds be used solely for the purposes of carrying out 
     section 505. Increase funding for Title V to $250 million for 
     fiscal year 2002.
       Disproportionate Minority Confinement (DMC)--Strengthen 
     accountability standards for states to take action to address 
     the disparate treatment of minorities at all stages of the 
     juvenile justice system, including intake, arrest, detention, 
     adjudication, disposition and transfer.
       Create a fifth core protection for juveniles by requiring 
     that states provide every adjudicated juvenile with 
     reasonable safety and security, with adequate food, heat, 
     light, sanitary facilities, bedding, clothing, recreation, 
     counseling, education, training, and medical care, including 
     necessary mental health services.
       Increase funding for the JJDPA Title II, Part B formula 
     grants, to raise the small state minimum to $750,000, create 
     a 3% set-aside for the establishment of state juvenile 
     justice coalitions and (include language that coalitions 
     include participation of youth), and a 3% set aside for 
     states to carry out state plans with respect to the DMC core 
     requirement.
       Repeal Part H of JJDPA (juvenile boot camps).
       Amend title II of the JJDPA by adding Access to Mental 
     Health and Substance Abuse Treatment, a grant program 
     encouraging states to invest in and coordinate with other 
     systems to provide appropriate treatment and other services 
     for incarcerated juvenile offenders.
       Fund Services for Youth Offenders at $40 million for fiscal 
     year 2002, providing funding for after care or wrap-around 
     services for youth discharged from the adult criminal or 
     juvenile justice system.
       Authorize the Juvenile Accountability Block Grant, which 
     would authorize and significantly modify the Juvenile 
     Accountability Incentive Block Grant (JAIBG) to provide 
     incentives to: build and maintain smaller juvenile 
     facilities, including separate units within juvenile 
     facilities for juveniles tried as adults; require all staff, 
     whether supervising juveniles adjudicated in the adult or 
     juvenile system, are trained appropriately; develop and 
     utilize accountable community-based alternatives to 
     incarceration; risk assessment; and enact Child Access 
     Prevention (CAP) laws.
       In order to receive funds under the new block grant, states 
     are prohibited from applying the death penalty to juvenile 
     offenders.
       Increase funding for the Runaway and Homeless Youth Act to 
     $120 million for fiscal year 2002.


  Title XI. Safe Start--Every Child Should Have A Safe Environment In 
                 Which To Learn And TO Live--Gun Safety

       Close the gun show loophole by applying the Brady 
     background check to gun sales

[[Page 9204]]

     conducted through private dealers at events where 50 or more 
     firearms are offered for sale.
       Require mandatory safety locks with the sale of all 
     handguns and establish consumer safety standards for such 
     safety locks.
       Ban the importation of large capacity ammunition clips 
     capable of holding more than 10 rounds.
       Ban the possession of assault weapons by juveniles.
       Require FTC study on marketing practices of gun industry.
       Ban the possession of handguns by individuals under 21 
     years of age.
       One-gun-a-month purchase limitation.
       Regulation of internet sales of firearms.
       ENFORCE--enhancements (both authorizing and appropriation) 
     to strengthen enforcement of gun laws.


                        Title XII. Miscellaneous

       Direct the Secretary of HHS to establish a blue-ribbon 
     commission to identify and highlight family-friendly 
     practices that the private sector and other employers can 
     promote.
       Provide for collection and dissemination of data on the 
     status of children and families who are or have been 
     recipients of government assistance.
                                 ______
                                 
      By Mrs. FEINSTEIN (for herself and Mrs. Boxer):
  S. 941. A bill to revise the boundaries of the Golden Gate National 
Recreation Area in the State of California, to extend the term of the 
advisory commission for the recreation area, and for other purposes; to 
the Committee on Energy and Natural Resources.
  Mrs. FEINSTEIN. Mr. President, today I am pleased to introduce 
legislation to add approximately 5,000 acres of pristine natural land 
to the Golden Gate National Recreation Area in San Mateo County. This 
addition will protect the sweeping views of the San Mateo Coast and 
ensure the protection of rich farmland, several miles of public trails, 
and incredible array of wildlife and vegetation. I am happy to be 
joined by Senator Boxer in sponsoring this legislation.
  The property to be added is one of the most visible and important 
pieces of land on the San Mateo coast north of Half Moon Bay. The 
largest parcel to be added is a 4,262 acre stretch of land known as the 
Rancho Corral de Tierra. The Rancho Corral de Tierra is one of the 
largest undeveloped tracts remaining on the San Mateo Coast and is 
constantly under threat of development.
  The mountainous property, which surrounds the coastal towns of Moss 
Beach and Montara, was previously purchased by the Peninsula Open Space 
Trust. The Trust has agreed to transfer the land to the Federal 
Government for about half of the purchase cost. It is this type of 
public-private partnership that Congress needs to support in our 
efforts to preserve open space.
  The Rancho Corral de Tierra Golden Gate National Recreation Area 
Boundary Act of 2001 has the support of the entire Bay Area 
Congressional Delegation. Similar legislation is being introduced today 
in the House of Representatives by Tom Lantos with co-sponsors Anna 
Eshoo, Nancy Pelosi, George Miller, Lynn Woolsey, Ellen Tauscher, Peter 
Stark, Mike Thompson, Barbara Lee, Mike Honda, and Zoe Lofgren.
  The addition of the Rancho Corral de Tierra property will result in 
the protection of all or part of four watersheds, and several 
endangered species such as the peregrine falcon, San Bruno elfin 
butterfly, San Francisco garter snake, and the red-legged frog. 
Moreover, due to the coastal marine influence and dramatic altitude 
changes, plants grow on the property that are found nowhere else in the 
world.
  This legislation will also reauthorize the Golden Gate National 
Recreation Area and Point Reyes National Seashore Advisory Commission 
for another 20 years. The Advisory Commission was established by 
Congress in 1972 to provide for the free exchange of ideas between the 
National Park Service and the public. The Commission holds open and 
accessible public meetings monthly at which the public has an 
opportunity to comment on park-related issues.
  I have always felt that protecting our nation's unique natural areas 
should be one of our highest priorities. The Golden Gate National 
Recreation Area is one of our Nation's most heavily visited urban 
national parks as it is in close proximity to millions of people. I 
invite my colleagues to join me in supporting this legislation.
                                 ______
                                 
      By Mr. GRAHAM (for himself, Mrs. Hutchison, Mr. Bingaman, Mr. 
        Hutchinson, Mr. Breaux, Mr. Ensign, Mrs. Lincoln, and Mr. 
        Thompson):
  S. 942. A bill to authorize the supplemental grant for population 
increases in certain states under the temporary assistance to needy 
families program for fiscal year 2002; to the Committee on Finance.
  Mr. GRAHAM. Mr. President, I rise today on behalf of Senators 
Hutchison, Bingaman, Hutchinson, Breaux, Ensign, Baucus, Lincoln, 
Thompson, and myself to introduce a piece of legislation which will 
extend the Temporary Assistance for Needy Families supplemental grants 
for one year. This grant program has been critical to the success of 
welfare reform in our States.
  The TANF block grant, as it is commonly known, was established in the 
1996 welfare law. These were modest supplemental grants for 17 
relatively poor or rapidly growing States. The grants were intended to 
reduce the very large disparity in welfare funding between poorer and 
wealthier States that resulted from the basic TANF funding formula. The 
TANF supplemental grants have afforded States, like ours a more 
adequate opportunity to achieve TANF goals. While TANF is scheduled to 
be reauthorized in 2002, the supplemental grants included in the 1996 
law were authorized only through October 2001.
  If the grants expire, 17 States will lose as much as 10 percent of 
their TANF funding beginning in October 1 of this year. Wealthy, low-
growth States will experience no reduction.
  These grants are not supplemental in the sense of being add-ons. They 
were designed as an integral part of the TANF allocation formula and 
are critical to the success of the TANF programs in the States that 
receive them. The decision to end the grants a year before 
reauthorizing the entire program was not a policy consideration, only a 
financial one. It was done in order to ensure a balanced budget by 
2002.
  The 2001 budget resolution, passed by both the House and the Senate, 
provides $319 million for a one-year extension of these important 
grants. This provision acknowledges the Senate's commitment to 
maintaining the tools that many of our States require to continue 
efforts to help people move from welfare to work, from jobs to careers.
  Since the passage of the welfare reform law in 1996, more is expected 
of state welfare systems that ever before. TANF agencies provide a 
broad range of social services that include job training and employment 
counseling, reducing out-of-wedlock births and promoting family 
formation, and addressing individual challenges such as domestic 
violence--just to name a few. Without the TANF supplemental grants, 
impacted states will find themselves unable to provide many of the 
programs that have enabled their citizens to successfully move from 
public assistance to independence.
  Given the significant costs of work supports, many of the 17 States 
that receive supplemental TANF grants are now spending more TANF funds 
each year than they receive from their basic TANF grant. In fiscal year 
2000, for example, TANF expenditures in nine of the 17 States that 
receive TANF supplemental grants exceeded 100 percent of their basic 
TANF allocation. These States are my own home State of Florida, Alaska, 
Arizona, Arkansas, Idaho, New Mexico, North Carolina, Tennessee, and 
Texas.
  For these reasons, we are requesting that a one year extension of the 
TANF supplemental grants. This step will help to ensure that high-
growth States can continue their welfare reform efforts and will enable 
the supplemental grants to be considered as part of the overall TANF 
reauthorization next year.
  Support for the extension of this program should come from all 
Senators who want to see the goals of welfare reform fulfilled. Whether 
or not one comes from a State that receives

[[Page 9205]]

TANF supplemental grant dollars, support for this bill will send a loud 
and clear message that the United States Senate adheres to the goal of 
ensuring that all States have the means to provide the services 
necessary to help all Americans, regardless of where they live, to move 
from dependence to independence.
  That is a goal worth fighting for and I encourage all of my Senate 
colleagues to cosponsor this important piece of legislation.
  Mr. BAUCUS. Mr. President, I am glad to cosponsor this bill from my 
colleagues Senators Graham and Hutchison. It's an important matter for 
those of us who represent less prosperous States. I have worked hard to 
promote economic development in Montana. It is crucial to providing a 
better future for the children of my great State. Until the economy 
improves in Montana, I will advocate for measures such as this one, 
which help alleviate the difficulties that stem from our circumstances.
  When we enacted welfare reform in 1996, a law I am glad to have 
supported, there was much discussion here about the appropriate way to 
allocate welfare funds among States. The old funding formula had 
produced wide disparities, especially between high per capita income 
States and low per capita income States. In the end it was resolved to 
provide additional funding in the form of ``TANF supplemental grants'' 
to certain states which were poorer or had high growth rates or both. 
However, the funding was only provided through fiscal year 2001, while 
the rest of the welfare funds were provided through fiscal year 2002, 
as part of an effort to balance the budget.
  Well, the budget is in surplus now. And we need to continue the TANF 
supplemental grants for one more year, as this legislation would do, so 
that we can assess it as a part of the policy on overall welfare 
funding during next year's reauthorization of the 1996 welfare reform 
law. The TANF supplemental grants represent a substantial source of 
welfare funds in several states. Failing to continue this funding would 
mean, in effect, a 10 percent reduction in the allocations for states 
such as Georgia, North Carolina, Florida, and Louisiana. My own state 
of Montana received $1 million last year. I assure you we can use those 
funds to help poor children in Montana, especially the many who have 
low-income working parents, the kind who hold down two or three part-
time minimum wage jobs, which is all too common in my State.
  I thank my colleagues for their leadership and look forward to 
working with them on this bill.

                          ____________________