[Congressional Record (Bound Edition), Volume 148 (2002), Part 15]
[Senate]
[Pages 20683-20689]
[From the U.S. Government Publishing Office, www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. BINGAMAN:
  S. 3111. A bill to compensate agricultural producers in the State of 
New Mexico that suffered crop losses as a result of use of a herbicide 
by the Bureau of Land Management; to the Committee on Agriculture, 
Nutrition, and Forestry.
  Mr. BINGAMAN. Mr. President, I rise today to introduce a bill that I 
do believe should not be necessary, and I hope ultimately will not be 
needed. Unfortunately, the failure of the Federal Government to own up 
to its responsibility has left a small group of farmers in Southern New 
Mexico with no other option.
  As I understand it, last July the Bureau of Land Management and the 
Natural Resources Conservation Service applied herbicide, Tebuthiuron, 
on a ranch in Southern Eddy County to help control woody brush. The 
brush control was part of an EQIP project under NRCS.
  I have no reason to doubt the application was consistent with label 
requirements and normal practice. Unfortunately, as frequently happens 
in New Mexico in July, a heavy rainstorm struck the area and the 
pellets of herbicide were apparently washed into the Black River. The 
river is the source of irrigation water for a number of farmers in the 
vicinity of the town of Malaga.
  Unaware of the contamination in the water, farmers irrigated their 
fields in the normal way. Almost immediately, damage to cotton, hay and 
other crops was observed. The Eddy County Extension Office of the 
Cooperative Extension Service at New Mexico State University was asked 
to investigate the damage to the crops.
  Mr. Woods E. Houghton of the Eddy County Office conducted a thorough 
review of the evidence and in a report dated August 20, 2002, concluded 
that Tebuthiuron was the likely cause of the crop damage. The report 
noted levels of Tebuthiuron of over 2 parts per million in some 
samples. Later tests by the State Chemistry Laboratory found levels 
over 5 pm. I ask unanimous consent that the August 20th Cooperative 
Extension Service report be printed in the Record at the conclusion of 
my remarks, exhibit 1.
  All the evidence seems to point to the government's application of 
Tebuthiuron as the most likely source of the poisoning of the crops in 
Malaga. Last month, I asked the heads of BLM and NRCS to look into the 
situation and to advise me what recourse is

[[Page 20684]]

available to the farmers who have lost their crops. Unfortunately, the 
agencies have not assumed any responsibility for the contamination. 
Moreover, normal crop insurance doesn't cover damage caused by 
chemicals.
  What are the farmers of Malaga, NM, to do? Through no fault of their 
own, they have lost their crops, and the Federal Government is not 
willing to take responsibility. For example, Mr. Oscar Vasquez and his 
family have lost 130 acres of cotton, 20 acres of hay and 1 acre of 
full-grown pecan trees. As Mr. Vasquez points out, his losses may 
persist for several years. He has asked for my assistance in securing 
compensation for his losses. I ask unanimous consent that a letter to 
me by Mr. Vasquez be printed in the Record at the conclusion of my 
remarks, exhibit 2. It appears that as many as nine farmers have 
suffered direct losses from the contamination of their crops and an 
additional thirteen farmers suffered losses when they couldn't irrigate 
because of the contamination in the water.
  I have urged the heads of BLM and NRCS in the strongest terms 
possible to do what they can to assist the farmers of Malaga. 
Unfortunately, nobody wants to take responsibility. The Federal 
Government's response so far is to suggest the farmers sue the 
government, but that's a long, drawn-out process. It is also an 
unacceptable response if the Federal Government is found to be 
responsible.
  The farmers of Malaga need help paying their bills now. These are not 
rich people, but hard working family farmers. Many have farmed the same 
land for many, many years. I ask unanimous consent that a recent 
article from the Carlsbad Current Argus describing the impact this 
event is having on a number of the farmers of Malaga be printed in the 
Record at the end of my remarks, exhibit 3.
  At this point I don't see any other option than to ask that Congress 
provide some relief to the farmers of Malaga that have suffered losses 
because of this unfortunate situation. I note that last year Congress 
provided financial compensation to farmers in Idaho that suffered crop 
losses in a very similar situation and where BLM and NRCS refused to 
provide compensation. When a federal program was clearly the source of 
the contamination in the water, I do believe the government has a 
responsibility to come to the assistance of the people who have 
suffered losses.
  It is my hope that the agencies involved will step forward, 
acknowledge their responsibility, and do what is right and necessary to 
compensate the farmers. Unfortunately, it now appears the agencies are 
not inclined to do the right thing. Instead, they tell us the affected 
farmers are free to file a tort claim; we all know what a costly and 
time-consuming process any legal action can be. However, the farmers 
need help right now. While it is not the best way, I do believe 
Congressional action may be the only way of getting these farmers the 
financial help they need in a timely manner.
  The bill I am introducing today simply authorizes the Secretary of 
Agriculture, in consultation with the Secretary of the Interior, to use 
funds of the Commodity Credit Corporation to compensate the farmers for 
their losses. We are still working with the Cooperative Extension 
Service at New Mexico State University to determine the total amount of 
the losses, but in light of the small area affected, I fully expect the 
sums needed to be very modest, indeed.
  Mr. President, I ask unanimous consent that a letter supporting this 
legislation from Frank DuBois, New Mexico's Secretary of Agriculture, 
exhibit 4, and a copy of the bill be printed in the Record.
  There being no objection, the bill and additional material was 
ordered to be printed in the Record, as follows:

                                S. 3111

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

     SECTION 1. COMPENSATION OF NEW MEXICO PRODUCERS FOR CROP 
                   DAMAGE FROM BLM USE OF HERBICIDE.

       (a) In General.--The Secretary of Agriculture, in 
     consultation with the Secretary of the Interior, may use such 
     funds of the Commodity Credit Corporation as are necessary to 
     compensate agricultural producers in the State of New Mexico 
     that suffered crop losses as a result of the use of the 
     herbicide tebuthiuron by the Bureau of Land Management during 
     the 2002 calendar year.
       (b) Liability.--Nothing in this section constitutes an 
     admission of liability by the United States arising from the 
     use of the herbicide tebuthiuron by the Bureau of Land 
     Management.
       (c) Regulations.--
       (1) In general.--The Secretary of Agriculture may 
     promulgate such regulations as are necessary to implement 
     this section.
       (2) Procedure.--The promulgation of the regulations and 
     administration of this section shall be made without regard 
     to--
       (A) the notice and comment provisions of section 553 of 
     title 5, United States Code;
       (B) the Statement of Policy of the Secretary of Agriculture 
     effective July 24, 1971 (36 Fed. Reg. 13804), relating to 
     notices of proposed rulemaking and public participation in 
     rulemaking; and
       (C) chapter 35 of title 44, United States Code (commonly 
     known as the ``Paperwork Reduction Act'').
       (3) Congressional review of agency rulemaking.--In carrying 
     out this subsection, the Secretary shall use the authority 
     provided under section 808 of title 5, United States Code.

         Cooperative Extension Service, New Mexico State 
           University,
                                  Las Cruces, NM, August 20, 2002.
       Saturation report of cotton damage in the Malaga NM area 
     approximately, 350 acres.
       Background: Oscar Vasquez farm, and his landlords.
       2001 crop year, cotton except 10 acres (Duarte); 23 acres 
     on home place, which was in alfalfa.
       Pre 15 January 2002 field were moldboard, disked to comply 
     with pink bollworm regulations. They were also treated with 1 
     pint Trifluralin, 1 pint Caporal per acre. This was 
     incorporated with a spring tooth harrow and disked one time. 
     Watered on 15-30 January 2002 and first part of February 
     2002, with black river water.
       15 March 2002 stale bed worked up.
       21 April 2002 Planted with DG-206 NK seed.
       25 June 2002 irrigated with CID water.
       2 July 2002 Cultivated.
       10-11 July 2002 sprayed for boll-worms (Heliothis zia) with 
     1.5 pint Lorsban and 1-pint Amigo surfactant per acre.
       26 July 2002 Boll weevil control committee sprayed fields 
     Malthion ULV.
       20-23 July 2002 Irrigated with black river water.
       18-19 July 2002 Rain floodwater on black river.
       27 July 2002 Oscar noticed problems with cotton.
       30 July 2002 Oscar called Woods E. Houghton county agent.
       31 July 2002 Woods E. Houghton visited Oscar Vasquez farm, 
     and concluded something in the water caused problems. Woods 
     took soil and plant samples. Samples sent to Dr. Bob Flynn 
     for Ecreading. Dr. Goldberg and Dr. McWilliams for diagnosis 
     of disease or nutrition disorders if they occurred. Surface 
     water bureau notified NM ED department Dr. Jim Davis. 
     Suspected possible illegal disposal of produced water which 
     is high in saline. High salt consternation could cause 
     similar damage.
       7 Aug 2002 Woods Houghton and Jim Ballard of Eddy County 
     Sheriff Office, flew over and photographed. Talked with Oscar 
     again. Recalled BLM treated a number of acres above on the 
     black river with Spike (Tebuthiuron) 8 July 2002. Confirmed 
     this with Mr. Mike Ramirez BLM. Reported possible off target 
     effects to Ms. Margery Lewis NMDA and Mr. Russell Knight 
     NMDA. Conferred with Mr. Tom Davis CID.
       8 Aug 2002 Dr. Flynn reported that the unhealthy plants had 
     a lower Ec value then the healthy plant soil samples. The 
     problem most likely not salt or produced water.
       16 Aug 2002 Received from Dr. Goldberg diagnosis record, 
     which indicated that no plant pathogenic microorganisms were 
     isolated from the sample submitted.
       Symptoms: Plant Yellowing at top and then turned clororotic 
     followed by necrosis between veins and on leaf edges with DG-
     206. On ACLA 1517-99 started from bottom to top but same 
     symptoms. Fruit drop starts first. Plants die from top down. 
     Some plants appear to recover set new flowers and attempting 
     new growth. Most 90% or more die back almost completely. 
     Symptoms atypical of Spike but consistent with chlorophyll 
     inhibitors. Also the root hairs are dead and brittle do not 
     stay attached to plant when pulled up.
       Other Information: On contact with BLM and NRCS equip 
     project on three mile draw area was treated with Tebuthiuron 
     (Spike 20p) on 8 July 02. Approximately 2,300 acres were 
     treated some at 0.5AI and some at 0.75 AI per acre. This draw 
     drains in to the black river above the diversion. The 
     diversion diverts water to the farms, which are reporting 
     damage. M&M Air Service was the applicator. Laboratory 
     results from Analytical Pesticide Technology Laboratories 
     Wyamissing Pa. Reported results of soil 0.187 ppm, cotton 1 
     1.66ppm, cotton 2 2.03ppm, Elm collected at diversion 
     0.196ppm, Cottonwood collected at diversion 0.329ppm. These 
     samples were collected by Mr. Tom Davis and

[[Page 20685]]

     submitted by Carisbad Irrigation District for analysis. 
     Samples were also taken by Mr. Russell Knight and Mr. Woods 
     Houghton on 09 Aug. 02. The hydrograph of blackriver at USGS 
     gauging station above the diversion but below three-mile draw 
     show the water flow on the 17 July at less then 4 CFS, on 18-
     19 July it peaked at greater the 100 CFS. This area 
     experienced high intensity short duration storm in this time 
     frame. There are older treatment areas in the vicinity as 
     well.
       Conclusion: Tebuthiuron Herbicide contamination of black 
     river prior to irrigation has resulted in cotton crop losses. 
     That flash flooding may have contributed to off target 
     movement of products containing Tebuthiuron.

                                            Woods E. Houghton,

                                    Eddy County Agriculture Agent/
     Acting Program Director.
                                  ____

                                               September 17, 2002.
     Senator Jeff Bingaman,
     Albuquerque, NM.
       Dear Senator Bingaman: I am writing this letter to ask for 
     your help with a serious problem that has occurred on my own 
     Farm, and my rented Farms.
       My name is Oscar Vasquez, I farm approximately 320 acres of 
     cotton, and alfalfa for 27 years. I own 145 acres, and share 
     crop 175 acres from my neighbors, Mr. Damon Bond, Mrs. 
     Catalina Carrasco, and Mr. Pedro Duarte.
       On July 20, 2002, I began watering my cotton with Black 
     River water as I would normally, and continued for 8 days. On 
     July 27, 2002, I began to see wilting effects on the cotton 
     fields I started watering first. I contacted Mr. Woods 
     Houghton, our Eddy County Extension agent. He came and saw 
     the damage on my cotton, it took us till August 7, 2002, to 
     conclude that my cotton had received the damage thru the 
     contaminated irrigation water. We also concluded that the BLM 
     had applied herbicide called Tebuthiuron (Spike) to 
     approximately 2400 acres on Three Mile Draw which is on the 
     Gene & Kathy Hood Ranch, above the Black River Irrigation 
     Diversion Dam.
       The BLM and the NRCS (National Resource Conservation 
     Services), applied this chemical to control brush on the Hood 
     Ranch. The chemical was applied by airplane in pellet form on 
     July 8, 9, & 12. The Hood Ranch received a 2\1/2\" rain in 45 
     minutes on the 18th & 19th of July washing the chemical in 
     the Black River. I began to irrigate my cotton on July 20, 
     2002. My cotton crop has since sustained severe damage, with 
     the chemical terminating the crop before maturity, therefore 
     my crop is totally ruined.
       I have contacted my cotton buyer and he does not want to 
     buy my cotton crop this year. I have sold him 23 consecutive 
     cotton crops in the past. What am I to do with this damaged 
     crop? Do I harvest it? If I do, who will buy it? Or do I 
     destroy it, or graze it? I need answers to all these 
     questions.
       New Mexico Agriculture Department has not assumed the 
     responsibility to let me know what to do. The BLM has not 
     assumed the responsibility either. What are my Landlords 
     going to do for income this year. Mr. & Mrs. Damon Bond are 
     86 years old, Mrs. Catalina Carrasco is 68 years old, and a 
     widow, Mr. Pedro Duarte is a little better off, he is 47 
     years old and has a job. I am 53 years old with the last of 5 
     children attending NMSU. My wife and I do not hire any help 
     on the Farm, we do all the tractor and manual labor work 
     ourselves
       We would appreciate an answer to all our problems, 
     preferably our income problem. The long term damage of these 
     chemical effect is 5 years, or longer. Thank you for your 
     cooperation.
           Sincerely yours,
                                                     Oscar Vasquez
       P.S. Please see attached evidence gathered by Woods 
     Houghton NM Eddy County Extension Agent, and the test results 
     on soil and foliage samples by N.M.A.D. Laboratories. The 
     total acreage is 130 acres of Cotton, 20 acres of Hay, and 1 
     acre of full grown Pecan Trees, on the Oscar Vasquez Farm.
                                  ____


                 [From the Current Argus, Oct. 5, 2002]

Fighting for the Farm: Malaga Farmers Face Uncertain Future After Crops 
                                Damaged

                           (By Stella Davis)

       Malaga.--Oscar and Gloria Vasquez sit at the table in their 
     dining room with a morning cup of coffee. But these days, the 
     couple gets little pleasure in gazing out through the large 
     dining room window facing their farm fields.
       Where normally they would see healthy stands of cotton, all 
     they see now are rows of small, leafless cotton stalks with 
     stringy cotton bolls.
       The couple farms about 320 acres--145 acres are owned by 
     them and the 175 remaining acres they sharecrop for three 
     other families who depend on the income from their shares.
       Disaster struck Malaga farmers in late July when they 
     watered their fields from the Black River diversion dam, 
     unaware the water had been contaminated with the herbicide, 
     tebuthiuron.
       Later they discovered the Bureau of Land Management applied 
     the herbicide on the ground just above the diversion dam to 
     control woody vegetation on range and ranchland.
       The chemical was applied in conjunction with a federal cost 
     share program through the Natural Resource Conservation 
     Service, an agency of the U.S. Department of Agriculture. The 
     rancher and the federal agency share the cost of applying the 
     chemical on private ranch land.
       ``This crop is our income. It's our living. We are losing 
     money, and the bills are coming in,';' Oscar Vasquez said. 
     ``I can survive this year, but there are other farmers who 
     won't. They will be wiped out financially. I have two 
     cousins, Tony and Mike Vasquez, who also have crop damage. 
     They are in their sixties and the income loss will be 
     devastating for them.''
       Oscar Vasquez, 53, said he has always tried to meet his 
     commitments and financial obligations and is proud that he 
     and his wife have put five children and a daughter-in-law 
     through college.
       ``My wife and I put them through college, and our youngest 
     is ready to graduate. They all went into engineering and 
     graduated from New Mexico State University. We worked hard on 
     the farm to make the income to put them through college. It's 
     expensive to put kids through college, but we managed. I feel 
     it is a privilege to send my kids to school. The next few 
     months are going to be tight in meeting our son's college 
     expenses. This couldn't have come at a worse time. He's close 
     to finishing.
       ``We will make it through this year financially, but I 
     don't know what is going to happen next year,'' he said. ``We 
     don't know how long the soil will stay contaminated. I have a 
     payment coming due on a mechanical baler, and there are costs 
     associated with planting cotton that I will have to cover 
     without the income from the crops. I usually grow hay and 
     cotton. But because water was scarce this year, I chose to 
     grow cotton and put all the water on it. Now I don't have 
     anything.''
       In another farmhouse about a mile down the road, Dick 
     Calderon worries how he is going to take care of his wife, 
     twin 4-year-old daughters, a 6-year-old son and his elderly 
     parents living next door, as well as meeting all his 
     financial obligations.
       Over half of his cotton crop is dying from water 
     contamination, and his alfalfa died due to lack of water.
       His Federal farm loans are coming due, as are his tractor 
     and equipment loans.
       Damon and Marie Bond, both 86, rely on income from the farm 
     that the Vasquezes sharecrop for them. This year they will 
     have to live on less. Their cotton crop is also damaged.
       The Vasquezes, Calderon and the Bondses are among 11 
     families that have fallen victim to the agriculture disaster.
       They say they are frustrated they feel the state Department 
     of Agriculture--the lead agency in the investigation of the 
     crop kill--has not given them answers or direction on what 
     they should do with their contaminated crops. Even worse, 
     they said, no one has stepped up to the plate to take 
     responsibility.
       ``I began watering my cotton with Black River water as I 
     would normally and continued for eight days,'' Vasquez said. 
     ``On July 27, I began to see wilting effects on the cottom 
     fields that I started watering first.''
       Alarmed, Vasquez contacted the county extension agent to 
     identify the cause.
       ``I contacted Woods Houghton, and he worked with me to 
     determine what caused the damage,'' Vasquez said. ``He's been 
     the only one who has tried to help us and do right by us.''
       Houghton's detective work, poring over books and data for 
     many hours, revealed the cotton crop showed classic signs of 
     chemical damage. More sleuthing on his part showed 
     tebuthiuron was the cause.
       After further investigation, farmers learned the chemical 
     had been applied in the early part of July. On July 18 and 
     19, more than 2 inches of rain fell on the Black River area 
     in a 45-minute period, and the chemical washed into the 
     river.
       Within days of Vasquez's report of crop losses, other 
     farmers who irrigated shortly after the rain began reporting 
     crop losses that ranged from cotton--the most susceptible to 
     tebuthiuron-to alfalfa and pecan and cottonwood trees.
       Calderon said the fear is ever present that the family farm 
     could be lost.
       ``We are going into the third month, and we have not got 
     any answers yet,'' Calderon said. ``The financial stress for 
     me is pretty high right now. I planted 45 acres of cotton, 
     and I've lost over half. I also lost my hay too. I had to 
     stop watering because the water was contaminated. It's dried 
     up, and farming has come to a dead stop for a lot of us. We 
     need some answers. We don't know what to do with what we have 
     in the ground.''
       Vasquez said no one wants to buy the contaminated cotton. 
     Harvesting it would be financial suicide, he said.
       ``The cotton market is down, which is bad enough, and then 
     this,'' he said. ``We get about $50 per bale, but when you 
     add up the cost to harvest one bale, it adds up to $135. No 
     one wants to buy damaged cotton, so why would we go to the 
     cost of harvesting it at $135 per bale.''
       He said the state Department of Agriculture has agreed to 
     one thing: Seed from the contaminated cotton cannot be fed to 
     livestock.

[[Page 20686]]

       ``We sell the seed to the dairies in Roswell,'' Vasquez 
     said. ``They use it to feed the cows. So there is another 
     amrket loss for us.''
       Vasquez's cousin, Mike Vasquez, said he has lost 25 acres 
     of cotton, and the loss of income will be devastating.
       ``I have disaster insurance, but I've been told it does not 
     cover manmade disasters,'' he said. `I didn't cause this 
     disaster. The federal government did. I may be poor, but I'm 
     not stupid. Why would I damage my crop that is my livelihood? 
     I'm not that dumb to put down a herbicide in our monsoon 
     season. The BLM, which is the federal government, did that 
     and look what it has brought us (farmers) financial ruin.
       ``We don't know what this stuff has done to the soil and we 
     don't know for how long the soil will be contaminated. It 
     could be several years. But no one is stepping up to take 
     blame for what has happened. The cotton is still in the 
     gound, and we don't know what to do with it.
       Mike Vasquez, who retired after 30 years with the city of 
     Carlsbad's water department, said farming supplements his 
     modest retirement income from the city, and he has had many 
     recent sleepless nights worrying how he is going to pay his 
     farm loans.
       ``The worry is making me physically sick,'' he said. ``We 
     need some answers, and nobody is giving them to us. We also 
     need some financial relief. There has to be someone out there 
     that can give us the answers we need.''
       Marie Bond, 86, who lives near Oscar and Gloria Vasquez, 
     said the loss of income this year is a blow, but she and her 
     husband will just have to tighten their belts and make do 
     with less.
       ``Anything that happens to Oscar happens to us,'' she said. 
     ``My husband and I have weathered some rough times in our 
     lives and, although the income from the farm is important, we 
     will make, it. It's a lot harder on Oscar because he has the 
     expenses that have to be paid and there is no money coming in 
     right now,'' she said.
       ``This is something that should not have happened. It could 
     have been avoided. It's just terrible.''

                                        Department of Agriculture,


                                          State of New Mexico,

                                  Las Cruces, NM, October 3, 2002.
     Hon. Jeff Bingaman,
     U.S. Senate, Hart Senate Office Building, Washington, DC.
       Dear Senator Bingaman: We have received complaints from 22 
     farmers in the Carlsbad region indicating they have crop 
     damage which appears to be from alleged movement of a 
     herbicide from an area treated by the Bureau of Land 
     Management (BLM) and the Natural Resource Conservation 
     Service (NRCS). We are currently investigating the complaints 
     to determine if there were violations of state or federal 
     law. I seek your assistance in providing financial support 
     for the individuals whose crops were damaged.
       On August 7, 2002, the New Mexico Department of Agriculture 
     (NMDA) received its first complaint regarding crop damage due 
     to alleged movement from an area treated with Tebuthriuron 
     (Spike) in the Three-Mile Draw area. Preliminary 
     investigation indicates the BLM and the NRCS treated 
     approximately 2,400 acres of rangeland. We also found 
     evidence of significant precipitation which occurred after 
     application in the approximate treated area.
       NMDA has taken samples from the complainants' fields as 
     part of the investigation. Some of the samples analyzed thus 
     far have tested positive for Tebuthiuron. We will continue to 
     analyze the remaining samples and will provide you with the 
     results when they are complete.
       It is my understanding that some of the complainants have 
     crop insurance; however, chemical related damages are not 
     covered. The affected individuals will suffer a severe 
     financial hardship if assistance is not provided. It is also 
     clear these individuals have suffered losses through no fault 
     of their own. Many are small farmers and may not survive 
     without direct financial assistance.
       In 2001 Congress authorized the expenditure of not more 
     than $5 million from the Commodity Credit Corporation to pay 
     claims of crop damage that resulted from the BLM's use of 
     herbicides during the 2001 calendar year in the state of 
     Idaho Enclosed is a copy of Section 757 of Public Law 107-76, 
     which provides the funding. Similar consideration should be 
     given to the affected New Mexico farmers. Our investigation 
     is not complete at this time, but I believe it is very 
     important to bring this matter to your attention since the 
     relevant appropriation bills have not been passed by 
     Congress.
       If you have any questions, please contact me.
           Sincerely,
                                                  Frank A. DuBois.
                                 ______
                                 
      By Mr. McCAIN:
  S. 3112. A bill to amend the Internal Revenue Code of 1986 to provide 
for a deferral of tax on gain from the sale of telecommunications 
businesses in specific circumstances or a tax credit and other 
incentives to promote diversity of ownership in telecommunications 
businesses; to the Committee on Finance.
  Mr. McCAIN. Mr. President, today I am introducing The 
Telecommunications Ownership Diversity Act of 2002. This legislation is 
designed to ensure that new entrants and small businesses will have the 
chance to participate in today's telecommunications marketplace.
  At a time when the telecommunications industry is economically 
depressed, this bill promotes the entry of new competitors and small 
businesses into the field by providing carefully limited changes to the 
tax law. Too often today, new entrants and small businesses lose out on 
opportunities to purchase telecom assets because they don't offer 
sellers the same tax treatment as their larger competitors. 
Specifically, a small purchaser's cash offer triggers tax liability, 
while a larger purchaser's cash offer triggers tax liability, while a 
larger purchaser's stock offer may be accepted effectively tax-free. 
When an entity chooses to sell a telecom business, our tax laws should 
not make one bidder more attractive than another.
  This legislation would give sellers of telecommunications businesses 
a tax deferral when their assets are bought for cash by small business 
telecom companies. It would also encourage the entry of new players and 
the growth of existing small businesses by enabling the seller of a 
telecom business to claim a tax deferral on capital gains if it invests 
the proceeds of any sale of its business in purchasing an interest in 
an eligible small telecom business.
  While large companies continue to merge into even larger companies, 
small businesses have faced substantial barriers in trying to become 
long-term players in the telecommunications market. These barriers can 
be even more formidable for members of minority groups and for women, 
for whom it has historically been more difficult to obtain necessary 
capital. Since new entry and the ability to grow existing businesses 
are key components of competition, and since competition is usually the 
most successful way to achieve the goals of better service and lower 
prices, restricting small business' ownership opportunities does not 
serve consumers' interests.
  It's easy to forget that telecommunications industry transactions are 
routinely valued in the billions. Even radio, which has traditionally 
been a comparatively easier telecom segment to enter, has been priced 
out of range of most would-be entrants. In addition to these monetary 
barriers, the tax code makes cash sales less attractive to sellers than 
stock-swaps. So new entrants and smaller incumbents, which typically 
must finance telecom acquisitions with cash rather than stock, are 
less-preferred purchasers than large incumbents. As a result, telecom 
business sellers have little incentive to sell their businesses to new 
entrants and small incumbents.
  But what should Congress do? Clamp down on merger activity? Insist 
that hopelessly-outdated ownership restrictions set by the Federal 
Communications Commission be retained? Rush to concoct new telecom 
ownership ``opportunities'' from government programs or regulations 
that, in the real world, present small business with only one real 
opportunity, the opportunity to fail? None of these proposals would 
succeed because all of them, like the Telecommunications Act of 1996, 
ignore marketplace realities instead of working with them.
  One answer is to level the playing field and give established telecom 
industry players the same economic incentives to deal with new entrants 
and small businesses as they currently have with respect to larger 
companies. And that's what this legislation would do.
  Specifically, the bill would amend the Internal Revenue Code by 
adding a new Section 1071 entitled ``Nonrecognition of gain on certain 
sales of telecommunications business.'' This new section of the tax 
code would allow a telecom business seller to elect to have capital 
gains deferred under the existing Section 1033 rules for any 
``qualified telecommunications sale.'' The aggregate amount of any gain 
deferred under the qualified sale would be limited to $250 million per 
transaction,

[[Page 20687]]

and less than $84 million per taxable year.
  A qualified telecommunications sale would be defined in two ways. The 
first type of qualified sale would be sales to an ``eligible 
purchaser'' of either the assets of a telecom business or the stock 
that makes up a controlling interest in a corporation with 
substantially all of its assets in one or more telecom businesses. 
Eligible purchasers would include economically and socially 
disadvantaged businesses that qualify under a carefully drawn three-
part test. The second type of qualified sale would be the sale of any 
telecom business to any purchaser, as long as the seller reinvests the 
proceeds in equity interests in eligible small telecom businesses.
  To account for the variety of telecommunications services available 
today, the legislation would broadly define telecommunications 
businesses eligible for capital gains tax deferral to include not only 
radio, broadcast TV, DBS, and cable TV, but also wireline and wireless 
telephone service providers and resellers.
  Some may be concerned that this legislation could potentially allow 
entities seeking to ``game the system'' to set up eligible purchasers 
to take advantage of the bill's provisions. In order to eliminate the 
potential for abuse, the bill would require the eligible purchaser to 
hold any property acquired for three years, during which time it could 
only so sold to an unrelated eligible purchaser. Moreover, the bill 
would require the General Accounting Office to thoroughly audit and 
report on the administration and effect of the law every two years.
  By sharing with smaller companies a portion of the investment 
benefits our tax laws give to the major telecom companies we have a 
chance to make sure that, at the end of the day, we won't regret what 
``might have been'' for small business. By enabling individuals and 
small businesses to use industry restructurings as opportunities for 
expansion, we will keep faith with those who have been, and remain, 
enduringly valuable contributors to our free-market system.
  Over the next several months, I look forward to working with 
interested organizations to further improve this legislation. In 
particular, I welcome comments on how to further refine the concepts of 
``qualified telecommunications business'' and ``eligible purchaser'' to 
ensure that this legislation can meet its goals in the most fair and 
effective manner.
  Revolutionary developments in the telecommunications industry have 
been made by gifted individuals with small companies and unlimited 
vision. In this sense, the telecommunciaitons industry is a true 
microcosm of the American free-market system. New entrants and small 
businesses should have a fair chance to participate across the broad 
spectrum of industries that will make up the telecommunications 
industry in the Information Age. This legislation will help them do 
that.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 3112

       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 ``Telecommunications Ownership 
     Diversification Act of 2002''.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--The Congress makes the following findings:
       (1) Current trends in the telecommunications industry show 
     that there is increasing convergence among various media, 
     including broadcasting, cable television, and Internet-based 
     businesses, that provide news, information, and 
     entertainment.
       (2) This convergence will continue, and therefore, 
     diversifying the ownership of telecommunications facilities 
     remains a pre-eminent public interest concern that should be 
     reflected in both telecommunications and tax policy.
       (3) A market-based, voluntary system of investment 
     incentives is a very effective, lawful, and economically 
     sound means of facilitating entry and diversification of 
     ownership in the telecommunications industry.
       (4) Opportunities for new entrants to participate and grow 
     in the telecommunications industry have substantially 
     decreased since the end of the Federal Communications 
     Commission's tax certificate policy in 1995, particularly in 
     light of the increase in tax-free like-kind exchanges, 
     despite the most robust period of transfers of radio and 
     television stations in history. During this time, businesses 
     owned or controlled by socially disadvantaged individuals, 
     including, but not limited to, members of minority groups and 
     women, have continued to be underrepresented as owners of 
     telecommunications facilities.
       (5) Businesses owned or controlled by socially 
     disadvantaged individuals are and historically have been 
     economically disadvantaged in the telecommunications 
     industry. For these businesses, access to and cost of capital 
     are and have been substantial obstacles to new entry and 
     growth. Consequently, diversification of ownership in the 
     telecommunications industry has been limited.
       (6) Telecommunications facilities owned by new entrants may 
     not be attractive to investors because their start-up costs 
     are often high, their revenue streams are uncertain, and 
     their profit margins are unknown.
       (7) It is consistent with the public interest and with the 
     pro-competition policies of the Telecommunications Act of 
     1996 to provide incentives that will facilitate investments 
     in, and acquisition of telecommunications facilities by, 
     socially and economically disadvantaged businesses, thereby 
     diversifying the ownership of telecommunications facilities.
       (8) Increased participation by socially and economically 
     disadvantaged businesses in the ownership of 
     telecommunications facilities will enhance competition in the 
     telecommunications industry. Permitting sellers of 
     telecommunications facilities to defer taxation of gains from 
     transactions involving socially and economically 
     disadvantaged businesses, and resulting from investments in 
     designated capital funds that provide capital for such 
     entities, will further the development of a competitive and 
     diverse United States telecommunications industry without 
     governmental intrusion in private investment decisions.
       (9) The public interest would not be served by attempts to 
     diversify the ownership of telecommunications; businesses 
     through any approach that would involve the use of mandated 
     set-asides or quotas.
       (10) Today, the telecommunications industry is struggling 
     to survive one of its most troubling times. Therefore, 
     facilitating voluntary, pro-competitive transactions that 
     will promote ownership of telecommunications facilities by 
     economically and socially disadvantaged businesses will aid 
     in providing the investment and capital that is crucial to 
     this sector.
       (b) Purpose.--The purpose of this Act is to facilitate 
     voluntary, pro-competitive transactions that will promote 
     ownership of telecommunications facilities by economically 
     and socially disadvantaged businesses.

     SEC. 3. NONRECOGNITION OF GAIN ON QUALIFIED SALES OF 
                   TELECOMMUNICATIONS BUSINESSES.

       (a) In General.--Subchapter O of chapter 1 of the Internal 
     Revenue Code of 1986 (relating to gain or loss on disposition 
     of property) is amended by inserting after part IV the 
     following new part:

        ``Part V--Certain Sales of Telecommunications Businesses

``Sec.
``1071. Nonrecognition of gain on certain sales of telecommunication 
              businesses.

     ``SEC. 1071. NONRECOGNITION OF GAIN ON CERTAIN SALES OF 
                   TELECOMMUNICATION BUSINESSES.

       ``(a) In General.--In case of any qualified 
     telecommunications sale, at the election of the taxpayer, 
     such sale shall be treated as an involuntary conversion of 
     property within the meaning of section 1033.
       ``(b) Limitation on Amount of Gain on Which Tax May Be 
     Deferred.--The amount of gain on any qualified 
     telecommunications sales which is not recognized by reason of 
     this section shall not exceed $250,000,000 per transaction 
     and shall not exceed $83,333,333 per taxable year. Excess 
     amounts can be carried forward in future years subject to the 
     annual limit.
       ``(c) Qualified Telecommunications Sale.--For purposes of 
     this section, the term `qualified telecommunications sale' 
     means--
       ``(1) any sale to an eligible purchaser of--
       ``(A) the assets of a telecommunications business, or
       ``(B) stock in a corporation if, immediately after such 
     sale--
       ``(i) the eligible purchaser controls (within the meaning 
     of Section 368 (c)) such corporation, and
       ``(ii) substantially all of the assets of such corporation 
     are assets of 1 or more telecommunications businesses; and
       ``(2) any sale of a telecommunications business, if the 
     taxpayer purchases, within the replacement period specified 
     in section 1033(a)(2)(b), 1 or more equity interests in an 
     entity that is an eligible purchaser as defined in subsection 
     (f)(1)(A) (the Telecommunications Development Fund.).
       ``(d) Special Rules.--
       ``(1) In General.--In applying section 1033 for purposes of 
     subsection (a) of this section,

[[Page 20688]]

     stock of a corporation operating a telecommunications 
     business, whether or not representing control of such 
     corporation, shall be treated as property similar or related 
     in service or use to the property sold in the qualified 
     telecommunications sale.
       ``(2) Election to reduce basis rather than recognize 
     remainder of gain.--If--
       ``(A) a taxpayer elects the treatment under subsection (a) 
     with respect to any qualified telecommunications sale, and
       ``(B) an amount of gain would (but for this paragraph) be 
     recognized on such sale other than by reason of subsection 
     (b),

     then the amount of gain described in subparagraph (B) shall 
     not be recognized to the extent that the taxpayer elects to 
     reduce the basis of depreciable property (as defined in 
     section 1017(b)(3)) held by the taxpayer immediately after 
     the sale or acquired in the same taxable year. The manner and 
     amount of such reduction shall be determined under 
     regulations prescribed by the Secretary.
       ``(3) Basis.--For basis of property acquired on a sale or 
     exchange treated as an involuntary conversion under 
     subsection (a), see section 1033(b).
       ``(e) Recapture of Tax Benefit if Telecommunications 
     Business Resold Within 3 Years, Etc.--
       ``(1) In general.--If, within 3 years after the date of any 
     qualified telecommunications sale, there is a recapture event 
     with respect to the property involved in such sale, then the 
     purchaser's tax imposed by this chapter for taxable year in 
     which such event occurs shall be increased by 20 percent of 
     the lesser of the consideration furnished by the purchaser in 
     such sale or the dollar amount specified in subsection (b).
       ``(2) Exception for reinvested amounts.--Paragraph (1) 
     shall not apply to any recapture event which is a sale if--
       ``(A) the sale is a qualified telecommunications sale, or
       ``(B) during the 60-day period beginning on the date of 
     such sale, the taxpayer is the purchaser in another qualified 
     telecommunications sale in which the consideration furnished 
     by the taxpayer is not less that the amount realized on the 
     recapture event sale.
       ``(1)  Recapture event.--For purpose of this subsection, 
     the term `recapture event' means with respect to any 
     qualified telecommunications sale--
       ``(A) any sale or other disposition of the assets or stock 
     referred to in subsection (c) which were acquired by the 
     taxpayer in such sale, and
       ``(B) in the case of a qualified telecommunications sale 
     described in subsection (c)(1)(B)--
       ``(i) any sale or other disposition of a telecommunications 
     business by the corporation referred to in such subsection, 
     or
       ``(ii) any other transaction which results in the eligible 
     purchaser business not having control (as defined in 
     subsection (c)(1)(B)(i)) of such corporation.
       ``(f) Definitions.--In this section:
       ``(1) Eligible purchaser.--The term `eligible purchaser' 
     means--
       ``(A) the Telecommunications Development Fund established 
     under section 714 of the Communications Act of 1934 (47 
     U.S.C. 614), or any wholly-owned affiliate of that Fund;
       ``(B) an economically and socially disadvantaged business, 
     as defined in paragraph (2) of this subsection; and
       ``(C) an entity qualified under section 851, if more than 
     50 percent of its gross income is derived from equity 
     investment in an economically and socially disadvantaged 
     business or businesses, as defined in paragraph (2) of this 
     subsection, as determined by the Secretary.
       ``(2) Economically and socially disadvantaged business.--
     The term `economically and socially disadvantaged business' 
     means a person that is designated by the Secretary as an 
     `economically and socially disadvantaged business' based on a 
     determination that the subject person--
       ``(A) meets the control requirements of paragraph (6);
       ``(B) will be a telecommunications business after the 
     purchase for which the eligibility determination is sought; 
     and
       ``(C) before the purchase for which the eligibility 
     determination is sought does not have:
       ``(i) attributable ownership interests in television 
     broadcast stations having an aggregate national audience 
     reach of more than 5 percent as defined by the Federal 
     Communications Commission under section 73.3555(e)(2)(i) of 
     title 47 of the Code of Federal Regulations as in effect on 
     January 1, 2001;
       ``(ii) attributable ownership interest in: (a) more than 50 
     radio stations nationally; and (b) radio stations with a 
     combined market share exceeding 10 percent of radio 
     advertising revenues in the relevant market as defined by the 
     Federal Communications Commission; or
       ``(iii) attributable ownership interests in any other 
     telecommunications business having more than 5 percent of 
     national subscribers.
       ``(3) Relevant market.--The term `relevant market' means 
     the local market served by the radio station or stations 
     being purchased.
       ``(4) Telecommunications business.--The term 
     `telecommunications business' means a business which, as its 
     primary purpose, engaged in electronic communications and is 
     regulated by the Federal Communications Commission pursuant 
     to the Communications Act, including a cable system (as 
     defined in section 602(7) of the Communications Act of 1934 
     (47 U.S.C. 532(7)), a radio station (as defined in section 
     3(35) of that Act (47 U.S.C. 153(35)), a broadcasting station 
     providing television service (as defined in section 3(49) of 
     that Act (47 U.S.C. 153(49)), a provider of direct broadcast 
     satellite service (as defined in section 335(b)(5) of that 
     Act (47 U.S.C. 335(b)(5)), a provider of video programming 
     (as defined in section 602(20) of that Act (47 U.S.C. 
     602(20)); a provider of commercial mobile services (as 
     defined in section 332(d)(1) of that Act (47 U.S.C. 
     332(d)(1)), a telecommunications carrier (as defined in 
     section 3(44), of that Act (47 U.S.C. 153(44)); a provider of 
     fixed satellite service; a reseller of telecommunications 
     service or commercial mobile service; or a provider of 
     multichannel multipoint distribution service.
       ``(5) Purchase.--The taxpayer shall be considered to have 
     purchased a property if, but for subsection (d)(2), the 
     unadjusted basis of the property would be its cost within the 
     meaning of section 1012.
       ``(6) Control.--
       ``(A) Individuals.--For purposes of paragraph (2)(A), an 
     individual who meets the requirements of paragraph (7) also 
     meets the requirements of this paragraph.
       ``(B) Entities.--For purposes of paragraph (1)(B), an 
     entity meets the requirement of this paragraph if the 
     requirements of subparagraph (C), (D), or (E) are satisfied.
       ``(C) 30-percent test.--The requirements of this 
     subparagraph are satisfied if--
       ``(i) with respect to any entity which is a corporation, 
     individuals who meet the requirements of paragraph (7) own 30 
     percent or more in value of the outstanding stock of the 
     corporation, and more than 50 percent of the total combined 
     voting power of all classes of stock entitled to vote of the 
     corporation; and
       ``(ii) with respect to any entity which is a partnership, 
     individuals who meet the requirements of paragraph (7) own 30 
     percent or more of the capital interest and the profits 
     interest in the partnership, and more than 50 percent of the 
     total combined voting power of all classes of partnership 
     interests entitled to vote.
       ``(D) 15-percent test.--The requirements of this 
     subparagraph are satisfied if--
       ``(i) with respect to any entity which is a corporation--
       ``(I) individuals who meet the requirements of paragraph 
     (7) own 15 percent or more in value of the outstanding stock 
     of the corporation, and more than 50 percent of the total 
     combined voting power of all classes of stock entitled to 
     vote of the corporation; and
       ``(II) no other person owns more than 25 percent in value 
     of the outstanding stock of the corporation; and
       ``(ii) with respect to any entity which is a partnership--
       ``(I) individuals who meet the requirements of paragraph 
     (7) own 15 percent or more of the capital interest and 
     profits interest of the partnership, and more than 50 percent 
     of the total combined voting power of all classes of 
     partnership interests entitled to vote; and
       ``(II) no other person owns more than 25 percent of the 
     capital interest and profits interest of the partnership.
       ``(E) Publicly-traded corporation test.--The requirements 
     of this subparagraph are satisfied if, with respect to a 
     corporation the securities of which are traded on an 
     established securities market--
       ``(i) individuals who meet the requirements of paragraph 
     (7) own 50 percent or more of the total combined voting power 
     of all classes of stock entitled to vote of the corporation; 
     and
       ``(ii) the stock owned by those individuals is not subject 
     to any agreement, arrangement, or understanding which 
     provides for, or relates to, the voting of the stock in any 
     manner by, or at the direction of, any person other than an 
     eligible individual who meets the requirements of paragraph 
     (7), or the right of any person other than one of those 
     individuals to acquire the voting power through purchase of 
     shares or otherwise.
       ``(F) Constructive ownership.--In applying subparagraphs 
     (C), (D), and (E), the following rules apply:
       ``(i) Stock or partnership interests owned, directly or 
     indirectly, by or for a corporation, partnership, estate, or 
     trust shall be considered as being owned proportionately by 
     or for its shareholders, partners, or beneficiaries.
       ``(ii) An individual shall be considered as owning stock 
     and partnership interests owned, directly or indirectly, by 
     or for his family.
       ``(iii) An individual owning (otherwise than by the 
     application of clause (ii)) any stock in corporation shall be 
     considered as owning the stock or partnership interests 
     owned, directly or indirectly, by or for his partner.
       ``(iv) An individual owning (otherwise than by the 
     application of clause (ii)) any partnership interest in a 
     partnership shall be considered as owning the stock or 
     partnership interests owned, directly or indirectly, by or 
     for his partner.
       ``(v) The family of an individual shall include only his 
     brothers and sisters (whether

[[Page 20689]]

     by the whole or half blood), spouse, ancestors, and lineal 
     descendants.
       ``(vi) Stock or partnership interests constructively owned 
     by a person by reason of the application of clause (i) shall, 
     for the purposes of applying clause (i), (ii), (iii), or 
     (iv), he treated as actually owned by that person, but stock 
     constructively owned by an individual by reason of the 
     application of clause (ii), (iii), or (iv) shall not be 
     treated as owned by that individual for the purpose of again 
     applying any of those clauses in order to make another the 
     constructive owner of the stock or partnership interests.
       ``(7) Individuals.--An individual is described in this 
     paragraph if that individual is
       ``(A) a United States citizen, and
       ``(B) a member of a socially or economically disadvantaged 
     class determined by the Secretary of Treasury to be 
     underrepresented in the ownership of the relevant 
     telecommunications business.''.

     SEC. 4. TELECOMMUNICATIONS BUSINESS CREDIT.

       (a) In General.--Subpart E of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (relating to 
     rules for computing investment credit) is amended by 
     inserting after section 48 the following:

     ``SEC. 48A. TELECOMMUNICATIONS BUSINESS CREDIT.

       ``For purposes of section 46, there is allowed as a credit 
     against the tax imposed by this chapter for any taxable year 
     an amount equal to 10 percent of the taxable income of any 
     taxpayer that at all times during that taxable year--
       ``(1) is a local exchange carrier (as defined in section 
     3(44) of the Communications Act of 1934 (47 U.S.C. 153(44)));
       ``(2) is not a Bell operating company (as defined in 
     section 3(4) of that Act (47 U.S.C. 153(4))); and
       ``(3) is headquartered in an area designed as an 
     empowerment zone by the Secretary of Housing and Urban 
     Development.''.
       (b) Conforming Amendments.--
       (1) Amendment of section 46.--Section 46 of such Code 
     (relating to amount of credit) is amended by--
       (A) striking ``and'' in paragraph (2);
       (B) striking ``credit.'' in paragraph (3) and inserting 
     ``credit; and''; and
       (C) adding at the end the following: ``(4) the 
     telecommunications business credit.''.
       (2) Clerical amendments.--
       (A) The analysis for part III of subchapter 0 of chapter 1 
     of such Code is amended by adding at the end thereof the 
     following:

``1071. Sale of telecommunications business.''.

       (B) The table of sections for Subpart E of part IV of 
     subchapter A of chapter 1 of such Code is amended by 
     inserting after the item relating to section 48 the 
     following:

``48A. Telecommunications business credit.''

     SEC. 5. EXCLUSION OF 50 PERCENT OF GAIN.

       Section 1202 of the Internal Revenue Code of 1986 (relating 
     to 50 percent exclusion for gain from certain small business 
     stock) is amended--
       (1) by adding at the end of subsection (a) the following:
       ``(3) Certain telecommunications investments by 
     corporations and investment companies.--Gross income does not 
     include 50 percent of any gain from the sale or exchange of 
     stock in an eligible purchaser (as defined in section 
     1071(f)(1)) engaged in a telecommunications business (as 
     defined in section 1071(f)(3)) held for more than 5 years.'';
       (2) by striking subparagraphs (A) and (B) of subsection 
     (b)(1) and inserting the following:
       ``(A) in the case of gain from the sale or exchange of 
     qualified small business stock held for more than 5 years--
       ``(i) $10,000,000 reduced by the aggregate amount of 
     eligible gain taken into account by the taxpayer under 
     subsection (a) for prior taxable years and attributable to 
     dispositions of stock issued by such corporations; or
       ``(ii) 10 times the aggregate adjusted bases of qualified 
     small business stock issued by such corporations and disposed 
     of by the taxpayer during the taxable year; and
       ``(B) in the case of gain from the sale or exchange of 
     stock in an eligible purchaser engaged in a 
     telecommunications business for more than 5 years--
       ``(i) $20,000,000 reduced by the aggregate amount of 
     eligible gain taken into account by their taxpayer under 
     subsection (a) for prior taxable years and attributable to 
     dispositions of stock issued by the eligible purchaser 
     engaged in a telecommunications business; or
       ``(ii) 15 times the aggregate adjusted bases of stock of an 
     eligible purchaser engaged in a telecommunications business 
     issued by such eligible purchaser and disposed of by the 
     taxpayer during the taxable year.'';
       (3) by striking ``years'' in subsection (b)(2) and 
     inserting ``years or any gain from the sale or exchange of 
     stock in an eligible purchaser engaged in a 
     telecommunications business held for more than 5 years.''; 
     and
       (4) by striking `` `$10,000,000'.'' in subsection (b)(3)(!) 
     and inserting `` `$10,000,000', and paragraph (1)(B) shall be 
     applied by substituting `$10,000,000' for `$20,000,000'.''.

     SEC. 6. EFFECTIVE DATE--TECHNICAL AND CONFORMING CHANGES.

       (a) Taxable years.--The amendments made by section 4 shall 
     apply to taxable years ending after the date of enactment of 
     this Act.
       (b) Sales.--The amendments made by section 3 shall apply 
     with respect to a sale described in section 1071(a) of the 
     Internal Revenue Code of 1986 (as added by this section) of a 
     telecommunications business or any equity interest on or 
     after the date of enactment of this Act. The amendments made 
     by section 5 shall apply to sales on or after the date of 
     enactment of this Act.
       (c) Technical and Conforming Changes.--The Secretary of the 
     Treasury shall, within 150 days after the date of enactment 
     of this Act, submit to the Committee on Ways and Means of the 
     House of Representatives and the Committee on Finance of the 
     Senate, a draft of any technical and conforming changes in 
     the Internal Revenue Code of 1986 which are necessary to 
     reflect throughout the Code the changes in the substantive 
     provisions of the Code made by section 3(a).

     SEC. 7. REGULATIONS.

       The Secretary of the Treasury, in consultation with the 
     Federal Communications Commission, shall promulgate 
     regulations to implement this Act no later than 90 days after 
     the effective date of this Act. The regulations shall provide 
     for determination by the Secretary as to whether an applicant 
     is an ``eligible purchaser'' as defined in new section 
     1071(f) of the IRC of 1986 (as added by section 3 of this 
     Act). The regulations shall further provide that such 
     determinations of eligibility shall be made not later than 45 
     calendar days after an application is filed with the 
     Secretary. The regulations implementing section 1071(f)(7) of 
     such Code (as added by section 3 of this Act) shall be 
     updated on an ongoing basis no less frequently than every 5 
     years.

     SEC. 8. BIENNIAL PROGRAM AUDITS BY GAO.

       No later than January 1, 2004, and no less frequently than 
     every 2 years thereafter, the Comptroller General shall audit 
     the administration of sections of the Internal Revenue Code 
     of 1986 added or amended by this Act, and issue a report on 
     the results of that audit. The Comptroller General shall 
     include in the report, notwithstanding any provision of 
     section 6103 of the Internal Revenue Code of 1986 to the 
     contrary--
       (1) a list of eligible purchasers (as defined in section 
     1071(f)(1) of such Code) and any other taxpayer receiving a 
     benefit from the operation of section 48A or 1202 of such 
     Code as that section was added or amended by this Act; and
       (2) an assessment of the effect the amendments made by this 
     Act have on increasing new entry and growth in the 
     telecommunications industry by socially and economically 
     disadvantaged businesses, and the effect of this Act on 
     enhancing the competitiveness of the telecommunications 
     industry.

                          ____________________