[Congressional Record (Bound Edition), Volume 149 (2003), Part 23]
[Senate]
[Pages 31269-31301]
[From the U.S. Government Publishing Office, www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. BAUCUS (for himself, Mr. Inhofe, Mrs. Dole, and Mr. 
        Rockefeller):
  S. 1936. A bill to amend the Internal Revenue Code of 1986 to exclude 
from unrelated business taxable income the gain or loss on the sale or 
exchange of certain brownfield sites, and for other purposes; to the 
Committee on Finance.
  Mr. BAUCUS. Mr. President, I am pleased to join my colleague Senator 
Inhofe, and my other Senate colleagues in introducing the Brownfield 
Revitalization Act of 2003. Given the nature of this legislation--
establishing tax incentives to encourage cleanup of environmentally 
contaminated property across the country--it is appropriate that this 
be a joint introduction between the Chairman of the Senate Environment 
and Public Works Committee and the Ranking Member of the Senate Finance 
Committee. This legislation is bipartisan, but it is also bicameral. A 
companion bill was introduced earlier this week in the House of 
Representatives by Congresswoman Nancy Johnson and Congressman Xavier 
Becerra.
  Across the United States, environmentally contaminated sites endanger 
public health, impede economic development, and negatively impact tax 
rolls. The United States has an estimated 1,000,000 such properties 
scattered across our inner cities and rural areas alike.
  In my own State of Montana, there are well over 5,000 such sites. 
This may seem surprising for a state like Montana that is relatively 
undeveloped and pristine. But we are by no means unaffected by the 
scourge of environmental contamination. In addition to contamination 
caused by leaking underground storage tanks and contamination caused by 
other light industries, Montana also has been impacted by significant 
contamination left behind by some of the very industries that built our 
great state.
  Contaminated sediments can be found along the Clark Fork River from 
Butte, MT, downstream for 140 miles to Missoula and on into Idaho--a 
legacy of the copper mining and smelting operations at Butte and 
Anaconda. Tremolite asbestos contamination is prevalent at numerous 
sites around Libby, MT, including the local high school and middle 
school tracks--a legacy from the Zonlite Mine that began operating in 
the 1920s and produced 80 percent of the world's supply of vermiculite. 
These industries created wealth and jobs for generations of Montanans. 
Today, however, contamination from wood processing facilities, 
abandoned mines, and numerous other activities have harmed human health 
and the environment and continue to stifle the development of new 
business in Montana. These sites are well known to Montanans: Sites 
such as Missoula Sawmill site and the White Pine Sash site in Missoula, 
the Missouri River Corridor site in Great Falls, and sites in Helena, 
Bozeman, Billings and numerous other communities all across Montana. We 
can and must do more to help revitalize these important areas.
  Congress has undertaken a number of initiatives to address the 
brownfield problem in this country. I am proud to have been able to 
play a leadership role in passing the Brownfields Revitalization and 
Reinvestment Act of 2001. That bill has helped provide new Federal 
funds for evaluation and remediation of brownfield sites and has helped 
to resolve some of the liability issues that were inhibiting 
remediation of these contaminated properties.
  But, We must do more. The U.S. Chamber of Commerce has estimated that 
at the current rate of cleanup, it will take 10,000 years for us to 
remediate all of the contaminated sites in America. The United States 
Environmental Protection Agency, in an analysis conducted with George 
Washington University, concluded that the remediation ``costs for all 
of the brownfields located within the United States have been estimated 
to exceed $650 billion,'' and that, consequently, ``it is imperative 
that private capital be attracted to the redevelopment of 
brownfields.''
  Late last year, Senator Grassley and I entered a colloquy in the 
Congressional Record expressing our concern that certain provisions in 
the tax code are having the unintended consequence of discouraging 
investment in the remediation and redevelopment of our nation's 
polluted sites. In that colloquy, we pledged to get our arms around 
this issue and to draft legislation to correct this problem. I am 
pleased that we are standing here today to introduce legislation to do 
just that.
  Let me briefly describe the basis for this bill and the means by 
which this legislation will dramatically accelerate the remediation of 
contaminated lands in America.
  Today, tax-exempt investors such as university endowments, private 
pension funds, and charitable foundations can invest their capital in 
the stock market and certain real estate transactions that do not clean 
the environment without fear of incurring an Unrelated Business Income 
Tax, or UBIT, on any gains they make from their investments.
  Because UBIT-sensitive entities hold over $6 trillion dollars in 
financial assets and routinely deploy more capital in real estate 
projects than any other category of investor, the unintended 
consequence of UBIT has been to drive our nation's biggest and most 
active real estate investors away from projects focused on the 
remediation and redevelopment of polluted properties.
  This bill seeks to address this problem by allowing eligible tax-
exempt entities to invest in the cleanup and redevelopment of qualified 
contaminated properties without incurring unrelated business income tax 
at the time they sell the property.
  The legislation accomplishes this goal by concentrating on three 
basic tasks: 1. focus investment on moderately and heavily polluted 
properties, 2. require taxpayers to work with the State authorities and 
the public to ensure adequate clean up, and 3. ensure that the 
legislation is tightly crafted to prevent abuse.
  First, this bill focuses on moderately and heavily polluted 
properties.
  Section 198 of the tax code contains a structure under which 
designated state environmental agencies certify contaminated property 
that is eligible for special rules concerning deductions of remediation 
costs. This bill uses this existing structure to identify and certify 
contaminated sites that are eligible for inclusion within this bill. 
Prior to requesting certification from a state agency, the taxpayer is 
required to provide the agency with site characterizations, assessments 
and other documentation illustrating the scope and character of the 
pollution problem at the target site.
  The legislation maintains its focus on moderately and heavily 
contaminated properties by requiring taxpayers to expend on remediation 
of each site the greater of $550,000 or 12 percent of the fair market 
value of the site, assessed as though the site were not contaminated. 
These remediation thresholds have intentionally been set higher than he 
typical range of costs reported to the Environmental Protection Agency 
to clean up brownfield

[[Page 31270]]

sites nationwide. By establishing such high remediation thresholds, the 
legislation excludes incidentally or trivially contaminated property 
and focuses new capital investment on those sites most in need of 
additional assistance.
  Second, this bill requires taxpayers to work with affected states and 
the public to ensure adequate clean up.
  In addition to requiring high levels of remediation expenditures on 
each site, the legislation contains numerous other safeguards designed 
to ensure that remediation of each site is performed to state 
specifications and with full public involvement.
  Similar to the front-end certification that is required to classify 
properties as truly contaminated, the legislation requires the taxpayer 
to obtain a tail-end certification from the state agency indicating 
that the site has been cleaned up and is no longer considered a 
brownfield. Prior to applying for this certification, the taxpayer must 
provide the State agency with sufficient information and documentation 
to allow the state agency to make this determination. In particular, 
the taxpayer must certify and provide documentation that: there are no 
longer hazardous substances, pollutants or contaminants on the property 
that are complicating the redevelopment or reuse of the site, 
environmental remediation is complete or substantially complete in 
conformance with all applicable federal, state and local environmental 
laws and regulations, the property is suitable for more economically 
productive or environmentally beneficial uses than at the time of 
acquisition, if additional activities are required to complete 
remediation, sufficient financial assurances and institutional controls 
are in place to complete the remediation in as short a time as 
possible, and the public was notified and given the opportunity to 
comment on the remedial actions taken to clean up the property and, if 
necessary, on any longer-term remediation activities.
  The provisions in this legislation are designed to create substantive 
thresholds that the tax-exempt entity must meet in order to qualify for 
the exemption from UBIT. This legislation does not alter the complex 
web of existing federal, state or local environmental laws, regulations 
or standards.
  Third, this bill ensures that the legislation is tightly crafted to 
prevent abuse.
  It is worth noting that this legislation has been drafted to contain 
numerous safeguards to prevent abuse of this program. The anti-abuse 
examples include the following. The taxpayer cannot be the party that 
has caused the pollution and cannot be otherwise related to the 
polluter. Also, all transactions, purchase of the property, sale of the 
property, expenditure of remediation funds, etc., must be arms-length 
transactions with parties unrelated to the taxpayer. Further, the 
taxpayer is not allowed to count any Federal funds, e.g. grants, etc., 
or other types of government payments and benefits toward and required 
remediation thresholds. There are also restrictions on how the taxpayer 
may treat costs across multiple properties, requiring that an election 
be made specifying when and which properties are considered for such 
purposes; this is intended to prevent cherry-picking among different 
properties once the election has been made. Moreover, the legislation 
contains special restrictions addressing the use of the legislation's 
provisions by partnerships and other pass-through entities including 
requiring that all partnerships under the bill be fractions-rule 
compliant.
  Because this legislation is narrowly crafted, and because tax-exempt 
entities are not currently investing in these sites, and thus are not 
paying UBIT, the Joint Committee on Taxation has concluded that this 
legislation will actually generate revenue for the Federal treasury 
during the first three years after enactment and that it will cost $10 
million over five years and $192 million over ten years.
  Further, because the legislation will accelerate cleanup of 
brownfield sites, create jobs, stimulate the economy, reduce blight and 
public health concerns, and because the bill has an acceptable fiscal 
impact, this legislative approach has been endorsed by Environmental 
Defense, the U.S. Chamber of Commerce, the National Taxpayers Union, 
and the U.S. Conference of Mayors, as well as numerous local, state and 
regional organizations and municipalities.
  Passage of this bill will dramatically increase the speed at which 
our country's contaminated properties are remediated and brought back 
into productive taxable use. This narrowly crafted legislation will 
create jobs, increase tax revenues, and protect the environment--all 
accomplished without creating new government programs or regulations 
and all at a minimal cost to the Federal treasury.
  I am pleased to be introducing this legislation with my colleague 
from Oklahoma. I look forward to working together to enact this 
legislation into law.
  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. 1936

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

     SECTION 1. EXCLUSION OF GAIN OR LOSS ON SALE OR EXCHANGE OF 
                   CERTAIN BROWNFIELD SITES FROM UNRELATED 
                   BUSINESS TAXABLE INCOME.

       (a) In General.--Subsection (b) of section 512 of the 
     Internal Revenue Code of 1986 (relating to unrelated business 
     taxable income) is amended by adding at the end the following 
     new paragraph:
       ``(18) Treatment of gain or loss on sale or exchange of 
     certain brownfield sites.--
       ``(A) In general.--Notwithstanding paragraph (5)(B), there 
     shall be excluded any gain or loss from the qualified sale, 
     exchange, or other disposition of any qualifying brownfield 
     property by an eligible taxpayer.
       ``(B) Eligible taxpayer.--For purposes of this paragraph--
       ``(i) In general.--The term `eligible taxpayer' means, with 
     respect to a property, any organization exempt from tax under 
     section 501(a) which--

       ``(I) acquires from an unrelated person a qualifying 
     brownfield property, and
       ``(II) pays or incurs eligible remediation expenditures 
     with respect to such property in an amount which exceeds the 
     greater of $550,000 or 12 percent of the fair market value of 
     the property at the time such property was acquired by the 
     eligible taxpayer, determined as if there was not a presence 
     of a hazardous substance, pollutant, or contaminant on the 
     property which is complicating the expansion, redevelopment, 
     or reuse of the property.

       ``(ii) Exception.--Such term shall not include any 
     organization which is--

       ``(I) potentially liable under section 107 of the 
     Comprehensive Environmental Response, Compensation, and 
     Liability Act of 1980 with respect to the qualifying 
     brownfield property,
       ``(II) affiliated with any other person which is so 
     potentially liable through any direct or indirect familial 
     relationship or any contractual, corporate, or financial 
     relationship (other than a contractual, corporate, or 
     financial relationship which is created by the instruments by 
     which title to any qualifying brownfield property is conveyed 
     or financed or by a contract of sale of goods or services), 
     or
       ``(III) the result of a reorganization of a business entity 
     which was so potentially liable.

       ``(C) Qualifying brownfield property.--For purposes of this 
     paragraph--
       ``(i) In general.--The term `qualifying brownfield 
     property' means any real property which is certified, before 
     the taxpayer incurs any eligible remediation expenditures 
     (other than to obtain a Phase I environmental site 
     assessment), by an appropriate State agency (within the 
     meaning of section 198(c)(4)) in the State in which such 
     property is located as a brownfield site within the meaning 
     of section 101(39) of the Comprehensive Environmental 
     Response, Compensation, and Liability Act of 1980 (as in 
     effect on the date of the enactment of this paragraph).
       ``(ii) Request for certification.--Any request by an 
     eligible taxpayer for a certification described in clause (i) 
     shall include a sworn statement by the eligible taxpayer and 
     supporting documentation of the presence of a hazardous 
     substance, pollutant, or contaminant on the property which is 
     complicating the expansion, redevelopment, or reuse of the 
     property given the property's reasonably anticipated future 
     land uses or capacity for uses of the property (including a 
     Phase I environmental site assessment and, if applicable, 
     evidence of the property's presence on a local, State, or 
     Federal list of brownfields or contaminated property) and

[[Page 31271]]

     other environmental assessments prepared or obtained by the 
     taxpayer.
       ``(D) Qualified sale, exchange, or other disposition.--For 
     purposes of this paragraph--
       ``(i) In general.--A sale, exchange, or other disposition 
     of property shall be considered as qualified if--

       ``(I) such property is transferred by the eligible taxpayer 
     to an unrelated person, and
       ``(II) within 1 year of such transfer the eligible taxpayer 
     has received a certification from the Environmental 
     Protection Agency or an appropriate State agency (within the 
     meaning of section 198(c)(4)) in the State in which such 
     property is located that, as a result of the eligible 
     taxpayer's remediation actions, such property would not be 
     treated as a qualifying brownfield property in the hands of 
     the transferee.

       ``(ii) Request for certification.--Any request by an 
     eligible taxpayer for a certification described in clause (i) 
     shall be made not later than the date of the transfer and 
     shall include a sworn statement by the eligible taxpayer 
     certifying the following:

       ``(I) Remedial actions which comply with all applicable or 
     relevant and appropriate requirements (consistent with 
     section 121(d) of the Comprehensive Environmental Response, 
     Compensation, and Liability Act of 1980) have been 
     substantially completed, such that there are no hazardous 
     substances, pollutants, or contaminants which complicate the 
     expansion, redevelopment, or reuse of the property given the 
     property's reasonably anticipated future land uses or 
     capacity for uses of the property.
       ``(II) The reasonably anticipated future land uses or 
     capacity for uses of the property are more economically 
     productive or environmentally beneficial than the uses of the 
     property in existence on the date of the certification 
     described in subparagraph (C)(i). For purposes of the 
     preceding sentence, use of property as a landfill or other 
     hazardous waste facility shall not be considered more 
     economically productive or environmentally beneficial.
       ``(III) A remediation plan has been implemented to bring 
     the property into compliance with all applicable local, 
     State, and Federal environmental laws, regulations, and 
     standards and to ensure that the remediation protects human 
     health and the environment.
       ``(IV) The remediation plan described in subclause (III), 
     including any physical improvements required to remediate the 
     property, is either complete or substantially complete, and, 
     if substantially complete, sufficient monitoring, funding, 
     institutional controls, and financial assurances have been 
     put in place to ensure the complete remediation of the 
     property in accordance with the remediation plan as soon as 
     is reasonably practicable after the sale, exchange, or other 
     disposition of such property.
       ``(V) Public notice that such request for certification 
     would be made was completed before the date of such request. 
     Such notice shall be in the same form and manner as required 
     for public participation required under section 117(a) of the 
     Comprehensive Environmental Response, Compensation, and 
     Liability Act of 1980 (as in effect on the date of the 
     enactment of this paragraph).

       ``(iii) Attachment to tax returns.--A copy of each of the 
     requests for certification described in clause (ii) of 
     subparagraph (C) and this subparagraph shall be included in 
     the tax return of the eligible taxpayer (and, where 
     applicable, of the qualifying partnership) for the taxable 
     year during which the transfer occurs.
       ``(E) Eligible remediation expenditures.--For purposes of 
     this paragraph--
       ``(i) In general.--The term `eligible remediation 
     expenditures' means, with respect to any qualifying 
     brownfield property, any amount paid or incurred by the 
     eligible taxpayer to an unrelated third person to obtain a 
     Phase I environmental site assessment of the property, and 
     any amount so paid or incurred after the date of the 
     certification described in subparagraph (C)(i) for goods and 
     services necessary to obtain a certification described in 
     subparagraph (D)(i) with respect to such property, including 
     expenditures--

       ``(I) to manage, remove, control, contain, abate, or 
     otherwise remediate a hazardous substance, pollutant, or 
     contaminant on the property,
       ``(II) to obtain a Phase II environmental site assessment 
     of the property, including any expenditure to monitor, 
     sample, study, assess, or otherwise evaluate the release, 
     threat of release, or presence of a hazardous substance, 
     pollutant, or contaminant on the property,
       ``(III) to obtain environmental regulatory certifications 
     and approvals required to manage the remediation and 
     monitoring of the hazardous substance, pollutant, or 
     contaminant on the property, and
       ``(IV) regardless of whether it is necessary to obtain a 
     certification described in subparagraph (D)(i)(II), to obtain 
     remediation cost-cap or stop-loss coverage, re-opener or 
     regulatory action coverage, or similar coverage under 
     environmental insurance policies, or financial guarantees 
     required to manage such remediation and monitoring.

       ``(ii) Exceptions.--Such term shall not include--

       ``(I) any portion of the purchase price paid or incurred by 
     the eligible taxpayer to acquire the qualifying brownfield 
     property,
       ``(II) environmental insurance costs paid or incurred to 
     obtain legal defense coverage, owner/operator liability 
     coverage, lender liability coverage, professional liability 
     coverage, or similar types of coverage,
       ``(III) any amount paid or incurred to the extent such 
     amount is reimbursed, funded, or otherwise subsidized by 
     grants provided by the United States, a State, or a political 
     subdivision of a State for use in connection with the 
     property, proceeds of an issue of State or local government 
     obligations used to provide financing for the property the 
     interest of which is exempt from tax under section 103, or 
     subsidized financing provided (directly or indirectly) under 
     a Federal, State, or local program provided in connection 
     with the property, or
       ``(IV) any expenditure paid or incurred before the date of 
     the enactment of this paragraph.

     For purposes of subclause (III), the Secretary may issue 
     guidance regarding the treatment of government-provided funds 
     for purposes of determining eligible remediation 
     expenditures.
       ``(F) Determination of gain or loss.--For purposes of this 
     paragraph, the determination of gain or loss shall not 
     include an amount treated as gain which is ordinary income 
     with respect to section 1245 or section 1250 property, 
     including amounts deducted as section 198 expenses which are 
     subject to the recapture rules of section 198(e), if the 
     taxpayer had deducted such amounts in the computation of its 
     unrelated business taxable income.
       ``(G) Special rules for partnerships.--
       ``(i) In general.--In the case of an eligible taxpayer 
     which is a partner of a qualifying partnership which 
     acquires, remediates, and sells, exchanges, or otherwise 
     disposes of a qualifying brownfield property, this paragraph 
     shall apply to the eligible taxpayer's distributive share of 
     the qualifying partnership's gain or loss from the sale, 
     exchange, or other disposition of such property.
       ``(ii) Qualifying partnership.--The term `qualifying 
     partnership' means a partnership which--

       ``(I) has a partnership agreement which satisfies the 
     requirements of section 514(c)(9)(B)(vi) at all times 
     beginning on the date of the first certification received by 
     the partnership under subparagraph (C)(i),
       ``(II) satisfies the requirements of subparagraphs (B)(i), 
     (C), (D), and (E), if `qualified partnership' is substituted 
     for `eligible taxpayer' each place it appears therein (except 
     subparagraph (D)(iii)), and
       ``(III) is not an organization which would be prevented 
     from constituting an eligible taxpayer by reason of 
     subparagraph (B)(ii).

       ``(iii) Requirement that tax-exempt partner be a partner 
     since first certification.--This paragraph shall apply with 
     respect to any eligible taxpayer which is a partner of a 
     partnership which acquires, remediates, and sells, exchanges, 
     or otherwise disposes of a qualifying brownfield property 
     only if such eligible taxpayer was a partner of the 
     qualifying partnership at all times beginning on the date of 
     the first certification received by the partnership under 
     subparagraph (C)(i) and ending on the date of the sale, 
     exchange, or other disposition of the property by the 
     partnership.
       ``(iv) Regulations.--The Secretary shall prescribe such 
     regulations as are necessary to prevent abuse of the 
     requirements of this subparagraph, including abuse through--

       ``(I) the use of special allocations of gains or losses, or
       ``(II) changes in ownership of partnership interests held 
     by eligible taxpayers.

       ``(H) Special rules for multiple properties.--
       ``(i) In general.--An eligible taxpayer or a qualifying 
     partnership of which the eligible taxpayer is a partner may 
     make a 1-time election to apply this paragraph to more than 1 
     qualifying brownfield property by averaging the eligible 
     remediation expenditures for all such properties acquired 
     during the election period. If the eligible taxpayer or 
     qualifying partnership makes such an election, the election 
     shall apply to all qualified sales, exchanges, or other 
     dispositions of qualifying brownfield properties the 
     acquisition and transfer of which occur during the period for 
     which the election remains in effect.
       ``(ii) Election.--An election under clause (i) shall be 
     made with the eligible taxpayer's or qualifying partnership's 
     timely filed tax return (including extensions) for the first 
     taxable year for which the taxpayer or qualifying partnership 
     intends to have the election apply. An election under clause 
     (i) is effective for the period--

       ``(I) beginning on the date which is the first day of the 
     taxable year of the return in which the election is included 
     or a later day in such taxable year selected by the eligible 
     taxpayer or qualifying partnership, and
       ``(II) ending on the date which is the earliest of a date 
     of revocation selected by the eligible taxpayer or qualifying 
     partnership, the date which is 8 years after the date 
     described in subclause (I), or, in the case of an election by 
     a qualifying partnership of which the eligible taxpayer is a 
     partner, the date of the termination of the qualifying 
     partnership.

[[Page 31272]]

       ``(iii) Revocation.--An eligible taxpayer or qualifying 
     partnership may revoke an election under clause (i)(II) by 
     filing a statement of revocation with a timely filed tax 
     return (including extensions). A revocation is effective as 
     of the first day of the taxable year of the return in which 
     the revocation is included or a later day in such taxable 
     year selected by the eligible taxpayer or qualifying 
     partnership. Once an eligible taxpayer or qualifying 
     partnership revokes the election, the eligible taxpayer or 
     qualifying partnership is ineligible to make another election 
     under clause (i) with respect to any qualifying brownfield 
     property subject to the revoked election.
       ``(I) Recapture.--If an eligible taxpayer excludes gain or 
     loss from a sale, exchange, or other disposition of property 
     to which an election under subparagraph (H) applies, and such 
     property fails to satisfy the requirements of this paragraph, 
     the unrelated business taxable income of the eligible 
     taxpayer for the taxable year in which such failure occurs 
     shall be determined by including any previously excluded gain 
     or loss from such sale, exchange, or other disposition 
     allocable to such taxpayer, and interest shall be determined 
     at the overpayment rate established under section 6621 on any 
     resulting tax for the period beginning with the due date of 
     the return for the taxable year during which such sale, 
     exchange, or other disposition occurred, and ending on the 
     date of payment of the tax.
       ``(J) Related persons.--For purposes of this paragraph, a 
     person shall be treated as related to another person if--
       ``(i) such person bears a relationship to such other person 
     described in section 267(b) (determined without regard to 
     paragraph (9) thereof), or section 707(b)(1), determined by 
     substituting `25 percent' for `50 percent' each place it 
     appears therein, and
       ``(ii) in the case such other person is a nonprofit 
     organization, if such person controls directly or indirectly 
     more than 25 percent of the governing body of such 
     organization.
       (b) Exclusion From Definition of Debt-Financed Property.--
     Section 514(b)(1) of the Internal Revenue Code of 1986 
     (defining debt-financed property) is amended by striking 
     ``or'' at the end of subparagraph (C), by striking the period 
     at the end of subparagraph (D) and inserting ``; or'', and by 
     inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) any property the gain or loss from the sale, 
     exchange, or other disposition of which would be excluded by 
     reason of the provisions of section 512(b)(18) in computing 
     the gross income of any unrelated trade or business.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to any gain or loss on the sale, exchange, or 
     other disposition of any property acquired by the taxpayer 
     after the date of the enactment of this Act.
                                 ______
                                 
      By Mr. BAUCUS (for himself, Mr. Grassley, Mr. Daschle, Mr. 
        Conrad, and Mr. Graham of Florida):
  S. 1937. A bill to amend the Internal Revenue Code of 1986 to curtail 
the use of tax shelters, and for other purposes; to the Committee on 
Finance.
  Mr. BAUCUS. Mr. President, I rise today to introduce the Tax Shelter 
Transparency and Enforcement Act. I am pleased to be joined by my good 
friend, the Chairman of the Senate Finance Committee, Chairman 
Grassley.
  He and I introduced similar legislation in the last Congress. And, 
just this year, the Finance Committee approved this legislation as part 
of the CARE Act, the energy bill, the Jobs and Growth Act, and the 
Jumpstart Our Business Strength Act.
  But why do we need this legislation? It has been more than 2 years 
since the collapse of Enron.
  Since then, numerous other corporate scandals have come to light, 
thousands of employees have lost their jobs and pension savings, and 
the after-shock has yet to settle down in the stock market.
  But there is one thing that has not happened. This Congress has 
failed to send to the President one single piece of tax legislation 
designed to shut down the kinds of abusive tax shelters we saw Enron 
use and that we know many others use.
  Every day that we fail to address this scandal, honest taxpayers pay 
the bill.
  A recent study commissioned by the IRS estimated that abusive 
corporate tax shelters alone cost honest taxpayers from $14 billion to 
$18 billion each year. That means up to $180 billion over ten years.
  Simply put, this abuse of our tax laws has got to stop.
  Abusive tax shelters are wide-spread--and not new.
  As early as 1995, the Clinton Administration undertook a 
comprehensive, multi-faceted effort to tackle the problem of corporate 
tax shelters. This included legislative proposals to halt the sale and 
marketing of shelters. Regulatory action to clamp down on illicit 
activity. And steps to better identify and pursue abusive transactions.
  The current Administration has added to the list of identified tax 
shelters and supported legislative proposals to ensure greater 
disclosure.
  This is not--and should not be--a partisan issue.
  The proliferation of abusive tax shelters hurts the entire tax 
system. Specifically, it places a greater tax burden on those Americans 
who are honestly and patriotically paying their fair share of taxes--
whether they are republican, democrat, or independent.
  These shelters undermine the confidence of the American people in the 
fairness of the tax system. Abusive tax shelters place honest corporate 
competitors at a disadvantage.
  And shutting down these abuses presents a great opportunity for 
Congress to restore fairness in the system.
  We should do no less.
  Let me take a few moments to discuss the nature of these tax 
shelters. Why they are wrong. And how purportedly reputable companies 
and professional advisors are participating in a disturbing race to the 
bottom.
  First, what are these tax shelters?
  Let me give you just one example of a tax shelter.
  On October 20th, the Finance Committee held a hearing on tax 
shelters. This hearing was a follow-up to a hearing earlier this year 
to review the Committee's investigative report on the collapse of 
Enron.
  At our hearing last month, we heard how some American corporations 
are purportedly buying and then leasing bridges, dams, subway systems, 
and other infrastructure through corporate tax shelters.
  It's like the old line: If you think these tax shelter transactions 
are legitimate--or what Congress intended--have I got a bridge to sell 
you.
  A former leasing industry executive, who testified before the Finance 
Committee, described complex transactions where U.S. companies make a 
single payment to a municipality to lease a bridge or other public 
infrastructure. These companies then lease the infrastructure back to 
the city. All along, the company takes a deduction on its U.S. taxes 
for the depreciation of the high valued asset.
  The companies never pay any real lease payments to the cities. And 
the cities never pay any lease payments to the companies. The cities 
never risk losing control of the bridge, dam, or subway system.
  But the companies--who include major banks and Fortune 500 
companies--take millions and millions of dollars in deductions for what 
is essentially a paper transaction. And the American taxpayer is left 
holding the bill.
  The witness testified: ``[M]uch of the old and new infrastructure 
throughout Europe has been leased to, and leased back from, American 
corporations.''
  In essence, in these transactions, the American people, through their 
tax dollars, are providing these companies a subsidy, part of which the 
companies pocket, and part of which they transfer to these cities.
  As Yale law school Professor Michael Graetz once said, a tax shelter 
is a ``deal done by very smart people, that, absent tax considerations, 
would be very stupid.''
  This is nothing more than an unwarranted tax subsidy to U.S. 
companies courtesy of honest taxpayers. It is simply wrong. It rewards 
a transaction with no real economic substance.
  This has got to stop. And it is up to Congress and the President to 
put an end to this kind of abuse.
  So how did this tax shelter industry develop?
  If there is one thing that we should have learned from the Enron 
scandal, it is the pervasive role of lawyers and accountants.
  Why did some of the country's leading professional firms devote so 
much effort to spinning reported earnings out of nothing? And what does 
that say

[[Page 31273]]

about the erosion of ethical standards for accountants and lawyers?
  In 1908, the American Bar Association adopted its first code of 
ethics.
  The preamble to their Model Rules states that a lawyer serves his 
client, but is also ``an officer of the legal system and a public 
citizen having special responsibility for the quality of justice.''
  It also states that a lawyer should ``further the public's 
understanding of and confidence in the rule of law and the justice 
system because legal institutions in a constitutional democracy depend 
on popular participation and support to maintain their authority.''
  In 1946, the Executive Director of the American Institute of 
Accountants--the predecessor to the American Institute of Certified 
Public Accountants--stated that:

       The very existence of the accounting profession depends on 
     public confidence in the determination of certified public 
     accountants to safeguard the public interest. This confidence 
     can be maintained only by evidence of both technical 
     competence and moral obligation. One item of evidence is 
     promulgation and enforcement of rules of professional 
     conduct.

  So, why did the legal and accounting profession fail to follow their 
own principles. And, why did they fail to police themselves?
  Part of the problem stems from the 1990s practices of investment 
bankers and venture capitalists--taking a piece of the deal or a piece 
of the upside performance. This behavior spread into almost every 
public company.
  And, following their clients, accountants and lawyers also began 
adopting these practices. Add to this an enormous pressure on company 
executives to hit revenue and earnings targets on a quarterly basis.
  Amidst this obsession with short-term results, no one was left to 
look after the company's long-term survival.
  At the same time, lawyers and accountants faced their own profit 
pressures as their compensation was tied to their ``book of business'' 
and their success in cross-selling different services to their clients.
  These cultural conflicts presented a threat to professional values.
  For auditing firms, traditional professional values mean attesting to 
investors and lenders that the company's financial statements are 
properly prepared and reflect all material issues.
  The business culture, however, encouraged the auditor to serve 
company executives--not only to refrain from pushing back, but also to 
affirmatively help them achieve their personal goals.
  Furthermore, audit services themselves became more and more of a low-
profit business, as audit firms battled each other to gain the inside 
audit position--which could help them market high-profit services. The 
big money was in selling tax-engineered products.
  Finally, the private interests of the accounting professional and the 
corporate executive converged on one kind of activity that has proved 
particularly toxic--the proprietary financial maneuver that boosted 
reported earnings. That means, manipulate the bottom line of the 
financial statements.
  Such maneuvers satisfied the executives' need to feed the markets and 
keep stock prices afloat.
  They also satisfied the accountant's need for generating large 
profits for their firm and for their own bonus formula.
  Similarly, for law firms, the traditional professional values are 
associated with loyalty to the client and advocacy of the client's 
interests within the bounds of the law.
  Yet, loyalty to the corporate client and attention to corporate risks 
came to be sorely tested in many instances.
  A company executive could well be more interested in getting a deal 
done--and getting the legal opinion needed to support the accounting 
analysis--than in gaining an accurate understanding of the legal merits 
of the issue and the associated risks to the company.
  A law firm might even have its own stake in getting the deal done--
because of a bonus or contingency fee associated with completing the 
deal--or because of having assisted a promoter in developing the deal.
  In many accounting and tax schemes, executives simply did not want a 
frank assessment of legal merits and risks.
  Instead, what they sought was a professional opinion that would 
justify hiding the true nature of a transaction from readers of 
financial reports and tax returns.
  This was not legal advice on the merits--it was advice that was 
needed to justify hiding the ball.
  Clearly, some accounting firms and law firms have abandoned ethics 
for the big dollar bonus.
  As an extreme example, there were many people in the Arthur Andersen 
Houston office who knew about the destruction of Enron documents. Not 
one appears to have realized that what they were doing was terribly 
wrong. Apparently, not one of these professionals even thought to check 
with anyone elsewhere in the firm about whether or not what they were 
doing was wrong.
  Professional firms also have been all too willing to let themselves 
be compartmentalized. This way, they could say ``That wasn't my job'' 
when things went wrong.
  Consider the case of prominent law firms that provided tax opinions 
for investment banks and other promoters to use in selling tax shelter 
products.
  These opinions described the consequences of complicated tax 
maneuvers--based on the assumption that the future tax shelter 
purchaser would have a valid business purpose. And on the assumption 
that the transaction would not be tweaked further to reduce financial 
risk to almost nothing.
  It may have been true that these firms were asked to provide advice 
based on those implausible assumptions. But that does not justify 
allowing the firm's professional reputation to be used to market tax 
shelters. The lawyers simply must have known that no purchaser could 
realistically be expected to supply the critical assumed facts.
  The Enron case of using tax shelters to generate phantom financial 
earnings also seems to reflect a cycle of ``That wasn't my job'' role-
playing.
  The tax lawyers found a business purpose for the transaction because 
it generated financial earnings.
  The accountants found financial earnings because the transaction 
promised future tax reductions. It all seems a bit circular.
  And it all assumes that creating misleading earnings reports is in 
the real business interest of the corporation. Again, the professionals 
appear to have lost track of who their real client was.
  Now, what do we need to do about this?
  Congress and Federal regulators started to address these issues with 
the Sarbanes-Oxley Act of 2002.
  For example, Sarbanes-Oxley calls for lawyers practicing before the 
SEC to report evidence of securities violations ``up the chain'' of 
their corporate clients--ultimately to corporate boards.
  And the Act calls for auditors to report directly to the corporate 
board's audit committee. And, provide a number of safeguards to assure 
that audit committees have the independence and autonomy needed to 
represent corporate interests and not personal interests.
  The Sarbanes-Oxley Act also addresses auditor independence in ways 
that respond to the business pressures that I described earlier.
  Audit partners cannot be compensated based on cross-selling. Audit 
personnel must be rotated periodically. And a one-year cooling off 
period is required in the case of individuals moving between employment 
at an audit firm and employment at an audit client.
  Public companies are prohibited from obtaining certain non-audit 
services from their auditor, and all other non-audit services require 
prior approval of the board's audit committee.
  But these changes just nibble at the edges of the bigger problem. We 
have to reign in these lawyers, accountants, and investment bankers who 
are out there manipulating the tax code to come up with tax shelter 
schemes.
  The tax shelter legislation that Chairman Grassley and I introduce 
today goes to the heart of the tax schemes problem.

[[Page 31274]]

  For example, the bill ensures that transactions are done for 
legitimate business purposes. That means that transactions must have 
economic substance and are not done merely to avoid taxes.
  It makes it explicit that achieving a particular kind of financial 
accounting treatment does not provide the needed ``business purpose'' 
to satisfy tax requirements.
  The bill also provides for stiff penalties that are needed to back up 
Treasury's new shelter disclosure requirements.
  As a Treasury official pointed out, ``[I]f a promoter is comfortable 
with selling a transaction. If a practitioner is comfortable with 
advising that the transaction is proper. And if a taxpayer is 
comfortable with entering into that transaction. Then they should all 
be comfortable with the IRS knowing about the transaction.''
  Our bill also broadens the IRS's ability to enjoin tax shelter 
promoters and allows the agency to impose monetary penalties--in 
addition to suspension or disbarment--on disreputable tax advisors or 
their firms.
  And more may be needed, from both government and the private sector.
  For one thing, we need to also pass Senator Levin's bill, S. 1767, 
the Auditor Independence and Tax Shelters Act. I am pleased to be an 
original co-sponsor of that legislation. The Auditor Independence and 
Tax Shelters Act compliments the legislation that I am introducing 
today.
  Senator Levin's legislation shuts down tax shelter promotion from the 
audit and financial statement side of the equation. Specifically, S. 
1767 would strengthen auditor independence by prohibiting them from 
providing tax shelter services to their audit clients.
  The legislation would also reduce potential auditor conflicts of 
interest by codifying four auditor independence principles to guide the 
audit committees of the Board of Directors of a publicly traded 
company, when that committee is required by the Sarbanes-Oxley Act to 
decide whether the company may provide certain non-audit services to 
the corporation.
  Next, the SEC and the new Public Accounting Oversight Board should 
devote significant resources to considering ways to improve the clarity 
of the tax footnote in the company's financial statements.
  They should also undertake a comprehensive review of financial 
reporting of income taxation. These agencies should also ensure that 
they have tax experts to ensure proper oversight investigations and 
reviews of the financial statement tax disclosures.
  The IRS should improve the clarity of the already-required 
reconciliation between book and tax earnings on the corporate tax 
return--the Schedule M-1.
  And we need to have better communication and coordination between the 
various federal departments and agencies with oversight over lawyers, 
accountants and investment bankers. The Department of Treasury, the 
IRS, the Department of Justice, the SEC, and the Public Accounting 
Oversight Board should talk to each other and not fall into the ``it's 
not my job'' mindset.
  The Sarbanes-Oxley Act also empowers the Public Company Accounting 
Oversight Board to describe new non-audit services that public 
companies could not acquire from their auditors, even if they are not 
explicitly described in the statute as a prohibited service.
  The Accounting Oversight Board should review the record of SEC 
rulemaking in this area, as well as ongoing business practices, and 
take action if it is needed to assure the public interest in auditor 
independence.
  Finally, professional firms need to cultivate professional cultures. 
The Enron scandal should serve as a wake-up call to all of us, but 
particularly the professionals.
  Law firms and accounting firms must be sure that their members and 
employees understand the nature of corporate representation and who the 
client is.
  Everyone who works at the firm needs to understand that the firm is 
committed to integrity and quality. And to understand that the firm's 
leaders will listen and react if legitimate questions arise.
  Professionals should resist the tendency to avert their eyes to 
obvious issues on the grounds that they are technically someone else's 
responsibility.
  In the best traditions of both the accounting and legal professions, 
the work of the professional must be guided by commitments to 
professional duty, fair dealing, and honesty.
  I hope that the leaders of the accounting and legal professions 
understand how important this is, and take the actions needed to give 
new vitality to these great traditions.
  Every Spring, Americans sit down at the kitchen table, or at their 
home computer, and figure out their taxes.
  With quiet patriotism, these Americans step up and pay their fair 
share. They are counting on us to make sure that sophisticated 
corporations pay their fair share as well.
  I am simply unwilling to tell the school teacher in Montana that he 
needs to pony up a little more because Congress is unwilling to shut 
down a loophole that is costing tens of billions every year.
  I look forward to continuing to work with the Chairman of the Finance 
Committee, Senator Grassley, to see the Tax Shelter Transparency and 
Enforcement Act through to enactment.
  I also urge all of my congressional colleagues--in the House and the 
Senate--to join forces to send tax shelter legislation to the President 
for his signature.
  We need to act to close these tax shelters and restore professional 
ethics. And we need to act before the next big scandal comes. Congress 
cannot ignore the problem any longer.
  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. 1937

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

     SECTION 1. SHORT TITLE; ETC.

       (a) Short Title.--This Act may be cited as the ``Tax 
     Shelter Transparency and Enforcement Act''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.
       (c) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.

          TITLE I--PROVISIONS DESIGNED TO CURTAIL TAX SHELTERS

Sec. 101. Clarification of economic substance doctrine.
Sec. 102. Penalty for failing to disclose reportable transaction.
Sec. 103. Accuracy-related penalty for listed transactions and other 
              reportable transactions having a significant tax 
              avoidance purpose.
Sec. 104. Penalty for understatements attributable to transactions 
              lacking economic substance, etc.
Sec. 105. Modifications of substantial understatement penalty for 
              nonreportable transactions.
Sec. 106. Tax shelter exception to confidentiality privileges relating 
              to taxpayer communications.
Sec. 107. Disclosure of reportable transactions.
Sec. 108. Modifications to penalty for failure to register tax 
              shelters.
Sec. 109. Modification of penalty for failure to maintain lists of 
              investors.
Sec. 110. Modification of actions to enjoin certain conduct related to 
              tax shelters and reportable transactions.
Sec. 111. Understatement of taxpayer's liability by income tax return 
              preparer.
Sec. 112. Penalty on failure to report interests in foreign financial 
              accounts.
Sec. 113. Frivolous tax submissions.
Sec. 114. Regulation of individuals practicing before the Department of 
              Treasury.
Sec. 115. Penalty on promoters of tax shelters.
Sec. 116. Statute of limitations for taxable years for which required 
              listed transactions not reported.

[[Page 31275]]

Sec. 117. Denial of deduction for interest on underpayments 
              attributable to nondisclosed reportable and noneconomic 
              substance transactions.
Sec. 118. Authorization of appropriations for tax law enforcement.

            TITLE II--OTHER CORPORATE GOVERNANCE PROVISIONS

Sec. 201. Affirmation of consolidated return regulation authority.
Sec. 202. Signing of corporate tax returns by chief executive officer.
Sec. 203. Denial of deduction for certain fines, penalties, and other 
              amounts.
Sec. 204. Disallowance of deduction for punitive damages.
Sec. 205. Increase in criminal monetary penalty limitation for the 
              underpayment or overpayment of tax due to fraud.

            TITLE III--ENRON-RELATED TAX SHELTER PROVISIONS

Sec. 301. Limitation on transfer or importation of built-in losses.
Sec. 302. No reduction of basis under section 734 in stock held by 
              partnership in corporate partner.
Sec. 303. Repeal of special rules for FASITs.
Sec. 304. Expanded disallowance of deduction for interest on 
              convertible debt.
Sec. 305. Expanded authority to disallow tax benefits under section 
              269.
Sec. 306. Modification of interaction between subpart F and passive 
              foreign investment company rules.

          TITLE I--PROVISIONS DESIGNED TO CURTAIL TAX SHELTERS

     SEC. 101. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

       (a) In General.--Section 7701 is amended by redesignating 
     subsection (n) as subsection (o) and by inserting after 
     subsection (m) the following new subsection:
       ``(n) Clarification of Economic Substance Doctrine; Etc.--
       ``(1) General rules.--
       ``(A) In general.--In any case in which a court determines 
     that the economic substance doctrine is relevant for purposes 
     of this title to a transaction (or series of transactions), 
     such transaction (or series of transactions) shall have 
     economic substance only if the requirements of this paragraph 
     are met.
       ``(B) Definition of economic substance.--For purposes of 
     subparagraph (A)--
       ``(i) In general.--A transaction has economic substance 
     only if--

       ``(I) the transaction changes in a meaningful way (apart 
     from Federal tax effects) the taxpayer's economic position, 
     and
       ``(II) the taxpayer has a substantial nontax purpose for 
     entering into such transaction and the transaction is a 
     reasonable means of accomplishing such purpose.

     In applying subclause (II), a purpose of achieving a 
     financial accounting benefit shall not be taken into account 
     in determining whether a transaction has a substantial nontax 
     purpose if the origin of such financial accounting benefit is 
     a reduction of income tax.
       ``(ii) Special rule where taxpayer relies on profit 
     potential.--A transaction shall not be treated as having 
     economic substance by reason of having a potential for profit 
     unless--

       ``(I) the present value of the reasonably expected pre-tax 
     profit from the transaction is substantial in relation to the 
     present value of the expected net tax benefits that would be 
     allowed if the transaction were respected, and
       ``(II) the reasonably expected pre-tax profit from the 
     transaction exceeds a risk-free rate of return.

       ``(C) Treatment of fees and foreign taxes.--Fees and other 
     transaction expenses and foreign taxes shall be taken into 
     account as expenses in determining pre-tax profit under 
     subparagraph (B)(ii).
       ``(2) Special rules for transactions with tax-indifferent 
     parties.--
       ``(A) Special rules for financing transactions.--The form 
     of a transaction which is in substance the borrowing of money 
     or the acquisition of financial capital directly or 
     indirectly from a tax-indifferent party shall not be 
     respected if the present value of the deductions to be 
     claimed with respect to the transaction is substantially in 
     excess of the present value of the anticipated economic 
     returns of the person lending the money or providing the 
     financial capital. A public offering shall be treated as a 
     borrowing, or an acquisition of financial capital, from a 
     tax-indifferent party if it is reasonably expected that at 
     least 50 percent of the offering will be placed with tax-
     indifferent parties.
       ``(B) Artificial income shifting and basis adjustments.--
     The form of a transaction with a tax-indifferent party shall 
     not be respected if--
       ``(i) it results in an allocation of income or gain to the 
     tax-indifferent party in excess of such party's economic 
     income or gain, or
       ``(ii) it results in a basis adjustment or shifting of 
     basis on account of overstating the income or gain of the 
     tax-indifferent party.
       ``(3) Definitions and special rules.--For purposes of this 
     subsection--
       ``(A) Economic substance doctrine.--The term `economic 
     substance doctrine' means the common law doctrine under which 
     tax benefits under subtitle A with respect to a transaction 
     are not allowable if the transaction does not have economic 
     substance or lacks a business purpose.
       ``(B) Tax-indifferent party.--The term `tax-indifferent 
     party' means any person or entity not subject to tax imposed 
     by subtitle A. A person shall be treated as a tax-indifferent 
     party with respect to a transaction if the items taken into 
     account with respect to the transaction have no substantial 
     impact on such person's liability under subtitle A.
       ``(C) Exception for personal transactions of individuals.--
     In the case of an individual, this subsection shall apply 
     only to transactions entered into in connection with a trade 
     or business or an activity engaged in for the production of 
     income.
       ``(D) Treatment of lessors.--In applying paragraph 
     (1)(B)(ii) to the lessor of tangible property subject to a 
     lease--
       ``(i) the expected net tax benefits with respect to the 
     leased property shall not include the benefits of--

       ``(I) depreciation,
       ``(II) any tax credit, or
       ``(III) any other deduction as provided in guidance by the 
     Secretary, and

       ``(ii) subclause (II) of paragraph (1)(B)(ii) shall be 
     disregarded in determining whether any of such benefits are 
     allowable.
       ``(4) Other common law doctrines not affected.--Except as 
     specifically provided in this subsection, the provisions of 
     this subsection shall not be construed as altering or 
     supplanting any other rule of law, and the requirements of 
     this subsection shall be construed as being in addition to 
     any such other rule of law.
       ``(5) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this subsection. Such regulations may include 
     exemptions from the application of this subsection.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to transactions entered into after the date of 
     the enactment of this Act.

     SEC. 102. PENALTY FOR FAILING TO DISCLOSE REPORTABLE 
                   TRANSACTION.

       (a) In General.--Part I of subchapter B of chapter 68 
     (relating to assessable penalties) is amended by inserting 
     after section 6707 the following new section:

     ``SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE REPORTABLE 
                   TRANSACTION INFORMATION WITH RETURN OR 
                   STATEMENT.

       ``(a) Imposition of Penalty.--Any person who fails to 
     include on any return or statement any information with 
     respect to a reportable transaction which is required under 
     section 6011 to be included with such return or statement 
     shall pay a penalty in the amount determined under subsection 
     (b).
       ``(b) Amount of Penalty.--
       ``(1) In general.--Except as provided in paragraphs (2) and 
     (3), the amount of the penalty under subsection (a) shall be 
     $50,000.
       ``(2) Listed transaction.--The amount of the penalty under 
     subsection (a) with respect to a listed transaction shall be 
     $100,000.
       ``(3) Increase in penalty for large entities and high net 
     worth individuals.--
       ``(A) In general.--In the case of a failure under 
     subsection (a) by--
       ``(i) a large entity, or
       ``(ii) a high net worth individual,

     the penalty under paragraph (1) or (2) shall be twice the 
     amount determined without regard to this paragraph.
       ``(B) Large entity.--For purposes of subparagraph (A), the 
     term `large entity' means, with respect to any taxable year, 
     a person (other than a natural person) with gross receipts in 
     excess of $10,000,000 for the taxable year in which the 
     reportable transaction occurs or the preceding taxable year. 
     Rules similar to the rules of paragraph (2) and subparagraphs 
     (B), (C), and (D) of paragraph (3) of section 448(c) shall 
     apply for purposes of this subparagraph.
       ``(C) High net worth individual.--For purposes of 
     subparagraph (A), the term `high net worth individual' means, 
     with respect to a reportable transaction, a natural person 
     whose net worth exceeds $2,000,000 immediately before the 
     transaction.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Reportable transaction.--The term `reportable 
     transaction' means any transaction with respect to which 
     information is required to be included with a return or 
     statement because, as determined under regulations prescribed 
     under section 6011, such transaction is of a type which the 
     Secretary determines as having a potential for tax avoidance 
     or evasion.
       ``(2) Listed transaction.--Except as provided in 
     regulations, the term `listed transaction' means a reportable 
     transaction which is the same as, or substantially similar 
     to, a transaction specifically identified by the Secretary as 
     a tax avoidance transaction for purposes of section 6011.
       ``(d) Authority To Rescind Penalty.--
       ``(1) In general.--The Commissioner of Internal Revenue may 
     rescind all or any portion of any penalty imposed by this 
     section with respect to any violation if--

[[Page 31276]]

       ``(A) the violation is with respect to a reportable 
     transaction other than a listed transaction,
       ``(B) the person on whom the penalty is imposed has a 
     history of complying with the requirements of this title,
       ``(C) it is shown that the violation is due to an 
     unintentional mistake of fact,
       ``(D) imposing the penalty would be against equity and good 
     conscience, and
       ``(E) rescinding the penalty would promote compliance with 
     the requirements of this title and effective tax 
     administration.
       ``(2) Discretion.--The exercise of authority under 
     paragraph (1) shall be at the sole discretion of the 
     Commissioner and may be delegated only to the head of the 
     Office of Tax Shelter Analysis. The Commissioner, in the 
     Commissioner's sole discretion, may establish a procedure to 
     determine if a penalty should be referred to the Commissioner 
     or the head of such Office for a determination under 
     paragraph (1).
       ``(3) No appeal.--Notwithstanding any other provision of 
     law, any determination under this subsection may not be 
     reviewed in any administrative or judicial proceeding.
       ``(4) Records.--If a penalty is rescinded under paragraph 
     (1), the Commissioner shall place in the file in the Office 
     of the Commissioner the opinion of the Commissioner or the 
     head of the Office of Tax Shelter Analysis with respect to 
     the determination, including--
       ``(A) the facts and circumstances of the transaction,
       ``(B) the reasons for the rescission, and
       ``(C) the amount of the penalty rescinded.
       ``(5) Report.--The Commissioner shall each year report to 
     the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate--
       ``(A) a summary of the total number and aggregate amount of 
     penalties imposed, and rescinded, under this section, and
       ``(B) a description of each penalty rescinded under this 
     subsection and the reasons therefor.
       ``(e) Penalty Reported to SEC.--In the case of a person--
       ``(1) which is required to file periodic reports under 
     section 13 or 15(d) of the Securities Exchange Act of 1934 or 
     is required to be consolidated with another person for 
     purposes of such reports, and
       ``(2) which--
       ``(A) is required to pay a penalty under this section with 
     respect to a listed transaction,
       ``(B) is required to pay a penalty under section 6662A with 
     respect to any reportable transaction at a rate prescribed 
     under section 6662A(c), or
       ``(C) is required to pay a penalty under section 6662B with 
     respect to any noneconomic substance transaction,

     the requirement to pay such penalty shall be disclosed in 
     such reports filed by such person for such periods as the 
     Secretary shall specify. Failure to make a disclosure in 
     accordance with the preceding sentence shall be treated as a 
     failure to which the penalty under subsection (b)(2) applies.
       ``(f) Coordination With Other Penalties.--The penalty 
     imposed by this section is in addition to any penalty imposed 
     under this title.''.
       (b) Conforming Amendment.--The table of sections for part I 
     of subchapter B of chapter 68 is amended by inserting after 
     the item relating to section 6707 the following:

``Sec. 6707A. Penalty for failure to include reportable transaction 
              information with return or statement.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to returns and statements the due date for which 
     is after the date of the enactment of this Act.

     SEC. 103. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS 
                   AND OTHER REPORTABLE TRANSACTIONS HAVING A 
                   SIGNIFICANT TAX AVOIDANCE PURPOSE.

       (a) In General.--Subchapter A of chapter 68 is amended by 
     inserting after section 6662 the following new section:

     ``SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON 
                   UNDERSTATEMENTS WITH RESPECT TO REPORTABLE 
                   TRANSACTIONS.

       ``(a) Imposition of Penalty.--If a taxpayer has a 
     reportable transaction understatement for any taxable year, 
     there shall be added to the tax an amount equal to 20 percent 
     of the amount of such understatement.
       ``(b) Reportable Transaction Understatement.--For purposes 
     of this section--
       ``(1) In general.--The term `reportable transaction 
     understatement' means the sum of--
       ``(A) the product of--
       ``(i) the amount of the increase (if any) in taxable income 
     which results from a difference between the proper tax 
     treatment of an item to which this section applies and the 
     taxpayer's treatment of such item (as shown on the taxpayer's 
     return of tax), and
       ``(ii) the highest rate of tax imposed by section 1 
     (section 11 in the case of a taxpayer which is a 
     corporation), and
       ``(B) the amount of the decrease (if any) in the aggregate 
     amount of credits determined under subtitle A which results 
     from a difference between the taxpayer's treatment of an item 
     to which this section applies (as shown on the taxpayer's 
     return of tax) and the proper tax treatment of such item.

     For purposes of subparagraph (A), any reduction of the excess 
     of deductions allowed for the taxable year over gross income 
     for such year, and any reduction in the amount of capital 
     losses which would (without regard to section 1211) be 
     allowed for such year, shall be treated as an increase in 
     taxable income.
       ``(2) Items to which section applies.--This section shall 
     apply to any item which is attributable to--
       ``(A) any listed transaction, and
       ``(B) any reportable transaction (other than a listed 
     transaction) if a significant purpose of such transaction is 
     the avoidance or evasion of Federal income tax.
       ``(c) Higher Penalty for Nondisclosed Listed and Other 
     Avoidance Transactions.--
       ``(1) In general.--Subsection (a) shall be applied by 
     substituting `30 percent' for `20 percent' with respect to 
     the portion of any reportable transaction understatement with 
     respect to which the requirement of section 6664(d)(2)(A) is 
     not met.
       ``(2) Rules applicable to assertion and compromise of 
     penalty.--
       ``(A) In general.--Only upon the approval by the Chief 
     Counsel for the Internal Revenue Service or the Chief 
     Counsel's delegate at the national office of the Internal 
     Revenue Service may a penalty to which paragraph (1) applies 
     be included in a 1st letter of proposed deficiency which 
     allows the taxpayer an opportunity for administrative review 
     in the Internal Revenue Service Office of Appeals. If such a 
     letter is provided to the taxpayer, only the Commissioner of 
     Internal Revenue may compromise all or any portion of such 
     penalty.
       ``(B) Applicable rules.--The rules of paragraphs (2), (3), 
     (4), and (5) of section 6707A(d) shall apply for purposes of 
     subparagraph (A).
       ``(d) Definitions of Reportable and Listed Transactions.--
     For purposes of this section, the terms `reportable 
     transaction' and `listed transaction' have the respective 
     meanings given to such terms by section 6707A(c).
       ``(e) Special Rules.--
       ``(1) Coordination with penalties, etc., on other 
     understatements.--In the case of an understatement (as 
     defined in section 6662(d)(2))--
       ``(A) the amount of such understatement (determined without 
     regard to this paragraph) shall be increased by the aggregate 
     amount of reportable transaction understatements and 
     noneconomic substance transaction understatements for 
     purposes of determining whether such understatement is a 
     substantial understatement under section 6662(d)(1), and
       ``(B) the addition to tax under section 6662(a) shall apply 
     only to the excess of the amount of the substantial 
     understatement (if any) after the application of subparagraph 
     (A) over the aggregate amount of reportable transaction 
     understatements and noneconomic substance transaction 
     understatements.
       ``(2) Coordination with other penalties.--
       ``(A) Application of fraud penalty.--References to an 
     underpayment in section 6663 shall be treated as including 
     references to a reportable transaction understatement and a 
     noneconomic substance transaction understatement.
       ``(B) No double penalty.--This section shall not apply to 
     any portion of an understatement on which a penalty is 
     imposed under section 6662B or 6663.
       ``(3) Special rule for amended returns.--Except as provided 
     in regulations, in no event shall any tax treatment included 
     with an amendment or supplement to a return of tax be taken 
     into account in determining the amount of any reportable 
     transaction understatement or noneconomic substance 
     transaction understatement if the amendment or supplement is 
     filed after the earlier of the date the taxpayer is first 
     contacted by the Secretary regarding the examination of the 
     return or such other date as is specified by the Secretary.
       ``(4) Noneconomic substance transaction understatement.--
     For purposes of this subsection, the term `noneconomic 
     substance transaction understatement' has the meaning given 
     such term by section 6662B(c).
       ``(5) Cross reference.--

  ``For reporting of section 6662A(c) penalty to the Securities and 
Exchange Commission, see section 6707A(e).''.

       (b) Determination of Other Understatements.--Subparagraph 
     (A) of section 6662(d)(2) is amended by adding at the end the 
     following flush sentence:

     ``The excess under the preceding sentence shall be determined 
     without regard to items to which section 6662A applies and 
     without regard to items with respect to which a penalty is 
     imposed by section 6662B.''.
       (c) Reasonable Cause Exception.--
       (1) In general.--Section 6664 is amended by adding at the 
     end the following new subsection:
       ``(d) Reasonable Cause Exception for Reportable Transaction 
     Understatements.--
       ``(1) In general.--No penalty shall be imposed under 
     section 6662A with respect to

[[Page 31277]]

     any portion of a reportable transaction understatement if it 
     is shown that there was a reasonable cause for such portion 
     and that the taxpayer acted in good faith with respect to 
     such portion.
       ``(2) Special rules.--Paragraph (1) shall not apply to any 
     reportable transaction understatement unless--
       ``(A) the relevant facts affecting the tax treatment of the 
     item are adequately disclosed in accordance with the 
     regulations prescribed under section 6011,
       ``(B) there is or was substantial authority for such 
     treatment, and
       ``(C) the taxpayer reasonably believed that such treatment 
     was more likely than not the proper treatment.

     A taxpayer failing to adequately disclose in accordance with 
     section 6011 shall be treated as meeting the requirements of 
     subparagraph (A) if the penalty for such failure was 
     rescinded under section 6707A(d).
       ``(3) Rules relating to reasonable belief.--For purposes of 
     paragraph (2)(C)--
       ``(A) In general.--A taxpayer shall be treated as having a 
     reasonable belief with respect to the tax treatment of an 
     item only if such belief--
       ``(i) is based on the facts and law that exist at the time 
     the return of tax which includes such tax treatment is filed, 
     and
       ``(ii) relates solely to the taxpayer's chances of success 
     on the merits of such treatment and does not take into 
     account the possibility that a return will not be audited, 
     such treatment will not be raised on audit, or such treatment 
     will be resolved through settlement if it is raised.
       ``(B) Certain opinions may not be relied upon.--
       ``(i) In general.--An opinion of a tax advisor may not be 
     relied upon to establish the reasonable belief of a taxpayer 
     if--

       ``(I) the tax advisor is described in clause (ii), or
       ``(II) the opinion is described in clause (iii).

       ``(ii) Disqualified tax advisors.--A tax advisor is 
     described in this clause if the tax advisor--

       ``(I) is a material advisor (within the meaning of section 
     6111(b)(1)) who participates in the organization, management, 
     promotion, or sale of the transaction or who is related 
     (within the meaning of section 267(b) or 707(b)(1)) to any 
     person who so participates,
       ``(II) is compensated directly or indirectly by a material 
     advisor with respect to the transaction,
       ``(III) has a fee arrangement with respect to the 
     transaction which is contingent on all or part of the 
     intended tax benefits from the transaction being sustained, 
     or
       ``(IV) as determined under regulations prescribed by the 
     Secretary, has a disqualifying financial interest with 
     respect to the transaction.

       ``(iii) Disqualified opinions.--For purposes of clause (i), 
     an opinion is disqualified if the opinion--

       ``(I) is based on unreasonable factual or legal assumptions 
     (including assumptions as to future events),
       ``(II) unreasonably relies on representations, statements, 
     findings, or agreements of the taxpayer or any other person,
       ``(III) does not identify and consider all relevant facts, 
     or
       ``(IV) fails to meet any other requirement as the Secretary 
     may prescribe.''.

       (2) Conforming amendment.--The heading for subsection (c) 
     of section 6664 is amended by inserting ``for Underpayments'' 
     after ``Exception''.
       (d) Conforming Amendments.--
       (1) Subparagraph (C) of section 461(i)(3) is amended by 
     striking ``section 6662(d)(2)(C)(iii)'' and inserting 
     ``section 1274(b)(3)(C)''.
       (2) Paragraph (3) of section 1274(b) is amended--
       (A) by striking ``(as defined in section 
     6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
       (B) by adding at the end the following new subparagraph:
       ``(C) Tax shelter.--For purposes of subparagraph (B), the 
     term `tax shelter' means--
       ``(i) a partnership or other entity,
       ``(ii) any investment plan or arrangement, or
       ``(iii) any other plan or arrangement,

     if a significant purpose of such partnership, entity, plan, 
     or arrangement is the avoidance or evasion of Federal income 
     tax.''.
       (3) Section 6662(d)(2) is amended by striking subparagraphs 
     (C) and (D).
       (4) Section 6664(c)(1) is amended by striking ``this part'' 
     and inserting ``section 6662 or 6663''.
       (5) Subsection (b) of section 7525 is amended by striking 
     ``section 6662(d)(2)(C)(iii)'' and inserting ``section 
     1274(b)(3)(C)''.
       (6)(A) The heading for section 6662 is amended to read as 
     follows:

     ``SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON 
                   UNDERPAYMENTS.''.

       (B) The table of sections for part II of subchapter A of 
     chapter 68 is amended by striking the item relating to 
     section 6662 and inserting the following new items:

``Sec. 6662. Imposition of accuracy-related penalty on underpayments.
``Sec. 6662A. Imposition of accuracy-related penalty on understatements 
              with respect to reportable transactions.''.

       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

     SEC. 104. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO 
                   TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

       (a) In General.--Subchapter A of chapter 68 is amended by 
     inserting after section 6662A the following new section:

     ``SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO 
                   TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

       ``(a) Imposition of Penalty.--If a taxpayer has an 
     noneconomic substance transaction understatement for any 
     taxable year, there shall be added to the tax an amount equal 
     to 40 percent of the amount of such understatement.
       ``(b) Reduction of Penalty for Disclosed Transactions.--
     Subsection (a) shall be applied by substituting `20 percent' 
     for `40 percent' with respect to the portion of any 
     noneconomic substance transaction understatement with respect 
     to which the relevant facts affecting the tax treatment of 
     the item are adequately disclosed in the return or a 
     statement attached to the return.
       ``(c) Noneconomic Substance Transaction Understatement.--
     For purposes of this section--
       ``(1) In general.--The term `noneconomic substance 
     transaction understatement' means any amount which would be 
     an understatement under section 6662A(b)(1) if section 6662A 
     were applied by taking into account items attributable to 
     noneconomic substance transactions rather than items to which 
     section 6662A would apply without regard to this paragraph.
       ``(2) Noneconomic substance transaction.--The term 
     `noneconomic substance transaction' means any transaction 
     if--
       ``(A) there is a lack of economic substance (within the 
     meaning of section 7701(n)(1)) for the transaction giving 
     rise to the claimed benefit or the transaction was not 
     respected under section 7701(n)(2), or
       ``(B) the transaction fails to meet the requirements of any 
     similar rule of law.
       ``(d) Rules Applicable to Compromise of Penalty.--
       ``(1) In general.--If the 1st letter of proposed deficiency 
     which allows the taxpayer an opportunity for administrative 
     review in the Internal Revenue Service Office of Appeals has 
     been sent with respect to a penalty to which this section 
     applies, only the Commissioner of Internal Revenue may 
     compromise all or any portion of such penalty.
       ``(2) Applicable rules.--The rules of paragraphs (2), (3), 
     (4), and (5) of section 6707A(d) shall apply for purposes of 
     paragraph (1).
       ``(e) Coordination With Other Penalties.--Except as 
     otherwise provided in this part, the penalty imposed by this 
     section shall be in addition to any other penalty imposed by 
     this title.
       ``(f) Cross References.--

  ``(1) For coordination of penalty with understatements under section 
6662 and other special rules, see section 6662A(e).
  ``(2) For reporting of penalty imposed under this section to the 
Securities and Exchange Commission, see section 6707A(e).''.

       (b) Clerical Amendment.--The table of sections for part II 
     of subchapter A of chapter 68 is amended by inserting after 
     the item relating to section 6662A the following new item:

``Sec. 6662B. Penalty for understatements attributable to transactions 
              lacking economic substance, etc.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions entered into after the date of 
     the enactment of this Act.

     SEC. 105. MODIFICATIONS OF SUBSTANTIAL UNDERSTATEMENT PENALTY 
                   FOR NONREPORTABLE TRANSACTIONS.

       (a) Substantial Understatement of Corporations.--Section 
     6662(d)(1)(B) (relating to special rule for corporations) is 
     amended to read as follows:
       ``(B) Special rule for corporations.--In the case of a 
     corporation other than an S corporation or a personal holding 
     company (as defined in section 542), there is a substantial 
     understatement of income tax for any taxable year if the 
     amount of the understatement for the taxable year exceeds the 
     lesser of--
       ``(i) 10 percent of the tax required to be shown on the 
     return for the taxable year (or, if greater, $10,000), or
       ``(ii) $10,000,000.''.
       (b) Reduction for Understatement of Taxpayer Due to 
     Position of Taxpayer or Disclosed Item.--
       (1) In general.--Section 6662(d)(2)(B)(i) (relating to 
     substantial authority) is amended to read as follows:
       ``(i) the tax treatment of any item by the taxpayer if the 
     taxpayer had reasonable belief that the tax treatment was 
     more likely than not the proper treatment, or''.
       (2) Conforming amendment.--Section 6662(d) is amended by 
     adding at the end the following new paragraph:
       ``(3) Secretarial list.--For purposes of this subsection, 
     section 6664(d)(2), and section 6694(a)(1), the Secretary may 
     prescribe a list of positions for which the Secretary 
     believes there is not substantial authority or

[[Page 31278]]

     there is no reasonable belief that the tax treatment is more 
     likely than not the proper tax treatment. Such list (and any 
     revisions thereof) shall be published in the Federal Register 
     or the Internal Revenue Bulletin.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. 106. TAX SHELTER EXCEPTION TO CONFIDENTIALITY PRIVILEGES 
                   RELATING TO TAXPAYER COMMUNICATIONS.

       (a) In General.--Section 7525(b) (relating to section not 
     to apply to communications regarding corporate tax shelters) 
     is amended to read as follows:
       ``(b) Section Not To Apply to Communications Regarding Tax 
     Shelters.--The privilege under subsection (a) shall not apply 
     to any written communication which is--
       ``(1) between a federally authorized tax practitioner and--
       ``(A) any person,
       ``(B) any director, officer, employee, agent, or 
     representative of the person, or
       ``(C) any other person holding a capital or profits 
     interest in the person, and
       ``(2) in connection with the promotion of the direct or 
     indirect participation of the person in any tax shelter (as 
     defined in section 1274(b)(3)(C)).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to communications made on or after the date of 
     the enactment of this Act.

     SEC. 107. DISCLOSURE OF REPORTABLE TRANSACTIONS.

       (a) In General.--Section 6111 (relating to registration of 
     tax shelters) is amended to read as follows:

     ``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.

       ``(a) In General.--Each material advisor with respect to 
     any reportable transaction shall make a return (in such form 
     as the Secretary may prescribe) setting forth--
       ``(1) information identifying and describing the 
     transaction,
       ``(2) information describing any potential tax benefits 
     expected to result from the transaction, and
       ``(3) such other information as the Secretary may 
     prescribe.
     Such return shall be filed not later than the date specified 
     by the Secretary.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Material advisor.--
       ``(A) In general.--The term `material advisor' means any 
     person--
       ``(i) who provides any material aid, assistance, or advice 
     with respect to organizing, managing, promoting, selling, 
     implementing, or carrying out any reportable transaction, and
       ``(ii) who directly or indirectly derives gross income in 
     excess of the threshold amount for such aid, assistance, or 
     advice.
       ``(B) Threshold amount.--For purposes of subparagraph (A), 
     the threshold amount is--
       ``(i) $50,000 in the case of a reportable transaction 
     substantially all of the tax benefits from which are provided 
     to natural persons, and
       ``(ii) $250,000 in any other case.
       ``(2) Reportable transaction.--The term `reportable 
     transaction' has the meaning given to such term by section 
     6707A(c).
       ``(c) Regulations.--The Secretary may prescribe regulations 
     which provide--
       ``(1) that only 1 person shall be required to meet the 
     requirements of subsection (a) in cases in which 2 or more 
     persons would otherwise be required to meet such 
     requirements,
       ``(2) exemptions from the requirements of this section, and
       ``(3) such rules as may be necessary or appropriate to 
     carry out the purposes of this section.''.
       (b) Conforming Amendments.--
       (1) The item relating to section 6111 in the table of 
     sections for subchapter B of chapter 61 is amended to read as 
     follows:

``Sec. 6111. Disclosure of reportable transactions.''.

       (2)(A) So much of section 6112 as precedes subsection (c) 
     thereof is amended to read as follows:

     ``SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANSACTIONS 
                   MUST KEEP LISTS OF ADVISEES.

       ``(a) In General.--Each material advisor (as defined in 
     section 6111) with respect to any reportable transaction (as 
     defined in section 6707A(c)) shall maintain, in such manner 
     as the Secretary may by regulations prescribe, a list--
       ``(1) identifying each person with respect to whom such 
     advisor acted as such a material advisor with respect to such 
     transaction, and
       ``(2) containing such other information as the Secretary 
     may by regulations require.

     This section shall apply without regard to whether a material 
     advisor is required to file a return under section 6111 with 
     respect to such transaction.''.
       (B) Section 6112 is amended by redesignating subsection (c) 
     as subsection (b).
       (C) Section 6112(b), as redesignated by subparagraph (B), 
     is amended--
       (i) by inserting ``written'' before ``request'' in 
     paragraph (1)(A), and
       (ii) by striking ``shall prescribe'' in paragraph (2) and 
     inserting ``may prescribe''.
       (D) The item relating to section 6112 in the table of 
     sections for subchapter B of chapter 61 is amended to read as 
     follows:

``Sec. 6112. Material advisors of reportable transactions must keep 
              lists of advisees.''.

       (3)(A) The heading for section 6708 is amended to read as 
     follows:

     ``SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH 
                   RESPECT TO REPORTABLE TRANSACTIONS.''.

       (B) The item relating to section 6708 in the table of 
     sections for part I of subchapter B of chapter 68 is amended 
     to read as follows:

``Sec. 6708. Failure to maintain lists of advisees with respect to 
              reportable transactions.''.

       (c) Required Disclosure Not Subject to Claim of 
     Confidentiality.--Subparagraph (A) of section 6112(b)(1), as 
     redesignated by subsection (b)(2)(B), is amended by adding at 
     the end the following new flush sentence:
     ``For purposes of this section, the identity of any person on 
     such list shall not be privileged.''.
       (d) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to transactions 
     with respect to which material aid, assistance, or advice 
     referred to in section 6111(b)(1)(A)(i) of the Internal 
     Revenue Code of 1986 (as added by this section) is provided 
     after the date of the enactment of this Act.
       (2) No claim of confidentiality against disclosure.--The 
     amendment made by subsection (c) shall take effect as if 
     included in the amendments made by section 142 of the Deficit 
     Reduction Act of 1984.

     SEC. 108. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER 
                   TAX SHELTERS.

       (a) In General.--Section 6707 (relating to failure to 
     furnish information regarding tax shelters) is amended to 
     read as follows:

     ``SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING 
                   REPORTABLE TRANSACTIONS.

       ``(a) In General.--If a person who is required to file a 
     return under section 6111(a) with respect to any reportable 
     transaction--
       ``(1) fails to file such return on or before the date 
     prescribed therefor, or
       ``(2) files false or incomplete information with the 
     Secretary with respect to such transaction,

     such person shall pay a penalty with respect to such return 
     in the amount determined under subsection (b).
       ``(b) Amount of Penalty.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     penalty imposed under subsection (a) with respect to any 
     failure shall be $50,000.
       ``(2) Listed transactions.--The penalty imposed under 
     subsection (a) with respect to any listed transaction shall 
     be an amount equal to the greater of--
       ``(A) $200,000, or
       ``(B) 50 percent of the gross income derived by such person 
     with respect to aid, assistance, or advice which is provided 
     with respect to the listed transaction before the date the 
     return including the transaction is filed under section 6111.

     Subparagraph (B) shall be applied by substituting `75 
     percent' for `50 percent' in the case of an intentional 
     failure or act described in subsection (a).
       ``(c) Certain Rules To Apply.--The provisions of section 
     6707A(d) shall apply to any penalty imposed under this 
     section.
       ``(d) Reportable and Listed Transactions.--The terms 
     `reportable transaction' and `listed transaction' have the 
     respective meanings given to such terms by section 
     6707A(c).''.
       (b) Clerical Amendment.--The item relating to section 6707 
     in the table of sections for part I of subchapter B of 
     chapter 68 is amended by striking ``tax shelters'' and 
     inserting ``reportable transactions''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to returns the due date for which is after the 
     date of the enactment of this Act.

     SEC. 109. MODIFICATION OF PENALTY FOR FAILURE TO MAINTAIN 
                   LISTS OF INVESTORS.

       (a) In General.--Subsection (a) of section 6708 is amended 
     to read as follows:
       ``(a) Imposition of Penalty.--
       ``(1) In general.--If any person who is required to 
     maintain a list under section 6112(a) fails to make such list 
     available upon written request to the Secretary in accordance 
     with section 6112(b)(1)(A) within 20 business days after the 
     date of the Secretary's request, such person shall pay a 
     penalty of $10,000 for each day of such failure after such 
     20th day.
       ``(2) Reasonable cause exception.--No penalty shall be 
     imposed by paragraph (1) with respect to the failure on any 
     day if such failure is due to reasonable cause.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to requests made after the date of the enactment 
     of this Act.

     SEC. 110. MODIFICATION OF ACTIONS TO ENJOIN CERTAIN CONDUCT 
                   RELATED TO TAX SHELTERS AND REPORTABLE 
                   TRANSACTIONS.

       (a) In General.--Section 7408 (relating to action to enjoin 
     promoters of abusive tax

[[Page 31279]]

     shelters, etc.) is amended by redesignating subsection (c) as 
     subsection (d) and by striking subsections (a) and (b) and 
     inserting the following new subsections:
       ``(a) Authority To Seek Injunction.--A civil action in the 
     name of the United States to enjoin any person from further 
     engaging in specified conduct may be commenced at the request 
     of the Secretary. Any action under this section shall be 
     brought in the district court of the United States for the 
     district in which such person resides, has his principal 
     place of business, or has engaged in specified conduct. The 
     court may exercise its jurisdiction over such action (as 
     provided in section 7402(a)) separate and apart from any 
     other action brought by the United States against such 
     person.
       ``(b) Adjudication and Decree.--In any action under 
     subsection (a), if the court finds--
       ``(1) that the person has engaged in any specified conduct, 
     and
       ``(2) that injunctive relief is appropriate to prevent 
     recurrence of such conduct,

     the court may enjoin such person from engaging in such 
     conduct or in any other activity subject to penalty under 
     this title.
       ``(c) Specified Conduct.--For purposes of this section, the 
     term `specified conduct' means any action, or failure to take 
     action, subject to penalty under section 6700, 6701, 6707, or 
     6708.''.
       (b) Conforming Amendments.--
       (1) The heading for section 7408 is amended to read as 
     follows:

     ``SEC. 7408. ACTIONS TO ENJOIN SPECIFIED CONDUCT RELATED TO 
                   TAX SHELTERS AND REPORTABLE TRANSACTIONS.''.

       (2) The table of sections for subchapter A of chapter 67 is 
     amended by striking the item relating to section 7408 and 
     inserting the following new item:

``Sec. 7408. Actions to enjoin specified conduct related to tax 
              shelters and reportable transactions.''.

       (c) Effective Date.--The amendment made by this section 
     shall take effect on the day after the date of the enactment 
     of this Act.

     SEC. 111. UNDERSTATEMENT OF TAXPAYER'S LIABILITY BY INCOME 
                   TAX RETURN PREPARER.

       (a) Standards Conformed to Taxpayer Standards.--Section 
     6694(a) (relating to understatements due to unrealistic 
     positions) is amended--
       (1) by striking ``realistic possibility of being sustained 
     on its merits'' in paragraph (1) and inserting ``reasonable 
     belief that the tax treatment in such position was more 
     likely than not the proper treatment'',
       (2) by striking ``or was frivolous'' in paragraph (3) and 
     inserting ``or there was no reasonable basis for the tax 
     treatment of such position'', and
       (3) by striking ``Unrealistic'' in the heading and 
     inserting ``Improper''.
       (b) Amount of Penalty.--Section 6694 is amended--
       (1) by striking ``$250'' in subsection (a) and inserting 
     ``$1,000'', and
       (2) by striking ``$1,000'' in subsection (b) and inserting 
     ``$5,000''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to documents prepared after the date of the 
     enactment of this Act.

     SEC. 112. PENALTY ON FAILURE TO REPORT INTERESTS IN FOREIGN 
                   FINANCIAL ACCOUNTS.

       (a) In General.--Section 5321(a)(5) of title 31, United 
     States Code, is amended to read as follows:
       ``(5) Foreign financial agency transaction violation.--
       ``(A) Penalty authorized.--The Secretary of the Treasury 
     may impose a civil money penalty on any person who violates, 
     or causes any violation of, any provision of section 5314.
       ``(B) Amount of penalty.--
       ``(i) In general.--Except as provided in subparagraph (C), 
     the amount of any civil penalty imposed under subparagraph 
     (A) shall not exceed $5,000.
       ``(ii) Reasonable cause exception.--No penalty shall be 
     imposed under subparagraph (A) with respect to any violation 
     if--

       ``(I) such violation was due to reasonable cause, and
       ``(II) the amount of the transaction or the balance in the 
     account at the time of the transaction was properly reported.

       ``(C) Willful violations.--In the case of any person 
     willfully violating, or willfully causing any violation of, 
     any provision of section 5314--
       ``(i) the maximum penalty under subparagraph (B)(i) shall 
     be increased to the greater of--

       ``(I) $25,000, or
       ``(II) the amount (not exceeding $100,000) determined under 
     subparagraph (D), and

       ``(ii) subparagraph (B)(ii) shall not apply.
       ``(D) Amount.--The amount determined under this 
     subparagraph is--
       ``(i) in the case of a violation involving a transaction, 
     the amount of the transaction, or
       ``(ii) in the case of a violation involving a failure to 
     report the existence of an account or any identifying 
     information required to be provided with respect to an 
     account, the balance in the account at the time of the 
     violation.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to violations occurring after the date of the 
     enactment of this Act.

     SEC. 113. FRIVOLOUS TAX SUBMISSIONS.

       (a) Civil Penalties.--Section 6702 is amended to read as 
     follows:

     ``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.

       ``(a) Civil Penalty for Frivolous Tax Returns.--A person 
     shall pay a penalty of $5,000 if--
       ``(1) such person files what purports to be a return of a 
     tax imposed by this title but which--
       ``(A) does not contain information on which the substantial 
     correctness of the self-assessment may be judged, or
       ``(B) contains information that on its face indicates that 
     the self-assessment is substantially incorrect; and
       ``(2) the conduct referred to in paragraph (1)--
       ``(A) is based on a position which the Secretary has 
     identified as frivolous under subsection (c), or
       ``(B) reflects a desire to delay or impede the 
     administration of Federal tax laws.
       ``(b) Civil Penalty for Specified Frivolous Submissions.--
       ``(1) Imposition of penalty.--Except as provided in 
     paragraph (3), any person who submits a specified frivolous 
     submission shall pay a penalty of $5,000.
       ``(2) Specified frivolous submission.--For purposes of this 
     section--
       ``(A) Specified frivolous submission.--The term `specified 
     frivolous submission' means a specified submission if any 
     portion of such submission--
       ``(i) is based on a position which the Secretary has 
     identified as frivolous under subsection (c), or
       ``(ii) reflects a desire to delay or impede the 
     administration of Federal tax laws.
       ``(B) Specified submission.--The term `specified 
     submission' means--
       ``(i) a request for a hearing under--

       ``(I) section 6320 (relating to notice and opportunity for 
     hearing upon filing of notice of lien), or
       ``(II) section 6330 (relating to notice and opportunity for 
     hearing before levy), and

       ``(ii) an application under--

       ``(I) section 6159 (relating to agreements for payment of 
     tax liability in installments),
       ``(II) section 7122 (relating to compromises), or
       ``(III) section 7811 (relating to taxpayer assistance 
     orders).

       ``(3) Opportunity to withdraw submission.--If the Secretary 
     provides a person with notice that a submission is a 
     specified frivolous submission and such person withdraws such 
     submission within 30 days after such notice, the penalty 
     imposed under paragraph (1) shall not apply with respect to 
     such submission.
       ``(c) Listing of Frivolous Positions.--The Secretary shall 
     prescribe (and periodically revise) a list of positions which 
     the Secretary has identified as being frivolous for purposes 
     of this subsection. The Secretary shall not include in such 
     list any position that the Secretary determines meets the 
     requirement of section 6662(d)(2)(B)(ii)(II).
       ``(d) Reduction of Penalty.--The Secretary may reduce the 
     amount of any penalty imposed under this section if the 
     Secretary determines that such reduction would promote 
     compliance with and administration of the Federal tax laws.
       ``(e) Penalties in Addition to Other Penalties.--The 
     penalties imposed by this section shall be in addition to any 
     other penalty provided by law.''.
       (b) Treatment of Frivolous Requests for Hearings Before 
     Levy.--
       (1) Frivolous requests disregarded.--Section 6330 (relating 
     to notice and opportunity for hearing before levy) is amended 
     by adding at the end the following new subsection:
       ``(g) Frivolous Requests for Hearing, Etc.--Notwithstanding 
     any other provision of this section, if the Secretary 
     determines that any portion of a request for a hearing under 
     this section or section 6320 meets the requirement of clause 
     (i) or (ii) of section 6702(b)(2)(A), then the Secretary may 
     treat such portion as if it were never submitted and such 
     portion shall not be subject to any further administrative or 
     judicial review.''.
       (2) Preclusion from raising frivolous issues at hearing.--
     Section 6330(c)(4) is amended--
       (A) by striking ``(A)'' and inserting ``(A)(i)'';
       (B) by striking ``(B)'' and inserting ``(ii)'';
       (C) by striking the period at the end of the first sentence 
     and inserting ``; or''; and
       (D) by inserting after subparagraph (A)(ii) (as so 
     redesignated) the following:
       ``(B) the issue meets the requirement of clause (i) or (ii) 
     of section 6702(b)(2)(A).''.
       (3) Statement of grounds.--Section 6330(b)(1) is amended by 
     striking ``under subsection (a)(3)(B)'' and inserting ``in 
     writing under subsection (a)(3)(B) and states the grounds for 
     the requested hearing''.
       (c) Treatment of Frivolous Requests for Hearings Upon 
     Filing of Notice of Lien.--Section 6320 is amended--
       (1) in subsection (b)(1), by striking ``under subsection 
     (a)(3)(B)'' and inserting ``in writing under subsection 
     (a)(3)(B) and states the grounds for the requested hearing'', 
     and
       (2) in subsection (c), by striking ``and (e)'' and 
     inserting ``(e), and (g)''.

[[Page 31280]]

       (d) Treatment of Frivolous Applications for Offers-in-
     Compromise and Installment Agreements.--Section 7122 is 
     amended by adding at the end the following new subsection:
       ``(e) Frivolous Submissions, Etc.--Notwithstanding any 
     other provision of this section, if the Secretary determines 
     that any portion of an application for an offer-in-compromise 
     or installment agreement submitted under this section or 
     section 6159 meets the requirement of clause (i) or (ii) of 
     section 6702(b)(2)(A), then the Secretary may treat such 
     portion as if it were never submitted and such portion shall 
     not be subject to any further administrative or judicial 
     review.''.
       (e) Clerical Amendment.--The table of sections for part I 
     of subchapter B of chapter 68 is amended by striking the item 
     relating to section 6702 and inserting the following new 
     item:

``Sec. 6702. Frivolous tax submissions.''.

       (f) Effective Date.--The amendments made by this section 
     shall apply to submissions made and issues raised after the 
     date on which the Secretary first prescribes a list under 
     section 6702(c) of the Internal Revenue Code of 1986, as 
     amended by subsection (a).

     SEC. 114. REGULATION OF INDIVIDUALS PRACTICING BEFORE THE 
                   DEPARTMENT OF TREASURY.

       (a) Censure; Imposition of Penalty.--
       (1) In general.--Section 330(b) of title 31, United States 
     Code, is amended--
       (A) by inserting ``, or censure,'' after ``Department'', 
     and
       (B) by adding at the end the following new flush sentence:

     ``The Secretary may impose a monetary penalty on any 
     representative described in the preceding sentence. If the 
     representative was acting on behalf of an employer or any 
     firm or other entity in connection with the conduct giving 
     rise to such penalty, the Secretary may impose a monetary 
     penalty on such employer, firm, or entity if it knew, or 
     reasonably should have known, of such conduct. Such penalty 
     shall not exceed the gross income derived (or to be derived) 
     from the conduct giving rise to the penalty and may be in 
     addition to, or in lieu of, any suspension, disbarment, or 
     censure of the representative.''.
       (2) Effective date.--The amendments made by this subsection 
     shall apply to actions taken after the date of the enactment 
     of this Act.
       (b) Tax Shelter Opinions, Etc.--Section 330 of such title 
     31 is amended by adding at the end the following new 
     subsection:
       ``(d) Nothing in this section or in any other provision of 
     law shall be construed to limit the authority of the 
     Secretary of the Treasury to impose standards applicable to 
     the rendering of written advice with respect to any entity, 
     transaction plan or arrangement, or other plan or 
     arrangement, which is of a type which the Secretary 
     determines as having a potential for tax avoidance or 
     evasion.''.

     SEC. 115. PENALTY ON PROMOTERS OF TAX SHELTERS.

       (a) Penalty on Promoting Abusive Tax Shelters.--Section 
     6700(a) is amended by adding at the end the following new 
     sentence: ``Notwithstanding the first sentence, if an 
     activity with respect to which a penalty imposed under this 
     subsection involves a statement described in paragraph 
     (2)(A), the amount of the penalty shall be equal to 50 
     percent of the gross income derived (or to be derived) from 
     such activity by the person on which the penalty is 
     imposed.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to activities after the date of the enactment of 
     this Act.

     SEC. 116. STATUTE OF LIMITATIONS FOR TAXABLE YEARS FOR WHICH 
                   REQUIRED LISTED TRANSACTIONS NOT REPORTED.

       (a) In General.--Section 6501(c) (relating to exceptions) 
     is amended by adding at the end the following new paragraph:
       ``(10) Listed transactions.--If a taxpayer fails to include 
     on any return or statement for any taxable year any 
     information with respect to a listed transaction (as defined 
     in section 6707A(c)(2)) which is required under section 6011 
     to be included with such return or statement, the time for 
     assessment of any tax imposed by this title with respect to 
     such transaction shall not expire before the date which is 1 
     year after the earlier of--
       ``(A) the date on which the Secretary is furnished the 
     information so required; or
       ``(B) the date that a material advisor (as defined in 
     section 6111) meets the requirements of section 6112 with 
     respect to a request by the Secretary under section 6112(b) 
     relating to such transaction with respect to such 
     taxpayer.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years with respect to which the period 
     for assessing a deficiency did not expire before the date of 
     the enactment of this Act.

     SEC. 117. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS 
                   ATTRIBUTABLE TO NONDISCLOSED REPORTABLE AND 
                   NONECONOMIC SUBSTANCE TRANSACTIONS.

       (a) In General.--Section 163 (relating to deduction for 
     interest) is amended by redesignating subsection (m) as 
     subsection (n) and by inserting after subsection (l) the 
     following new subsection:
       ``(m) Interest on Unpaid Taxes Attributable to Nondisclosed 
     Reportable Transactions and Noneconomic Substance 
     Transactions.--No deduction shall be allowed under this 
     chapter for any interest paid or accrued under section 6601 
     on any underpayment of tax which is attributable to--
       ``(1) the portion of any reportable transaction 
     understatement (as defined in section 6662A(b)) with respect 
     to which the requirement of section 6664(d)(2)(A) is not met, 
     or
       ``(2) any noneconomic substance transaction understatement 
     (as defined in section 6662B(c)).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to transactions in taxable years beginning after 
     the date of the enactment of this Act.

     SEC. 118. AUTHORIZATION OF APPROPRIATIONS FOR TAX LAW 
                   ENFORCEMENT.

       There is authorized to be appropriated $300,000,000 for 
     each fiscal year beginning after September 30, 2003, for the 
     purpose of carrying out tax law enforcement to combat tax 
     avoidance transactions and other tax shelters, including the 
     use of offshore financial accounts to conceal taxable income.

            TITLE II--OTHER CORPORATE GOVERNANCE PROVISIONS

     SEC. 201. AFFIRMATION OF CONSOLIDATED RETURN REGULATION 
                   AUTHORITY.

       (a) In General.--Section 1502 (relating to consolidated 
     return regulations) is amended by adding at the end the 
     following new sentence: ``In prescribing such regulations, 
     the Secretary may prescribe rules applicable to corporations 
     filing consolidated returns under section 1501 that are 
     different from other provisions of this title that would 
     apply if such corporations filed separate returns.''.
       (b) Result Not Overturned.--Notwithstanding subsection (a), 
     the Internal Revenue Code of 1986 shall be construed by 
     treating Treasury regulation Sec. 1.1502-20(c)(1)(iii) (as in 
     effect on January 1, 2001) as being inapplicable to the type 
     of factual situation in 255 F.3d 1357 (Fed. Cir. 2001).
       (c) Effective Date.--The provisions of this section shall 
     apply to taxable years beginning before, on, or after the 
     date of the enactment of this Act.

     SEC. 202. SIGNING OF CORPORATE TAX RETURNS BY CHIEF EXECUTIVE 
                   OFFICER.

       (a) In General.--Section 6062 (relating to signing of 
     corporation returns) is amended by inserting after the first 
     sentence the following new sentences: ``The return of a 
     corporation with respect to income shall also include a 
     declaration signed by the chief executive officer of such 
     corporation (or other such officer of the corporation as the 
     Secretary may designate if the corporation does not have a 
     chief executive officer), under penalties of perjury, that 
     the chief executive officer ensures that such return complies 
     with this title and that the chief executive officer was 
     provided reasonable assurance of the accuracy of all material 
     aspects of such return. The preceding sentence shall not 
     apply to any return of a regulated investment company (within 
     the meaning of section 851).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to returns filed after the date of the enactment 
     of this Act.

     SEC. 203. DENIAL OF DEDUCTION FOR CERTAIN FINES, PENALTIES, 
                   AND OTHER AMOUNTS.

       (a) In General.--Subsection (f) of section 162 (relating to 
     trade or business expenses) is amended to read as follows:
       ``(f) Fines, Penalties, and Other Amounts.--
       ``(1) In general.--Except as provided in paragraph (2), no 
     deduction otherwise allowable shall be allowed under this 
     chapter for any amount paid or incurred (whether by suit, 
     agreement, or otherwise) to, or at the direction of, a 
     government or entity described in paragraph (4) in relation 
     to the violation of any law or the investigation or inquiry 
     by such government or entity into the potential violation of 
     any law.
       ``(2) Exception for amounts constituting restitution.--
     Paragraph (1) shall not apply to any amount which the 
     taxpayer establishes constitutes restitution for damage or 
     harm caused by the violation of any law or the potential 
     violation of any law. This paragraph shall not apply to any 
     amount paid or incurred as reimbursement to the government or 
     entity for the costs of any investigation or litigation.
       ``(3) Exception for amounts paid or incurred as the result 
     of certain court orders.--Paragraph (1) shall not apply to 
     any amount paid or incurred by order of a court in a suit in 
     which no government or entity described in paragraph (4) is a 
     party.
       ``(4) Certain nongovernmental regulatory entities.--An 
     entity is described in this paragraph if it is--
       ``(A) a nongovernmental entity which exercises self-
     regulatory powers (including imposing sanctions) in 
     connection with a qualified board or exchange (as defined in 
     section 1256(g)(7)), or
       ``(B) to the extent provided in regulations, a 
     nongovernmental entity which exercises self-regulatory powers 
     (including imposing sanctions) as part of performing an 
     essential governmental function.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to amounts

[[Page 31281]]

     paid or incurred after April 27, 2003, except that such 
     amendment shall not apply to amounts paid or incurred under 
     any binding order or agreement entered into on or before 
     April 27, 2003. Such exception shall not apply to an order or 
     agreement requiring court approval unless the approval was 
     obtained on or before April 27, 2003.

     SEC. 204. DISALLOWANCE OF DEDUCTION FOR PUNITIVE DAMAGES.

       (a) Disallowance of Deduction.--
       (1) In general.--Section 162(g) (relating to treble damage 
     payments under the antitrust laws) is amended by adding at 
     the end the following new paragraph:
       ``(2) Punitive damages.--No deduction shall be allowed 
     under this chapter for any amount paid or incurred for 
     punitive damages in connection with any judgment in, or 
     settlement of, any action. This paragraph shall not apply to 
     punitive damages described in section 104(c).''.
       (2) Conforming amendments.--
       (A) Section 162(g) is amended--
       (i) by striking ``If'' and inserting:
       ``(1) Treble damages.--If'', and
       (ii) by redesignating paragraphs (1) and (2) as 
     subparagraphs (A) and (B), respectively.
       (B) The heading for section 162(g) is amended by inserting 
     ``or Punitive Damages'' after ``Laws''.
       (b) Inclusion in Income of Punitive Damages Paid by Insurer 
     or Otherwise.--
       (1) In general.--Part II of subchapter B of chapter 1 
     (relating to items specifically included in gross income) is 
     amended by adding at the end the following new section:

     ``SEC. 91. PUNITIVE DAMAGES COMPENSATED BY INSURANCE OR 
                   OTHERWISE.

       ``Gross income shall include any amount paid to or on 
     behalf of a taxpayer as insurance or otherwise by reason of 
     the taxpayer's liability (or agreement) to pay punitive 
     damages.''.
       (2) Reporting requirements.--Section 6041 (relating to 
     information at source) is amended by adding at the end the 
     following new subsection:
       ``(f) Section To Apply to Punitive Damages Compensation.--
     This section shall apply to payments by a person to or on 
     behalf of another person as insurance or otherwise by reason 
     of the other person's liability (or agreement) to pay 
     punitive damages.''.
       (3) Conforming amendment.--The table of sections for part 
     II of subchapter B of chapter 1 is amended by adding at the 
     end the following new item:

``Sec. 91. Punitive damages compensated by insurance or otherwise.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to damages paid or incurred on or after the date 
     of the enactment of this Act.

     SEC. 205. INCREASE IN CRIMINAL MONETARY PENALTY LIMITATION 
                   FOR THE UNDERPAYMENT OR OVERPAYMENT OF TAX DUE 
                   TO FRAUD.

       (a) In General.--Section 7206 (relating to fraud and false 
     statements) is amended--
       (1) by striking ``Any person who--'' and inserting ``(a) In 
     General.--Any person who--'', and
       (2) by adding at the end the following new subsection:
       ``(b) Increase in Monetary Limitation for Underpayment or 
     Overpayment of Tax Due To Fraud.--If any portion of any 
     underpayment (as defined in section 6664(a)) or overpayment 
     (as defined in section 6401(a)) of tax required to be shown 
     on a return is attributable to fraudulent action described in 
     subsection (a), the applicable dollar amount under subsection 
     (a) shall in no event be less than an amount equal to such 
     portion. A rule similar to the rule under section 6663(b) 
     shall apply for purposes of determining the portion so 
     attributable.''.
       (b) Increase in Penalties.--
       (1) Attempt to evade or defeat tax.--Section 7201 is 
     amended--
       (A) by striking ``$100,000'' and inserting ``$250,000'',
       (B) by striking ``$500,000'' and inserting ``$1,000,000'', 
     and
       (C) by striking ``5 years'' and inserting ``10 years''.
       (2) Willful failure to file return, supply information, or 
     pay tax.--Section 7203 is amended--
       (A) in the first sentence--
       (i) by striking ``misdemeanor'' and inserting ``felony'', 
     and
       (ii) by striking ``1 year'' and inserting ``10 years'', and
       (B) by striking the third sentence.
       (3) Fraud and false statements.--Section 7206(a) (as 
     redesignated by subsection (a)) is amended--
       (A) by striking ``$100,000'' and inserting ``$250,000'',
       (B) by striking ``$500,000'' and inserting ``$1,000,000'', 
     and
       (C) by striking ``3 years'' and inserting ``5 years''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to underpayments and overpayments attributable to 
     actions occurring after the date of the enactment of this 
     Act.

            TITLE III--ENRON-RELATED TAX SHELTER PROVISIONS

     SEC. 301. LIMITATION ON TRANSFER OR IMPORTATION OF BUILT-IN 
                   LOSSES.

       (a) In General.--Section 362 (relating to basis to 
     corporations) is amended by adding at the end the following 
     new subsection:
       ``(e) Limitations on Built-In Losses.--
       ``(1) Limitation on importation of built-in losses.--
       ``(A) In general.--If in any transaction described in 
     subsection (a) or (b) there would (but for this subsection) 
     be an importation of a net built-in loss, the basis of each 
     property described in subparagraph (B) which is acquired in 
     such transaction shall (notwithstanding subsections (a) and 
     (b)) be its fair market value immediately after such 
     transaction.
       ``(B) Property described.--For purposes of subparagraph 
     (A), property is described in this subparagraph if--
       ``(i) gain or loss with respect to such property is not 
     subject to tax under this subtitle in the hands of the 
     transferor immediately before the transfer, and
       ``(ii) gain or loss with respect to such property is 
     subject to such tax in the hands of the transferee 
     immediately after such transfer.

     In any case in which the transferor is a partnership, the 
     preceding sentence shall be applied by treating each partner 
     in such partnership as holding such partner's proportionate 
     share of the property of such partnership.
       ``(C) Importation of net built-in loss.--For purposes of 
     subparagraph (A), there is an importation of a net built-in 
     loss in a transaction if the transferee's aggregate adjusted 
     bases of property described in subparagraph (B) which is 
     transferred in such transaction would (but for this 
     paragraph) exceed the fair market value of such property 
     immediately after such transaction.''.
       ``(2) Limitation on transfer of built-in losses in section 
     351 transactions.--
       ``(A) In general.--If--
       ``(i) property is transferred by a transferor in any 
     transaction which is described in subsection (a) and which is 
     not described in paragraph (1) of this subsection, and
       ``(ii) the transferee's aggregate adjusted bases of such 
     property so transferred would (but for this paragraph) exceed 
     the fair market value of such property immediately after such 
     transaction,

     then, notwithstanding subsection (a), the transferee's 
     aggregate adjusted bases of the property so transferred shall 
     not exceed the fair market value of such property immediately 
     after such transaction.
       ``(B) Allocation of basis reduction.--The aggregate 
     reduction in basis by reason of subparagraph (A) shall be 
     allocated among the property so transferred in proportion to 
     their respective built-in losses immediately before the 
     transaction.
       ``(C) Exception for transfers within affiliated group.--
     Subparagraph (A) shall not apply to any transaction if the 
     transferor owns stock in the transferee meeting the 
     requirements of section 1504(a)(2). In the case of property 
     to which subparagraph (A) does not apply by reason of the 
     preceding sentence, the transferor's basis in the stock 
     received for such property shall not exceed its fair market 
     value immediately after the transfer.''.
       (b) Comparable Treatment Where Liquidation.--Paragraph (1) 
     of section 334(b) (relating to liquidation of subsidiary) is 
     amended to read as follows:
       ``(1) In general.--If property is received by a corporate 
     distributee in a distribution in a complete liquidation to 
     which section 332 applies (or in a transfer described in 
     section 337(b)(1)), the basis of such property in the hands 
     of such distributee shall be the same as it would be in the 
     hands of the transferor; except that the basis of such 
     property in the hands of such distributee shall be the fair 
     market value of the property at the time of the 
     distribution--
       ``(A) in any case in which gain or loss is recognized by 
     the liquidating corporation with respect to such property, or
       ``(B) in any case in which the liquidating corporation is a 
     foreign corporation, the corporate distributee is a domestic 
     corporation, and the corporate distributee's aggregate 
     adjusted bases of property described in section 362(e)(1)(B) 
     which is distributed in such liquidation would (but for this 
     subparagraph) exceed the fair market value of such property 
     immediately after such liquidation.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to transactions after February 13, 2003.

     SEC. 302. NO REDUCTION OF BASIS UNDER SECTION 734 IN STOCK 
                   HELD BY PARTNERSHIP IN CORPORATE PARTNER.

       (a) In General.--Section 755 is amended by adding at the 
     end the following new subsection:
       ``(c) No Allocation of Basis Decrease to Stock of Corporate 
     Partner.--In making an allocation under subsection (a) of any 
     decrease in the adjusted basis of partnership property under 
     section 734(b)--
       ``(1) no allocation may be made to stock in a corporation 
     (or any person which is related (within the meaning of 
     section 267(b) or 707(b)(1)) to such corporation) which is a 
     partner in the partnership, and
       ``(2) any amount not allocable to stock by reason of 
     paragraph (1) shall be allocated under subsection (a) to 
     other partnership property in such manner as the Secretary 
     may prescribe.

     Gain shall be recognized to the partnership to the extent 
     that the amount required to be

[[Page 31282]]

     allocated under paragraph (2) to other partnership property 
     exceeds the aggregate adjusted basis of such other property 
     immediately before the allocation required by paragraph 
     (2).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions after February 13, 2003.

     SEC. 303. REPEAL OF SPECIAL RULES FOR FASITS.

       (a) In General.--Part V of subchapter M of chapter 1 
     (relating to financial asset securitization investment 
     trusts) is hereby repealed.
       (b) Conforming Amendments.--
       (1) Paragraph (6) of section 56(g) is amended by striking 
     ``REMIC, or FASIT'' and inserting ``or REMIC''.
       (2) Clause (ii) of section 382(l)(4)(B) is amended by 
     striking ``a REMIC to which part IV of subchapter M applies, 
     or a FASIT to which part V of subchapter M applies,'' and 
     inserting ``or a REMIC to which part IV of subchapter M 
     applies,''.
       (3) Paragraph (1) of section 582(c) is amended by striking 
     ``, and any regular interest in a FASIT,''.
       (4) Subparagraph (E) of section 856(c)(5) is amended by 
     striking the last sentence.
       (5)(A) Section 860G(a)(1) is amended by adding at the end 
     the following new sentence: ``An interest shall not fail to 
     qualify as a regular interest solely because the specified 
     principal amount of the regular interest (or the amount of 
     interest accrued on the regular interest) can be reduced as a 
     result of the nonoccurrence of 1 or more contingent payments 
     with respect to any reverse mortgage loan held by the REMIC 
     if, on the startup day for the REMIC, the sponsor reasonably 
     believes that all principal and interest due under the 
     regular interest will be paid at or prior to the liquidation 
     of the REMIC.''.
       (B) The last sentence of section 860G(a)(3) is amended by 
     inserting ``, and any reverse mortgage loan (and each balance 
     increase on such loan meeting the requirements of 
     subparagraph (A)(iii)) shall be treated as an obligation 
     secured by an interest in real property'' before the period 
     at the end.
       (6) Paragraph (3) of section 860G(a) is amended by adding 
     ``and'' at the end of subparagraph (B), by striking ``, and'' 
     at the end of subparagraph (C) and inserting a period, and by 
     striking subparagraph (D).
       (7) Section 860G(a)(3), as amended by paragraph (6), is 
     amended by adding at the end the following new sentence: 
     ``For purposes of subparagraph (A), if more than 50 percent 
     of the obligations transferred to, or purchased by, the REMIC 
     are originated by the United States or any State (or any 
     political subdivision, agency, or instrumentality of the 
     United States or any State) and are principally secured by an 
     interest in real property, then each obligation transferred 
     to, or purchased by, the REMIC shall be treated as secured by 
     an interest in real property.''.
       (8)(A) Section 860G(a)(3)(A) is amended by striking ``or'' 
     at the end of clause (i), by inserting ``or'' at the end of 
     clause (ii), and by inserting after clause (ii) the following 
     new clause:
       ``(iii) represents an increase in the principal amount 
     under the original terms of an obligation described in clause 
     (i) or (ii) if such increase--

       ``(I) is attributable to an advance made to the obligor 
     pursuant to the original terms of the obligation,
       ``(II) occurs after the startup day, and
       ``(III) is purchased by the REMIC pursuant to a fixed price 
     contract in effect on the startup day.''.

       (B) Section 860G(a)(7)(B) is amended to read as follows:
       ``(B) Qualified reserve fund.--For purposes of subparagraph 
     (A), the term `qualified reserve fund' means any reasonably 
     required reserve to--
       ``(i) provide for full payment of expenses of the REMIC or 
     amounts due on regular interests in the event of defaults on 
     qualified mortgages or lower than expected returns on cash 
     flow investments, or
       ``(ii) provide a source of funds for the purchase of 
     obligations described in clause (ii) or (iii) of paragraph 
     (3)(A).

     The aggregate fair market value of the assets held in any 
     such reserve shall not exceed 50 percent of the aggregate 
     fair market value of all of the assets of the REMIC on the 
     startup day, and the amount of any such reserve shall be 
     promptly and appropriately reduced to the extent the amount 
     held in such reserve is no longer reasonably required for 
     purposes specified in clause (i) or (ii) of paragraph 
     (3)(A).''.
       (9) Subparagraph (C) of section 1202(e)(4) is amended by 
     striking ``REMIC, or FASIT'' and inserting ``or REMIC''.
       (10) Section 1272(a)(6)(B) is amended by adding at the end 
     the following new flush sentence:

     ``For purposes of clause (iii), the Secretary shall prescribe 
     regulations permitting the use of a current prepayment 
     assumption, determined as of the close of the accrual period 
     (or such other time as the Secretary may prescribe during the 
     taxable year in which the accrual period ends).''.
       (11) Subparagraph (C) of section 7701(a)(19) is amended by 
     adding ``and'' at the end of clause (ix), by striking ``, 
     and'' at the end of clause (x) and inserting a period, and by 
     striking clause (xi).
       (12) The table of parts for subchapter M of chapter 1 is 
     amended by striking the item relating to part V.
       (c) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall take effect on February 
     14, 2003.
       (2) Exception for existing fasits.--
       (A) In general.--Paragraph (1) shall not apply to any FASIT 
     in existence on the date of the enactment of this Act to the 
     extent that regular interests issued by the FASIT before such 
     date continue to remain outstanding in accordance with the 
     original terms of issuance.
       (B) Transfer of additional assets not permitted.--Except as 
     provided in regulations prescribed by the Secretary of the 
     Treasury or the Secretary's delegate, subparagraph (A) shall 
     cease to apply as of the earliest date after the date of the 
     enactment of this Act that any property is transferred to the 
     FASIT.

     SEC. 304. EXPANDED DISALLOWANCE OF DEDUCTION FOR INTEREST ON 
                   CONVERTIBLE DEBT.

       (a) In General.--Paragraph (2) of section 163(l) is amended 
     by striking ``or a related party'' and inserting ``or equity 
     held by the issuer (or any related party) in any other 
     person''.
       (b) Capitalization Allowed With Respect to Equity of 
     Persons Other Than Issuer and Related Parties.--Section 
     163(l) is amended by redesignating paragraphs (4) and (5) as 
     paragraphs (5) and (6) and by inserting after paragraph (3) 
     the following new paragraph:
       ``(4) Capitalization allowed with respect to equity of 
     persons other than issuer and related parties.--If the 
     disqualified debt instrument of a corporation is payable in 
     equity held by the issuer (or any related party) in any other 
     person (other than a related party), the basis of such equity 
     shall be increased by the amount not allowed as a deduction 
     by reason of paragraph (1) with respect to the instrument.''.
       (c) Exception for Certain Instruments Issued by Dealers In 
     Securities.--Section 163(l), as amended by subsection (b), is 
     amended by redesignating paragraphs (5) and (6) as paragraphs 
     (6) and (7) and by inserting after paragraph (4) the 
     following new paragraph:
       ``(5) Exception for certain instruments issued by dealers 
     in securities.--For purposes of this subsection, the term 
     `disqualified debt instrument' does not include indebtedness 
     issued by a dealer in securities (or a related party) which 
     is payable in, or by reference to, equity (other than equity 
     of the issuer or a related party) held by such dealer in its 
     capacity as a dealer in securities. For purposes of this 
     paragraph, the term `dealer in securities' has the meaning 
     given such term by section 475.''.
       (c) Conforming Amendments.--Paragraph (3) of section 163(l) 
     is amended--
       (1) by striking ``or a related party'' in the material 
     preceding subparagraph (A) and inserting ``or any other 
     person'', and
       (2) by striking ``or interest'' each place it appears.
       (d) Effective Date.--The amendments made by this section 
     shall apply to debt instruments issued after February 13, 
     2003.

     SEC. 305. EXPANDED AUTHORITY TO DISALLOW TAX BENEFITS UNDER 
                   SECTION 269.

       (a) In General.--Subsection (a) of section 269 (relating to 
     acquisitions made to evade or avoid income tax) is amended to 
     read as follows:
       ``(a) In General.--If--
       ``(1)(A) any person or persons acquire, directly or 
     indirectly, control of a corporation, or
       ``(B) any corporation acquires, directly or indirectly, 
     property of another corporation and the basis of such 
     property, in the hands of the acquiring corporation, is 
     determined by reference to the basis in the hands of the 
     transferor corporation, and
       ``(2) the principal purpose for which such acquisition was 
     made is evasion or avoidance of Federal income tax,

     then the Secretary may disallow such deduction, credit, or 
     other allowance. For purposes of paragraph (1)(A), control 
     means the ownership of stock possessing at least 50 percent 
     of the total combined voting power of all classes of stock 
     entitled to vote or at least 50 percent of the total value of 
     all shares of all classes of stock of the corporation.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to stock and property acquired after February 13, 
     2003.

     SEC. 306. MODIFICATION OF INTERACTION BETWEEN SUBPART F AND 
                   PASSIVE FOREIGN INVESTMENT COMPANY RULES.

       (a) Limitation on Exception From PFIC Rules for United 
     States Shareholders of Controlled Foreign Corporations.--
     Paragraph (2) of section 1297(e) (relating to passive foreign 
     investment company) is amended by adding at the end the 
     following flush sentence:

     ``Such term shall not include any period if the earning of 
     subpart F income by such corporation during such period would 
     result in only a remote likelihood of an inclusion in gross 
     income under section 951(a)(1)(A)(i).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable

[[Page 31283]]

     years of controlled foreign corporations beginning after 
     February 13, 2003, and to taxable years of United States 
     shareholders with or within which such taxable years of 
     controlled foreign corporations end.

  Mr. GRASSLEY. Mr. President, I rise today to co-sponsor legislation, 
the ``Tax Shelter Transparency and Enforcement Act"to address the 
continuing proliferation of tax shelters. This bill reflects tax 
shelter measures that have been passed by the Senate Finance Committee 
in the Jobs and Growth Tax Relief Act of 2003, the CARE Act, the JOBS 
Act, and the Energy bill. The full Senate has passed these shelters 
provisions twice this year.
  We have known for many years that abusive tax shelters, which are 
structured to exploit unintended consequences of our complicated 
Federal income tax system, erode the federal tax base and the public's 
confidence in the tax system. Such transactions are patently unfair to 
the vast majority of taxpayers who do their best to comply with the 
letter and spirit of the tax law. The Finance Committee produced its 
first draft of tax shelter legislation in 1999, and has produced 
several subsequent bills, each of which were enhanced to attack new 
developments in abusive tax shelters. The most recent Finance Committee 
bill was the Tax Shelter Transparency Act in May 2002. Today's bill 
builds on that 2002 legislation by adding certain corporate governance 
provisions, the recommendations from the Finance Committee's tax 
shelter investigation of Enron, and a proposal to clarify the judicial 
economic substance doctrine.
  The Finance Committee has worked exceedingly hard over many several 
years to develop a legislative response to tax shelters, and the bill 
we offer today may not be the final word in that response. Thoughtful 
and well-considered comments on the provisions in this bill have been 
greatly appreciated by the staff and members of the Finance Committee, 
and will be considered in further refining today's bill, particularly 
with respect to clarification of the economic substance doctrine.
  In our ongoing efforts to end tax shelters, we have attacked the 
issue on several fronts. We have introduced numerous measures to end 
specific shelter abuses as they are discovered. We have offered 
legislation attacking corporate inversions, individual expatiations, 
and corporate deductions for phony leases of tax-payer funded subways, 
bridges, and water lines. I have pursued public disclosure of the 
differences in the income on financial statements reported by public 
companies to their shareholders, and the income the company reports to 
the IRS on its tax return. I have written to the President, Treasury 
and SEC to encourage them to consider this idea.
  During the Senate's 2002 deliberation of the Sarbanes-Oxley bill, I 
attempted to add an amendment that would have prohibited auditors from 
opining on the financial statement results of tax shelters that they 
had sold to an audit client. I was blocked in my attempt to offer that 
amendment, with several members expressing skepticism about the need 
for such a measure. I suspect that today, however, few members would 
have such reservations.
  On October 21st, 2003, the Senate Finance Committee conducted a 
hearing to determine if tax shelters were a continuing problem. Not 
only are they continuing, they are now expanding to mid-level companies 
and wealthy individuals, many of whom have been duped into engaging in 
shelter transactions. During our hearing, we heard testimony from 
taxpayers who relied on reputable tax professionals and accounting 
firms for sound tax advice, but unknowingly purchased tax shelters that 
were peddled by those trusted professionals through a web of collusion 
and deception. We also heard from employees of large accounting firms 
and major corporations who testified regarding the pressure exerted on 
them to bless transactions that, in their professional opinions, would 
constitute abusive tax shelters. The price for their integrity was the 
loss of their jobs and the ruin of their career. Tax shelter abuse must 
be stopped for the sake of fairness, the integrity of our tax system, 
and the protection of honest tax professionals.
  Our years of work on this issue was recently reaffirmed in a hearing 
before the Permanent Subcommittee on Investigations, which explored 
abusive shelters that were promoted by purportedly reputable tax 
lawyers and accounting firms. Following that hearing, there has been 
considerable discussion of promoting an amendment similar to the one I 
offered in 2002 during the Sarbanes-Oxley debate, and I am appreciative 
of that effort. I hope we are able to construct a measure that can be 
readily enforced by the Public Accounting Oversight Board and the SEC, 
even though that agency lacks expertise in, or jurisdiction over, 
federal tax matters.
  At its core, however, the problem is not an SEC matter, but is a 
problem of ongoing abuse of the tax code by very smart people doing 
some very ugly business. The only way to end this problem is to put it 
out in the open. Even the most cynical tax advisor does not want their 
dirty laundry in the public eye, particularly if that public includes 
the IRS. That is why disclosure of abusive or potentially abusive 
transactions is so important in solving this problem.
  The Tax Shelter Transparency and Enforcement Act requires taxpayer 
disclosure of potentially abusive tax avoidance transactions. It is 
surprising and unfortunate that taxpayers, though required to disclose 
tax shelter transactions under present law, have refused to comply. The 
Tax Shelter Transparency and Enforcement Act will curb non-compliance 
by providing clearer and more objective rules for the reporting of 
potential tax shelters and by providing strong penalties for anyone who 
refuses to comply with the revised disclosure requirements.
  The legislation has been carefully structured to reward those who are 
forthcoming with disclosure. I wholeheartedly agree with the remarks 
offered by a former Treasury Assistant Secretary for Tax Policy, that 
``if a taxpayer is comfortable entering into a transaction, a promoter 
is comfortable selling it, and an advisor is comfortable blessing it, 
they all should be comfortable disclosing it to the IRS.'' Transparency 
is essential to an evaluation by the IRS and ultimately by the Congress 
of the United States as to whether the tax benefits generated by 
complex business transactions are appropriate interpretations of 
existing tax law.
  It is time to get this bill done. The Finance Committee has worked on 
rooting out tax shelters for nearly five years, and we have debated the 
issue long enough. The time to act is now. I will vigorously pursue 
enactment of an anti-tax shelters bill in the upcoming year. I think we 
can all take pride in the Senate's consistent action of passing the 
measures in today's bill. We must press forward to put a final end to 
the seemingly endless abuse of tax shelters.
                                 ______
                                 
      By Mr. CORZINE (for himself, Mr. Schumer, Mr. Lautenberg, and Mr. 
        Reed):
  S. 1938. A bill to amend the Forest and Rangeland Renewable Resources 
Planning Act of 1974 and related laws to strengthen the protection of 
native biodiversity and ban clearcutting on Federal land, and to 
designate certain Federal land as Ancient forests, roadless areas, 
watershed protection areas, and special areas where logging and other 
intrusive activities are prohibited; to the Committee on Energy and 
Natural Resources.
  Mr. CORZINE. Mr. President, today along with Senators Schumer, 
Lautenberg, and Reed, I am introducing the Act to Save America's 
Forests. This important legislation is designed to protect our national 
forests from needless clearcutting, safeguard our roadless areas, and 
preserve the last remaining stands of Ancient forests in this country.
  There used to be over one billion acres of forest on the land that is 
now the United States. Over 95 percent of that original forest has been 
logged, and less than one percent is in a form large enough to support 
all the native plants and animals. This land is under

[[Page 31284]]

continuous threat, and if we don't act now to protect these Ancient 
forests we might lose many of them forever.
  Our national forests also are under attack by clearcutting. Removing 
huge groups of trees at once creates a blighted landscape, destroys 
wildlife habitats, increases soil erosion, and degrades water quality. 
In the last ten years, over a quarter-million acres of our national 
forests were clearcut. Clearcutting destroys a vibrant, ecologically 
diverse natural forest, which is usually replaced, if at all, with a 
single species tree farm: tightly packed rows of the most profitable 
trees. This is forest management focused solely on economics, not 
ecology. And it is not the way to save America's forests.
  This bill is a balanced, scientific approach to forest management. It 
bans all logging operations in roadless areas, Ancient forests, and 
forests that have extraordinary biological, scenic, or recreational 
values. These are our most fragile ecosystems and need to be protected. 
This bill also bans clearcutting in our national forests except in 
specific cases where complete removal of non-native invasive tree 
species is ecologically necessary.
  However, this bill does not ban all logging in our national forests. 
It allows a method of logging called ``selection management,'' which 
cuts individual trees instead of the whole forest, leaving a healthy, 
diverse woodland. Selection management is less harmful to the soil, 
less destructive to wildlife, and less disturbing to people who enjoy 
the scenic beauty of our forests. Selection management can be 
sustainable and profitable, as demonstrated by a number of private 
forests around the country.
  This legislation emphasizes biodiversity and sustainable management, 
allowing ecologically sound logging practices in some of our national 
forestland and fully protecting the rest. That's why over 600 
scientists, including Dr. Jane Goodall and Dr. E.O. Wilson, and the 
Union of Concerned Scientists, support this bill. I am proud to 
introduce this legislation to protect and restore America's public 
forests, and 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. 1938

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

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Act to 
     Save America's Forests''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.

                        TITLE I--LAND MANAGEMENT

Sec. 101. Committee of scientists.
Sec. 102. Continuous forest inventory.
Sec. 103. Administration and management.
Sec. 104. Conforming amendments.

  TITLE II--PROTECTION FOR ANCIENT FORESTS, ROADLESS AREAS, WATERSHED 
                  PROTECTION AREAS, AND SPECIAL AREAS

Sec. 201. Findings.
Sec. 202. Definitions.
Sec. 203. Designation of special areas.
Sec. 204. Restrictions on management activities in Ancient forests, 
              roadless areas, watershed protection areas, and special 
              areas.

                       TITLE III--EFFECTIVE DATE

Sec. 301. Effective date.
Sec. 302. Effect on existing contracts.
Sec. 303. Wilderness act exclusion.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--Congress finds that--
       (1) Federal agencies that permit clearcutting and other 
     forms of even-age logging operations include the Forest 
     Service, the United States Fish and Wildlife Service, and the 
     Bureau of Land Management;
       (2) clearcutting and other forms of even-age logging 
     operations cause substantial alterations in native 
     biodiversity by--
       (A) emphasizing the production of a limited number of 
     commercial species, and often only a single species, of trees 
     on each site;
       (B) manipulating the vegetation toward greater relative 
     density of the commercial species;
       (C) suppressing competing species; and
       (D) requiring the planting, on numerous sites, of a 
     commercial strain of the species that reduces the relative 
     diversity of other genetic strains of the species that were 
     traditionally located on the same sites;
       (3) clearcutting and other forms of even-age logging 
     operations--
       (A) frequently lead to the death of immobile species and 
     the very young of mobile species of wildlife; and
       (B) deplete the habitat of deep-forest species of animals, 
     including endangered species and threatened species;
       (4)(A) clearcutting and other forms of even-age logging 
     operations--
       (i) expose the soil to direct sunlight and the impact of 
     precipitation;
       (ii) disrupt the soil surface;
       (iii) compact organic layers; and
       (iv) disrupt the run-off restraining capabilities of roots 
     and low-lying vegetation, resulting in soil erosion, the 
     leaching of nutrients, a reduction in the biological content 
     of soil, and the impoverishment of soil; and
       (B) all of the consequences described in subparagraph (A) 
     have a long-range deleterious effect on all land resources, 
     including timber production;
       (5) clearcutting and other forms of even-age logging 
     operations aggravate global climate change by--
       (A) decreasing the capability of the soil to retain carbon; 
     and
       (B) during the critical periods of felling and site 
     preparation, reducing the capacity of the biomass to process 
     and to store carbon, with a resultant loss of stored carbon 
     to the atmosphere;
       (6) clearcutting and other forms of even-age logging 
     operations render soil increasingly sensitive to acid 
     deposits by causing a decline of soil wood and coarse woody 
     debris;
       (7) a decline of solid wood and coarse woody debris reduces 
     the capacity of soil to retain water and nutrients, which in 
     turn increases soil heat and impairs soil's ability to 
     maintain protective carbon compounds on the soil surface;
       (8) clearcutting and other forms of even-age logging 
     operations result in--
       (A) increased stream sedimentation and the silting of 
     stream bottoms;
       (B) a decline in water quality;
       (C) the impairment of life cycles and spawning processes of 
     aquatic life from benthic organisms to large fish; and
       (D) as a result of the effects described in subparagraphs 
     (A) through (C), a depletion of the sport and commercial 
     fisheries of the United States;
       (9) clearcutting and other forms of even-age management of 
     Federal forests disrupt natural disturbance regimes that are 
     critical to ecosystem function;
       (10) clearcutting and other forms of even-age logging 
     operations increase harmful edge effects, including--
       (A) blowdowns;
       (B) invasions by weed species; and
       (C) heavier losses to predators and competitors;
       (11) by reducing the number of deep, canopied, variegated, 
     permanent forests, clearcutting and other forms of even-age 
     logging operations--
       (A) limit areas where the public can satisfy an expanding 
     need for recreation; and
       (B) decrease the recreational value of land;
       (12) clearcutting and other forms of even-age logging 
     operations replace forests described in paragraph (11) with a 
     surplus of clearings that grow into relatively impenetrable 
     thickets of saplings, and then into monoculture tree 
     plantations;
       (13) because of the harmful and, in many cases, 
     irreversible, damage to forest species and forest ecosystems 
     caused by logging of Ancient and roadless forests, 
     clearcutting, and other forms of even-age management, it is 
     important that these practices be halted based on the 
     precautionary principle;
       (14) human beings depend on native biological resources, 
     including plants, animals, and micro-organisms--
       (A) for food, medicine, shelter, and other important 
     products; and
       (B) as a source of intellectual and scientific knowledge, 
     recreation, and aesthetic pleasure;
       (15) alteration of native biodiversity has serious 
     consequences for human welfare, as the United States 
     irretrievably loses resources for research and agricultural, 
     medicinal, and industrial development;
       (16) alteration of biodiversity in Federal forests 
     adversely affects the functions of ecosystems and critical 
     ecosystem processes that--
       (A) moderate climate;
       (B) govern nutrient cycles and soil conservation and 
     production;
       (C) control pests and diseases; and
       (D) degrade wastes and pollutants;
       (17)(A) clearcutting and other forms of even-age management 
     operations have significant deleterious effects on native 
     biodiversity, by reducing habitat and food for cavity-nesting 
     birds and insectivores such as the 3-toed woodpecker and 
     hairy woodpecker and for neotropical migratory bird species; 
     and
       (B) the reduction in habitat and food supply could disrupt 
     the lines of dependency among species and their food 
     resources and thereby jeopardize critical ecosystem function, 
     including limiting outbreaks of destructive insect 
     populations; for example--
       (i) the 3-toed woodpecker requires clumped snags in spruce-
     fir forests, and 99 percent of its winter diet is composed of 
     insects, primarily spruce beetles; and
       (ii) a 3-toed woodpecker can consume as much as 26 percent 
     of the brood of an endemic population of spruce bark beetle 
     and

[[Page 31285]]

     reduce brood survival of the population by 70 to 79 percent;
       (18) the harm of clearcutting and other forms of even-age 
     logging operations on the natural resources of the United 
     States and the quality of life of the people of the United 
     States is substantial, severe, and avoidable;
       (19) by substituting selection management, as required by 
     this Act, for clearcutting and other forms of even-age 
     logging operations, the Federal agencies involved with those 
     logging operations would substantially reduce devastation to 
     the environment and improve the quality of life of the people 
     of the United States;
       (20) selection management--
       (A) retains natural forest structure and function;
       (B) focuses on long-term rather than short-term management;
       (C) works with, rather than against, the checks and 
     balances inherent in natural processes; and
       (D) permits the normal, natural processes in a forest to 
     allow the forest to go through the natural stages of 
     succession to develop a forest with old growth ecological 
     functions;
       (21) by protecting native biodiversity, as required by this 
     Act, Federal agencies would maintain vital native ecosystems 
     and improve the quality of life of the people of the United 
     States;
       (22) selection logging--
       (A) is more job intensive, and therefore provides more 
     employment than clearcutting and other forms of even-age 
     logging operations to manage the same quantity of timber 
     production; and
       (B) produces higher quality sawlogs than clearcutting and 
     other forms of even-age logging operations; and
       (23) the judicial remedies available to enforce Federal 
     forest laws are inadequate, and should be strengthened by 
     providing for injunctions, declaratory judgments, statutory 
     damages, and reasonable costs of suit.
       (b) Purpose.--The purpose of this Act is to conserve native 
     biodiversity and protect all native ecosystems on all Federal 
     land against losses that result from--
       (1) clearcutting and other forms of even-age logging 
     operations; and
       (2) logging in Ancient forests, roadless areas, watershed 
     protection areas, and special areas.

                        TITLE I--LAND MANAGEMENT

     SEC. 101. COMMITTEE OF SCIENTISTS.

       Section 6 of the Forest and Rangeland Renewable Resources 
     Planning Act of 1974 (16 U.S.C. 1604) is amended by striking 
     subsection (h) and inserting the following:
       ``(h) Committee of Scientists.--
       ``(1) In general.--To carry out subsection (g), the 
     Secretary shall appoint a committee composed of scientists--
       ``(A) who are not officers or employees of the Forest 
     Service, of any other public entity, or of any entity engaged 
     in whole or in part in the production of wood or wood 
     products;
       ``(B) not more than one-third of whom have contracted with 
     or represented any entity described in subparagraph (A) 
     during the 5-year period ending on the date of the proposed 
     appointment to the committee; and
       ``(C) not more than one-third of whom are foresters.
       ``(2) Qualifications of foresters.--A forester appointed to 
     the committee shall be an individual with--
       ``(A) extensive training in conservation biology; and
       ``(B) field experience in selection management.
       ``(3) Duties.--The committee shall provide scientific and 
     technical advice and counsel on proposed guidelines and 
     procedures and all other issues involving forestry and native 
     biodiversity to promote an effective interdisciplinary 
     approach to forestry and native biodiversity.
       ``(4) Termination.--The committee shall terminate on the 
     date that is 10 years after the date of enactment of the Act 
     to Save America's Forests.''

     SEC. 102. CONTINUOUS FOREST INVENTORY.

       (a) In General.--Not later than 2 years after the date of 
     enactment of this Act, each of the Chief of the Forest 
     Service, the Director of the United States Fish and Wildlife 
     Service, and the Director of the Bureau of Land Management 
     (referred to individually as an ``agency head'') shall 
     prepare a continuous inventory of forest land administered by 
     those agency heads, respectively.
       (b) Requirements.--A continuous forest inventory shall 
     constitute a long-term monitoring and inventory system that--
       (1) is contiguous throughout affected Federal forest land; 
     and
       (2) is based on a set of permanent plots that are 
     inventoried every 10 years to--
       (A) assess the impacts that human activities are having on 
     management of the ecosystem;
       (B) gauge--
       (i) floristic and faunistic diversity, abundance, and 
     dominance; and
       (ii) economic and social value; and
       (C) monitor changes in the age, structure, and diversity of 
     species of trees and other vegetation.
       (c) Decennial Inventories.--Each decennial inventory under 
     subsection (b)(2) shall be completed not more than 60 days 
     after the date on which the inventory is begun.
       (d) National Academy of Sciences.--In preparing a 
     continuous forest inventory, an agency head may use the 
     services of the National Academy of Sciences to--
       (1) develop a system for the continuous forest inventory by 
     which certain guilds or indicator species are measured; and
       (2) identify any changes to the continuous forest inventory 
     that are necessary to ensure that the continuous forest 
     inventory is consistent with the most accurate scientific 
     methods.
       (e) Whole-System Measures.--At the end of each forest 
     planning period, an agency head shall document whole-system 
     measures that will be taken as a result of a decennial 
     inventory.
       (f) Public Availability.--Results of a continuous forest 
     inventory shall be made available to the public without 
     charge.

     SEC. 103. ADMINISTRATION AND MANAGEMENT.

       The Forest and Rangeland Renewable Resources Planning Act 
     of 1974 is amended by adding after section 6 (16 U.S.C. 1604) 
     the following:

     ``SEC. 6A. CONSERVATION OF NATIVE BIODIVERSITY; SELECTION 
                   LOGGING; PROHIBITION OF CLEARCUTTING.

       ``(a) Applicability.--This section applies to the 
     administration and management of--
       ``(1) National Forest System land, under this Act;
       ``(2) Federal land, under the Federal Land Policy and 
     Management Act of 1976 (43 U.S.C. 1701 et seq.); and
       ``(3) National Wildlife Refuge System land, under the 
     National Wildlife Refuge System Administration Act of 1966 
     (16 U.S.C. 668dd et seq.).
       ``(b) Native Biodiversity in Forested Areas.--The Secretary 
     shall provide for the conservation or restoration of native 
     biodiversity in each stand and each watershed throughout each 
     forested area, except during the extraction stage of 
     authorized mineral development or during authorized 
     construction projects, in which cases the Secretary shall 
     conserve native biodiversity to the maximum extent 
     practicable.
       ``(c) Restriction on Use of Certain Logging Practices.--
       ``(1) Definitions.--In this subsection:
       ``(A) Age diversity.--The term `age diversity' means the 
     naturally occurring range and distribution of age classes 
     within a given species.
       ``(B) Basal area.--The term `basal area' means the area of 
     the cross section of a tree stem, including the bark, at 4.5 
     feet above the ground.
       ``(C) Clearcutting.--The term `clearcutting' means an even-
     age logging operation that removes all of the trees over a 
     considerable portion of a stand at 1 time.
       ``(D) Conservation.--The term `conservation' means 
     protective measures for maintaining native biodiversity and 
     active and passive measures for restoring diversity through 
     management efforts, in order to protect, restore, and enhance 
     as much of the variety of species and communities as 
     practicable in abundances and distributions that provide for 
     their continued existence and normal functioning, including 
     the viability of populations throughout their natural 
     geographic distributions.
       ``(E) Even-age logging operation.--
       ``(i) In general.--The term `even-age logging operation' 
     means a logging activity that--

       ``(I) creates a clearing or opening that exceeds \1/5\ 
     acre;
       ``(II) creates a stand in which the majority of trees are 
     within 10 years of the same age; or
       ``(III) within a period of 30 years, cuts or removes more 
     than the lesser of--

       ``(aa) the growth of the basal area of all tree species 
     (not including a tree of a non-native invasive tree species 
     or an invasive plantation species) in a stand; or
       ``(bb) 20 percent of the basal area of a stand.
       ``(ii) Inclusion.--The term `even-age logging operation' 
     includes the application of clearcutting, high grading, seed-
     tree cutting, shelterwood cutting, or any other logging 
     method in a manner inconsistent with selection management.
       ``(iii) Exclusion.--The term `even-age logging operation' 
     does not include the cutting or removal of--

       ``(I) a tree of a non-native invasive tree species; or
       ``(II) an invasive plantation species, if native longleaf 
     pine are planted in place of the removed invasive plantation 
     species.

       ``(F) Genetic diversity.--The term `genetic diversity' 
     means the differences in genetic composition within and among 
     populations of a species.
       ``(G) High grading.--The term `high grading' means the 
     removal of only the larger or more commercially valuable 
     trees in a stand, resulting in an alteration in the natural 
     range of age diversity or species diversity in the stand.
       ``(H) Invasive plantation species.--The term `invasive 
     plantation species' means a loblolly pine or slash pine that 
     was planted or managed by the Forest Service or any other 
     Federal agency as part of an even-aged monoculture tree 
     plantation.
       ``(I) Native biodiversity.--
       ``(i) In general.--The term `native biodiversity' means--

[[Page 31286]]

       ``(I) the full range of variety and variability within and 
     among living organisms; and
       ``(II) the ecological complexes in which the living 
     organisms would have occurred (including naturally occurring 
     disturbance regimes) in the absence of significant human 
     impact.

       ``(ii) Inclusions.--The term `native biodiversity' includes 
     diversity--

       ``(I) within a species (including genetic diversity, 
     species diversity, and age diversity);
       ``(II) within a community of species;
       ``(III) between communities of species;
       ``(IV) within a discrete area, such as a watershed;
       ``(V) along a vertical plane from ground to sky, including 
     application of the plane to all the other types of diversity; 
     and
       ``(VI) along the horizontal plane of the land surface, 
     including application of the plane to all the other types of 
     diversity.

       ``(J) Non-native invasive tree species.--
       ``(i) In general.--The term `non-native invasive tree 
     species' means a species of tree not native to North America.
       ``(ii) Inclusions.--The term `non-native invasive tree 
     species' includes--

       ``(I) Australian pine (Casaurina equisetifolia);
       ``(II) Brazilian pepper (Schinus terebinthifolius);
       ``(III) Common buckthorn (Rhamnus cathartica);
       ``(IV) Eucalyptus (Eucalyptus globulus);
       ``(V) Glossy buckthorn (Rhamnus frangula);
       ``(VI) Melaleuca (Melaleuca quinquenervia);
       ``(VII) Norway maple (Acer platanoides);
       ``(VIII) Princess tree (Paulownia tomentosa);
       ``(IX) Salt cedar (Tamarix species);
       ``(X) Silk tree (Albizia julibrissin);
       ``(XI) Strawberry guava (Psidium cattleianum);
       ``(XII) Tree-of-heaven (Ailanthus altissima);
       ``(XIII) Velvet tree (Miconia calvescens); and
       ``(XIV) White poplar (Populus alba).

       ``(K) Seed-tree cut.--The term `seed-tree cut' means an 
     even-age logging operation that leaves a small minority of 
     seed trees in a stand for any period of time.
       ``(L) Selection management.--
       ``(i) In general.--The term `selection management' means a 
     method of logging that emphasizes the periodic, individual 
     selection and removal of varying size and age classes of the 
     weaker, nondominant cull trees in a stand and leaves uncut 
     the stronger dominant trees to survive and reproduce, in a 
     manner that works with natural forest processes and--

       ``(I) ensures the maintenance of continuous high forest 
     cover where high forest cover naturally occurs;
       ``(II) ensures the maintenance or natural regeneration of 
     all native species in a stand;
       ``(III) ensures the growth and development of trees through 
     a range of diameter or age classes to provide a sustained 
     yield of forest products including clean water, rich soil, 
     and native plants and wildlife; and
       ``(IV) ensures that some dead trees, standing and downed, 
     shall be left in each stand where selection logging occurs, 
     to fulfill their necessary ecological functions in the forest 
     ecosystem, including providing elemental and organic 
     nutrients to the soil, water retention, and habitat for 
     endemic insect species that provide the primary food source 
     for predators (including various species of amphibians and 
     birds, such as cavity nesting woodpeckers).

       ``(ii) Exclusion.--

       ``(I) In general.--Subject to subclause (II), the term 
     `selection management' does not include an even-age logging 
     operation.
       ``(II) Felling age; native biodiversity.--Subclause (I) 
     does not--

       ``(aa) establish a 150-year projected felling age as the 
     standard at which individual trees in a stand are to be cut; 
     or
       ``(bb) limit native biodiversity to that which occurs 
     within the context of a 150-year projected felling age.
       ``(M) Shelterwood cut.--The term `shelterwood cut' means an 
     even-age logging operation that leaves--
       ``(i) a minority of the stand (larger than a seed-tree cut) 
     as a seed source; or
       ``(ii) a protection cover remaining standing for any period 
     of time.
       ``(N) Species diversity.--The term `species diversity' 
     means the richness and variety of native species in a 
     particular location.
       ``(O) Stand.--The term `stand' means a biological community 
     of trees on land described in subsection (a), comprised of 
     not more than 100 contiguous acres with sufficient identity 
     of 1 or more characteristics (including location, topography, 
     and dominant species) to be managed as a unit.
       ``(P) Timber purpose.--
       ``(i) In general.--The term `timber purpose' means the use, 
     sale, lease, or distribution of trees, including the felling 
     of trees or portions of trees.
       ``(ii) Exception.--The term `timber purpose' does not 
     include the felling of trees or portions of trees to create 
     land space for a Federal administrative structure.
       ``(Q) Within-community diversity.--The term `within-
     community diversity' means the distinctive assemblages of 
     species and ecological processes that occur in various 
     physical settings of the biosphere and distinct locations.
       ``(2) Prohibition of clearcutting and other forms of even-
     age logging operations.--No clearcutting or other form of 
     even-age logging operation shall be permitted in any stand or 
     watershed.
       ``(3) Management of native biodiversity.--On each stand on 
     which an even-age logging operation has been conducted on or 
     before the date of enactment of this section, and on each 
     deforested area managed for timber purposes on or before the 
     date of enactment of this section, excluding areas occupied 
     by existing buildings, the Secretary shall--
       ``(A) prescribe a shift to selection management; or
       ``(B) cease managing the stand for timber purposes, in 
     which case the Secretary shall--
       ``(i) undertake an active restoration of the native 
     biodiversity of the stand; or
       ``(ii) permit the stand to regain native biodiversity.
       ``(4) Enforcement.--
       ``(A) Finding.-- Congress finds that all people of the 
     United States are injured by actions on land to which 
     subsection (g)(3)(B) and this subsection applies.
       ``(B) Purpose.--The purpose of this paragraph is to foster 
     the widest and most effective possible enforcement of 
     subsection (g)(3)(B) and this subsection.
       ``(C) Federal enforcement.--The Secretary of Agriculture, 
     the Secretary of the Interior, and the Attorney General shall 
     enforce subsection (g)(3)(B) and this subsection against any 
     person that violates 1 or more of those provisions.
       ``(D) Citizen suits.--
       ``(i) In general.--A citizen harmed by a violation of 
     subsection (g)(3)(B) or this subsection may bring a civil 
     action in United States district court for a declaratory 
     judgment, a temporary restraining order, an injunction, 
     statutory damages, or other remedy against any alleged 
     violator, including the United States.
       ``(ii) Judicial relief.--If a district court of the United 
     States determines that a violation of subsection (g)(3)(B) or 
     this subsection has occurred, the district court--

       ``(I) shall impose a damage award of not less than $5,000;
       ``(II) may issue 1 or more injunctions or other forms of 
     equitable relief; and
       ``(III) shall award to the plaintiffs reasonable costs of 
     bringing the action, including attorney's fees, witness fees, 
     and other necessary expenses.

       ``(iii) Standard of proof.--The standard of proof in all 
     actions under this subparagraph shall be the preponderance of 
     the evidence.
       ``(iv) Trial.--A trial for any action under this subsection 
     shall be de novo.
       ``(E) Payment of damages.--
       ``(i) Non-federal violator.--A damage award under 
     subparagraph (D)(ii) shall be paid to the Treasury by a non-
     Federal violator or violators designated by the court.
       ``(ii) Federal violator.--

       ``(I) In general.--Not later than 40 days after the date on 
     which judgment is rendered, a damage award under subparagraph 
     (D)(ii) for which the United States is determined to be 
     liable shall be paid from the Treasury, as provided under 
     section 1304 of title 31, United States Code, to the person 
     or persons designated to receive the damage award.
       ``(II) Use of damage award.--A damage award described under 
     subclause (I) shall be used by the recipient to protect or 
     restore native biodiversity on Federal land or on land 
     adjoining Federal land.
       ``(III) Court costs.--Any award of costs of litigation and 
     any award of attorney fees shall be paid by a Federal 
     violator not later than 40 days after the date on which 
     judgment is rendered.

       ``(F) Waiver of sovereign immunity.--
       ``(i) In general.--The United States (including agents and 
     employees of the United States) waives its sovereign immunity 
     in all respects in all actions under subsection (g)(3)(B) and 
     this subsection.
       ``(ii) Notice.--No notice is required to enforce this 
     subsection.''.

     SEC. 104. CONFORMING AMENDMENTS.

       Section 6(g)(3) of the Forest and Rangeland Renewable 
     Resource Planning Act of 1974 (16 U.S.C. 1604(g)(3)) is 
     amended--
       (1) in subparagraph (D), by inserting ``and'' after the 
     semicolon at the end;
       (2) in subparagraph (E), by striking ``; and'' and 
     inserting a period; and
       (3) by striking subparagraph (F).

  TITLE II--PROTECTION FOR ANCIENT FORESTS, ROADLESS AREAS, WATERSHED 
                  PROTECTION AREAS, AND SPECIAL AREAS

     SEC. 201. FINDINGS.

       Congress finds that--
       (1) unfragmented forests on Federal land, unique and 
     valuable assets to the general public, are damaged by 
     extractive logging;
       (2) less than 10 percent of the original unlogged forests 
     of the United States remain, and the vast majority of the 
     remnants of the original forests of the United States are 
     located on Federal land;
       (3) large, unfragmented forest watersheds provide high-
     quality water supplies for

[[Page 31287]]

     drinking, agriculture, industry, and fisheries across the 
     United States;
       (4) the most recent scientific studies indicate that 
     several thousand species of plants and animals are dependent 
     on large, unfragmented forest areas;
       (5) many neotropical migratory songbird species are 
     experiencing documented broad-scale population declines and 
     require large, unfragmented forests to ensure their survival;
       (6) destruction of large-scale natural forests has resulted 
     in a tremendous loss of jobs in the fishing, hunting, 
     tourism, recreation, and guiding industries, and has 
     adversely affected sustainable nontimber forest products 
     industries such as the collection of mushrooms and herbs;
       (7) extractive logging programs on Federal land are carried 
     out at enormous financial costs to the Treasury and taxpayers 
     of the United States;
       (8) Ancient forests continue to be threatened by logging 
     and deforestation and are rapidly disappearing;
       (9) Ancient forests help regulate atmospheric balance, 
     maintain biodiversity, and provide valuable scientific 
     opportunity for monitoring the health of the planet;
       (10) prohibiting extractive logging in the Ancient forests 
     would create the best conditions for ensuring stable, well 
     distributed, and viable populations of the northern spotted 
     owl, marbled murrelet, American marten, and other 
     vertebrates, invertebrates, vascular plants, and nonvascular 
     plants associated with those forests;
       (11) prohibiting extractive logging in the Ancient forests 
     would create the best conditions for ensuring stable, well 
     distributed, and viable populations of anadromous salmonids, 
     resident salmonids, and bull trout;
       (12) roadless areas are de facto wilderness that provide 
     wildlife habitat and recreation;
       (13) large unfragmented forests, contained in large part on 
     roadless areas on Federal land, are among the last refuges 
     for native animal and plant biodiversity, and are vital to 
     maintaining viable populations of threatened, endangered, 
     sensitive, and rare species;
       (14) roads cause soil erosion, disrupt wildlife migration, 
     and allow nonnative species of plants and animals to invade 
     native forests;
       (15) the mortality and reproduction patterns of forest 
     dwelling animal populations are adversely affected by 
     traffic-related fatalities that accompany roads;
       (16) the exceptional recreational, biological, scientific, 
     or economic assets of certain special forested areas on 
     Federal land are valuable to the public of the United States 
     and are damaged by extractive logging;
       (17) in order to gauge the effectiveness and 
     appropriateness of current and future resource management 
     activities, and to continue to broaden and develop our 
     understanding of silvicultural practices, many special 
     forested areas need to remain in a natural, unmanaged state 
     to serve as scientifically established baseline control 
     forests;
       (18) certain special forested areas provide habitat for the 
     survival and recovery of endangered and threatened plant and 
     wildlife species, such as grizzly bears, spotted owls, 
     Pacific salmon, and Pacific yew, that are harmed by 
     extractive logging;
       (19) many special forested areas on Federal land are 
     considered sacred sites by native peoples; and
       (20) as a legacy for the enjoyment, knowledge, and well-
     being of future generations, provisions must be made for the 
     protection and perpetuation of the Ancient forests, roadless 
     areas, watershed protection areas, and special areas of the 
     United States.

     SEC. 202. DEFINITIONS.

       In this title:
       (1) Ancient forest.--The term ``Ancient forest'' means--
       (A) the northwest Ancient forests, including--
       (i) Federal land identified as late-successional reserves, 
     riparian reserves, and key watersheds under the heading 
     ``Alternative 1'' of the report entitled ``Final Supplemental 
     Environmental Impact Statement on Management of Habitat for 
     Late-Successional and Old-Growth Forest Related Species 
     Within the Range of the Northern Spotted Owl, Vol. I.'', and 
     dated February 1994; and
       (ii) Federal land identified by the term ``medium and large 
     conifer multi-storied, canopied forests'' as defined in the 
     report described in clause (i);
       (B) the eastside Cascade Ancient forests, including--
       (i) Federal land identified as ``Late-Succession/Old-growth 
     Forest (LS/OG)'' depicted on maps for the Colville National 
     Forest, Fremont National Forest, Malheur National Forest, 
     Ochoco National Forest, Umatilla National Forest, Wallowa-
     Whitman National Forest, and Winema National Forest in the 
     report entitled ``Interim Protection for Late-Successional 
     Forests, Fisheries, and Watersheds: National Forests East of 
     the Cascade Crest, Oregon, and Washington'', prepared by the 
     Eastside Forests Scientific Society Panel (The Wildlife 
     Society, Technical Review 94-2, August 1994);
       (ii) Federal land east of the Cascade crest in the States 
     of Oregon and Washington, defined as ``late successional and 
     old-growth forests'' in the general definition on page 28 of 
     the report described in clause (i); and
       (iii) Federal land classified as ``Oregon Aquatic Diversity 
     Areas'', as defined in the report described in clause (i); 
     and
       (C) the Sierra Nevada Ancient forests, including--
       (i) Federal land identified as ``Areas of Late-Successional 
     Emphasis (ALSE)'' in the report entitled, ``Final Report to 
     Congress: Status of the Sierra Nevada'', prepared by the 
     Sierra Nevada Ecosystem Project (Wildland Resources Center 
     Report #40, University of California, Davis, 1996/97);
       (ii) Federal land identified as ``Late-Succession/Old-
     Growth Forests Rank 3, 4 or 5'' in the report described in 
     clause (i); and
       (iii) Federal land identified as ``Potential Aquatic 
     Diversity Management Areas'' on the map on page 1497 of 
     Volume II of the report described in clause (i).
       (2) Extractive logging.--The term ``extractive logging'' 
     means the felling or removal of any trees from Federal forest 
     land for any purpose.
       (3) Improved road.--The term ``improved road'' means any 
     road maintained for travel by standard passenger type 
     vehicles.
       (4) Roadless area.--The term ``roadless area'' means a 
     contiguous parcel of Federal land that is--
       (A) devoid of improved roads, except as provided in 
     subparagraph (B); and
       (B) composed of--
       (i) at least 1,000 acres west of the 100th meridian (with 
     up to \1/2\ mile of improved roads per 1,000 acres);
       (ii) at least 1,000 acres east of the 100th meridian (with 
     up to \1/2\ mile of improved roads per 1,000 acres); or
       (iii) less than 1,000 acres, but share a border that is not 
     an improved road with a wilderness area, primitive area, or 
     wilderness study area.
       (5) Secretary.--The term ``Secretary'', with respect to any 
     Federal land in an Ancient forest, roadless area, watershed 
     protection area, or special area, means the head of the 
     Federal agency having jurisdiction over the Federal land.
       (6) Special area.--The term ``special area'' means an area 
     of Federal forest land designated under section 3 that may 
     not meet the definition of an Ancient forest, roadless area, 
     or watershed protection area, but that--
       (A) possesses outstanding biological, scenic, recreational, 
     or cultural values; and
       (B) is exemplary on a regional, national, or international 
     level.
       (7) Watershed protection area.--The term ``watershed 
     protection area'' means Federal land that extends--
       (A) 300 feet from both sides of the active stream channel 
     of any permanently flowing stream or river;
       (B) 100 feet from both sides of the active channel of any 
     intermittent, ephemeral, or seasonal stream, or any other 
     nonpermanently flowing drainage feature having a definable 
     channel and evidence of annual scour or deposition of flow-
     related debris;
       (C) 300 feet from the edge of the maximum level of any 
     natural lake or pond; or
       (D) 150 feet from the edge of the maximum level of a 
     constructed lake, pond, or reservoir, or a natural or 
     constructed wetland.

     SEC. 203. DESIGNATION OF SPECIAL AREAS.

       (a) In General.--
       (1) Finding.--A special area shall possess at least 1 of 
     the values described in paragraphs (2) through (5).
       (2) Biological values.--The biological values of a special 
     area may include the presence of--
       (A) threatened species or endangered species of plants or 
     animals;
       (B) rare or endangered ecosystems;
       (C) key habitats necessary for the recovery of endangered 
     species or threatened species;
       (D) recovery or restoration areas of rare or 
     underrepresented forest ecosystems;
       (E) migration corridors;
       (F) areas of outstanding biodiversity;
       (G) old growth forests;
       (H) commercial fisheries; and
       (I) sources of clean water such as key watersheds.
       (3) Scenic values.--The scenic values of a special area may 
     include the presence of--
       (A) unusual geological formations;
       (B) designated wild and scenic rivers;
       (C) unique biota; and
       (D) vistas.
       (4) Recreational values.--The recreational values of a 
     special area may include the presence of--
       (A) designated national recreational trails or recreational 
     areas;
       (B) areas that are popular for such recreation and sporting 
     activities as--
       (i) hunting;
       (ii) fishing;
       (iii) camping;
       (iv) hiking;
       (v) aquatic recreation; and
       (vi) winter recreation;
       (C) Federal land in regions that are underserved in terms 
     of recreation;
       (D) land adjacent to designated wilderness areas; and
       (E) solitude.

[[Page 31288]]

       (5) Cultural values.--The cultural values of a special area 
     may include the presence of--
       (A) sites with Native American religious significance; and
       (B) historic or prehistoric archaeological sites eligible 
     for listing on the national historic register.
       (b) Size Variation.--A special area may vary in size to 
     encompass the outstanding biological, scenic, recreational, 
     or cultural value or values to be protected.
       (c) Designation of Special Areas.--There are designated the 
     following special areas, which shall be subject to the 
     management restrictions specified in section 204:
       (1) Alabama.--
       (A) Sipsey wilderness headwaters.--Certain land in the 
     Bankhead National Forest, Bankhead Ranger District, in 
     Lawrence County, totaling approximately 22,000 acres, located 
     directly north and upstream of the Sipsey Wilderness, and 
     directly south of Forest Road 213.
       (B) Brushy fork.--Certain land in the Bankhead National 
     Forest, Bankhead Ranger District, in Lawrence County, 
     totaling approximately 6,200 acres, bounded by Forest Roads 
     249, 254, and 246 and Alabama Highway 33.
       (C) Rebecca mountain.--Certain land in the Talladega 
     National Forest, Talladega Ranger District, Talladega County 
     and Clay County, totaling approximately 9,000 acres, 
     comprised of all Talladega National Forest lands south of 
     Forest Roads 621 and 621 B, east of Alabama Highway 48/77 and 
     County Highway 308, and north of the power transmission line.
       (D) Augusta mine ridge.--Certain land in the Talladega 
     National Forest, Shoal Creek Ranger District, Cherokee County 
     and Cleburn County, totaling approximately 6,000 acres, and 
     comprised of all Talladega National Forest land north of the 
     Chief Ladiga Rail Trail.
       (E) Mayfield creek.--Certain land in the Talladega National 
     Forest, Oakmulgee Ranger District, in Rail County, totaling 
     approximately 4,000 acres, and bounded by Forest Roads 731, 
     723, 718, and 718A.
       (F) Bear bay.--Certain land in the Conecuh National Forest, 
     Conecuh District, in Covington County, totaling approximately 
     3,000 acres, bounded by County Road 11, Forest Road 305, 
     County Road 3, and the County Road connecting County Roads 3 
     and 11.
       (2) Alaska.--
       (A) Turnagain arm.--Certain land in the Chugach National 
     Forest, on the Kenai Peninsula, totaling approximately 
     100,000 acres, extending from sea level to ridgetop 
     surrounding the inlet of Turnagain Arm, known as ``Turnagain 
     Arm''.
       (B) Honker divide.--Certain land in the Tongass National 
     Forest, totaling approximately 75,000 acres, located on north 
     central Prince of Wales Island, comprising the Thorne River 
     and Hatchery Creek watersheds, stretching approximately 40 
     miles northwest from the vicinity of the town of Thorne Bay 
     to the vicinity of the town of Coffman Cove, generally known 
     as the ``Honker Divide''.
       (3) Arizona: north rim of the grand canyon.--Certain land 
     in the Kaibab National Forest that is included in the Grand 
     Canyon Game Preserve, totaling approximately 500,000 acres, 
     abutting the northern side of the Grand Canyon in the area 
     generally known as the ``North Rim of the Grand Canyon''.
       (4) Arkansas.--
       (A) Cow creek drainage, arkansas.--Certain land in the 
     Ouachita National Forest, Mena Ranger District, in Polk 
     County, totaling approximately 7,000 acres, known as ``Cow 
     Creek Drainage, Arkansas'', and bounded approximately--
       (i) on the north, by County Road 95;
       (ii) on the south, by County Road 157;
       (iii) on the east, by County Road 48; and
       (iv) on the west, by the Arkansas-Oklahoma border.
       (B) Leader and brush mountains.--Certain land in the 
     Ouachita National Forest, Montgomery County and Polk County, 
     totaling approximately 120,000 acres, known as ``Leader 
     Mountain'' and ``Brush Mountain'', located in the vicinity of 
     the Blaylock Creek Watershed between Long Creek and the South 
     Fork of the Saline River.
       (C) Polk creek area.--Certain land in the Ouachita National 
     Forest, Mena Ranger District, totaling approximately 20,000 
     acres, bounded by Arkansas Highway 4 and Forest Roads 73 and 
     43, known as the ``Polk Creek area''.
       (D) Lower buffalo river watershed.--Certain land in the 
     Ozark National Forest, Sylamore Ranger District, totaling 
     approximately 6,000 acres, including Forest Service land that 
     has not been designated as a wilderness area before the date 
     of enactment of this Act, located in the watershed of Big 
     Creek southwest of the Leatherwood Wilderness Area, Searcy 
     County and Marion County, and known as the ``Lower Buffalo 
     River Watershed''.
       (E) Upper buffalo river watershed.--Certain land in the 
     Ozark National Forest, Buffalo Ranger District, totaling 
     approximately 220,000 acres, comprised of Forest Service that 
     has not been designated as a wilderness area before the date 
     of enactment of this Act, known as the ``Upper Buffalo River 
     Watershed'', located approximately 35 miles from the town of 
     Harrison, Madison County, Newton County, and Searcy County, 
     upstream of the confluence of the Buffalo River and Richland 
     Creek in the watersheds of--
       (i) the Buffalo River;
       (ii) the various streams comprising the Headwaters of the 
     Buffalo River;
       (iii) Richland Creek;
       (iv) Little Buffalo Headwaters;
       (v) Edgmon Creek;
       (vi) Big Creek; and
       (vii) Cane Creek.
       (5) California: giant sequoia preserve.--Certain land in 
     the Sequoia National Forest and Sierra National Forest, known 
     as the ``Giant Sequoia Preserve'', comprised of 3 
     discontinuous parcels and approximately 442,425 acres, 
     located in Fresno County, Tulare County, and Kern County, in 
     the Southern Sierra Nevada mountain range, including--
       (A) the Kings River Unit (145,600 acres) and nearby Redwood 
     Mountain Unit (11,730 acres), located approximately 25 miles 
     east of the city of Fresno; and
       (B) the South Unit (285,095 acres), located approximately 
     15 miles east of the city of Porterville.
       (6) Colorado: cochetopa hills.--Certain land in the 
     Gunnison Basin area, known as the ``Cochetopa Hills'', 
     administered by the Gunnison National Forest, Grand Mesa 
     National Forest, Uncompahgre National Forest, and Rio Grand 
     National Forest, totaling approximately 500,000 acres, 
     spanning the continental divide south and east of the city of 
     Gunnison, in Saguache County, and including--
       (A) Elk Mountain and West Elk Mountain;
       (B) the Grand Mesa;
       (C) the Uncompahgre Plateau;
       (D) the northern San Juan Mountains;
       (E) the La Garitas Mountains; and
       (F) the Cochetopa Hills.
       (7) Georgia.--
       (A) Armuchee cluster.--Certain land in the Chattahoochee 
     National Forest, Armuchee Ranger District, known as the 
     ``Armuchee Cluster'', totaling approximately 19,700 acres, 
     comprised of 3 parcels known as ``Rocky Face'', ``Johns 
     Mountain'', and ``Hidden Creek'', located approximately 10 
     miles southwest of Dalton and 14 miles north of Rome, in 
     Whitfield County, Walker County, Chattooga County, Floyd 
     County, and Gordon County.
       (B) Blue ridge corridor cluster, georgia areas.--Certain 
     land in the Chattahoochee National Forest, Chestatee Ranger 
     District, totaling approximately 15,000 acres, known as the 
     ``Blue Ridge Corridor Cluster, Georgia Areas'', comprised of 
     5 parcels known as ``Horse Gap'', ``Hogback Mountain'', 
     ``Blackwell Creek'', ``Little Cedar Mountain'', and ``Black 
     Mountain'', located approximately 15 to 20 miles north of the 
     town of Dahlonega, in Union County and Lumpkin County.
       (C) Chattooga watershed cluster, georgia areas.--Certain 
     land in the Chattahoochee National Forest, Tallulah Ranger 
     District, totaling 63,500 acres, known as the ``Chattooga 
     Watershed Cluster, Georgia Areas'', comprised of 7 areas 
     known as ``Rabun Bald'', ``Three Forks'', ``Ellicott Rock 
     Extension'', ``Rock Gorge'', ``Big Shoals'', ``Thrift's 
     Ferry'', and ``Five Falls'', in Rabun County, near the towns 
     of Clayton, Georgia, and Dillard, South Carolina.
       (D) Cohutta cluster.--Certain land in the Chattahoochee 
     National Forest, Cohutta Ranger District, totaling 
     approximately 28,000 acres, known as the ``Cohutta Cluster'', 
     comprised of 4 parcels known as ``Cohutta Extensions'', 
     ``Grassy Mountain'', ``Emery Creek'', and ``Mountaintown'', 
     near the towns of Chatsworth and Ellijay, in Murray County, 
     Fannin County, and Gilmer County.
       (E) Duncan ridge cluster.--Certain land in the 
     Chattahoochee National Forest, Brasstown and Toccoa Ranger 
     Districts, totaling approximately 17,000 acres, known as the 
     ``Duncan Ridge Cluster'', comprised of the parcels known as 
     ``Licklog Mountain'', ``Duncan Ridge'', ``Board Camp'', and 
     ``Cooper Creek Scenic Area Extension'', approximately 10 to 
     15 miles south of the town of Blairsville, in Union County 
     and Fannin County.
       (F) Ed jenkins national recreation area cluster.--Certain 
     land in the Chattahoochee National Forest, Toccoa and 
     Chestatee Ranger Districts, totaling approximately 19,300 
     acres, known as the ``Ed Jenkins National Recreation Area 
     Cluster'', comprised of the Springer Mountain, Mill Creek, 
     and Toonowee parcels, 30 miles north of the town of 
     Dahlonega, in Fannin County, Dawson County, and Lumpkin 
     County.
       (G) Gainesville ridges cluster.--Certain land in the 
     Chattahoochee National Forest, Chattooga Ranger District, 
     totaling approximately 14,200 acres, known as the 
     ``Gainesville Ridges Cluster'', comprised of 3 parcels known 
     as ``Panther Creek'', ``Tugaloo Uplands'', and ``Middle Fork 
     Broad River'', approximately 10 miles from the town of 
     Toccoa, in Habersham County and Stephens County.
       (H) Northern blue ridge cluster, georgia areas.--Certain 
     land in the Chattahoochee National Forest, Brasstown and 
     Tallulah Ranger Districts, totaling approximately 46,000 
     acres, known as the ``Northern

[[Page 31289]]

     Blue Ridge Cluster, Georgia Areas'', comprised of 8 areas 
     known as ``Andrews Cove'', ``Anna Ruby Falls Scenic Area 
     Extension'', ``High Shoals'', ``Tray Mountain Extension'', 
     ``Kelly Ridge-Moccasin Creek'', ``Buzzard Knob'', ``Southern 
     Nantahala Extension'', and ``Patterson Gap'', approximately 5 
     to 15 miles north of Helen, 5 to 15 miles southeast of 
     Hiawassee, north of Clayton, and west of Dillard, in White 
     County, Towns County, and Rabun County.
       (I) Rich mountain cluster.--Certain land in the 
     Chattahoochee National Forest, Toccoa Ranger District, 
     totaling approximately 9,500 acres, known as the ``Rich 
     Mountain Cluster'', comprised of the parcels known as ``Rich 
     Mountain Extension'' and ``Rocky Mountain'', located 10 to 15 
     miles northeast of the town of Ellijay, in Gilmer County and 
     Fannin County.
       (J) Wilderness heartlands cluster, georgia areas.--Certain 
     land in the Chattahoochee National Forest, Chestatee, 
     Brasstown and Chattooga Ranger Districts, totaling 
     approximately 16,500 acres, known as the ``Wilderness 
     Heartlands Cluster, Georgia Areas'', comprised of 4 parcels 
     known as the ``Blood Mountain Extensions'', ``Raven Cliffs 
     Extensions'', ``Mark Trail Extensions'', and ``Brasstown 
     Extensions'', near the towns of Dahlonega, Cleveland, Helen, 
     and Blairsville, in Lumpkin County, Union County, White 
     County, and Towns County.
       (8) Idaho.--
       (A) Cove/mallard.--Certain land in the Nez Perce National 
     Forest, totaling approximately 94,000 acres, located 
     approximately 30 miles southwest of the town of Elk City, and 
     west of the town of Dixie, in the area generally known as 
     ``Cove/Mallard''.
       (B) Meadow creek.--Certain land in the Nez Perce National 
     Forest, totaling approximately 180,000 acres, located 
     approximately 8 miles east of the town of Elk City in the 
     area generally known as ``Meadow Creek''.
       (C) French creek/patrick butte.--Certain land in the 
     Payette National Forest, totaling approximately 141,000 
     acres, located approximately 20 miles north of the town of 
     McCall in the area generally known as ``French Creek/Patrick 
     Butte''.
       (9) Illinois.--
       (A) Cripps bend.--Certain land in the Shawnee National 
     Forest, totaling approximately 39 acres, located in Jackson 
     County in the Big Muddy River watershed, in the area 
     generally known as ``Cripps Bend''.
       (B) Opportunity area 6.--Certain land in the Shawnee 
     National Forest, totaling approximately 50,000 acres, located 
     in northern Pope County surrounding Bell Smith Springs 
     Natural Area, in the area generally known as ``Opportunity 
     Area 6''.
       (C) Quarrel creek.--Certain land in the Shawnee National 
     Forest, totaling approximately 490 acres, located in northern 
     Pope County in the Quarrel Creek watershed, in the area 
     generally known as ``Quarrel Creek''.
       (10) Michigan: trap hills.--Certain land in the Ottawa 
     National Forest, Bergland Ranger District, totaling 
     approximately 37,120 acres, known as the ``Trap Hills'', 
     located approximately 5 miles from the town of Bergland, in 
     Ontonagon County.
       (11) Minnesota.--
       (A) Trout lake and suomi hills.--Certain land in the 
     Chippewa National Forest, totaling approximately 12,000 
     acres, known as ``Trout Lake/Suomi Hills'' in Itasca County.
       (B) Lullaby white pine reserve.--Certain land in the 
     Superior National Forest, Gunflint Ranger District, totaling 
     approximately 2,518 acres, in the South Brule Opportunity 
     Area, northwest of Grand Marais in Cook County, known as the 
     ``Lullaby White Pine Reserve''.
       (12) Missouri: eleven point-big springs area.--Certain land 
     in the Mark Twain National Forest, Eleven Point Ranger 
     District, totaling approximately 200,000 acres, comprised of 
     the administrative area of the Eleven Point Ranger District, 
     known as the ``Eleven Point-Big Springs Area''.
       (13) Montana: mount bushnell.--Certain land in the Lolo 
     National Forest, totaling approximately 41,000 acres, located 
     approximately 5 miles southwest of the town of Thompson Falls 
     in the area generally known as ``Mount Bushnell''.
       (14) New mexico.--
       (A) Angostura.--Certain land in the eastern half of the 
     Carson National Forest, Camino Real Ranger District, totaling 
     approximately 10,000 acres, located in Township 21, Ranges 12 
     and 13, known as ``Angostura'', and bounded--
       (i) on the northeast, by Highway 518;
       (ii) on the southeast, by the Angostura Creek watershed 
     boundary;
       (iii) on the southern side, by Trail 19 and the Pecos 
     Wilderness; and
       (iv) on the west, by the Agua Piedra Creek watershed.
       (B) La manga.--Certain land in the western half of the 
     Carson National Forest, El Rito Ranger District, at the 
     Vallecitos Sustained Yield Unit, totaling approximately 5,400 
     acres, known as ``La Manga'', in Township 27, Range 6, and 
     bounded--
       (i) on the north, by the Tierra Amarilla Land Grant;
       (ii) on the south, by Canada Escondida;
       (iii) on the west, by the Sustained Yield Unit boundary and 
     the Tierra Amarilla Land Grant; and
       (iv) on the east, by the Rio Vallecitos.
       (C) Elk mountain.--Certain land in the Santa Fe National 
     Forest, totaling approximately 7,220 acres, known as ``Elk 
     Mountain'' located in Townships 17 and 18 and Ranges 12 and 
     13, and bounded--
       (i) on the north, by the Pecos Wilderness;
       (ii) on the east, by the Cow Creek Watershed;
       (iii) on the west, by the Cow Creek; and
       (iv) on the south, by Rito de la Osha.
       (D) Jemez highlands.--Certain land in the Jemez Ranger 
     District of the Santa Fe National Forest, totaling 
     approximately 54,400 acres, known as the ``Jemez Highlands'', 
     located primarily in Sandoval County.
       (15) North carolina.--
       (A) Central nantahala cluster, north carolina areas.--
     Certain land in the Nantahala National Forest, Tusquitee, 
     Cheoah, and Wayah Ranger Districts, totaling approximately 
     107,000 acres, known as the ``Central Nantahala Cluster, 
     North Carolina Areas'', comprised of 9 parcels known as 
     ``Tusquitee Bald'', ``Shooting Creek Bald'', ``Cheoah Bald'', 
     ``Piercy Bald'', ``Wesser Bald'', ``Tellico Bald'', ``Split 
     White Oak'', ``Siler Bald'', and ``Southern Nantahala 
     Extensions'', near the towns of Murphy, Franklin, Bryson 
     City, Andrews, and Beechertown, in Cherokee County, Macon 
     County, Clay County, and Swain County.
       (B) Chattooga watershed cluster, north carolina areas.--
     Certain land in the Nantahala National Forest, Highlands 
     Ranger District, totaling approximately 8,000 acres, known as 
     the ``Chattooga Watershed Cluster, North Carolina Areas'', 
     comprised of the Overflow (Blue Valley) and Terrapin Mountain 
     parcels, 5 miles from the town of Highlands, in Macon County 
     and Jackson County.
       (C) Tennessee border cluster, north carolina areas.--
     Certain land in the Nantahala National Forest, Tusquitee and 
     Cheoah Ranger Districts, totaling approximately 28,000 acres, 
     known as the ``Tennessee Border Cluster, North Carolina 
     Areas'', comprised of the 4 parcels known as the ``Unicoi 
     Mountains'', ``Deaden Tree'', ``Snowbird'', and ``Joyce 
     Kilmer-Slickrock Extension'', near the towns of Murphy and 
     Robbinsville, in Cherokee County and Graham County.
       (D) Bald mountains.--Certain land in the Pisgah National 
     Forest, French Broad Ranger District, totaling approximately 
     13,000 acres known as the ``Bald Mountains'', located 12 
     miles northeast of the town of Hot Springs, in Madison 
     County.
       (E) Big ivy tract.--Certain land in the Pisgah National 
     Forest, totaling approximately 14,000 acres, located 
     approximately 15 miles west of Mount Mitchell in the area 
     generally known as the ``Big Ivy Tract''.
       (F) Black mountains cluster, north carolina areas.--Certain 
     land in the Pisgah National Forest, Toecane and Grandfather 
     Ranger Districts, totaling approximately 62,000 acres, known 
     as the ``Black Mountains Cluster, North Carolina Areas'', 
     comprised of 5 parcels known as ``Craggy Mountains'', ``Black 
     Mountains'', ``Jarrett Creek'', ``Mackey Mountain'', and 
     ``Woods Mountain'', near the towns of Burnsville, Montreat 
     and Marion, in Buncombe County, Yancey County, and McDowell 
     County.
       (G) Linville cluster.--Certain land in the Pisgah National 
     Forest, Grandfather District, totaling approximately 42,000 
     acres, known as the ``Linville Cluster'', comprised of 7 
     parcels known as ``Dobson Knob'', ``Linville Gorge 
     Extension'', ``Steels Creek'', ``Sugar Knob'', ``Harper 
     Creek'', ``Lost Cove'', and ``Upper Wilson Creek'', near the 
     towns of Marion, Morgantown, Spruce Pine, Linville, and 
     Blowing Rock, in Burke County, McDowell County, Avery County, 
     and Caldwell County.
       (H) Nolichucky, north carolina area.--Certain land in the 
     Pisgah National Forest, Toecane Ranger District, totaling 
     approximately 4,000 acres, known as the ``Nolichucky, North 
     Carolina Area'', located 25 miles northwest of Burnsville, in 
     Mitchell County and Yancey County.
       (I) Pisgah cluster, north carolina areas.--Certain land in 
     the Pisgah National Forest, Pisgah Ranger District, totaling 
     approximately 52,000 acres, known as the ``Pisgah Cluster, 
     North Carolina Areas'', comprised of 5 parcels known as 
     ``Shining Rock and Middle Prong Extensions'', ``Daniel 
     Ridge'', ``Cedar Rock Mountain'', ``South Mills River'', and 
     ``Laurel Mountain'', 5 to 12 miles north of the town of 
     Brevard and southwest of the city of Asheville, in Haywood 
     County, Transylvania County, and Henderson County.
       (J) Wildcat.--Certain land in the Pisgah National Forest, 
     French Broad Ranger District, totaling approximately 6,500 
     acres, known as ``Wildcat'', located 20 miles northwest of 
     the town of Canton, in Haywood County.
       (16) Ohio.--
       (A) Archers fork complex.--Certain land in the Marietta 
     Unit of the Athens Ranger District, in the Wayne National 
     Forest, in Washington County, known as ``Archers Fork 
     Complex'', totaling approximately 18,350 acres, located 
     northeast of Newport and bounded--
       (i) on the northwest, by State Highway 26;
       (ii) on the northeast, by State Highway 260;
       (iii) on the southeast, by the Ohio River; and

[[Page 31290]]

       (iv) on the southwest, by Bear Run and Danas Creek.
       (B) Bluegrass ridge.--Certain land in the Ironton Ranger 
     District on the Wayne National Forest, in Lawrence County, 
     known as ``Bluegrass Ridge'', totaling approximately 4,000 
     acres, located 3 miles east of Etna in Township 4 North, 
     Range 17 West, Sections 19 through 23 and 27 through 30.
       (C) Buffalo creek.--Certain land in the Ironton Ranger 
     District of the Wayne National Forest, Lawrence County, Ohio, 
     known as ``Buffalo Creek'', totaling approximately 6500 
     acres, located 4 miles northwest of Waterloo in Township 5 
     North, Ranger 17 West, sections 3 through 10 and 15 through 
     18.
       (D) Lake vesuvius.--Certain land in the Ironton Ranger 
     District of the Wayne National Forest, in Lawrence County, 
     totaling approximately 4,900 acres, generally known as ``Lake 
     Vesuvius'', located to the east of Etna in Township 2 North, 
     Range 18 West, and bounded--
       (i) on the southwest, by State Highway 93; and
       (ii) on the northwest, by State Highway 4.
       (E) Morgan sisters.--Certain land in the Ironton Ranger 
     District of the Wayne National Forest, in Lawrence County, 
     known as ``Morgan Sisters'', totaling approximately 2,500 
     acres, located 1 mile east of Gallia and bounded by State 
     Highway 233 in Township 6 North, Range 17 West, sections 13, 
     14, 23 and 24 and Township 5 North, Range 16 West, sections 
     18 and 19.
       (F) Utah ridge.--Certain land in the Athens Ranger District 
     of the Wayne National Forest, in Athens County, known as 
     ``Utah Ridge'', totaling approximately 9,000 acres, located 1 
     mile northwest of Chauncey and bounded--
       (i) on the southeast, by State Highway 682 and State 
     Highway 13;
       (ii) on the southwest, by US Highway 33 and State Highway 
     216; and
       (iii) on the north, by State Highway 665.
       (G) Wildcat hollow.--Certain land in the Athens Ranger 
     District of the Wayne National Forest, in Perry County and 
     Morgan County, known as ``Wildcat Hollow'', totaling 
     approximately 4,500 acres, located 1 mile east of Corning in 
     Township 12 North, Range 14 West, sections 1, 2, 11-14, 23 
     and 24 and Township 8 North, Range 13 West, sections 7, 18, 
     and 19.
       (17) Oklahoma: cow creek drainage, oklahoma.--Certain land 
     in the Ouachita National Forest, Mena Ranger District, in Le 
     Flore County, totaling approximately 3,000 acres, known as 
     ``Cow Creek Drainage, Oklahoma'', and bounded approximately--
       (A) on the west, by the Beech Creek National Scenic Area;
       (B) on the north, by State Highway 63;
       (C) on the east, by the Arkansas-Oklahoma border; and
       (D) on the south, by County Road 9038 on the south.
       (18) Oregon: applegate wilderness.--Certain land in the 
     Siskiyou National Forest and Rogue River National Forest, 
     totaling approximately 20,000 acres, approximately 20 miles 
     southwest of the town of Grants Pass and 10 miles south of 
     the town of Williams, in the area generally known as the 
     ``Applegate Wilderness''.
       (19) Pennsylvania.--
       (A) The bear creek special area.--Certain land in the 
     Allegheny National Forest, Marienville Ranger District, Elk 
     County, totaling approximately 7,800 acres, and comprised of 
     Allegheny National Forest land bounded--
       (i) on the west, by Forest Service Road 136;
       (ii) on the north, by Forest Service Roads 339 and 237;
       (iii) on the east, by Forest Service Road 143; and
       (iv) on the south, by Forest Service Road 135.
       (B) The bogus rocks special area.--Certain land in the 
     Allegheny National Forest, Marienville Ranger District, 
     Forest County, totaling approximately 1,015 acres, and 
     comprised of Allegheny National Forest land in compartment 
     714 bounded--
       (i) on the northeast and east, by State Route 948;
       (ii) on the south, by State Route 66;
       (iii) 0n the southwest and west, by Township Road 370;
       (iv) on the northwest, by Forest Service Road 632; and
       (v) on the north, by a pipeline.
       (C) The chappel fork special area.--Certain land in the 
     Allegheny National Forest, Bradford Ranger District, McKean 
     County, totaling approximately 10,000 acres, and comprised of 
     Allegheny National Forest land bounded--
       (i) on the south and southeast, by State Road 321;
       (ii) on the south, by Chappel Bay;
       (iii) on the west, by the Allegheny Reservoir;
       (iv) on the north, by State Route 59; and
       (v) on the east, by private land.
       (D) The fools creek special area.--Certain land in the 
     Allegheny National Forest, Bradford Ranger District, Warren 
     County, totaling approximately 1,500 acres, and comprised of 
     Allegheny National Forest land south and west of Forest 
     Service Road 255 and west of FR 255A, bounded--
       (i) on the west, by Minister Road; and
       (ii) on the south, by private land.
       (E) The hickory creek special area.--Certain land in the 
     Allegheny National Forest, Bradford Ranger District, Warren 
     County, totaling approximately 2,000 acres, and comprised of 
     Allegheny National Forest land bounded--
       (i) on the east and northeast, by Heart's Content Road;
       (ii) on the south, by Hickory Creek Wilderness Area;
       (iii) on the northwest, by private land; and
       (iv) on the north, by Allegheny Front National Recreation 
     Area.
       (F) The lamentation run special area.--Certain land in the 
     Allegheny National Forest, Marienville Ranger District, 
     Forest County, totaling approximately 4,500 acres, and--
       (i) comprised of Allegheny National Forest land bounded--

       (I) on the north, by Tionesta Creek;
       (II) on the east, by Salmon Creek;
       (III) on the southeast and southwest, by private land; and
       (IV) on the south, by Forest Service Road 210; and

       (ii) including the lower reaches of Bear Creek.
       (G) The lewis run special area.--Certain land in the 
     Allegheny National Forest, Bradford Ranger District, McKean 
     County, totaling approximately 500 acres, and comprised of 
     Allegheny National Forest land north and east of Forest 
     Service Road 312.3, including land known as the ``Lewis Run 
     Natural Area'' and consisting of land within Compartment 466, 
     Stands 1-3, 5-8, 10-14, and 18-27.
       (H) The mill creek special area.--Certain land in the 
     Allegheny National Forest, Marienville Ranger District, Elk 
     County, totaling approximately 2,000 acres, and comprised of 
     Allegheny National Forest land within a 1-mile radius of the 
     confluence of Red Mill Run and Big Mill Creek and known as 
     the ``Mill Creek Natural Area''.
       (I) The millstone creek special area.--Certain land in the 
     Allegheny National Forest, Marienville Ranger District, 
     Forest County, totaling approximately 30,000 acres, and 
     comprised of Allegheny National Forest land bounded--
       (i) on the north, by State Route 66;
       (ii) on the northeast, by Forest Service Road 226;
       (iii) on the east, by Forest Service Roads 130, 774, and 
     228;
       (iv) on the southeast, by State Road 3002 and Forest 
     Service Road 189;
       (v) on the south, by the Clarion River; and
       (vi) on the southwest, west, and northwest, by private 
     land.
       (J) The minister creek special area.--Certain land in the 
     Allegheny National Forest, Bradford Ranger District, Warren 
     County, totalling approximately 6,600 acres, and comprised of 
     Allegheny National Forest land bounded--
       (i) on the north, by a snowmobile trail;
       (ii) on the east, by Minister Road;
       (iii) on the south, by State Route 666 and private land;
       (iv) on the southwest, by Forest Service Road 420; and
       (v) on the west, by warrants 3109 and 3014.
       (K) The muzette special area.--Certain land in the 
     Allegheny National Forest, Marienville Ranger District, 
     Forest County, totaling approximately 325 acres, and 
     comprised of Allegheny National Forest land bounded--
       (i) on the west, by 79 deg.16' longitude, approximately;
       (ii) on the north, by Forest Service Road 561;
       (iii) on the east, by Forest Service Road 212; and
       (iv) on the south, by private land.
       (L) The sugar run special area.--Certain land in the 
     Allegheny National Forest, Bradford Ranger District, McKean 
     County, totaling approximately 8,800 acres, and comprised of 
     Allegheny National Forest land bounded--
       (i) on the north, by State Route 346 and private land;
       (ii) on the east, by Forest Service Road 137; and
       (iii) on the south and west, by State Route 321.
       (M) The tionesta special area.--Certain land in the 
     Allegheny National Forest, Bradford and Marienville Ranger 
     Districts, Elk, Forest, McKean, and Warren Counties, 
     totalling approximately 27,000 acres, and comprised of 
     Allegheny National Forest land bounded--
       (i) on the west, by private land and State Route 948;
       (ii) on the northwest, by Forest Service Road 258;
       (iii) on the north, by Hoffman Farm Recreation Area and 
     Forest Service Road 486;
       (iv) on the northeast, by private land and State Route 6;
       (v) on the east, by private land south to Forest Road 133, 
     then by snowmobile trail from Forest Road 133 to Windy City, 
     then by private land and Forest Road 327 to Russell City; and
       (vi) on the southwest, by State Routes 66 and 948.
       (20) South carolina.--
       (A) Big shoals, south carolina area.--Certain land in the 
     Sumter National Forest, Andrew Pickens Ranger District, in 
     Oconee County, totaling approximately 2,000 acres,

[[Page 31291]]

     known as ``Big Shoals, South Carolina Area'', 15 miles south 
     of Highlands, North Carolina.
       (B) Brasstown creek, south carolina area.--Certain land in 
     the Sumter National Forest, Andrew Pickens Ranger District, 
     in Oconee County, totaling approximately 3,500 acres, known 
     as ``Brasstown Creek, South Carolina Area'', approximately 15 
     miles west of Westminster, South Carolina.
       (C) Chauga.--Certain land in the Sumter National Forest, 
     Andrew Pickens Ranger District, in Oconee County, totaling 
     approximately 16,000 acres, known as ``Chauga'', 
     approximately 10 miles west of Walhalla, South Carolina.
       (D) Dark bottoms.--Certain land in the Sumter National 
     Forest, Andrew Pickens Ranger District, in Oconee County, 
     totaling approximately 4,000 acres, known as ``Dark 
     Bottoms'', approximately 10 miles northwest of Westminster, 
     South Carolina.
       (E) Ellicott rock extension, south carolina area.--Certain 
     land in the Sumter National Forest, Andrew Pickens Ranger 
     District, in Oconee County, totaling approximately 2,000 
     acres, known as ``Ellicott Rock Extension, South Carolina 
     Area'', located approximately 10 miles south of Cashiers, 
     North Carolina.
       (F) Five falls, south carolina area.--Certain land in the 
     Sumter National Forest, Andrew Pickens Ranger District, in 
     Oconee County, totaling approximately 3,500 acres, known as 
     ``Five Falls, South Carolina Area'', approximately 10 miles 
     southeast of Clayton, Georgia.
       (G) Persimmon mountain.--Certain land in the Sumter 
     National Forest, Andrew Pickens Ranger District, in Oconee 
     County, totaling approximately 7,000 acres, known as 
     ``Persimmon Mountain'', approximately 12 miles south of 
     Cashiers, North Carolina.
       (H) Rock gorge, south carolina area.--Certain land in the 
     Sumter National Forest, Andrew Pickens Ranger District, in 
     Oconee County, totaling approximately 2,000 acres, known as 
     ``Rock Gorge, South Carolina Area'', 12 miles southeast of 
     Highlands, North Carolina.
       (I) Tamassee.--Certain land in the Sumter National Forest, 
     Andrew Pickens Ranger District, in Oconee County, totaling 
     approximately 5,500 acres, known as ``Tamassee'', 
     approximately 10 miles north of Walhalla, South Carolina.
       (J) Thrift's ferry, south carolina area.--Certain land in 
     the Sumter National Forest, Andrew Pickens Ranger District, 
     in Oconee County, totaling approximately 5,000 acres, known 
     as ``Thrift's Ferry, South Carolina Area'', 10 miles east of 
     Clayton, Georgia.
       (21) South dakota.--
       (A) Black fox area.--Certain land in the Black Hills 
     National Forest, totaling approximately 12,400 acres, located 
     in the upper reaches of the Rapid Creek watershed, known as 
     the ``Black Fox Area'', and roughly bounded--
       (i) on the north, by FDR 206;
       (ii) on the south, by the steep slopes north of Forest Road 
     231; and
       (iii) on the west, by a fork of Rapid Creek.
       (B) Breakneck area.--Certain land in the Black Hills 
     National Forest, totaling 6,700 acres, located along the 
     northeast edge of the Black Hills in the vicinity of the 
     Black Hills National Cemetery and the Bureau of Land 
     Management's Fort Meade Recreation Area, known as the 
     ``Breakneck Area'', and generally--
       (i) bounded by Forest Roads 139 and 169 on the north, west, 
     and south; and
       (ii) demarcated along the eastern and western boundaries by 
     the ridge-crests dividing the watershed.
       (C) Norbeck preserve.--Certain land in the Black Hills 
     National Forest, totaling approximately 27,766 acres, known 
     as the ``Norbeck Preserve'', and encompassed approximately by 
     a boundary that, starting at the southeast corner--
       (i) runs north along FDR 753 and United States Highway Alt. 
     16, then along SD 244 to the junction of Palmer Creek Road, 
     which serves generally as a northwest limit;
       (ii) heads south from the junction of Highways 87 and 89;
       (iii) runs southeast along Highway 87; and
       (iv) runs east back to FDR 753, excluding a corridor of 
     private land along FDR 345.
       (D) Pilger mountain area.--Certain land in the Black Hills 
     National Forest, totaling approximately 12,600 acres, known 
     as the ``Pilger Mountain Area'', located in the Elk Mountains 
     on the southwest edge of the Black Hills, and roughly 
     bounded--
       (i) on the east and northeast, by Forest Roads 318 and 319;
       (ii) on the north and northwest, by Road 312; and
       (iii) on the southwest, by private land.
       (E) Stagebarn canyons.--Certain land in the Black Hills 
     National Forest, known as ``Stagebarn Canyons'', totaling 
     approximately 7,300 acres, approximately 10 miles west of 
     Rapid City, South Dakota.
       (22) Tennessee.--
       (A) Bald mountains cluster, tennessee areas.--Certain land 
     in the Nolichucky and Unaka Ranger Districts of the Cherokee 
     National Forest, in Cocke County, Green County, Washington 
     County, and Unicoi County, totaling approximately 46,133 
     acres, known as the ``Bald Mountains Cluster, Tennessee 
     Areas'', and comprised of 10 parcels known as ``Laurel Hollow 
     Mountain'', ``Devil's Backbone'', ``Laurel Mountain'', 
     ``Walnut Mountain'', ``Wolf Creek'', ``Meadow Creek 
     Mountain'', ``Brush Creek Mountain'', ``Paint Creek'', ``Bald 
     Mountain'', and ``Sampson Mountain Extension'', located near 
     the towns of Newport, Hot Springs, Greeneville, and Erwin.
       (B) Big frog/cohutta cluster.--Certain land in the Cherokee 
     National Forest, in Polk County, Ocoee Ranger District, 
     Hiwassee Ranger District, and Tennessee Ranger District, 
     totaling approximately 28,800 acres, known as the ``Big Frog/
     Cohutta Cluster'', comprised of 4 parcels known as ``Big Frog 
     Extensions'', ``Little Frog Extensions'', ``Smith Mountain'', 
     and ``Rock Creek'', located near the towns of Copperhill, 
     Ducktown, Turtletown, and Benton.
       (C) Citico creek watershed cluster tennessee areas.--
     Certain land in the Tellico Ranger District of the Cherokee 
     National Forest, in Monroe County, totaling approximately 
     14,256 acres, known as the ``Citico Creek Watershed Cluster, 
     Tennessee Areas'', comprised of 4 parcels known as ``Flats 
     Mountain'', ``Miller Ridge'', ``Cowcamp Ridge'', and ``Joyce 
     Kilmer-Slickrock Extension'', near the town of Tellico 
     Plains.
       (D) Iron mountains cluster.--Certain land in the Cherokee 
     National Forest, Watauga Ranger District, totaling 
     approximately 58,090 acres, known as the ``Iron Mountains 
     Cluster'', comprised of 8 parcels known as ``Big Laurel 
     Branch Addition'', ``Hickory Flat Branch'', ``Flint Mill'', 
     ``Lower Iron Mountain'', ``Upper Iron Mountain'', ``London 
     Bridge'', ``Beaverdam Creek'', and ``Rodgers Ridge'', located 
     near the towns of Bristol and Elizabethton, in Sullivan 
     County and Johnson County.
       (E) Northern unicoi mountains cluster.--Certain land in the 
     Tellico Ranger District of the Cherokee National Forest, in 
     Monroe County, totaling approximately 30,453 acres, known as 
     the ``Northern Unicoi Mountain Cluster'', comprised of 4 
     parcels known as ``Bald River Gorge Extension'', ``Upper Bald 
     River'', ``Sycamore Creek'', and ``Brushy Ridge'', near the 
     town of Tellico Plains.
       (F) Roan mountain cluster.--Certain land in the Cherokee 
     National Forest, Unaka and Watauga Ranger Districts, totaling 
     approximately 23,725 acres known as the ``Roan Mountain 
     Cluster'', comprised of 7 parcels known as ``Strawberry 
     Mountain'', ``Highlands of Roan'', ``Ripshin Ridge'', ``Doe 
     River Gorge Scenic Area'', ``White Rocks Mountain'', ``Slide 
     Hollow'' and ``Watauga Reserve'', approximately 8 to 20 miles 
     south of the town of Elizabethton, in Unicoi County, Carter 
     County, and Johnson County.
       (G) Southern unicoi mountains cluster.--Certain land in the 
     Hiwassee Ranger District of the Cherokee National Forest, in 
     Polk County, Monroe County, and McMinn County, totaling 
     approximately 11,251 acres, known as the ``Southern Unicoi 
     Mountains Cluster'', comprised of 3 parcels known as ``Gee 
     Creek Extension'', ``Coker Creek'', and ``Buck Bald'', near 
     the towns of Etowah, Benton, and Turtletown.
       (H) Unaka mountains cluster, tennessee areas.--Certain land 
     in the Cherokee National Forest, Unaka Ranger District, 
     totaling approximately 15,669 acres, known as the ``Unaka 
     Mountains Cluster, Tennessee Areas'', comprised of 3 parcels 
     known as ``Nolichucky'', ``Unaka Mountain Extension'', and 
     ``Stone Mountain'', approximately 8 miles from Erwin, in 
     Unicoi County and Carter County.
       (23) Texas: longleaf ridge.--Certain land in the Angelina 
     National Forest, in Jasper County and Angelina County, 
     totaling approximately 30,000 acres, generally known as 
     ``Longleaf Ridge'', and bounded--
       (A) on the west, by Upland Island Wilderness Area;
       (B) on the south, by the Neches River; and
       (C) on the northeast, by Sam Rayburn Reservoir.
       (24) Vermont.--
       (A) Glastenbury area.--Certain land in the Green Mountain 
     National Forest, totaling approximately 35,000 acres, located 
     3 miles northeast of Bennington, generally known as the 
     ``Glastenbury Area'', and bounded--
       (i) on the north, by Kelly Stand Road;
       (ii) on the east, by Forest Road 71;
       (iii) on the south, by Route 9; and
       (iv) on the west, by Route 7.
       (B) Lamb brook.--Certain land in the Green Mountain 
     National Forest, totaling approximately 5,500 acres, located 
     3 miles southwest of Wilmington, generally known as ``Lamb 
     Brook'', and bounded--
       (i) on the west, by Route 8;
       (ii) on the south, by Route 100;
       (iii) on the north, by Route 9; and
       (iv) on the east, by land owned by New England Power 
     Company.
       (C) Robert frost mountain area.--Certain land in the Green 
     Mountain National Forest, totaling approximately 8,500 acres, 
     known as ``Robert Frost Mountain Area'', located northeast of 
     Middlebury, consisting of the Forest Service land bounded--
       (i) on the west, by Route 116;
       (ii) on the north, by Bristol Notch Road;
       (iii) on the east, by Lincoln/Ripton Road; and
       (iv) on the south, by Route 125.
       (25) Virginia.--

[[Page 31292]]

       (A) Bear creek.--Certain land in the Jefferson National 
     Forest, Wythe Ranger District, known as ``Bear Creek'', north 
     of Rural Retreat, in Smyth County and Wythe County.
       (B) Cave springs.--Certain land in the Jefferson National 
     Forest, Clinch Ranger District, totaling approximately 3,000 
     acres, known as ``Cave Springs'', between State Route 621 and 
     the North Fork of the Powell River, in Lee County.
       (C) Dismal creek.--Certain land totaling approximately 
     6,000 acres, in the Jefferson National Forest, Blacksburg 
     Ranger District, known as ``Dismal Creek'', north of State 
     Route 42, in Giles County and Bland County.
       (D) Stone coal creek.--Certain land in the Jefferson 
     National Forest, New Castle Ranger District, totaling 
     approximately 2,000 acres, known as ``Stone Coal Creek'', in 
     Craig County and Botetourt County.
       (E) White oak ridge: terrapin mountain.--Certain land in 
     the Glenwood Ranger District of the Jefferson National 
     Forest, known as ``White Oak Ridge--Terrapin Mountain'', 
     totaling approximately 8,000 acres, east of the Blue Ridge 
     Parkway, in Botetourt County and Rockbridge County.
       (F) Whitetop mountain.--Certain land in the Jefferson 
     National Forest, Mt. Rodgers Recreation Area, totaling 3,500 
     acres, known as ``Whitetop Mountain'', in Washington County, 
     Smyth County, and Grayson County.
       (G) Wilson mountain.--Certain land known as ``Wilson 
     Mountain'', in the Jefferson National Forest, Glenwood Ranger 
     District, totaling approximately 5,100 acres, east of 
     Interstate 81, in Botetourt County and Rockbridge County.
       (H) Feathercamp.--Certain land in the Mt. Rodgers 
     Recreation Area of the Jefferson National Forest, totaling 
     4,974 acres, known as ``Feathercamp'', located northeast of 
     the town of Damascus and north of State Route 58 on the 
     Feathercamp ridge, in Washington County.
       (26) Wisconsin.--
       (A) Flynn lake.--Certain land in the Chequamegon-Nicolet 
     National Forest, Washburn Ranger District, totaling 
     approximately 5,700 acres, known as ``Flynn Lake'', in the 
     Flynn Lake semi-primitive nonmotorized area, in Bayfield 
     County.
       (B) Ghost lake cluster.--Certain land in the Chequamegon-
     Nicolet National Forest, Great Divide Ranger District, 
     totaling approximately 6,000 acres, known as ``Ghost Lake 
     Cluster'', including 5 parcels known as ``Ghost Lake'', 
     ``Perch Lake'', ``Lower Teal River'', ``Foo Lake'', and 
     ``Bulldog Springs'', in Sawyer County.
       (C) Lake owens cluster.--Certain land in the Chequamegon-
     Nicolet National Forest, Great Divide and Washburn Ranger 
     Districts, totaling approximately 3,600 acres, known as 
     ``Lake Owens Cluster'', comprised of parcels known as ``Lake 
     Owens'', ``Eighteenmile Creek'', ``Northeast Lake'', and 
     ``Sugarbush Lake'', in Bayfield County.
       (D) Medford cluster.--Certain land in the Chequamegon-
     Nicolet National Forest, Medford-Park Falls Ranger District, 
     totaling approximately 23,000 acres, known as the ``Medford 
     Cluster'', comprised of 12 parcels known as ``County E 
     Hardwoods'', ``Silver Creek/Mondeaux River Bottoms'', ``Lost 
     Lake Esker'', ``North and South Fork Yellow Rivers'', ``Bear 
     Creek'', ``Brush Creek'', ``Chequamegon Waters'', ``John's 
     and Joseph Creeks'', ``Hay Creek Pine-Flatwoods'', ``558 
     Hardwoods'', ``Richter Lake'', and ``Lower Yellow River'', in 
     Taylor County.
       (E) Park falls cluster.--Certain land in the Chequamegon-
     Nicolet National Forest, Medford-Park Falls Ranger District, 
     totaling approximately 23,000 acres, known as ``Park Falls 
     Cluster'', comprised of 11 parcels known as ``Sixteen 
     Lakes'', ``Chippewa Trail'', ``Tucker and Amik Lakes'', 
     ``Lower Rice Creek'', ``Doering Tract'', ``Foulds Creek'', 
     ``Bootjack Conifers'', ``Pond'', ``Mud and Riley Lake 
     Peatlands'', ``Little Willow Drumlin'', and ``Elk River'', in 
     Price County and Vilas County.
       (F) Penokee mountain cluster.--Certain land in the 
     Chequamegon-Nicolet National Forest, Great Divide Ranger 
     District, totaling approximately 23,000 acres, known as 
     ``Penokee Mountain Cluster'', comprised of--
       (i) the Marengo River and Brunsweiler River semi-primitive 
     nonmotorized areas; and
       (ii) parcels known as ``St. Peters Dome'', ``Brunsweiler 
     River Gorge'', ``Lake Three'', ``Hell Hole Creek'', and 
     ``North Country Trail Hardwoods'', in Ashland County and 
     Bayfield County.
       (G) Southeast great divide cluster.--Certain land in the 
     Chequamegon-Nicolet National Forest, Medford Park Falls 
     Ranger District, totaling approximately 25,000 acres, known 
     as the ``Southeast Great Divide Cluster'', comprised of 
     parcels known as ``Snoose Lake'', ``Cub Lake'', ``Springbrook 
     Hardwoods'', ``Upper Moose River'', ``East Fork Chippewa 
     River'', ``Upper Torch River'', ``Venison Creek'', ``Upper 
     Brunet River'', ``Bear Lake Slough'', and ``Noname Lake'', in 
     Ashland County and Sawyer County.
       (H) Diamond roof cluster.--Certain land in the Chequamegon-
     Nicolet National Forest, Lakewood-Laona Ranger District, 
     totaling approximately 6,000 acres, known as ``Diamond Roof 
     Cluster'', comprised of 4 parcels known as ``McCaslin 
     Creek'', ``Ada Lake'', ``Section 10 Lake'', and ``Diamond 
     Roof'', in Forest County, Langlade County, and Oconto County.
       (I) Argonne forest cluster.--Certain land in the 
     Chequamegon-Nicolet National Forest, Eagle River-Florence 
     Ranger District, totaling approximately 12,000 acres, known 
     as ``Argonne Forest Cluster'', comprised of parcels known as 
     ``Argonne Experimental Forest'', ``Scott Creek'', ``Atkins 
     Lake'', and ``Island Swamp'', in Forest County.
       (J) Bonita grade.--Certain land in the Chequamegon-Nicolet 
     National Forest, Lakewood-Laona Ranger District, totaling 
     approximately 1,200 acres, known as ``Bonita Grade'', 
     comprised of parcels known as ``Mountain Lakes'', ``Temple 
     Lake'', ``Second South Branch'', ``First South Branch'', and 
     ``South Branch Oconto River'', in Langlade County.
       (K) Franklin and butternut lakes cluster.--Certain land in 
     the Chequamegon-Nicolet National Forest, Eagle River-Florence 
     Ranger District, totaling approximately 12,000 acres, known 
     as ``Franklin and Butternut Lakes Cluster'', comprised of 8 
     parcels known as ``Bose Lake Hemlocks'', ``Luna White Deer'', 
     ``Echo Lake'', ``Franklin and Butternut Lakes'', ``Wolf 
     Lake'', ``Upper Ninemile'', ``Meadow'', and ``Bailey 
     Creeks'', in Forest County and Oneida County.
       (L) Lauterman lake and kieper creek.--Certain land in the 
     Chequamegon-Nicolet National Forest, Eagle River-Florence 
     Ranger District, totaling approximately 2,500 acres, known as 
     ``Lauterman Lake and Kieper Creek'', in Florence County.
       (27) Wyoming: sand creek area.--
       (A) In general.--Certain land in the Black Hills National 
     Forest, totaling approximately 8,300 acres known as the 
     ``Sand Creek area'', located in Crook County, in the far 
     northwest corner of the Black Hills.
       (B) Boundary.--Beginning in the northwest corner and 
     proceeding counterclockwise, the boundary for the Sand Creek 
     Area roughly follows--
       (i) forest Roads 863, 866, 866.1B;
       (ii) a line linking forest roads 866.1B and 802.1B;
       (iii) forest road 802.1B;
       (iv) forest road 802.1;
       (v) an unnamed road;
       (vi) Spotted Tail Creek (excluding all private land);
       (vii) forest road 829.1;
       (viii) a line connecting forest roads 829.1 and 864;
       (ix) forest road 852.1; and
       (x) a line connecting forest roads 852.1 and 863.
       (d) Committee of Scientists.--
       (1) Establishment.--The Secretaries concerned shall appoint 
     a committee consisting of scientists who--
       (A) are not officers or employees of the Federal 
     Government;
       (B) are not officers or employees of any entity engaged in 
     whole or in part in the production of wood or wood products; 
     and
       (C) have not contracted with or represented any entity 
     described in subparagraph (A) or (B) in a period beginning 5 
     years before the date on which the scientist is appointed to 
     the committee.
       (2) Recommendations for additional special areas.--Not 
     later than 2 years of the date of the enactment of this Act, 
     the committee shall provide Congress with recommendations for 
     additional special areas.
       (3) Candidate areas.--Candidate areas for recommendation as 
     additional special areas shall have outstanding biological 
     values that are exemplary on a local, regional, and national 
     level, including the presence of--
       (A) threatened or endangered species of plants or animals;
       (B) rare or endangered ecosystems;
       (C) key habitats necessary for the recovery of endangered 
     or threatened species;
       (D) recovery or restoration areas of rare or 
     underrepresented forest ecosystems;
       (E) migration corridors;
       (F) areas of outstanding biodiversity;
       (G) old growth forests;
       (H) commercial fisheries; and
       (I) sources of clean water such as key watersheds.
       (4) Governing principle--The committee shall adhere to the 
     principles of conservation biology in identifying special 
     areas based on biological values.

     SEC. 204. RESTRICTIONS ON MANAGEMENT ACTIVITIES IN ANCIENT 
                   FORESTS, ROADLESS AREAS, WATERSHED PROTECTION 
                   AREAS, AND SPECIAL AREAS.

       (a) Restriction of Management Activities in Ancient 
     Forests.--On Federal land located in Ancient forests--
       (1) no roads shall be constructed or reconstructed;
       (2) no extractive logging shall be permitted; and
       (3) no improvements for the purpose of extractive logging 
     shall be permitted.
       (b) Restriction of Management Activities in Roadless 
     Areas.--On Federal land located in roadless areas (except 
     military installations)--
       (1) no roads shall be constructed or reconstructed;
       (2) no extractive logging shall be permitted except of non-
     native invasive tree species, in

[[Page 31293]]

     which case the limitations on logging in title I shall apply; 
     and
       (3) no improvements for the purpose of extractive logging 
     shall be permitted.
       (c) Restriction of Management Activities in Watershed 
     Protection Areas.--On Federal land located in watershed 
     protection areas--
       (1) no roads shall be constructed or reconstructed;
       (2) no extractive logging shall be permitted except of non-
     native invasive tree species, in which case the limitations 
     on logging in title I shall apply; and
       (3) no improvements for the purpose of extractive logging 
     shall be permitted.
       (d) Restriction of Management Activities in Special 
     Areas.--On Federal land located in special areas--
       (1) no roads shall be constructed or reconstructed;
       (2) no extractive logging shall be permitted except of non-
     native invasive tree species, in which case the limitations 
     on logging in title I shall apply; and
       (3) no improvements for the purpose of extractive logging 
     shall be permitted.
       (e) Maintenance of Existing Roads.--
       (1) In general.--Except as provided in paragraph (2), the 
     restrictions described in subsection (a) shall not prohibit 
     the maintenance of an improved road, or any road accessing 
     private inholdings.
       (2) Abandoned roads.--Any road that the Secretary 
     determines to have been abandoned before the date of 
     enactment of this Act shall not be maintained or 
     reconstructed.
       (f) Enforcement.--
       (1) Finding.--Congress finds that all people of the United 
     States are injured by actions on land to which this section 
     applies.
       (2) Purpose.--The purpose of this subsection is to foster 
     the widest possible enforcement of this section.
       (3) Federal enforcement.--The Secretary and the Attorney 
     General of the United States shall enforce this section 
     against any person that violates this section.
       (4) Citizen suits.--
       (A) In general.--A citizen harmed by a violation of this 
     section may enforce this section by bringing a civil action 
     for a declaratory judgment, a temporary restraining order, an 
     injunction, statutory damages, or other remedy against any 
     alleged violator, including the United States, in any 
     district court of the United States.
       (B) Judicial relief.--If a district court of the United 
     States determines that a violation of this section has 
     occurred, the district court--
       (i) shall impose a damage award of not less than $5,000;
       (ii) may issue 1 or more injunctions or other forms of 
     equitable relief; and
       (iii) shall award to each prevailing party the reasonable 
     costs of bringing the action, including attorney's fees, 
     witness fees, and other necessary expenses.
       (C) Standard of proof.--The standard of proof in all 
     actions under this paragraph shall be the preponderance of 
     the evidence.
       (D) Trial.--A trial for any action under this section shall 
     be de novo.
       (E) Payment of damages.--
       (i) Non-federal violator.--A damage award under 
     subparagraph (B)(i) shall be paid by a non-Federal violator 
     or violators designated by the court to the Treasury.
       (ii) Federal violator.--

       (I) In general.--Not later than 40 days after the date on 
     which judgment is rendered, a damage award under subparagraph 
     (B)(i) for which the United States is determined to be liable 
     shall be paid from the Treasury, as provided under section 
     1304 of title 31, United States Code, to the person or 
     persons designated to receive the damage award.
       (II) Use of damage award.--A damage award described under 
     subclause (I) shall be used by the recipient to protect or 
     restore native biodiversity on Federal land or on land 
     adjoining Federal land.
       (III) Court costs.--Any award of costs of litigation and 
     any award of attorney fees shall be paid by a Federal 
     violator not later than 40 days after the date on which 
     judgment is rendered.

       (5) Waiver of sovereign immunity.--
       (A) In general.--The United States (including agents and 
     employees of the United States) waives its sovereign immunity 
     in all respects in all actions under this section.
       (B) Notice.--No notice is required to enforce this 
     subsection.

                       TITLE III--EFFECTIVE DATE

     SEC. 301. EFFECTIVE DATE.

       This Act and the amendments made by this Act take effect on 
     the date of enactment of this Act.

     SEC. 302. EFFECT ON EXISTING CONTRACTS.

       This Act and the amendments made by this Act shall not 
     apply to any contract for the sale of timber that was entered 
     into on or before the date of enactment of this Act.

     SEC. 303. WILDERNESS ACT EXCLUSION.

       This Act and the amendments made by this Act shall not 
     apply to any Federal wilderness area designated under the 
     Wilderness Act (16 U.S.C. 1131 et seq.).
                                 ______
                                 
      By Mr. CORZINE:
  S. 1942. A bill to require the President to submit to Congress a 
quarterly report on the projected total cost of United States 
operations in Iraq, including military operations and reconstruction 
efforts, through fiscal year 2008; through fiscal year 2008; to the 
Committee on Armed Services.
  Mr. CORZINE. Mr. President, I am introducing today a bill that will 
ensure that we properly budget for what we are now learning will be a 
long and costly war in Iraq. This legislation, which requires the 
President to submit a report every 90 days on the projected total costs 
of military operations and reconstruction efforts to Iraq is identifcal 
to an amendment I offered to the supplemental appropriations bill to 
October. That announcement was agreed to by unanimously consent. 
Unfortunately, it was removed in conference.
  In recent days, the Administration has finally begun to acknowledge 
what Secretary of Defense Donald Rumsfeld wrote in an internal 
memorandum last month: that Iraq will be a ``long, hard slog.'' This 
past Thursday, November 20, President Bush told us that quote, ``We 
could have less troops in Iraq, we could have the same number of troops 
in Iraq, we could have more troops in Iraq, whatever is necessary to 
secure Iraq.'' The following day, the New York Times, citing a ``senior 
Army officer,'' reported that the Army was planning to keep about 
100,000 troops in Iraq through early 2006.
  For over a year, this Administration has downplayed the costs of the 
war in Iraq. Last September, after White House economic advisor 
Lawrence Lindsay put the figure at between $100 billion and $200 
billion, OMB Director Mitch Daniels insisted that that estimate was, 
quote: ``very, very high.'' Mr. Lindsay, whose candor reportedly cost 
him his job, was the Administration official to provide anything close 
to a realistic estimate. In December, Director Daniels put the figure 
at $50 billion to $60 billion. A few weeks later, Secretary of Defense 
Donald Rumsfeld told us that the war would cost under $50 billion.
  As the Administration planned for war, it stopped making any public 
estimates at all. As Deputy Defense Secretary Wolfowitz said in 
February, quote: ``I think it's necessary to preserve some ambiguity of 
exactly where the numbers are.'' Administration officials also insisted 
repeatedly that Iraq would pay for its own reconstruction. To quote 
Deputy Secretary Wolfowitz again: ``There's a lot of money there, and 
to assume that we're going to pay for it is just wrong.''
  The Administration failed to include any military or reconstruction 
costs in its Fiscal Year 2004 budget estimate, and refused to submit to 
Congress a budget amendment. As a result, we passed a budget resolution 
that included enormous, fiscally irresponsible tax cuts but no money 
for a war that was already upon us. Even after President Bush had 
issued his ultimatum to Saddam Hussein, the Administration, along with 
my Republican colleagues, opposed a series of efforts to put aside 
between $80 billion and $100 billion for the war. Only the following 
week, after the budget resolution was passed, did we receive the first 
supplemental request, for nearly $75 billion, of which nearly $60 
billion was for defense and nearly two and a half billion was for the 
reconstruction of Iraq.
  Even with the war having begun, the Administration continued to 
downplay the expected costs of reconstruction. On March 27, Deputy 
Secretary Wolfowitz stated, quote: ``We're dealing with a country that 
can really finance its own reconstruction, and relatively soon.'' And, 
on April 10, Secretary Rumsfeld said, quote: ``I don't know that 
there's much reconstruction to do.''
  These reassurances were contradicted flatly by outside experts. In 
March, a panel led by former Nixon and Ford Secretary of Defense James 
Schlesinger estimated that the cost of postwar reconstruction would be 
at least $20 billion a year. The panel, which included the first 
President Bush's ambassador to the United Nations, Thomas Pickering, 
former Chairman of the Joint Chiefs of Staff John Shalikashvili, and 
former Reagan U.N. ambassador Jeanne Kirkpatrick, concluded that 
President Bush had failed,

[[Page 31294]]

quote: ``to fully describe to Congress and the American people the 
magnitude of the resources that will be required to meet the post-
conflict needs'' of Iraq.
  But the Administration continued to insist otherwise. In April, USAID 
Administrator Andrew Natsios was asked whether the Administration was 
sticking to its estimate of total costs. He responded, quote: ``That is 
our plan and that is our intention. And these figures, outlandish 
figures I've seen, I have to say, there a little bit of hoopla involved 
in this. Three months later, OMB Director Josh Bolton promised, quote: 
``We don't anticipate requesting anything additional for the balance of 
the year.''
  Then we got the bill: a second supplemental request for $87 billion, 
of which more than $20 billion was for the reconstruction of Iraq.
  This war--which I opposed--has been far more costly to the American 
taxpayer than was necessary. The Administration's blind assumption that 
we would be greeted as liberators has resulted in unnecessary costs. 
The failure to prevent looting, for example, or to anticipate sabotage, 
has made reconstruction more expensive than the Administration 
promised.
  The Bush Administration's unilateral approach to the war has also 
cost U.S. taxpayers. It is worth remembering that while the first 
Persian Gulf War cost more than $61 billion, our allies paid for all 
but $4.7 billion. Had President Bush managed to enlist more of our 
friends and allies in this effort, the American taxpayer would not be 
footing this enormous bill practically alone.
  We are also paying for the vast majority of reconstruction costs, and 
may be paying more in the future. The World Bank has estimated Iraq's 
reconstruction costs to be $56 billion. Iraq also has $120 billion in 
debts that have not yet been restructured. Outside contributions have 
been relatively meager. The recent donors' conference in Madrid 
produced pledges of $13 billion, but two thirds of that amount was in 
the form of loans. As for Iraqi oil, next year's revenues will be used 
entirely for government operations, leaving nothing for reconstruction.
  It is long past time for the Administration to be more forthcoming 
about the future costs of operations in Iraq. Right now, the only 
estimates come from outside sources, such as the Congressional Budget 
Office, which earlier this month estimated that with 67,000 to 106,000 
military personnel in Iraq, the annual cost of the occupation would be 
between $14 billion and $19 billion. Given recent revelations about the 
Army's current planning, we might now expect those upper range costs, 
at least through 2006. And even these figures seem low considering that 
we are now spending in Iraq at the rate of $4 billion a month, which 
would translate into $48 billion per year.
  We cannot continue to play guessing games with the war in Iraq, our 
national defense, or our children's future. The Congressional Budget 
Office has estimated the Fiscal Year 2004 ``on-budget deficit'' to be 
$644 billion. We have serious domestic needs in everything from health 
care, to education, to the environment. We are not adequately 
protecting ourselves against terrorism, denying our first responders 
the resources they need and leaving critical infrastructure such as 
chemical facilities unguarded. We are underfunding veterans' benefits 
at a time when thousands of new veterans are returning home from Iraq 
wounded and disabled. And we are overstretching our troops and may have 
to consider a significant increase in end-strength. All of these 
priorities are put at risk so long as we fail to budget for future 
costs of the war and occupation in Iraq.
  The Senate clearly recognized the seriousness of this problem when it 
agreed unanimously last month to this legislation. There is simply no 
reason why we should not expect the Administration to plan for the 
future costs of the occupation of Iraq, to budget accordingly, and to 
keep Congress and the American people informed.
  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. 1942

       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 ``Future Iraq Costs Act''.

     SEC. 2. REPORT ON PROJECTED TOTAL COST OF UNITED STATES 
                   OPERATIONS IN IRAQ.

       (a) Quarterly Report.--Not later than 30 days after the 
     date of the enactment of this Act, and every 90 days 
     thereafter, the President shall submit to each Member of 
     Congress a report on the projected total cost of United 
     States operations in Iraq, including military operations and 
     reconstruction efforts, through fiscal year 2008.
       (b) Explanation of Changes in Projected Cost.--The 
     President shall include in each report submitted under 
     subsection (a) after the initial report under that subsection 
     an explanation for any change in the total projected total 
     cost of United States operations in Iraq from the projected 
     total cost of such operations stated in the preceding report.
       (c) Termination of Reporting Requirement in Fiscal Year 
     2008.--No report is required under this section after 
     December 31, 2007.
                                 ______
                                 
      By Mr. ENSIGN (for himself, Mr. Nelson of Florida, Mr. Coleman, 
        Mr. Graham of South Carolina, Mr. Crapo, Mr. Reid, Mr. Bayh, 
        Mr. Edwards, Mr. Allard, Mr. Smith, Mr. Allen, and Mrs. Boxer):
  S. 1944. A bill to enhance peace between the Israelis and 
Palestinians; to the Committee on Foreign Relations.
  Mr. ENSIGN. Mr. President, a lot has changed in the climate of the 
Middle East since I was there in 1995, but unfortunately not enough has 
changed.
  In 1995, the Oslo Accords were signed and suicide bombers detonated 
themselves on buses around Jerusalem. Eight years later, Israelis 
continue to face the daily threat of terrorism on their buses, in their 
grocery stores, in their restaurants, and in their cafes. For them, 
every single day is September 11. It's hard to imagine that kind of 
reality and the strength it takes to continue each day not knowing 
where the next attack will occur.
  I think about September 11 here in the United States, and the shock 
many Americans felt--not just at the terrible loss of life, but the 
fact that terrorists had targeted our people here in our own country--
where they live and work. I remember one commentator back then said--
today, every American learned what it is like to be an Israeli.
  We came together as a nation to comfort each other, but also to do 
whatever we could to prevent another attack on our soil and to 
eliminate the world of the evil terrorists who had targeted our 
innocent victims. In those moments and days that followed, leaders from 
around the world called to express their condolences. There were no 
calls to the United States to show restraint in responding to the 
terrorists. And it there were, they would have fallen on deaf ears. The 
world knew that President Bush and the United States would do whatever 
it took to keep our citizens safe. The security of our nation would 
always be our priority.
  But when September 11 happens on a daily basis in Israel, the calls 
they get are not to express sympathy, but to urge restraint in 
responding to the attack. Not only is Israel criticized for doing 
exactly what the United States has done--respond to attacks against its 
citizens by going after the terrorists where they hide--Israel is even 
criticized for taking steps to secure its homeland security and prevent 
further attacks.
  So where do we go from here?
  Well, the legislation I am introducing with my colleagues, the junior 
Senator from Florida, focuses on the fact that Israel has a right to 
make the security of their country a priority and that such security is 
a major and enduring national security interest of the United States.
  The bipartisan Israeli-Palestinian Peace Enhancement Act of 2003 
contains strong, unequivocal expressions of the Senate's support for 
the President's June 24, 2002, speech and the vision of two states 
living side-by-side in peace and security.

[[Page 31295]]

  However, it expresses the Senate's expectation that the Palestinian 
Authority must meet certain conditions before a Palestinian state is 
recognized, including: a leadership not compromised by terrorism; a 
firm commitment to peace with Israel; the dismantling of terrorist 
infrastructures in the West Bank and Gaza; sustained security 
cooperation with Israel; and an end to anti-Israel incitement.
   It provides concrete, positive incentives for the Palestinians to 
achieve the reforms called for by President Bush and a negotiated peace 
with Israel by authorizing significant United States assistance, and a 
commitment to organize international assistance, to build the new state 
when it comes into being and has been recognized by the United States 
and Israel--conditions that can only occur in the absence of terrorism.
   Ambiguous promises of non-aggression are not enough. Lasting peace 
means the absence of terror. Without legitimate guarantees for the 
security of the state of Israel, there can be no lasting peace in the 
region.
   Words are cheap--and nowhere are they cheaper than in the Middle 
East. Until there is Palestinian leadership that is committed to 
eliminating the terrorist infrastructure, that is serious about making 
peace with Israel, and that envisions two states existing together, 
peace will not be known.
   Who can we trust to support Israel in this hour of crisis?
   Well, I believe we can trust President Bush. Particularly after 
September 11, the President understands thee can be no peace without 
security. He made that clear on June 24, 2002, when he gave an address 
in the Rose Garden that went above and beyond any other official United 
States position on the Middle East. He made clear that unless and until 
Israel has a trustworthy partner on the Palestinian side, there can be 
no lasting peace. And he emphasized that a Palestinian state could 
become a reality only after new leaders--not compromised by terror--
were elected and a practicing democracy, based on tolerance and liberty 
was built.
   That statement should be the road map to peace. That is why we have 
taken the principles the President laid out in his June 24 speech, and 
turned them into legislation.
   In closing, I would like to thank the original cosponsors of the 
Israeli-Palestinian Peace Enhancement Act of 2003, including Senator 
Bill Nelson, Senator Coleman, Senator Lindsey Graham, Senator Crapo, 
Senator Reid, Senator Bayh, Senator Edwards, Senator Allard, Senator 
Gordon Smith, Senator Allen, and Senator Boxer for joining me in 
working toward a lasting and true peace in the Middle East.
                                 ______
                                 
      By Mr. CORZINE:
  S. 1946. A bill to establish an independent national commission to 
examine and evaluate the collection, analysis, reporting, use, and 
dissemination of intelligence related to Iraq and Operation Iraqi 
Freedom; to the Select Committee on Intelligence.
  Mr. CORZINE. Mr. President, I am introducing today a bill to 
establish an independent, bipartisan commission to examine intelligence 
issues related to Iraq. This commission is necessary because what we 
have discovered on the ground in Iraq has shown our intelligence to be 
wrong. It is necessary because Administration officials misused 
intelligence--that is, they made public statements and submitted 
reports to Congress that the Administration knew at the time to be 
unsupported by the available intelligence. And it is necessary because 
inaccurate and misused intelligence played a role in leading us to war.
  Accurate, objective, and credible intelligence is a fundamental 
cornerstone of our national security, particularly in an age of shadowy 
terrorist networks and clandestine weapons programs. Unless we improve 
our intelligence, we risk failing to identify serious threats to the 
United States and being distracted by lesser dangers at the expense of 
larger and more urgent security concerns.
  This effort must include not only the collection and analysis of 
intelligence, but the use, reporting, and dissemination of intelligence 
assessments. If the American people are asked to go to war to preempt 
an attack, or--as in the case of Iraq--to prevent a possible future 
threat from emerging, it is critical that the public statements of our 
officials be supported by the available intelligence. If members of 
Congress are to consider authorizing the use of force, particularly 
against countries that have not attacked the United States, they must 
be provided with honest and complete intelligence. And if our allies 
are to be asked to join us in confronting these threats, the 
intelligence that we share with them and that we rely on to bolster our 
case must be credible in the eyes of the world.
  I first proposed an independent commission to examine intelligence 
related to Iraq last summer, when it became clear that President Bush 
had made an important but unsubstantiated claim in his January 2002 
State of the Union address. That claim was, quote: ``The British 
government has learned that Saddam Hussein recently sought significant 
quantities of uranium from Africa.''
  Although this statement has been dismissed as the ``16 words,'' its 
significant cannot be overstated. The State of the Union address is the 
most important, the most scrutinized speech the President delivers. The 
statement concerned the most important topic a President can discuss--
whether to send Americans to war. And this claim was the most important 
element of the President's argument for war: that there was evidence 
that Saddam Hussein might have the necessary materials to produce a 
nuclear bomb. As for the reference to the British government, it is 
hard to imagine how the use of the word ``learned'' could imply 
anything other than that the United States independently believed that 
the claim was true.
  It turns out that the Bush Administration had ample reason to know at 
the time that what the President was telling the nation could not be 
substantiated. The CIA had sought to dissuade the White House from 
making claims about uranium purchases. And on February 5, a week after 
the State of the Union address, Secretary of State Powell made a 
presentation to the Untied Nations in which he omitted the claim 
precisely because it was not supported by the available intelligence.
  Despite this knowledge, the Administration never issued a 
clarification. As a result, the President's statement stood, as an 
important element of the Administration's case for war. Only last 
summer, after Americans learned from Ambassador Joe Wilson and others 
what Administration officials knew at the time, did the Administration 
acknowledge that the uranium allegation should never have been included 
in the State of the Union Address.
  The case generated outrage across party lines. Republicans as well as 
Democrats expressed serious concern about the credibility of the 
Administration and the country. They stressed that cabinet members, the 
vice president, and the entire administration are responsible for 
honestly representing intelligence. They called for someone in the 
Administration to be held accountable. The Senate passed a resolution 
by voice vote. The chairman of the Senate Intelligence Committee 
promised to undertake a, quote ``very aggressive review.'' And the Bush 
Administration insisted that it would cooperate. As White House 
spokesman Ari Fleischer stated on June 11, quote: ``The Administration 
welcomes the review. It's important.''
  In July, when I first sought to establish this commission, there was 
no dispute that the use of intelligence, as well as the collection and 
analysis of intelligence, should be examined. Republicans who voted 
against the commission did so, they said, because the commission would 
intrude on the jurisdiction of the Intelligence Committee. I was, and 
remain supportive of efforts by the committee to look into the use of 
intelligence related to Iraq, an inquiry that is clearly included 
within the committee's jurisdiction. But it was and is my belief that 
an independent, bipartisan commission, building on the findings of 
Congressional and other investigations, could undertake the most 
thorough, depoliticized review possible.

[[Page 31296]]

  Now, however, it seems an independent commission is the only 
remaining means left to examine the use, or misuse, of intelligence. On 
November 13, the Chairman of the Intelligence Committee announced that 
there would be no examination of how intelligence was used by 
policymakers. I deeply regret this decision by the chairman and 
fervently hope the committee will ultimately exercise its role, 
established in the resolution laying out its jurisdiction, in 
overseeing the, quote: ``use or dissemination'' of intelligence. In the 
meantime, I would expect that an independent commission would receive 
strong bipartisan support.
   It is now beyond question that our intelligence on Iraq was 
inaccurate. After months of searching, investigative teams have yet to 
find stockpiles of chemical or biological weapons. David Kay, who heads 
up the Iraqi Survey Group, has stated that Iraq's nuclear program was 
only at the, quote: ``very most rudimentary level.'' The Administration 
has yet to produce evidence of the high-level ties between Iraq and al 
Qaeda that it warned of prior to the war. And now, tragically, we must 
add to the list of intelligence failures the inability to anticipate 
the current resistance to U.S. occupation. Clearly, the facts and 
circumstances surrounding these failings warrant a detailed and 
systematic review.
   But what of the use of intelligence? As important as the State of 
the Union address was, that speech was only part of a larger case made 
by the Administration for war. Administration officials made many 
claims--particularly those related to chemical and biological weapons--
that were expressed in terms that were more specific and more certain 
than the intelligence may have supported. Most troubling, however, were 
the highly dubious assessments and suggestions related to nuclear 
programs and terrorism with which the Administration built its most 
powerful and emotionally potent argument. That argument had three 
elements: 1. That Iraq had a nuclear weapons program, and possibly even 
a nuclear weapon; 2. that Saddam Hussein was allied with al Qaeda, and 
that he may have been involved with the terrorist attacks of September 
11; and 3. that the threat was imminent.
   The Administration began to make its argument in the summer of 2002. 
As vice President Cheney stated in an August 26 speech, quote: ``Simply 
stated, there is no doubt that Saddam Hussein now has weapons of mass 
destruction.'' In an indication of how Administration officials would 
make their case over the next seven months, the vice president insisted 
that the intelligence indicated no doubt, no internal disagreement, and 
no uncertainty.
   Then, on September 12, President bush, in his speech to the United 
Nations, went further, stating, quote: ``right now, Iraq is expanding 
and improving facilities that were used for the production of 
biological weapons.'' the President also made two statements regarding 
Iraq's alleged nuclear program. The first was that Iraq had made, 
quote: ``several attempts to buy high-strength aluminum tubes used to 
enrich uranium for a nuclear weapon.'' He failed to mention that 
neither the Department of Energy nor the Department of State's Bureau 
of Intelligence and Research believed that the tubes were intended for 
that purpose. The President's second statement added the missing 
ingredient: the uranium itself. As the President stated, quote: 
``Should Iraq acquire fissile material, it would be able to build a 
nuclear weapon within year.'' This was the context for the President's 
claim made in the State of the Union address that Iraq had sought to 
purchase uranium from Africa.
  The Administration continued making its case throughout the fall of 
2002, adding claims concerning ties between Saddam Hussein and al 
Qaeda. One of many examples was Secretary Rumsfeld's September 26 
statement that the Administration had, quote: ``very reliable reporting 
of senior level contacts going back a decade.''
  As Congress deliberated whether to authorize the use of force against 
Iraq, the Administration officials made increasingly alarming 
statements about Iraq's ties to al Qaeda and about its nuclear weapons 
program. On October 7, three days before the vote in the House of 
Representatives and four days before the vote in the Senate, President 
Bush gave a speech in which he said, unequivocally, that, quote: ``We 
know that Iraq and al Qaeda have had high-level contacts that go back a 
decade,'' and, quote: ``The evidence indicates the Iraq is 
reconstituting its nuclear weapons program.'' He repeated the 
allegations about uranium tubes and the warning about purchases of 
uranium. Then the President put it all together--the implication that 
Iraq was connected to the September 11 attacks, the implication that 
Iraq could have a nuclear bomb at any time, and the warning that Saddam 
Hussein could decide on any day to explode a nuclear bomb in the United 
States. Here is what the President said: ``Why do we need to confront 
it [Saddam] now? And there's a reason. We've experienced the horror of 
September the 11th. We have seen that those who hate America are 
willing to crash airplanes into buildings full of innocent people. Our 
enemies would be no less willing, in fact, they would be eager, to use 
biological or chemical, or a nuclear weapon. Knowing these realities, 
America must not ignore the threat gathering against us. Facing clear 
evidence of peril, we cannot wait for the final proof--the smoking 
gun--that could come in the form of a mushroom cloud.''
  This was the most powerful, dire, and convincing warning a President 
could give. And it was based on one inference that the President has 
acknowledged he never had any evidence of, that Saddam was tied to 
September 11, and another which had already been refuted by many within 
the Administration, that Iraq was reconstituting its nuclear program.
  Later statements included Secretary of Defense Rumsfeld's claims to 
specific knowledge of the whereabouts and movements of biological and 
chemical weapons. On March 11, he stated, quote: ``We know he continues 
to hide biological and chemical weapons, moving them to different 
locations as often as every 12 to 24 hours, and placing them in 
residential neighborhoods.'' On March 30, he said, quote: ``We know 
where they are. They're in the area around Tikrit and Baghdad and east, 
west, south and north somewhat.''
  The Administration also continued to insist that the threat was 
imminent--a claim that served to counter arguments that the United 
Nations should be given more time. On February 6, the day after 
Secretary of State Powell made his presentation to the UN, Secretary of 
Defense Rumsfeld made an appeal for immediate action. ``Why now?'' he 
asked. ``The answer is that every week that goes by, his weapons of 
mass destruction programs become more mature.'' That same day, Deputy 
Secretary Wolfowitz stated, quote: ``Connections with terrorists, which 
go back decades, and which started some 10 years ago with al Qaeda, are 
growing every day.''
  Finally, on March 16, the day before President Bush's ultimatum to 
Saddam Hussein, Vice President Cheney went beyond claims that Iraq had 
the intent to produce nuclear weapons, and even beyond the claims that 
Iraq was seeking centrifuge equipment or uranium. Rather, the vice 
president stated flatly, quote: ``We believe he has, in fact, 
reconstituted nuclear weapons.'' This assertion, which the vice 
president has recently acknowledged was a misstatement, was not 
corrected. Instead, it was allowed to stand as nearly the final word on 
why we were going to war.
  Questions surrounding the Administration's use of intelligence extend 
beyond public statements, to include reports to and testimony before 
Congress. One example of unsubstantiated reporting was the January 20 
report to Congress, mandated by the use of force resolution, that cited 
Iraq's failure to declare its, quote: ``attempts to acquire uranium and 
the means to enrich it''--the same unsubstantiated claim made in the 
President's State of the Union address.
  This commission would be authorized to examine other intelligence 
issues related to Iraq, as well. The Administration made claims related 
to weapons

[[Page 31297]]

delivery systems, including President Bush's assertion on October 7 
that, quote: ``Iraq has a growing fleet of manned and unmanned aerial 
vehicles that could be used to disperse chemical or biological weapons 
across broad areas,'' and that Iraq could use them for, quote: 
``missions targeting the United States.'' There has never been evidence 
that Iraq had UAVs with ranges of thousands of miles.
  Administration officials made claims related to the occupation, 
including Vice President Cheney's March 16 assertion that, quote: ``I 
really do believe that we will be greeted as liberators,'' and Deputy 
Defense Secretary Wolfowitz's November 17 analogy to, quote: ``post-
liberation France.''
  The Administration also downplayed the costs of the occupation. 
Despite White House economic advisor Lawrence Lindsey's estimate that 
the occupation would cost between $100 and $200 billion--an estimate 
for which he was apparently fired--Secretary of Defense Rumsfeld on 
January 19 put the figure at, quote: ``something under $50 billion,'' 
On February 27, Deputy Defense Secretary Wolfowitiz stated that, quote: 
``there's a lot of money there, and to assume that we're going to pay 
for it is just wrong.'' And, on March 27, Deputy Secretary Wolfowitz 
stated, quote: ``We're dealing with a country that can really finance 
its own reconstruction, and relatively soon.''
  The independent commission I propose would be authorized to examine 
the relationship between policy makers and the intelligence community. 
Were members of the intelligence community pressured to produce 
analyses that conformed to the Administration's policies? Did 
Administration officials seek to bypass the normal analysis process by 
cherry-picking bits of intelligence that suited their agenda, through 
the Office of Special Plans in the Department of Defense or through 
other special or ad hoc arrangements? Did the Administration base its 
analyses on foreign intelligence sources of dubious credibility? These 
questions must be answered, and corrective measures undertaken, if our 
intelligence community is to be as effective and objective as we need 
it to be.
  Perhaps the most egregious undermining, indeed betrayal, of the 
intelligence community was the identification by senior Administration 
officials of a covert CIA operative. The operative is the spouse of a 
person who has been called a national hero by President George H.W. 
Bush but who questioned the current Administration's statements 
regarding Iraq. The leak of this operative's identity sent an implicit 
warning to others in the intelligence community who might disagree with 
the Administration's positions. It potentially endanged the life of the 
operative and those with whom the operative worked. And it rendered the 
operative's skills, experience and sources permanently useless, thus 
wasting precisely the kind of intelligence asset that the United States 
so desperately needs right now.
  The purpose of this commission is to identify ways in which we can 
learn from past mistakes and thus improve our collection, analysis, 
reporting, use and dissemination of intelligence. The commission's 
members, who will come from both parties, will be prominent Americans 
with experience in intelligence, the armed forces and other relevant 
areas. Their work will build on relevant Congressional and other 
investigations.
   The commission, through an objective, independent, highly 
professional examination process, will help depoliticize an extremely 
complicated and sensitive topic. By reviewing intelligence related to 
Iraq beginning in 1998, it will draw conclusions about the use of 
intelligence by a Democratic as well as Republican Administration. And 
by reporting its recommendations directly to the President and to 
Congress, it will serve as a valuable resource outside the context of 
open political debate. In this respect, I disagree with the Chairman of 
the Intelligence Committee who has stated that the full Congress and 
the public could ``decide for themselves whether the intelligence was 
accurately represented by government officials.''
   This issue is far too serious to simply ignore. Over one hundred 
thousand brave Americans are currently serving in Iraq, facing 
challenges that require accurate and objective intelligence. We have an 
obligation to pursue every opportunity to improve that intelligence. 
Meanwhile, the United States faces other threats--from despotic regimes 
with nuclear, chemical, or biological weapons, from terrorism, and from 
the horrible possibility that terrorists could acquire these weapons. 
Our ability to confront these threats requires that our intelligence be 
accurate and objective. And, as we seek to enlist our friends and 
allies in our efforts to address these common threats, we must ensure 
that our intelligence is credible.
   Unless we identify and correct the mistakes of the past, we will not 
be safer.
   I ask unanimous consent that the text of the legislation be printed 
in the Record.
   There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1946

       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 ``Independent Iraq 
     Intelligence Commission Act''.

     SEC. 2. ESTABLISHMENT OF COMMISSION.

       There is established the National Commission on Iraq 
     Intelligence (in this Act referred to as the ``Commission'').

     SEC. 3. PURPOSES.

       The purposes of the Commission are as follows:
       (1) To examine and evaluate the performance of the United 
     States intelligence community with respect to the collection 
     of intelligence, and the quality of intelligence obtained, on 
     the weapons of mass destruction and related delivery systems 
     capabilities of Iraq in the period from 1998 until the 
     conclusion of military operations against Iraq under 
     Operation Iraqi Freedom.
       (2) To examine and evaluate the performance of the United 
     States intelligence community with respect to the collection 
     of intelligence, and the quality of intelligence obtained, on 
     the connections and support, if any, of Iraq with and for the 
     plans and intentions of terrorist groups to attack the United 
     States or United States interests abroad during the period 
     referred to in paragraph (1).
       (3) To examine and evaluate the performance of the United 
     States intelligence community with respect to the collection 
     of intelligence, and the quality of intelligence obtained, 
     during and after the period referred to in paragraph (1), on 
     matters relating to--
       (A) the conduct of military and intelligence operations 
     against Iraq;
       (B) the search for and securing of weapons of mass 
     destruction, related delivery systems capabilities, and 
     conventional weapons in Iraq; and
       (C) the military, political, and economic aspects of the 
     occupation of Iraq.
       (4) To examine and evaluate the quality of the analysis by 
     the United States intelligence community of the available 
     intelligence related to the matters referred to in paragraphs 
     (1) through (3), including intelligence from foreign 
     intelligence services, that served as a basis during the 
     period referred to in paragraph (1) for--
       (A) reports, testimony, and presentations to policymakers 
     in the Executive Branch and Congress, and to United Nations 
     bodies and other consumers; and
       (B) assessments that were used or disseminated by the 
     Executive Branch.
       (5) To examine and evaluate the effect, if any, on the 
     United States intelligence community of the actions of 
     Executive Branch officials regarding the collection, 
     analysis, and reporting on intelligence matters referred to 
     in paragraphs (1) through (3).
       (6) To examine and evaluate the relevant facts and 
     circumstances relating to the use and dissemination by 
     Executive Branch officials of intelligence and intelligence 
     analyses underlying assessment of intelligence matters 
     referred to in paragraphs (1) through (3) during the period 
     referred to in paragraph (1), including assessments contained 
     in public speeches, statements, and interviews, reports to 
     and testimony before Congress, and communications with and 
     reports and presentations to United Nations bodies.
       (7) To build on the investigations of other entities, and 
     avoid unnecessary duplication, by reviewing the work, 
     findings, conclusions, and recommendations of other Executive 
     Branch, Congressional, or independent commission 
     investigations into the collection, analysis, reporting, use, 
     and dissemination of intelligence related to Iraq by the 
     United States.
       (8) Based on the examinations and evaluations under 
     paragraphs (1) through (6) and the work, findings, 
     conclusions, and recommendations of other investigations 
     referred to in paragraph (7), to identify corrective measures 
     to improve the collection, analysis, reporting, use, and 
     dissemination

[[Page 31298]]

     of intelligence by the Executive Branch, and to report to the 
     President and Congress on the examinations, evaluations, 
     findings, and conclusions of the Commission and on the 
     recommendations of the Commission with respect to such 
     corrective measures.

     SEC. 4. COMPOSITION OF COMMISSION.

       (a) Members.--The Commission shall be composed of 10 
     members, of whom--
       (1) 1 member shall be appointed by the President, who shall 
     serve as co-chairman of the Commission;
       (2) 1 member shall be appointed by the leader of the Senate 
     (majority or minority leader, as the case may be) of the 
     Democratic Party, in consultation with the leader of the 
     House of Representatives (majority or minority leader, as the 
     case may be) of the Democratic Party, who shall serve as co-
     chairman of the Commission;
       (3) 2 members shall be appointed by the senior member of 
     the Senate leadership of the Democratic Party;
       (4) 2 members shall be appointed by the senior member of 
     the leadership of the House of Representatives of the 
     Republican Party;
       (5) 2 members shall be appointed by the senior member of 
     the Senate leadership of the Republican Party; and
       (6) 2 members shall be appointed by the senior member of 
     the leadership of the House of Representatives of the 
     Democratic Party.
       (b) Qualifications; Initial Meeting.--
       (1) Political party affiliation.--Not more than 5 members 
     of the Commission shall be from the same political party.
       (2) Nongovernmental appointees.--An individual appointed to 
     the Commission may not be an officer or employee of the 
     Federal Government or any State or local government.
       (3) Other qualifications.--It is the sense of Congress that 
     individuals appointed to the Commission should be prominent 
     United States citizens, with national recognition and 
     significant depth of experience in such professions as 
     governmental service, the armed services, law, intelligence, 
     and foreign affairs.
       (4) Deadline for appointment.--All members of the 
     Commission shall be appointed not later than one month after 
     the date of the enactment of this Act.
       (5) Initial meeting.--The Commission shall meet and begin 
     the operations of the Commission as soon as practicable.
       (c) Quorum; Vacancies.--After its initial meeting, the 
     Commission shall meet upon the joint call of the co-chairmen 
     or a majority of its members. Six members of the Commission 
     shall constitute a quorum. Any vacancy in the Commission 
     shall not affect its powers, but shall be filled in the same 
     manner in which the original appointment was made.

     SEC. 5. FUNCTIONS OF COMMISSION.

       The functions of the Commission are--
       (1) to conduct an investigation into the relevant facts and 
     circumstances relating to the collection, analysis, 
     reporting, use, and dissemination by the United States 
     intelligence community and others in the Executive Branch of 
     intelligence relating to Iraq and Operation Iraqi Freedom, 
     including--
       (A) an examination and evaluation of the quantity and 
     quality of United States intelligence underlying assessments 
     made during the period referred to in section 3(1) of--
       (i) weapons of mass destruction and delivery systems 
     capabilities of Iraq;
       (ii) connections and support, if any, of Iraq with and for 
     the plans and intentions of terrorist groups to attack the 
     United States or United States interests abroad;
       (B) an examination and evaluation of the quantity and 
     quality of United States intelligence underlying assessments 
     made during after the period referred to in section 3(1) on 
     intelligence matters relating to--
       (i) the conduct of military and intelligence operations 
     against Iraq;
       (ii) the search for and securing of weapons of mass 
     destruction, related delivery systems capabilites, and 
     conventional weapons in Iraq; and
       (iii) the military, political, and economic aspects of the 
     occupation of Iraq;
       (C) an examination and evaluation regarding whether the 
     analytical judgments in the assessments referred to in 
     subparagraphs (A) and (B) were thorough, timely, objective, 
     independent, and reasonable, based upon intelligence 
     collection;
       (D) an examination and evaluation of the accuracy of the 
     assessments referred to in subparagraphs (A) and (B) when 
     compared with the results of the investigative efforts of the 
     Iraq Survey Group and other relevant Executive Branch and 
     Congressional entities, and with relevant assessments of the 
     United Nations and other multilateral bodies, foreign 
     governments, nongovernmental organizations, and other 
     institutions and individuals;
       (E) an examination and evaluation of the quality of the 
     intelligence on Iraq that was provided to the United States 
     intelligence community and Executive Branch policymakers, 
     including by foreign intelligence services, that served as a 
     basis during the period referred to in section 3(1) for--
       (i) reports, testimony, and presentations to policymakers 
     in the Executive Branch and Congress, and to United Nations 
     bodies and other consumers; and
       (ii) assessments that were used or disseminated by the 
     Executive Branch;
       (F) a determination of the extent, if any, to which 
     elements of the United States intelligence community were 
     inappropriately pressured by members of the Executive Branch 
     to produce intelligence consistent with such members policy 
     objectives, and of the extent, if any, to which intelligence 
     was manipulated or misrepresented by members of the Executive 
     Branch or elements under their control;
       (G) an assessment of the extent to which Congress was kept 
     fully and currently informed about intelligence related to 
     Iraq and Operation Iraqi Freedom;
       (H) a determination of the extent to which the intelligence 
     of the United States intelligence community, and of the 
     United States Armed Forces and coalition forces, were 
     sufficiently accurate, thorough, timely, objective, and 
     independent to prepare such forces to conduct effective 
     military and intelligence operations against Iraq, including 
     the search for and securing of weapons of mass destruction 
     and conventional weapons in Iraq, and to prepare such forces 
     and other United States and coalition entities to 
     successfully carry out the military, political, and economic 
     aspects of the occupation of Iraq; and
       (I) an examination, evaluation, and assessment of such 
     other related facts and circumstances that the Commission 
     considers appropriate;
       (2) to identify, review, and evaluate the lessons learned 
     from issues related to the collection, analysis, reporting, 
     use, and dissemination of intelligence relating to Iraq and 
     Operation Iraqi Freedom;
       (3) to investigate the facts and circumstances relating to 
     disclosures, if any, by Executive Branch officials of the 
     identify of a covert Central Intelligence Agency official; 
     and
       (4) to submit to the President and Congress the reports 
     provided for by section 11.

     SEC. 6. POWERS OF COMMISSION.

       (a) In General.--
       (1) Hearings and evidence.--The Commission or, on the 
     authority of the Commission, any subcommittee or member 
     thereof, may, for the purpose of carrying out this Act--
       (A) hold such hearings and sit and act at such times and 
     places, take such testimony, receive such evidence, 
     administer such oaths; and
       (B) subject to paragraph (2)(A), require, by subpoena or 
     otherwise, the attendance and testimony of such witnesses and 
     the production of such books, records, correspondence, 
     memoranda, papers, and documents, as the Commission or such 
     designated subcommittee or designated member may determine 
     advisable.
       (2) Subpoenas.--
       (A) Issuance.--
       (i) In general.--A subpoena may be issued under this 
     subsection only--

       (I) by the joint agreement of the co-chairmen; or
       (II) by the affirmative vote of 5 members of the 
     Commission.

       (ii) Signature.--Subject to clause (i), subpoenas issued 
     under this subsection may be issued under the signature of a 
     co-chairman or any member designated by 5 members of the 
     Commission, and may be served by any person designated by a 
     co-chairman or by a member designated by 5 members of the 
     Commission.
       (B) Enforcement.--
       (i) In general.--In the case of contumacy or failure to 
     obey a subpoena issued under subsection (a), the United 
     States district court for the judicial district in which the 
     subpoenaed person resides, is served, or may be found, or 
     where the subpoena is returnable, may issue an order 
     requiring such person to appear at any designated place to 
     testify or to produce documentary or other evidence. Any 
     failure to obey the order of the court may be punished by the 
     court as a contempt of that court.
       (ii) Additional enforcement.--In the case of any failure of 
     any witness to comply with any subpoena or to testify when 
     summoned under authority of this section, the Commission may 
     certify a statement of fact constituting such failure to the 
     appropriate United States attorney, who may bring the matter 
     before the grand jury for its action, under the same 
     statutory authority and procedures as if the United States 
     attorney had received a certification under sections 102 
     through 104 of the Revised Statutes of the United States (2 
     U.S.C. 192 through 194).
       (b) Contracting.--The Commission may, to such extent and in 
     such amounts as are provided in appropriation Acts, enter 
     into contracts to enable the Commission to discharge its 
     duties under this Act.
       (c) Information From Federal Agencies.--
       (1) In general.--The Commission may secure directly from 
     any executive department, bureau, agency, board, commission, 
     office, independent establishment, or instrumentality of the 
     Government, information, suggestions, estimates, and 
     statistics for the purposes of this Act. Each department, 
     bureau, agency, board, commission, office, independent 
     establishment, or instrumentality shall, to the extent 
     authorized by law, furnish such information, suggestions, 
     estimates, and statistics directly to the Commission, upon 
     request made by a co-chairman, the chairman or co-chairman of 
     any

[[Page 31299]]

     subcommittee created by 5 members of the Commission, or any 
     member designated by 5 members of the Commission.
       (2) Receipt, handling, storage, and dissemination.--
     Information shall only be received, handled, stored, and 
     disseminated by members of the Commission and its staff 
     consistent with all applicable statutes, regulations, and 
     Executive orders.
       (d) Assistance From Federal Agencies.--
       (1) General services administration.--The Administrator of 
     General Services shall provide to the Commission on a 
     reimbursable basis administrative support and other services 
     for the performance of the Commission's functions.
       (2) Other departments and agencies.--In addition to the 
     assistance prescribed in paragraph (1), departments and 
     agencies of the United States may provide to the Commission 
     such services, funds, facilities, staff, and other support 
     services as they may determine advisable and as may be 
     authorized by law.
       (e) Gifts.--The Commission may accept, use, and dispose of 
     gifts or donations of services or property.
       (f) Postal Services.--The Commission may use the United 
     States mails in the same manner and under the same conditions 
     as departments and agencies of the United States.

     SEC. 7. NONAPPLICABILITY OF FEDERAL ADVISORY COMMITTEE ACT.

       (a) In General.--The Federal Advisory Committee Act (5 
     U.S.C. App.) shall not apply to the Commission.
       (b) Public Meetings and Release of Public Versions of 
     Reports.--The Commission shall--
       (1) hold public hearings and meetings to the extent 
     appropriate; and
       (2) release public versions of the reports provided for by 
     subsections (a) and (b) of section 11.
       (c) Public Hearings.--Any public hearings of the Commission 
     shall be conducted in a manner consistent with the protection 
     of information provided to or developed for or by the 
     Commission as required by any applicable statute, regulation, 
     or Executive order.

     SEC. 8. STAFF OF COMMISSION.

       (a) In General.--
       (1) Appointment and compensation.--The co-chairmen, acting 
     jointly and in accordance with rules agreed upon by the 
     Commission, may appoint and fix the compensation of a staff 
     director and such other personnel as may be necessary to 
     enable the Commission to carry out its functions, without 
     regard to the provisions of title 5, United States Code, 
     governing appointments in the competitive service, and 
     without regard to the provisions of chapter 51 and subchapter 
     III of chapter 53 of such title relating to classification 
     and General Schedule pay rates, except that no rate of pay 
     fixed under this subsection may exceed the equivalent of that 
     payable for a position at level V of the Executive Schedule 
     under section 5316 of title 5, United States Code.
       (2) Personnel as federal employees.--
       (A) In general.--The executive director and any personnel 
     of the Commission who are employees shall be employees under 
     section 2105 of title 5, United States Code, for purposes of 
     chapters 63, 81, 83, 84, 85, 87, 89, and 90 of that title.
       (B) Members of commission.--Subparagraph (A) shall not be 
     construed to apply to members of the Commission.
       (b) Detailees.--Any Federal Government employee may be 
     detailed to the Commission without reimbursement from the 
     Commission, and such detailee shall retain the rights, 
     status, and privileges of his or her regular employment 
     without interruption.
       (c) Consultant Services.--The Commission may procure the 
     services of experts and consultants in accordance with 
     section 3109 of title 5, United States Code, but at rates not 
     to exceed the daily rate paid a person occupying a position 
     at level IV of the Executive Schedule under section 5315 of 
     title 5, United States Code.

     SEC. 9. COMPENSATION AND TRAVEL EXPENSES.

       (a) Compensation.--Each member of the Commission may be 
     compensated at not to exceed the daily equivalent of the 
     annual rate of basic pay in effect for a position at level IV 
     of the Executive Schedule under section 5315 of title 5, 
     United States Code, for each day during which that member is 
     engaged in the actual performance of the duties of the 
     Commission.
       (b) Travel Expenses.--While away from their homes or 
     regular places of business in the performance of services for 
     the Commission, members of the Commission shall be allowed 
     travel expenses, including per diem in lieu of subsistence, 
     in the same manner as persons employed intermittently in the 
     Government service are allowed expenses under section 5703(b) 
     of title 5, United States Code.

     SEC. 10. SECURITY CLEARANCES FOR COMMISSION MEMBERS AND 
                   STAFF.

       The appropriate Federal agencies or departments shall 
     cooperate with the Commission in expeditiously providing to 
     the Commission members and staff appropriate security 
     clearances to the extent possible pursuant to existing 
     procedures and requirements, except that no person shall be 
     provided with access to classified information under this Act 
     without the appropriate security clearances.

     SEC. 11. REPORTS OF COMMISSION; TERMINATION.

       (a) Interim Reports.--The Commission may submit to the 
     President and Congress interim reports containing such 
     examinations, evaluations, findings, and conclusions of the 
     Commission, and such recommendations with respect to 
     corrective measures (including changes in policies, 
     practices, organizational structures, and arrangements), as 
     have been agreed to by a majority of Commission members.
       (b) Final Report.--Not later than 18 months after the date 
     of the enactment of this Act, the Commission shall submit to 
     the President and Congress a final report containing such 
     examinations, evaluations, findings, and conclusions of the 
     Commission, and such recommendations with respect to 
     corrective measures (including changes in policies, 
     practices, organizational structures, and arrangements), as 
     have been agreed to by a majority of Commission members.
       (c) Termination.--
       (1) In general.--The Commission, and all the authorities of 
     this Act, shall terminate 60 days after the date on which the 
     final report is submitted under subsection (b).
       (2) Administrative activities before termination.--The 
     Commission may use the 60-day period referred to in paragraph 
     (1) for the purpose of concluding its activities, including 
     providing testimony to committees of Congress concerning its 
     reports and disseminating the final report.

     SEC. 12. FUNDING.

       (a) In General.--Of the amounts authorized to be 
     appropriated for the intelligence and intelligence-related 
     activities of the United States Government for fiscal year 
     2004, $15,000,000 shall be available for transfer to the 
     Commission for purposes of the activities of the Commission 
     under this Act.
       (b) Duration of Availability.--Amounts made available to 
     the Commission under subsection (a) shall remain available 
     until the termination of the Commission.
                                 ______
                                 
      By Mr. REID (for himself and Mr. Daschle):
  S. 1948. A bill to provide that service of the members of the 
organization known as the United States Cadet Nurse Corps during World 
War II constituted active military service for purposes of laws 
administered by the Secretary of Veterans Affairs; to the Committee on 
Veterans' Affairs.
  Mr. REID. Mr. President, 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. 1948

       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 ``United States Cadet Nurse 
     Corps Equity Act of 2003''.

     SEC. 2. SERVICE DEEMED TO BE ACTIVE MILITARY SERVICE.

       (a) In General.--For purposes of section 401(a)(1)(A) of 
     the GI Bill Improvement Act of 1977 (38 U.S.C. 106 note), the 
     Secretary of Defense is deemed to have determined that 
     qualified service of a person constituted active military 
     service.
       (b) Determination of Discharge Status.--(1) The Secretary 
     of Defense shall issue an honorable discharge under section 
     401(a)(1)(B) of the GI Bill Improvement Act of 1977 to each 
     person whose qualified service warrants an honorable 
     discharge.
       (2) Such discharge shall be issued before the end of the 
     one-year period beginning on the date of the enactment of 
     this Act.

     SEC. 3. PROHIBITION OF RETROACTIVE BENEFITS.

        No benefits may be paid to any person as a result of the 
     enactment of this Act for any period before the date of the 
     enactment of this Act.

     SEC. 4. DEFINITION.

       For purposes of this Act, the term ``qualified service'' 
     means service of a person as a member of the organization 
     known as the United States Cadet Nurse Corps during the 
     period beginning on July 1, 1943, and ending on December 15, 
     1945.
                                 ______
                                 
      By Mr. BIDEN:
  S. 1949. A bill to establish The Return of Talent Program to allow 
aliens who are legally present in the United States to return 
temporarily to the country of citizenship of the alien if that country 
is engaged in post-conflict reconstruction, and for other purposes; to 
the Committee on the Judiciary.
  Mr. BIDEN. Mr. President, one of the greatest challenges we face 
today is how to address the needs of failed states--or countries that 
are on the verge of becoming failed states--and how to rebuild post-
conflict countries. It is a critical issue, and one that we cannot 
afford to get wrong--for the sake of the people living in those 
nations, and for the sake of our own security.

[[Page 31300]]

  Last January, a bipartisan commission organized by the Center for 
Strategic and International Studies and the Association of the U.S. 
Army found to no one's surprise that ``failed states matter--for 
national security as well as for humanitarian reasons. If left to their 
own devices, such states can become sanctuaries for terrorist networks, 
organized crime and drug traffickers, as well as posing grave 
humanitarian challenges and threats to regional stability.''
  The most obvious case in point is the reconstruction of Iraq. I've 
spent many hours on this floor making clear that we have to get it 
right in Iraq. And in addition to Iraq, unfortunately, we can talk 
about many other states that are either unstable, or are tenuously 
recovering from past conflicts including Liberia, Afghanistan, East 
Timor, Kosovo, Bosnia, Haiti, and Somalia. We need comprehensive 
strategies to address the many needs in rebuilding all of these 
struggling countries.
  A significant component of reconstruction, in my view, is to tap into 
the store of human as well as financial resources here in the United 
States. We should allow, and indeed encourage, immigrants from post-
conflict countries to use their skills, talents,and knowledge to be 
part of the efforts to rebuild. In fact, the diaspora presents one of 
the best collective resources that exists: these people know the 
communities. They know the culture. They know the language--more than 
any contractors, more than any humanitarian workers from the outside, 
no matter how well-trained, no matter how much expertise they may have.
  So today, Mr. President, I am introducing legislation creating a visa 
``Return of Talent'' program.
  The idea is simple: a Return of Talent program would allow legal 
immigrants in the United States to return home to help with 
reconstruction. ``Legal Permanent Residents'' will be able to return 
temporarily to their countries after a conflict to help rebuild, 
without their time out of the United States affecting their ability to 
meet their requirements for U.S. citizenship.
  Under current law, a Legal Permanent Resident who want to apply for 
U.S. citizenship is required to be physically present in the United 
States for at least half of the five years immediately preceding the 
date of filing the naturalization application.
  This residency requirement could be particularly difficult to meet 
for those who may have family and friends at home who are in desperate 
need of help. We should not stand in their way of going home, holding 
over them their hope for citizenship here in the United States. We 
should be helping them bring their talent and expertise home, helping 
them help their country of origin at a time of greatest need.
  Recent press articles have highlighted stories of such indivduals--
engineers, bankers, teachers and translators--who are willing to 
contribute to reconstruction efforts. They simply cannot do so without 
jeopardizing their immigration status.
  This legislation would encourage those skilled and committed 
individuals to return to their countries of origin to revive the 
business, industry, agriculture, education and other sectors that have 
been weakened or destroyed after years of conflict.
  The Return of Talent program would include any individual who 
demonstrates an ability and willingness to make a material contribution 
to the post-conflict reconstruction in their countries of origin.
  The program would apply to immigrants from countries where U.S. armed 
forces are, or have engaged in the past ten years, in armed conflict or 
peacekeeping, or to immigrants who are from countries where the United 
Nations Security Council has authorized peacekeeping operations in the 
past ten years.
  Estimates of individuals who could participate in this program are 
relatively low. For example, the United States admitted 1,764 Afghani 
and 5,196 Iraqi immigrants in 2002, and similar levels since 1992, who 
are not Legal Permanent Residents eligible to pursue U.S. citizenship. 
Yet, while the program would have a small impact on the U.S. 
naturalization process, the contributions of even a few hundred 
individuals could have a tremendous positive effect on post-conflict 
reconstruction work.
  In simple terms, a Return of Talent program makes sense. Everybody 
wins: The United States is able to support rebuilding efforts; 
immigrants are able to use their skills and resources to help rebuild 
their communities without jeopardizing their immigration status; and 
post-conflict countries, and the people in them, receive much-needed 
assistance.
  We have not done enough in Iraq, Afghanistan and many other countries 
that are--or are on the verge of becoming--failed states. As the 
``Winning the Peace'' report also states, ``Despite over a decade of 
recent experience in trying to address the challenges of . . . 
rebuilding countries following conflict, U.S. capacity of addressing 
these challenges remains woefully inadequate.''
  A Return of Talent program is an important piece of our overall 
strategy to stabilize and rebuild countries torn by conflict. I urge my 
colleagues to support his legislation.
  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. 1949

       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 ``Return of Talent Act''.

     SEC. 2. RETURN OF TALENT PROGRAM.

       (a) In General.--Title III of the Immigration and 
     Nationality Act (8 U.S.C. 1401 et seq.) is amended by 
     inserting after section 317 the following:


 ``temporary absence of persons participating in the return of talent 
                                program

       ``Sec. 317A. (a) In General.--The Secretary of Homeland 
     Security shall establish the Return of Talent Program to 
     permit eligible aliens to temporarily return to the alien's 
     country of citizenship in order to make a material 
     contribution to that country if the country is engaged in 
     post-conflict reconstruction activities, for a period not 
     exceeding 24 months, unless an exception is granted under 
     subsection (d).
       ``(b) Eligible Alien.--An alien is eligible to participate 
     in the Return of Talent Program established under subsection 
     (a) if the alien meets the special immigrant description 
     under section 101(a)(27)(N).
       ``(c) Family Members.--The spouse, parents, siblings, and 
     any children of an alien who participates in the Return of 
     Talent Program established under subsection (a) may return to 
     such alien's country of citizenship with the alien and 
     reenter the United States with the alien.
       ``(d) Extension of Time.--The Secretary of Homeland 
     Security may extend the 24-month period referred to in 
     subsection (a) upon a showing that circumstances warrant that 
     an extension is necessary for post-conflict reconstruction 
     efforts.
       ``(e) Residency Requirements.--An immigrant described in 
     section 101(a)(27)(N) who participates in the Return of 
     Talent Program established under subsection (a), and the 
     spouse, parents, siblings, and any children who accompany 
     such immigrant to that immigrant's country of citizenship, 
     shall be considered, during such period of participation in 
     the program--
       ``(1) for purposes of section 316(a), physically present 
     and residing in the United States for purposes of 
     naturalization within the meaning of that section; and
       ``(2) for purposes of section 316(b), to meet the 
     continuous residency requirements in that section.
       ``(f) Oversight and Enforcement.--The Secretary of Homeland 
     Security, in consultation with the Secretary of State, shall 
     oversee and enforce the requirements of this section.''.
       (b) Table of Contents.--The table of contents for the 
     Immigration and Nationality Act (8 U.S.C. 1101 et seq.) is 
     amended by inserting after the item relating to section 317 
     the following:

``317A. Temporary absence of persons participating in the Return of 
              Talent Program.''.

     SEC. 3. ELIGIBLE IMMIGRANTS.

       Section 101(a)(27) of the Immigration and Nationality Act 
     (8 U.S.C. 1101(a)(27)) is amended--
       (1) in subparagraph (L), by inserting a semicolon after 
     ``Improvement Act of 1998'';
       (2) in subparagraph (M), by striking the period and 
     inserting ``; or''; and
       (3) by adding at the end the following:
       ``(N) an immigrant who--
       ``(i) has been lawfully admitted to the United States for 
     permanent residence;

[[Page 31301]]

       ``(ii) demonstrates an ability and willingness to make a 
     material contribution to the post-conflict reconstruction in 
     the alien's country of citizenship; and
       ``(iii) as determined by the Secretary of State in 
     consultation with the Secretary of Homeland Security--
       ``(I) is a citizen of a country in which Armed Forces of 
     the United States are engaged, or have engaged in the 10 
     years preceding such determination, in combat or peacekeeping 
     operations; or
       ``(II) is a citizen of a country where authorization for 
     United Nations peacekeeping operations was initiated by the 
     United Nations Security Council during the 10 years preceding 
     such determination.''.

     SEC. 4. REPORT TO CONGRESS.

       Not later than 24 months after the date of enactment of 
     this Act, the Secretary of Homeland Security shall submit a 
     report to Congress that describes--
       (1) the countries of citizenship of the participants in the 
     Return of Talent Program established under section 2;
       (2) the post-conflict reconstruction efforts that 
     benefited, or were made possible, through participation in 
     the program; and
       (3) any other information that the Secretary of Homeland 
     Security determines to be appropriate.

     SEC. 5. REGULATIONS.

       Not later than 6 months after the date of enactment of this 
     Act, the Secretary of Homeland Security shall promulgate 
     regulations to carry out this Act.

     SEC. 6. AUTHORIZATION OF APPROPRIATIONS.

       There is authorized to be appropriated to the Bureau of 
     Citizenship and Immigration Services for each of the fiscal 
     years 2004 and 2005, such sums as may be necessary to carry 
     out this Act.

                          ____________________