[Congressional Record (Bound Edition), Volume 150 (2004), Part 7]
[Senate]
[Pages 8929-8962]
[From the U.S. Government Publishing Office, www.gpo.gov]




         JUMPSTART OUR BUSINESS STRENGTH (JOBS) ACT--Continued

  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. I yield 5 minutes to the senior Senator from New Mexico.
  The PRESIDING OFFICER. The Senator from New Mexico.
  Mr. DOMENICI. First, I thank the chairman and the ranking member for 
their kindness and generosity as we work on this bill. I am speaking 
now of the energy tax parts of this bill. The rest of it is the 
jurisdiction of the Finance Committee, and they essentially have done 
that. We have helped with the energy provisions because we were trying 
to put together a comprehensive energy package.
  It is good that in the Senate, after one Senator talks and states his 
position, there is an opportunity for somebody else to state their 
position, and I want to do that because actually earlier today the 
distinguished Senator from Arizona talked about a bill that I do not 
even recognize, talked about things wrong with this bill that I am not 
even sure are in this bill, but certainly failed to mention anything 
that is good about it. So I would like to talk about some of the good 
parts.
  It is estimated that this part of the bill will create 650,000 jobs. 
Those jobs will be in construction and the operation of infrastructure 
vital to the energy security of this country. Tax provisions will allow 
us to build an Alaska pipeline, which is supported by the Senate and 
will bring us American-owned gas all the way from Alaska. It will not 
do any environmental damage, and in the next 5 years we will add 
substantially to our inventory of natural gas.
  The package provides incentives for electricity produced from clean 
coal. If there is anything that we need in America, it is a vital, 
growing, prospering energy grid in the United States. We have to have a 
stronger energy grid if we are going to have a stronger America. 
Everybody says that. This bill provides for incentives so that will 
happen.
  Third, this package puts incentives in for biomass, geothermal, and 
solar.
  Last, but not least, we have the renewables. We have wind energy that 
is to break and come through in large quantity. It is all stopped now 
until this bill passes and the incentives in this bill are adopted.
  If you have a major solar energy facility, construction is stopped 
until this bill is produced. Then that will grow faster than any 
renewable we have ever had. In addition, clean coal technology is 
applied so that we can have other alternatives for the production of 
electricity. If there is anything we need, it is alternatives. Clean 
coal will be an alternative.
  If we tell the world we are producing alternatives, they will believe 
we are worried and they will believe we can do something for ourselves, 
instead of continuing to put our hands out and rely upon foreign 
sources of energy.

[[Page 8930]]

  There are tax provisions related to the restructuring of the 
electricity industry that are being imposed by the Federal Energy 
Regulatory Commission. It is absolutely imperative that if the 
Government forces utilities to sell assets as part of deregulation, it 
will not also turn around and punish utilities for those sales through 
the Tax Code.
  Some of the critical incentives in this package that will encourage 
domestic oil and gas production are in this bill. We know it. Everybody 
who has studied it knows it. There may be some provisions that Senators 
do not like because when you put a package together you just cannot 
have everybody liking everything. But I submit, to come here with a 
Time magazine that was talking about a different bill and a different 
time--there are things that are alluded to that are not in this bill--
is truly not something the Senate should bank on with reference to 
whether they vote for this. They ought to vote for this. It is half an 
energy package and it is better than none.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Crapo). The Senator from Montana.
  Mr. BAUCUS. Mr. President, I yield 5 minutes to the Senator from 
Wyoming.
  The PRESIDING OFFICER. The Senator from Wyoming is recognized for 5 
minutes.
  Mr. THOMAS. Mr. President, we are dealing with an issue that is 
probably the most important that we have before us, in terms of jobs, 
in terms of meeting the needs in this country. We are dealing with an 
issue we have talked about for 2 years or more. We have finally come up 
with some solutions. This is an issue that has already been on the 
floor that passed with 58 positive votes. The Senator from Arizona 
indicated it hasn't been discussed or talked about or voted on. That is 
absolutely not the case. It has been, and that is where we are.
  There are two major issues involved. I am not going to get into the 
details. We are creating a policy for our future energy needs. As we 
look around at our families and our businesses and everything we do, 
there is nothing that affects our lives all day long more than energy. 
Whether it is lights, whether it is air-conditioning, whether it is 
heat, whether it is cars, whether it is receiving goods in your 
community, that all takes energy. So we are developing a policy, not 
necessarily for what is going to happen next week or next year, but 
down the road, where are we going to be?
  The second portion deals with some of the issues that are troublesome 
now: The price of fuel, and the idea we are going to run short on some 
of the kinds of fuel we are using. All those things are there. This was 
part of an energy bill. It is not all of it, but it is a good part of 
it that we have worked on for a very long time. It is backed up by the 
facts. Unfortunately, to say we talked about no facts, here that is not 
true. This is a broad policy, for one thing, that deals with 
alternative sources of energy. It deals with renewables, the 
cleanliness of coal, with pipelines. It deals with all those things 
that are so important to do this job.
  One thing that always strikes me, probably because we in Wyoming are 
the largest coal producer in the country, is that coal is the largest 
fossil fuel resource that we have available to us. At the same time, 
some other things have been easier. All the electric-generating plants 
over the last 15 years use natural gas. Natural gas can be used for 
many things where coal really is only available for this purpose, coal 
and nuclear. But we want to make coal energy clean so the air will be 
clean. This is what this bill does. It allows us to use that fuel most 
available to us and have it for the future.
  We have been taking a look at energy usage, and what strikes us is 
that consumption continues to go up at a rather fast rate. We are using 
more in our cars; we have bigger homes; we are doing things so that 
consumption of energy goes up. But the production level is going down. 
If that doesn't create some kind of crisis in the future, I don't know 
what possibly could.
  It was mentioned, and it should be mentioned again, that this is a 
jobs bill. That is really what we are trying to do. We can create more 
jobs in this particular provision, not only immediate jobs for the 
development of nuclear powerplants or power lines or coal mines or 
whatever, but the jobs created for other industries, of course, have to 
have energy available for them.
  The amendment proposed here certainly would do away with one of the 
most important things we have done for a good long time, something we 
have worked on for a good long time, something that not only deals 
immediately with problems but addresses the future of our families, 
yours and ours, and jobs. So we ought not pass this amendment. I urge 
my colleagues to vote against it.
  I yield the floor.
  Mr. GRASSLEY. Mr. President, the press and some in this body have 
unfairly defined this legislation as a ``porky'' tax bill. There have 
been articles in all the major papers following that line of attack.
  One Member of the leadership on the other side said on April 20 he is 
worried that the sheer amount of tax breaks in the bill could end up 
impeding its progress. ``They've loaded this truck up and the tires are 
about to explode,'' he said, calling the efforts to pile sweeteners 
onto the bill ``haphazard.''
  That Member went on and cautioned, ``any time you load it up as 
vigorously as they have, you create as many problems as you solve.''
  Well, let's talk about the so-called ``porky'' provisions in this 
bill. It is a bit irritating that the complaints come from folks who 
say they support the bill. Every provision in the bill is the result of 
a joint recommendation of myself and Senator Baucus. We responded to 
requests from every Senator, including those who are critical of the 
bill.
  I guess I would ask anyone, including the critics a question. That 
question would be, ``Are you willing to throw aside the provision you 
asked us to put in the bill?'' Are you willing to go back to your 
constituents and tell them you don't think their interest has merit?
  I don't think I will hear any of the critics respond yes. I haven't 
had any takers yet and don't think I will by the time the bill's done.
  Let's look at the bigger picture.
  This bill has about $60 billion dedicated to the replacement of the 
FSC/ETI benefit. This bill has another $40 billion dedicated to 
international tax reforms to make our domestic manufacturers more 
competitive overseas.
  There is another roughly $20 billion in domestic manufacturing 
incentives, including the research and development tax credit.
  Some of that package deals with issues such as the unfair tax on bows 
and arrows which has a domestic job impact. There's another $8 billion 
dealing with the extenders, including a permanent tax credit directed 
at hiring hard-to-place workers. There's another $10 billion dealing 
with housing, rural areas, hard hit urban areas, Indian tribes, and 
other sectors of our economy. We're directing resources at economic 
development, plain and simple.
  Finally, there's another almost $20 billion for the bipartisan 
Finance Committee energy incentives package which has passed the Senate 
twice.
  All of this is offset with corporate loophole closers and measures 
aimed at curtailing tax shelters. The dollars involved in the much-
criticized provisions are very small--perhaps less than 3 percent of 
the total cost of the bill. Members and the ``big city'' press need to 
keep their eyes on the ball: ending the euro tax and helping domestic 
manufacturers.
  Senator Daniel Patrick Moynihan responded to the New York Times 
regarding the 1997 bipartisan tax relief bill. The press had made much 
of a few narrow provisions, such as a provision to provide tax relief 
for parachuter trainees. There is an excise tax on air travel. The tax 
is meant to apply to commercial travel. Read literally, the tax applied 
to parachute training flights even though those flights are not 
commercial transportation.
   Senator Moynihan described the Finance Committee provisions that 
were designed to deal with these inequities this way: ``You will never 
see representative government more specific

[[Page 8931]]

than in the Senate Finance Committee . . . It's a form of 
accommodation, and in between you think about the national interest, 
because there are things we all share.''
   Like the 1997 tax relief bill, the bill before us includes a number 
of provisions that, at face value, may seem to be trivial. It is 
important to keep in mind, however, that each of these provisions was 
added in response to specific requests from fellow Senators who are 
looking out for the vital interests of their constituents. That is what 
representative government is all about.
   The Federal tax system is vast. It touches virtually every aspect of 
life. From birth to grave. There are excise taxes to fund our airports 
and highways. There is a corporate and individual income tax to fund 
defense and general welfare. There are payroll taxes to fund Social 
Security and Medicare benefits. There is an unemployment payroll tax to 
fund unemployment benefits.
   Now, when you go through this bill, you can find some provisions 
that involve animal manure or windmills. If you don't look beyond the 
superficial humor of the subject matter, you can have a lot of fun. Of 
course, big city papers like to make fun of these rural provisions. I 
always have to remind these folks that food doesn't grow in 
supermarkets. It grows on farms. The byproducts of those farms can give 
us clean energy. What's so bad about that?
   Part of what we hear out in the heartland is get us some insurance 
that jobs are coming back. Especially, they say, in the area of 
manufacturing. The economy is coming back. The U.S. economy, the 
mightiest in the history of the planet, is adding jobs at a healthy 
rate. The people want an insurance policy.
   Growing jobs in our diverse economy is not a cookie cutter exercise. 
This bill has general policies for the most part. Some are proactive, 
like the manufacturing deduction. Others are reactive, like responding 
to the Euro tax. Still others are particular. They may relate to small 
isolated communities or a single industry. When you take a look you'll 
find a common thread through nearly all of them: job creation.
   That is what this bill is all about. Creating jobs, plain and 
simple.
  Mr. FEINGOLD. Mr. President, I would like to express my support for 
the amendment offered by the senior Senator from Arizona, Mr. McCain, 
to strike the energy tax title from the Foreign Sales Corporation bill. 
I recognize the need for a comprehensive energy policy and incentives 
for alternative energy development. I also believe that the tax package 
offered by the Senator from Iowa and the Senator from Montana was more 
balanced than the energy tax title from the H.R. 6. energy conference 
report. However, I am disappointed that the energy tax title in the 
FSC/ETI bill did not extend these tax credits in a more fiscally 
responsible way.
  I support many of the tax credits in this legislation, such as 
extension of the wind energy producer credit. The wind energy tax 
credit is an important step in the continued effort to increase our 
energy security and to decrease our reliance on carbon-based energy 
sources. Wisconsin has a lot to offer in this area. I support tradeable 
tax credits for rural cooperatives, and the other provisions that would 
specifically benefit rural cooperatives and small renewable fuel 
producers. I also support many of the other provisions that increase 
energy efficiency and promote renewable fuels and alternative energy 
sources.
  The energy tax title as written, however, will cost from $15-20 
billion dollars. The oil and gas incentive section would cost taxpayers 
$6.5 billion and allows companies to deduct the costs of mineral 
exploration and marginal oil wells. The nuclear power incentives total 
$1 billion, and the so-called ``clean coal'' incentive is $2.2 billion. 
In addition to these credits to mature industries, the ``non-
conventional fuel credit'' that supports the synfuels industry and 
coalbed methane industry would cost the taxpayers an additional $2.5 
billion. According to a Time magazine article entitled ``The Great 
Energy Scam,'' some plants merely spray newly mined coal with diesel 
fuel or pine-tar resin to qualify for the synfuel tax credit. We also 
need to consider the detrimental environmental impacts of these tax 
breaks. A proposed coalbed methane project in Wyoming, for example, 
could draw on 1 billion gallons of groundwater a day and would benefit 
from this provision.
  I remain committed to supporting legislation to encourage alternative 
energy research and production. In terms of overall energy policy, I 
believe we must develop cleaner, more efficient energy sources and 
promote conservation. We need a comprehensive energy policy, but it 
must be balanced and fiscally responsible. I believe that we can meet 
these goals, but unfortunately, this energy tax title falls short of 
that goal. Therefore, I support the McCain amendment to strike it from 
the bill.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. How much time remains on our side?
  The PRESIDING OFFICER. The opposition has 6 minutes 44 seconds, and 
the proponents have 8 minutes 30 seconds.
  Mr. BAUCUS. I yield 3 minutes 22 seconds to the Senator from 
Delaware, and 3 minutes 22 seconds to the Senator from Alaska following 
the Senator from Delaware.
  The PRESIDING OFFICER. The Senator from Delaware is recognized for 3 
minutes 22 seconds.
  Mr. CARPER. I thank the Senator for yielding me 3 minutes 22 seconds.
  Mr. President, as we gather for this debate, about 60 percent of the 
oil we use in this country comes from other places. We are importing 
all that oil. It adds to a huge trade deficit, about $500 billion and 
growing. About a third of that trade deficit is related to the 
importation of oil.
  We have the opportunity with the energy provisions that are part of 
this bill to do some good things with respect to energy independence in 
this country. We have the opportunity to urge people to buy more 
energy-efficient cars, trucks, and vans. We have the opportunity to 
nurture an automotive industry which will provide fuel-cell-powered 
vehicles that will provide for vehicles that are powered by a 
combination of electric and internal combustion--maybe a combination of 
diesel and electric. We have the opportunity to provide incentives for 
people to use solar energy more frequently and more effectively, to use 
geothermal energy more effectively, more broadly. We have the 
opportunity to encourage people to use wind power as a source of 
electricity, and other forms of energy, through this bill.
  Some would say we ought to have a comprehensive energy bill, and 
these elements ought to be part of the comprehensive energy bill. I 
will tell you I don't know if we are going to have a chance to debate a 
comprehensive energy bill. We do have the opportunity today to 
encourage solar energy, wind power, fuel cells, hybrid vehicles, and we 
have a chance to do this today.
  About 100 miles from here there are fields on the Delmarva 
Peninsula--in Delaware, Maryland, and Virginia--where we are growing 
soybeans. We use soybeans in my part of America to feed the chickens. 
We take the hull and we feed the chickens and raise more chickens in 
Delaware, I think, than anyplace in the country. We use the corn we 
raise to feed the chickens. We have a lot of soybean oil we don't know 
what to do with, and one of the things we figured out to do is take 
soybean oil and mix it with diesel fuel--80-percent diesel, 20-percent 
soybean oil--and we use it to power our DelDOT vehicles in the State of 
Delaware. We use it to power more farm equipment in the State of 
Delaware that is diesel power.
  It works, it is energy efficient, and it is environmentally friendly. 
People tell me it smells like french fries.
  That is one of the things we are more likely do with this bill. The 
intent and encouragement of this bill is to reduce our dependence on 
foreign oil and move to biofuels, including soy diesel. Good results 
come out of using soybeans for this purpose. It reduces our reliance on 
foreign oil, it is environmentally

[[Page 8932]]

friendly, and it gives the folks who are raising soybeans--whether it 
is Delaware, Idaho, or any other place--the opportunity to have another 
market for their commodity. That is good for farmers, actually paying 
them to grow a commodity rather than paying them not to do that. This 
makes a whole lot of sense.
  I wish the Senator from Arizona in offering his amendment had focused 
on section 29. That is a more narrowly crafted amendment. My hope is 
this will be defeated and we may reconsider it and come back to address 
that.
  I thank the Chair.
  The PRESIDING OFFICER. The Senator from Alaska.
  Ms. MURKOWSKI. Mr. President, we talk about energy all the time. 
There is a certain, not confusion but a real consternation about what 
is going on in the Senate right now and why we can't get specific 
provisions of the Energy bill through the Senate.
  We understand energy in Alaska, whether it is gas or whether it is 
oil, whether it is renewable energy or thermal. What we have before us 
is an opportunity to make some of the energy policy a reality in the 
country.
  Last week I had the opportunity to testify before the House 
Subcommittee on Energy and Air Quality about the proposed Alaskan 
natural gas pipeline. I talked about the role which this pipeline can 
play in meeting the needs of some very critical areas in the country--
specifically, our national security, the health of our economy, job 
creation, and achieving and maintaining a healthy environment for 
ourselves and our families.
  Whether we are talking about the creation of hundreds of thousands of 
jobs across the Nation from this project or providing a secure and 
stable domestic supply of energy, whether it is providing the critical 
feedstock we have heard about on the floor here today at a reasonable 
price for the chemical, agricultural, and other important sectors of 
the economy or providing an abundance of clean-burning, environmentally 
friendly fuel, there is no doubt about it, this project is not only in 
the best interests of Alaska, my State, but across the entire country.
  As we talk about the project in Alaska, it has been suggested with 
the price of natural gas as it is, we don't need to have the incentives 
that are included in this legislation before us right now. With the 
specific proposals which are pending, why do we need the incentive? 
Yes, in fact, the proposals are out there, but they will tell you we 
need the assistance. They have stressed the necessity of Congress 
enacting the fiscal incentives contained in this bill in order for 
construction of the pipeline to go forward.
  We need these provisions to achieve all of the positives a gas 
pipeline has to offer. It is essentially a futures contract with the 
American people. We provide the incentive to build the pipeline and you 
will receive all the benefits the gas pipeline has to offer. The Alaska 
natural gas pipeline is one of those rare examples of a project that is 
a win from every perspective. It helps us achieve our environmental 
goals, it helps the economy by creating a great number of good-paying 
jobs, and it enhances our national security. But if the McCain 
amendment is adopted and the energy tax provisions are stripped from 
this bill, the relief Alaska's natural gas can provide remains stuck in 
the ground.
  I urge my colleagues to oppose the McCain amendment and retain the 
financial incentives needed to construct the Alaska natural gas 
pipeline.
  I thank the Chair. I yield the floor.
  Mr. GRASSLEY. Mr. President, I ask unanimous consent that all time be 
yielded.
  The PRESIDING OFFICER. Without objection, it is so ordered. All time 
is yielded.
  Mr. GRASSLEY. I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second? There is a 
sufficient second. The question is on agreeing to the amendment. The 
clerk will call the roll.
  The legislative clerk called the roll.
  Mr. REID. I announce that the Senator from North Carolina (Mr. 
Edwards) and the Senator from Massachusetts (Mr. Kerry) are necessarily 
absent.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The results was announced--yeas 13, nays 85, as follows:

                      [Rollcall Vote No. 89 Leg.]

                                YEAS--13

     Biden
     Boxer
     Corzine
     Dodd
     Feingold
     Graham (FL)
     Gregg
     Hollings
     Kennedy
     Kyl
     Lautenberg
     McCain
     Sununu

                                NAYS--85

     Akaka
     Alexander
     Allard
     Allen
     Baucus
     Bayh
     Bennett
     Bingaman
     Bond
     Breaux
     Brownback
     Bunning
     Burns
     Byrd
     Campbell
     Cantwell
     Carper
     Chafee
     Chambliss
     Clinton
     Cochran
     Coleman
     Collins
     Conrad
     Cornyn
     Craig
     Crapo
     Daschle
     Dayton
     DeWine
     Dole
     Domenici
     Dorgan
     Durbin
     Ensign
     Enzi
     Feinstein
     Fitzgerald
     Frist
     Graham (SC)
     Grassley
     Hagel
     Harkin
     Hatch
     Hutchison
     Inhofe
     Inouye
     Jeffords
     Johnson
     Kohl
     Landrieu
     Leahy
     Levin
     Lieberman
     Lincoln
     Lott
     Lugar
     McConnell
     Mikulski
     Miller
     Murkowski
     Murray
     Nelson (FL)
     Nelson (NE)
     Nickles
     Pryor
     Reed
     Reid
     Roberts
     Rockefeller
     Santorum
     Sarbanes
     Schumer
     Sessions
     Shelby
     Smith
     Snowe
     Specter
     Stabenow
     Stevens
     Talent
     Thomas
     Voinovich
     Warner
     Wyden

                             NOT VOTING--2

     Edwards
     Kerry
       
  The amendment (No. 3129) was rejected.
  Mr. DOMENICI. Mr. President, I move to reconsider the vote.
  Mr. BAUCUS. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. GRASSLEY. Mr. President, I ask unanimous consent that following 
the disposition of the Hollings amendment, the next amendments to be 
offered are the following in the order provided: Senator Kyl, No. 3127, 
60 minutes equally divided; Senator Landrieu, 60 minutes equally 
divided; Senator Levin, 20 minutes equally divided; further, that there 
be no second-degree amendments in order to the amendments prior to the 
vote.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Montana is recognized.
  Mr. BAUCUS. Mr. President, as has been ordered, after the Hollings 
amendment, there are three more. I am not sure any votes are needed on 
the three amendments the chairman just mentioned, by Senators Kyl, 
Landrieu, and Levin. We have times, but we are trying to work with the 
Senators. For example, it is my understanding that the Kyl amendment 
will be offered and withdrawn. We may be able to work out the others as 
well. Nevertheless, that is the order.
  Mr. GRASSLEY. Mr. President, I ask unanimous consent that the 
Senators from Pennsylvania, the senior and the junior Senators, have 5 
minutes apiece to discuss something very personal to their State.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Pennsylvania, Mr. Santorum, is recognized.


                             Murder in Iraq

  Mr. SANTORUM. Mr. President, I rise today to talk about a death in 
Iraq. There has been a lot of death in Iraq. We can all come to the 
floor and give a story about a brave man or woman who sacrificed their 
life for freedom in that country. Today I rise to talk about not a 
soldier who has bravely fought in battle over there but a civilian who 
was brutally murdered by a group of al-Qaida terrorists. We are now 
seeing this displayed on our television screens across America.
  This civilian's name is Berg, Nicholas Berg. He is 26 years old, from 
West Chester, PA, outside of Philadelphia. As described by an AP 
article that came across my desk, a group of five al-Qaida terrorists, 
one of them purporting to be Abu Musab al-Zarqawi, the No. 2 man of the 
Islamic terrorist group, wearing ski masks and scarfs,

[[Page 8933]]

standing over Mr. Berg, who had just given a statement as to who he was 
and where he was from. They read a statement and then proceeded to push 
this man on his side and to cut off his head with a large knife, and 
then they held the head out before the camera.
  If anybody wants to know what we are fighting and why we are fighting 
this war on terror, this is a very good example of it. Those who have 
seen the tape on television have described it as revolting and 
sickening, and I will describe it as an outrage to the civilized world, 
and one to which we must strongly condemn and respond. We must continue 
to respond as aggressively as possible in rooting out these terrorist 
cells and going after them where they are. Where they are, in this 
case, is in Iraq. This occurred in Iraq. He was a civilian contractor 
working in Iraq. His body was found a couple of days ago on a bridge in 
Iraq.
  First and foremost, I express my sympathy to his parents, Michael and 
Suzanne, who I know have gone through a very harrowing experience over 
the past couple of months when they didn't know where their son was on 
more than one occasion. They did not know his whereabouts for the past 
month. And to find out about this tragedy, the loss of their son, in 
such a violent and horrific way and to not know until, I am sure, 
seeing it on television and hearing it described, is a nightmare for 
any parent.
  The Bergs certainly have my prayers and I know all in this Chamber 
share the sorrow.
  The PRESIDING OFFICER. The Senator from Pennsylvania, Mr. Specter, is 
recognized.
  Mr. SPECTER. Mr. President, I join my colleague, Senator Santorum, in 
expressing sympathy for the parents and family of Mr. Nick Berg, who 
was the victim of a brutal assassination. Actually, it was a 
decapitation.
  It is hard to express the shock of this kind of barbaric conduct. It 
is subhuman what they did--taking a video of this man, who identifies 
himself, identifies his mother, his father, his siblings, and then, in 
view of the video, they decapitate him, with the anguish of a man being 
brutally murdered. It is just subhuman conduct.
  We ought to put on notice these murderers, assassins, that whatever 
it takes, the civilized world will bring them to justice. The news 
reports are that they were wearing masks and hoods to conceal their 
identities. I have seen investigations succeed even where people were 
wearing masks and hoods. They will talk about it, or someone will talk 
about it. In a cruel, barbaric world, this conduct descends to new 
levels.
  This incident will unleash as intensive a manhunt as has ever been 
witnessed, with the United States leading the way--obviously, because 
it is an American citizen from a Philadelphia suburban town. We will be 
joined by all of the civilized world in bringing these malefactors, 
these perpetrators to justice. Just because they are wearing hoods, 
because their identities are disguised, doesn't mean they cannot be 
identified and apprehended. I know every last thing will be done to 
bring them to justice.
  And then, beyond the identification of these specific assassins, 
these specific terrorists will renew our determination, which is 
already at the 100-percent level, to bring the terrorists to justice. 
They already murdered thousands of Americans on September 11, 2001, and 
Iraq is a magnet for terrorists from all over the area.
  This underscores the necessity to confront the terrorists in Iraq. If 
we don't confront them there, we will be doing it again in the United 
States.
  This is an incident which will receive enormous attention to try to 
determine the perpetrators and to bring them to justice.
  There are some other matters which have been suggested as to Mr. Nick 
Berg's being in custody, one report taken into custody by the Iraqis 
and held by U.S. military personnel. I am advised a lawsuit was 
started, and then Mr. Berg was released. We are now making an effort to 
identify the attorneys in the matter to try to get some background 
before we talk to the parents and the relatives of the victim of this 
atrocious conduct.
  There is also a question of bringing back the remains of Mr. Berg. We 
shall do our best to facilitate that and to help the family.
  This atrocity is obviously going to receive widespread attention. In 
a cruel, brutal world, this descends to new depths.
  Again, our sympathy to the parents. We will pursue the matter to 
bring these specific perpetrators to justice and to bring the 
terrorists to justice, generally.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from South Carolina.


                           Amendment No. 3134

(Purpose: To strike the international tax provisions that are unrelated 
 to the FSC/ETI repeal and eliminate the phase-in of the deduction for 
                qualified production activities income)

  Mr. HOLLINGS. Mr. President, I call up my amendment No. 3134 and ask 
the clerk to report.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from South Carolina [Mr. Hollings] proposes an 
     amendment numbered 3134.

  Mr. HOLLINGS. Mr. President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The amendment is printed in today's Record under ``Text of 
Amendments.'')
  The PRESIDING OFFICER. There are 40 minutes to each side.
  Mr. HOLLINGS. I thank the distinguished Chair.
  Mr. President, the underlying bill gives a 5-percent domestic 
manufacturing deduction to the manufacturing industry. Of course, that 
is woefully insufficient. My amendment would provide a full 9-percent 
domestic manufacturing deduction.
  The underlying bill slowly phases in the domestic manufacturing 
provision over a 5-year period, but instantly it gets the full effect 
of the overseas industry, the outsourcing. They immediately get some 
tax breaks over the period of the bill covering some 39, almost 40 
billion bucks.
  Can you imagine that? Here is a bill entitled--this is the committee 
report--the Jump-Start Our Business Strength, JOBS, Act. It jump-starts 
the jobs in Shanghai and Guadalajara and not in Philadelphia, PA, I can 
tell you that right now.
  What my amendment does is provide the right incentives. It eliminates 
the tax breaks for corporations that have moved American jobs offshore 
and gives those tax breaks to the employers of jobs in America today.
  I wish to thank, first, the distinguished ranking member, Senator 
Baucus, of our Finance Committee and his outstanding staff. They have 
been very helpful in trying to make this amendment not only relevant 
but budget neutral. I am not sure about its budget neutrality, but I am 
told now we do have a relevant amendment. If we have to get into the 
arcane discussion with respect to budget neutrality, I will be glad to 
join it.
  I want to get to the point. We are still in a post-World War II 
culture, what they call up here an environment or pedigree. What 
happened was, after World War II, we had our finest hour with the 
Marshall plan. We sent money overseas. We sent expertise overseas. We 
sent equipment overseas. In the cold war, capitalism defeated 
communism. It worked. All during that almost 50-year period since World 
War II, we all enjoyed it because we fudged when it came to trade. We 
treated fair trade more or less as foreign aid, but we knew what we 
were doing. We had to sacrifice a certain amount of our industry, our 
jobs, our economic strength to prevail in this cold war.
  Now what has occurred is the competition has regeared, they have 
rebuilt, they have industrialized, and they have become outlandishly 
competitive. And here amidst a trade war, we hear those in the national 
Congress running around and saying: Woo, we might start a trade war; 
free trade, free trade, I am for free trade, when they know free trade 
is like dry water. There is no such thing. If you trade,

[[Page 8934]]

you are trading something, you are swapping an article with various 
countries, free trade, but we know that is not going to come to pass.
  The example we set of a capitalistic free market and our endeavor in 
the last 50 years, the Japanese did not follow suit. They have the 
financing, they have the subsidies, they have the nontariff barriers, 
and we have yet to get into downtown Tokyo with American sales. Come 
on, quit kidding each other. It worked that way for Japan. Korea 
followed. And now China is following the same Japanese pattern of 
restricted and competitive trade, not free trade.
  Today we are in real trouble. We are losing jobs like gangbusters 
overseas. We have lost 68,000 jobs in the little State of South 
Carolina in the last 3 years, over 3 million jobs nationally. I can 
tell you, 58,000 of those jobs are our textile jobs, and they are not 
going to be replaced. You can put all this statistical information from 
the Federal Reserve and Greenspan about how we are creating jobs, but 
they are not coming to South Carolina.
  As Abraham Lincoln said some years ago: The dogmas of the quiet path 
are inadequate to the stormy present. As our case is new, we must think 
anew, we must act anew, we must disenthrall ourselves, and then working 
together we can save our Nation. That is the reason for this amendment.
  One does not put up an amendment to this finance bill with hope. The 
chairman of the Finance Committee knows there are not going to be any 
amendments. But we might be able to disenthrall our colleagues because 
the country has to develop a competitive trade policy in order to 
subsist and survive.
  I can point out survival in the very beginning of this Nation started 
with Alexander Hamilton. Of course, I will not read the book--Ron 
Chernow's ``Alexander Hamilton.'' They will not give me that much time, 
but I recommend to everyone this particular edition. You will find the 
mother country, England, prevented manufacture in the Colonies, later 
the United States of America. In fact, they arrested and jailed anyone 
with any manufacturing talent who would move from England to the 
Colonies.
  We had a veritable struggle in the earliest days, and we had just 
barely 1 hour of freedom when the mother country said: Under this David 
Ricardo doctrine of comparative advantage, we will trade with you what 
you produce best and you trade back with us what we produce best.
  As a result, Alexander Hamilton wrote his famous treatise, ``Report 
on Manufacturers.'' I will not read that and put it in the Record, but 
I will say in a phrase exactly what Hamilton told the Brits: Bug off. 
He told the Brits, we are not going to remain your colony, shipping you 
our timber, iron ore, rice, cotton, indigo, and natural resources, and 
importing the manufactured articles and remaining a banana republic; we 
are going to build up our own manufacturing.
  It caused me to listen to our friend Akio Morita, the former head of 
Sony. Some 20 years ago in Chicago, while lecturing third world 
countries, he said you have to develop a strong manufacturing sector in 
order to become a nation state. Then he pointed to me and said: 
Senator, that world power that loses its manufacturing capacity will 
cease to be a world power.
  It is economic strength that counts in this terrorism war. It is 
diplomacy. It is negotiation. It is not military strength. We have to 
disenthrall ourselves and realize when we are going around talking 
about we might start a trade war, it was Hamilton himself and the 
United States of America some 228 years ago that started the trade war.
  The very first bill--well, Pat Moynihan used to correct me on that. 
He said the first was a resolution for the United States Seal. So let's 
say the second bill that passed this Congress in its history on July 4, 
1789, was a tariff bill, protectionism, a 50-percent tariff on 60 
different articles. We started a trade war.
  When Abraham Lincoln was President, they were going to build a 
transcontinental railroad. They said, we are going to get the steel 
from England. President Lincoln said, we are going to build our own 
steel plants, and he put import restrictions on that British steel and 
we built the steel plants.
  When Franklin Roosevelt was President in the darkest days of the 
Depression, we did not practice any comparative advantage. He put on 
the most successful initiative ever with import quotas and subsidies 
for America's agriculture. That farm crowd that is now heading up our 
Finance Committee gets $180 billion worth of all kinds of subsidies. 
Then they run around here and tell this poor little textile Senator, 
protectionism, protectionism, you are going to start a trade war.
  We do not get a subsidy. We do not have those things the farmers 
have. I favor what the farmers have, I say in the same breath. I vote 
for it because I think it is a very successful program.
  President Eisenhower, in the mid-1950s, put on oil import quotas. 
Yes, John F. Kennedy--I sat there with Andy Hatcher and we would grind 
out the mimeograph machine--and we got the seven-point Kennedy textile 
program of restrictions on textile imports in 1961.
  Who else other than Ronald Reagan, the best of the best, he put 
import quotas on steel, machine tools, semiconductors, motorcycles. 
Last night, I was near Myrtle Beach and they told me there were 100,000 
motorcyclists--I think I ran into 99,000 of them out on the highway--
but do my colleagues remember what old Ronnie Reagan did? He started a 
trade war of motorcycles. He put a 50-percent import tariff on 
motorcycles. Harley Davidson now has recovered its health and we have 
them all running up and down the beach at Myrtle Beach, SC. So do not 
come now and tell me about starting a trade war.
  We have had that trade war and we know simply and clearly what 
happens. I want to read starting on page 20 of ``Theodore Rex'' by 
Edmund Morris, because this is so interesting. I will read what 
protectionism did at the turn of the century, this is under Teddy 
Roosevelt, when we did not have an income tax. For the first 100 and 
some years, we financed this great United States of America with 
protectionism. I am trying to get that through so this crowd will wake 
up and quit pulling off this charade of the multinationals, because 
that is who we are facing. We are facing the U.S. Chamber of Commerce, 
the Business Roundtable, the National Association of Manufacturers, the 
Conference Board, the United Federation of Independent Businesses. The 
newspapers make a majority of their money on retail advertising and 
grind out this free trade, free trade, do not let us start a trade war.
  Well, here is what the trade war gave us:

       This first year of the new century found her worth twenty-
     five billion dollars more than her nearest rival, Great 
     Britain, with a gross national product more than twice that 
     of Germany and Russia. The United States was already so rich 
     in goods and services that she was more self-sustaining than 
     any industrial power in history. . . .
       More than half of the world's cotton, corn, copper, and oil 
     flowed from the American cornucopia, and at least one-third 
     of all steel, iron, silver, and gold.

  Here we are having trouble manufacturing steel. We were exporting 
one-third of the world's steel.

       Even if the United States were not so blessed with raw 
     materials, the excellence of her manufactured products 
     guaranteed her dominance of world markets. Current 
     advertisements in British magazines gave the impression that 
     the typical Englishman woke to the ring of an Ingersoll 
     alarm, shaved with a Gillette razor, combed his hair with 
     Vaseline tonic, buttoned his Arrow shirt, hurried downstairs 
     for Quaker Oats, California Figs and Maxwell House coffee, 
     commuted in a Westinghouse tram (body by Fisher), rose to his 
     office in an Otis elevator, and worked all day with his 
     Waterman pen under the efficient glare of Edison light bulbs. 
     ``It only remains,'' one Fleet Street wag suggested, ``for 
     [us] to take American coal to Newcastle.'' Behind the joke 
     lay real concern: the United States was already supplying 
     beer to Germany, pottery to Bohemia, and oranges to Valencia.
       As a result of this billowing surge in productivity, Wall 
     Street was awash with foreign capital. Carnegie calculated 
     that America could afford to buy the entire United Kingdom, 
     and settle Britain's national debt in the bargain. For the 
     first time in history, transatlantic money currents were 
     thrusting more powerfully westward than east. Even

[[Page 8935]]

     the Bank of England had begun to borrow money on Wall Street. 
     New York City seemed destined to replace London as the 
     world's financial center.

  Well, in the year 2004, we are broke. We have come from the greatest 
creditor nation to the greatest debtor nation. The Japanese are 
financing over $460 billion of my deficit. The Chinese are financing my 
debt--not me financing any other country like we started with 
protectionism. The Chinese have over $200 billion of my deficit. We 
will end up this year in September, in a few short months, with a 
deficit that will approximate $700 billion.
  We are spending around $2 billion a day more than we are taking in. 
Can you imagine that? In the early 1980s when I talked about budget 
matters, I spoke about how it took us 200 years of our history to get 
to $1 trillion in debt. The cost of the Revolution, the Civil War, 
Spanish-American War, World War I, World War II, Korea War, Vietnam 
War--it took us 200 years and the cost of all the wars to reach a $1 
trillion debt.
  In the last 3\1/2\ years--because we don't want to pay for our war 
and want to give tax breaks instead--we have already piled up $2 
trillion in debt; $2 trillion in the last 3\1/2\ years.
  This crowd has to sober up. We have to get hold of ourselves. We have 
to disenthrall ourselves and we have to start competing. Remember, it 
is our standard of living. That is the most frustrating thing around 
here. Here we add on these requirements: the minimum wage, Social 
Security, Medicare, Medicaid, plant closing notice, parental leave, 
safe working place, safe machinery, the old age act, the discrimination 
act, and this act and that act--all of that goes into the cost of 
production. It is not just the minimum wage; it is our high standard of 
living. Every Republican and every Democrat favors clean air and clean 
water. So we are not going back on our standard of living. So 
fundamentally we have to protect, and that is the fundamental role of 
Government.
  I will never forget when we swore in President Ronald Reagan for his 
second term. It was inclement weather and we did it in the Rotunda. He 
raised his hand to preserve, protect, and defend. We came back and we 
were debating trade, and we said: Oh, we don't want to protect, we 
don't want to protect. The fundamental oath that we take as public 
servants is to protect. We have the Army to protect us from enemies 
without, the FBI to protect us from enemies within. We have Social 
Security to protect us from old age, Medicare to protect us from ill-
health; clean air, clean water--antitrust laws to protect the freedom 
of the market. We can go right on down the list. Are we going to pass a 
wonderful high standard of living and then run around like ninnies 
hollering: Wait a minute, wait a minute, free trade, free trade. We 
don't want to start protectionism--they get that garbage from the 
Business Roundtable and the U.S. Chamber of Commerce.
  I talk as one having received all of their awards. In 1992, I was man 
of the year of the National Chamber of Commerce. By 1998 they were 
sending out leaflets against me. So I speak advisedly. That crowd is 
not any longer interested in Main Street America. They are interested 
in Main Street Beijing. That is where you make the money, and the 
country can go to hell as far as they are concerned. So it is our duty 
to protect the economy and open up the markets and everything else like 
that.
  Don't tell us more about retrain, retrain, retrain. I continually 
hear that. Oh, we have to retrain. I went through another little town 
yesterday, Andrews, SC. It brings to mind Oneida. I brought that plant 
in. They make little T-shirts. They closed to go to Mexico. At the time 
of closure they had 487 employees. The average age was 47 years.
  We have done it, Senator, your way. We have retrained them and we 
have 487 highly skilled computer operators. Are you going to hire the 
47-year-old highly skilled computer operator or the 21-year-old highly 
skilled computer operator? You are not going to take on the retirement, 
the pension cost of the 47-year-old. You are not going to take on the 
health cost of the 47-year-old. You are going to get the 21-year-old. 
So don't tell me about retraining.
  We have the most productive economy--that is what Alan Greenspan 
says. He is sobering up himself. He came down here with this 
administration saying we were paying down too much debt. ``We are 
paying down too much debt.'' He sanctioned all these tax cuts. Now he 
says debt and deficits matter, and he is worried about interest rates 
now and everything else of that kind, and paying bills.
  It is time we speak out as much as we can, early on, so we will know 
exactly where we stand. Where we stand is that we have to reorganize--
begin to organize, I should say--our trade effort, not just the 
Department of Commerce, but a Department of Trade and Commerce. I have 
been serving for almost 38 years on what was originally the Committee 
of Foreign and Interstate Commerce because article I section 8 says 
that Congress--not the President, not the Supreme Court--but the 
Congress of the United States shall regulate foreign commerce.
  But, instead, it is over in the hands of a deep six group known as 
the Finance Committee. What they do is they work out their little 
deals. You might get a stadium, you might get a courthouse, you might 
get any kind of visions of sugarplums dancing in their head.
  Forget about trade. They put on fast track. After they make their 
deal, the vote is fixed. Then it comes to the floor of the most 
deliberative body that cannot, under fast track, deliberate. And we 
enjoy it. We have tied our hands with fast track because we don't want 
to take the responsibility. That is what the polls will tell you: Don't 
say you are for or against, just say you are concerned.
  So we say we are concerned and we keep getting reelected and the 
country goes to hell in an economic hand pot. I can tell you right now 
we are in real trouble, and we have to disenthrall.
  What happens is that we need to organize a Department of Trade and 
Commerce, take that special Trade Representative, put it under that 
Secretary, do away with the International Trade Commission, which is a 
fix. You can find the damage done by the International Trade 
Administration over in Commerce. Then you go over to the Commission and 
they find out--oh, there is never any injury because you have growth. 
The GNP now is 3 or 4 percent, so there is no injury. So we keep 
sending the jobs out of the country like gangbusters, and we ought to 
do away with that particular fix of the Finance Committee. Then come in 
and get an Attorney General--an assistant, let's say, to enforce the 
trade laws.
  Many a trade lawyer in this city has gone all the way to the Supreme 
Court and found out that, well, politically it is set aside. It was 
that way in the Zenith case, when they were gathered around the Cabinet 
table and President Reagan walked in and he said: I have to take care 
of Nakasone. We are going to have to reverse that decision, after 3 
years and millions of dollars of legal costs.
  So we ought to put in, like we have for antitrust, like we have for 
equal employment--we have to put in an Assistant Attorney General to 
enforce those laws, get the Customs agents, and finally when we get 
right down to it, do like the others do, play their game. If you are 
going to sell it here, you have to make it here. Isn't that wonderful? 
That is exactly what China really controls.
  They said, if you want to sell it here you have to make it here. I 
haven't gotten them that far along, I am just trying to flex their 
minds so we will get away from this trade war and protectionism 
nonsense, so we can put in a competitive trade policy and save our 
industrial backbone.
  Mr. President, how much time do I have remaining? My distinguished 
colleague from Florida, Mr. Bob Graham, wants to be heard.
  The PRESIDING OFFICER (Mr. Chafee). There is 12 minutes.
  Mr. HOLLINGS. Let me yield at this time to the proponents and the 
distinguished leadership of our Finance Committee. I retain the 
remainder of our time.
  The PRESIDING OFFICER. The Senator from Iowa.

[[Page 8936]]


  Mr. GRASSLEY. Mr. President, I yield myself such time as I might 
consume.
  Senator Hollings asks us to take $39 billion of international reforms 
and put it towards more domestic manufacturing relief.
  I have told my colleagues so many times I shouldn't have to repeat 
it. But this bill is all about encouraging domestic manufacturing.
  The level of spending in this bill is already over three to one in 
favor of domestic issues. We dedicate over $75 billion to domestic 
manufacturing relief.
  FSC/ETI currently benefits manufacturing by $50 billion. Obviously, 
you can see this bill is a much stronger commitment to manufacturing 
than the old FSC/ETI bill we are replacing. We have already accelerated 
the phase-in of the manufacturing tax rate. That is thanks to a 
bipartisan amendment by Senator Bunning and Senator Stabenow. We have 
modified the transition rules to provide stronger relief in transition 
for manufacturing companies which presently get the old FSC/ETI 
benefits this bill replaces.
  I hope it is easy for my colleagues to conclude that there is very 
little to be gained by the amendment proposed by the Senator from South 
Carolina.
  It is time we had our rational discussion of the international 
reforms in this JOBS bill because we have been spending so much time on 
nongermane amendments. The amendment before us is not one of those 
nongermane amendments but it has kept us from discussing so much which 
is very basic with this legislation. Maybe people think there is no 
reason to discuss it because this bill was built from the ground up in 
a bipartisan way, coming out of our committee on a very overwhelming 
vote of 9 to 2.
  I think Members will be surprised to learn that some of our 
international tax rules actually harm the domestic operations of U.S. 
companies. When foreign income is brought home, the United States 
allows an offset against U.S. tax for any foreign taxes paid on that 
income. That is why it is called the foreign tax credit. Foreign tax 
credits ensure that we do not double tax foreign earnings. Accordingly, 
the foreign tax credit plays a vital role in preserving the 
international competitiveness of our companies.
  In the Tax Reform Act of 1986, Congress enacted a provision that 
causes foreign tax credits to expire every 5 years. That was done for a 
reason that is not very well justified because it is often used around 
here--to make that 1986 tax bill revenue neutral.
  Some claim this is a good rule because it forces foreign earnings to 
be repatriated within 5 years. But that conclusion does not comport 
with reality. The reason companies don't bring back foreign earnings is 
because of double taxation. That is what occurs with foreign tax 
credits expiring.
  I will give you an example. A U.S. company sets up new operations in 
Poland to serve Eastern Europe at this time when Eastern Europe is 
being integrated with the European Union. That happened last week. For 
the next 8 years in this hypothetical--quite reasonably--it takes all 
of the capital generated by the Polish subsidiary to expand the 
company's presence in Eastern Europe. At the end of 8 years, it finally 
has some extra cash which it can send home.
  What happens? It discovers the taxes it paid to Poland from years 1 
through 3 are no longer eligible for the foreign tax credit because 
they are more than 5 years old. The Polish tax rate is 28 percent. This 
means if a company repatriates those early earnings, it will pay 
combined Polish and U.S. taxes of 63 percent. It is really almost 
confiscatory. That means, of course, the money is not coming home for 
reinvestment in the United States. We lose the benefit.
  If those early tax credits had not expired, the United States would 
actually pick up some tax revenues. The subsidiary would owe the 
difference between the 28-percent Polish rate and the 35-percent U.S. 
rate. That happens to be a gain of 7 percentage points of taxation into 
our U.S. Treasury from that company.
  To ensure that double taxation no longer occurs, our JOBS bill 
extends the carry-forward period for foreign tax credits from 5 years 
to 20 years. Twenty years is the amount of time companies have to 
utilize net operating losses. It is only appropriate, then, that the 
key mechanism for avoiding double taxation should have the same shelf 
life.
  Our JOBS bill mostly fixes problems in the foreign tax credit area. 
The only time a company benefits from a foreign tax credit is when it 
brings that money home.
  To repeat a very elementary point, foreign tax credits are a benefit 
to that company only when that company brings foreign earnings home for 
reinvestment. When the credit expires, this impedes capital mobility 
because of double taxation, and it blocks reinvestment of foreign 
earnings in the United States.
  Another example of guaranteed double taxation is our rule that only 
allows 90 percent of a company's AMT to be offset with foreign tax 
credits. This rule guarantees that the company will be double taxed on 
10 percent of the alternative minimum tax. The JOBS bill allows what is 
common sense--a 100-percent offset.
  To give you a real-life example of how these two changes will help 
U.S. operations make investments in America and create jobs in America, 
the largest American manufacturer in this example of a particular 
automobile part is bringing dividends back from its profitable foreign 
operations to cover losses in its U.S. operations. Their U.S. losses, 
when combined with the foreign dividends to fund the U.S. operations, 
has created huge unused foreign tax credits with a 5-year expiration 
period. Because of their ongoing U.S. losses, it is unlikely these 
credits will be used within those 5 years.
  This company also has a growing alternative minimum tax because their 
foreign tax credits can only be offset by 95 percent of their AMT 
liability.
  The limit is creating an annual alternative minimum tax liability 
because the additional 10 percent of the AMT cannot be offset with the 
foreign taxes that have already been paid on that income. The company 
is guaranteed to incur double tax on foreign earnings brought back to 
support the U.S. operation. This may be unbelievable to anyone 
listening, but this is actually happening under U.S. tax laws.
  The company's foreign competitors in the United States are not 
equally hindered in the same way by the 90-percent alternative minimum 
tax, foreign tax credit limit. If a foreign competitor loses money, 
they get a 20-year U.S. net operating loss compared to the 5-year 
foreign tax credit carryforward. Our Tax Code, then, is harming a 
company that has operations in all 50 States and employs 38,000 people 
in 16 different manufacturing facilities.
  This example shows why the 20-year foreign tax credit carryforward 
and the repeal of the 90-percent AMT foreign tax credit limits are in 
this very important jobs in manufacturing bill. The current rules harm 
U.S. operations and we need to fix it.
  I also have some comments on another provision, the interest 
allocation provisions, to give another example of how our international 
rules harm U.S. operations. As I said earlier, foreign tax credits can 
only offset foreign income; they cannot offset income from U.S. 
activities. In determining the amount of foreign income, certain U.S. 
expenses, such as interest expense, are partially allocated to foreign 
income. This is used in calculating the amount of foreign tax credit a 
U.S. company is allowed to claim on its return. The United States 
arbitrarily allocates U.S. interest expense to foreign earnings, but 
the foreign government does not recognize that interest expense for its 
tax purposes. It is as if the interest expense somehow disappears into 
the clear air.
  The interest allocation rules artificially reduce the foreign tax 
credits that can be used, and when the credits cannot be used the 
credits expire. It may surprise many Senators to hear that our interest 
allocation rules create a competitive disadvantage for U.S. 
multinationals that try to expand their operations into the United 
States and maybe do not get expanded here.

[[Page 8937]]

  A portion of the interest expense on debt incurred to invest in the 
United States is allocated to foreign source income. A foreign 
corporation making the same U.S. investment is not impacted by these 
interest allocation rules. It gets to fully deduct the interest costs 
within the United States and thereby has a lower cost of capital than a 
U.S. company making that same investment. Therefore, the interest 
allocation rules actually work against U.S. multinational companies 
that invest in the United States. It has put some at a competitive 
disadvantage with foreign companies operating in the United States. I 
hope this is very clear, that this is not the right thing for the U.S. 
Tax Code to do to foreign manufacturers. Why should we encourage 
international competition in the United States against our own domestic 
manufacturer?
  We have Senators demonizing the JOBS bill international provisions. 
This gives me an opportunity to emphasize once again how anything gets 
done in the Senate--only in a bipartisan way. This is a bipartisan 
bill. Democrats and Republicans agree to everything in this bill, and 
the international provisions we agreed to were provisions that actually 
help U.S. job creation and help our own economic growth.
  I ask the Senate to support Senator Baucus and this Senator in this 
bipartisan bill. I hope Members will not buy the distortion. None of 
the international changes caused jobs to go offshore. Just the 
opposite. These were selected to bring the foreign money back for real 
investment in the United States, creating jobs in the United States, 
creating manufacturing jobs in the United States because this is a 
manufacturing bill. These changes level the playing field between the 
United States and foreign companies operating inside the United States. 
They were specifically selected because they tend to help U.S.-based 
manufacturers more than other sectors of our economy.
  The entire JOBS bill is geared towards creating jobs in 
manufacturing--jobs in the United States, not overseas--because 
American manufacturing overseas does not benefit from this bill.
  It is quite simple. These are the only kinds of international 
provisions we could ever get bipartisan agreement on because it is so 
obvious. It is so obvious, it came 19-2 out of our committee. We should 
not allow international rules to remain in place if they harm U.S. 
operation. Once again, we are talking about commonsense international 
tax reform. In fact, if anyone wants to condemn this bill, it is that 
maybe we do not do anything radical in this bill. We just fix problems. 
We fix problems with current law. We fix problems with current law that 
happens to be harming U.S. domestic interests.
  So I ask Members to vote against the amendment of the distinguished 
Senator from South Carolina.
  I yield the floor.
  Mr. HOLLINGS. Mr. President, I yield 8 minutes to the distinguished 
Senator from Florida.
  The PRESIDING OFFICER. The Senator from Florida.
  Mr. GRAHAM of Florida. Mr. President, we are here for two fundamental 
reasons. One, we are here to remove from our Tax Code a provision that 
has been declared illegal by the World Trade Organization, and certain 
industries in America are now being sanctioned for that illegal 
provision.
  We would not be here debating an international tax law change but for 
the fact that the WTO declared illegal our system of encouraging U.S. 
manufacturers to export. I don't think any Member would challenge that 
statement. These international tax changes are totally being carried by 
the need to eliminate this WTO-offending sanctions-creating provision.
  There is a second step we ought to be taking. We ought to remove the 
incentive for U.S. firms to take jobs from the United States overseas. 
There are a lot of incentives that are already out there. There are 
incentives of lower labor costs, lower environmental standards, lower 
standards in terms of human rights. All of those are already in place. 
However, we do not need to be giving a further economic incentive to 
move jobs out of the United States.
  Let me state briefly what I believe we ought to be thinking about as 
we consider this matter. Just a couple of hours ago, as I was walking 
to the Capitol, I ran into a large group of folks. I stopped and asked 
them who they were. They were machinists from Wichita, KS. Do you know 
what they told me? In Wichita, KS, machinists used to be 27,000 strong. 
Do you know how many they have in Wichita today? Only 16,000. Eleven 
thousand jobs have left Wichita from that one union. I asked, where did 
the jobs go? Did they disappear? No longer producing airplanes? No, the 
11,000 jobs are still in place, but they just happen to be in places 
such as China, India, Brazil, and other countries which are now 
building the airplanes that used to be built in Wichita.
  When I told that group of Wichita machinists why, in part, those jobs 
had left Wichita to go offshore, they were stunned. So let me tell the 
Senate what I told the Wichita machinists. We have a fancy provision in 
the international tax law called ``deferral.'' In fact, this Senate 
voted about 20 years ago to repeal this deferral. But that effort 
failed.
  ``Deferral'' basically means the income earned by the foreign 
subsidiary of a U.S. multinational is not subject to tax. They do have 
to pay whatever their local taxes are to China or India, but they do 
not pay any tax to the U.S. Government.
  Do you know what that costs us every year in lost revenue for our 
Government? According to the Treasury Department, it costs us $11 
billion a year. That is the incentive we are giving. That $11 billion, 
incidentally, is about what it would take to do two things we debate a 
lot around here: fully fund the No Child Left Behind law and fully fund 
our veterans program.
  Over the years, this benefit has produced substantial savings to 
American corporations. Let me give you a few examples. Citigroup has 
saved, on an accumulated basis, $6 billion as a result of this 
provision; ExxonMobil, $22 billion; Hewlett-Packard, $14 billion; IBM, 
$18 billion.
  Aside from taking advantage of this extremely generous tax break, 
which creates a positive incentive to move jobs from the United States 
overseas, every one of those firms appears on Lou Dobbs' ``Exporting 
America'' list. Every one of the firms that is getting this tremendous 
benefit is doing what the benefit is designed to do, which is to 
encourage the relocation of jobs outside the United States of America.
  So in light of that, what are we doing in this bill to reduce or 
eliminate the incentive for jobs to leave America? Do you know what we 
are doing? We are increasing it by $3.7 billion per year.
  I respect greatly and consider Senator Grassley to be one of my 
friends who I most respect and admire in the Senate, but I wish he were 
here to answer this question. If this bill does not give greater 
incentives to American firms to leave America and move jobs offshore, 
why does it cost us $3.7 billion? Why are we going to have an 
additional revenue loss of that magnitude other than the fact that we 
are encouraging jobs that would not otherwise have left America to do 
so and, therefore, create more of this deferral tax benefit?
  But it does not end there, as with my friends from Wichita. There is 
a second provision. It has the fancy name ``repatriation.'' What does 
that mean? That means after a company has deferred paying U.S. taxes on 
the $18 or $14 or $22 billion they have accumulated, and they finally 
decide, ``Well, I want to move some of it back to the United States,'' 
for whatever purpose, we are now going to say for 1 year they can do 
that, not at the same tax rate they would have paid had they kept those 
jobs in the United States--which is approximately 35 percent--they are 
going to be able to move that money back to the United States at 5.25 
percent, which is approximately an 85-percent benefit, tax gift over 
what they would have paid had they kept those same jobs at home.
  What is this going to cost us? What is the difference between a 35-
percent and a 5.25-percent tax rate? Well, the cost to the Federal 
Treasury is going to be approximately $16 billion in the year this 
window is opened.

[[Page 8938]]

  Now the proponents of this window are going to say: Oh, this is a 
temporary window. We are going to shut that thing tight after 1 year. 
Friends, I would be willing to make a substantial wager of Florida 
oranges that once this window gets in the tax law, it is going to be 
like all those other tax practices that were supposed to be temporary.
  I say to the Senator, do you remember when the President came down 
here in 2001 and said: ``I want you to pass all these tax benefits, but 
they are only going to be temporary so we can stimulate the economy''? 
Now what is the President's tax plan? To make all those temporary taxes 
permanent.
  What do you think is going to be his tax plan when it gets to be 
2005, if he is still the occupant of 1600 Pennsylvania Avenue? He will 
be down here wanting to make this window a permanently open window.
  I could not imagine, at a time when we are so concerned with the loss 
of jobs, we would pass legislation that would create even additional 
incentives for American jobs to pick up--maybe on aircraft made by 
Americans in Wichita, KS--and fly away to other lands.
  We should support Senator Hollings' amendment. And then we should 
vote no on final passage of this bill.
  The PRESIDING OFFICER. The Senator's time has expired.
  The Senator from South Carolina.
  Mr. HOLLINGS. Mr. President, how much time is remaining on this side?
  The PRESIDING OFFICER. There is 3\1/2\ minutes.
  Mr. HOLLINGS. Mr. President, I yield whatever time I have to the 
distinguished Senator from North Dakota.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. DORGAN. Mr. President, I am going to support the amendment to 
strike this section. I do that because the Senator from South Carolina 
is absolutely right. So is the Senator from Florida. The fact is, there 
are several provisions that incentivize the movement of U.S. jobs 
overseas. At a time when we are trying to create new jobs in this 
country, to say to companies--which, by the way, have moved their jobs 
overseas already--``Repatriate your income to this country now, and we 
will give you a 5.25-percent tax rate,'' how about a 5.25-percent tax 
rate for every American? How about a 5.25-percent tax rate for those 
who live in North Dakota or South Carolina or Florida?
  Why should we provide incentives for companies that want to move 
their jobs overseas? I have talked at length about Huffy bicycles. They 
are gone. They are now made in China. They used to be made in the 
United States. Radio Flyer, the little red wagons, they are gone. They 
used to be made in the United States. Those little red wagons are now 
made in China. The U.S. taxpayers provide an incentive for those 
companies to close their U.S. plants, fire their workers, and move 
their jobs overseas.
  Now this bill comes to the floor of the Senate and says to those 
companies that moved their jobs overseas: We will give you a good deal. 
Repatriate some of that money, and we will lower your tax rate to 5.25 
percent. Well, that sends a signal to everybody that when you decide 
next to move your jobs overseas to access lower labor costs, at some 
point in the future somebody will get behind a closed door and come up 
with this goofy idea that they will reduce your tax rate again--maybe 
to 5.25 percent, maybe to 1.25 percent. How about zero?
  My question is this: If it is good enough for these companies, why is 
a 5.25-percent tax rate not good enough for every American? Why is it 
not good enough for working families?
  But the Senator from South Carolina has it right. We ought not, in 
any circumstance, provide any additional incentive to move more 
American jobs overseas. They are moving overseas to access lower labor 
costs and less restrictions with respect to safe plants and 
environmental restrictions. Why on Earth would we want to give them a 
tax benefit as they leave this country? This makes no sense to me.
  There are some provisions in the international tax section which I 
think are all right. But there are some that are, in my judgment, a 
colossal waste of money and fundamentally the wrong incentive with 
respect to American jobs. Because of that, because of this pernicious 
provision that reduces the tax rate to 5.25 percent for the 
repatriation of earnings for those that have already moved their jobs 
overseas, I am going to support the amendment that is offered by the 
Senator from South Carolina. He is right on track.
  As you know, we had a vote a few days ago on my amendment that would 
have done more than this amendment, essentially. My amendment was 
taking out of existing law the provision that encourages companies to 
move overseas. The Senator from South Carolina supported that. The 
Senator from South Carolina now says they are creating a new piece of 
legislation that, in the long run, will have even more incentive to 
move American jobs overseas. He says: Let's stop that. Let's not do 
that. I agree with him completely. I think the Senator from South 
Carolina does a service to this Chamber by offering this amendment. I 
intend to support his amendment.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from South Carolina.
  Mr. HOLLINGS. Mr. President, I ask for the yeas and nays on the 
amendment.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I say to the Senator, if you do not have 
any more time, then I will yield back my time and we can then vote.
  Mr. HOLLINGS. Good.
  Mr. GRASSLEY. Is that OK?
  Mr. HOLLINGS. Yes.
  Mr. GRASSLEY. Mr. President, I yield back all time on this side.
  The PRESIDING OFFICER. All time has expired.
  The question is on agreeing to amendment No. 3134. The yeas and nays 
have been ordered. The clerk will call the roll.
  The assistant legislative clerk called the roll.
  Mr. McCONNELL. I announce that the Senator from Arizona (Mr. McCain) 
is necessarily absent.
  Mr. REID. I announce that the Senator from North Carolina (Mr. 
Edwards) and the Senator from Massachusetts (Mr. Kerry) are necessarily 
absent.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 23, nays 74, as follows:

                      [Rollcall Vote No. 90 Leg.]

                                YEAS--23

     Akaka
     Byrd
     Clinton
     Conrad
     Dayton
     Dodd
     Dorgan
     Durbin
     Feingold
     Graham (FL)
     Harkin
     Hollings
     Inouye
     Jeffords
     Kennedy
     Kohl
     Leahy
     Levin
     Mikulski
     Reed
     Reid
     Rockefeller
     Sarbanes

                                NAYS--74

     Alexander
     Allard
     Allen
     Baucus
     Bayh
     Bennett
     Biden
     Bingaman
     Bond
     Boxer
     Breaux
     Brownback
     Bunning
     Burns
     Campbell
     Cantwell
     Carper
     Chafee
     Chambliss
     Cochran
     Coleman
     Collins
     Cornyn
     Corzine
     Craig
     Crapo
     Daschle
     DeWine
     Dole
     Domenici
     Ensign
     Enzi
     Feinstein
     Fitzgerald
     Frist
     Graham (SC)
     Grassley
     Gregg
     Hagel
     Hatch
     Hutchison
     Inhofe
     Johnson
     Kyl
     Landrieu
     Lautenberg
     Lieberman
     Lincoln
     Lott
     Lugar
     McConnell
     Miller
     Murkowski
     Murray
     Nelson (FL)
     Nelson (NE)
     Nickles
     Pryor
     Roberts
     Santorum
     Schumer
     Sessions
     Shelby
     Smith
     Snowe
     Specter
     Stabenow
     Stevens
     Sununu
     Talent
     Thomas
     Voinovich
     Warner
     Wyden

                             NOT VOTING--3

     Edwards
     Kerry
     McCain
  The amendment (No. 3134) was rejected.
  Mr. GRASSLEY. Mr. President, I move to reconsider the vote.
  Mr. BAUCUS. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.

[[Page 8939]]

  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, I have a unanimous consent request that 
has been cleared on both sides. I ask unanimous consent the pending Kyl 
amendment be recalled.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRASSLEY. Mr. President, I ask unanimous consent that the Senator 
from Texas, Mrs. Hutchison, have 2 minutes for an amendment that she 
wants to offer.
  The PRESIDING OFFICER. The Senator from Texas.


                           Amendment No. 3138

  Mrs. HUTCHISON. Mr. President, I call up amendment No. 3138 and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Texas [Mrs. Hutchison] for herself, Mr. 
     Smith, and Ms. Landrieu, proposes an amendment numbered 3138.

  Mrs. HUTCHISON. I ask unanimous consent the reading of the amendment 
be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

   (Purpose: To make certain engineering and architectural services 
 eligible for the deduction relating to income attributable to United 
 States production activities and to limit an employer's deduction for 
  entertainment expenses of covered employees to the amount which the 
                      employee includes in income)

       On page 35, between lines 11 and 12, insert the following:

     SEC. 103. DEDUCTION FOR UNITED STATES PRODUCTION ACTIVITIES 
                   INCLUDES INCOME RELATED TO CERTAIN 
                   ARCHITECTURAL AND ENGINEERING SERVICES.

       (a) In General.--Paragraph (1) of section 199(e) (relating 
     to domestic production gross receipts), as added by section 
     102, is amended to read as follows:
       ``(1) In general.--
       ``(A) Receipts from qualifying production property.--The 
     term `domestic production gross receipts' means the gross 
     receipts of the taxpayer which are derived from--
       ``(i) any sale, exchange, or other disposition of, or
       ``(ii) any lease, rental, or license of,

     qualifying production property which was manufactured, 
     produced, grown, or extracted in whole or in significant part 
     by the taxpayer within the United States.
       ``(B) Receipts from certain services.--
       ``(i) In general.--Such term also includes the applicable 
     percentage of gross receipts of the taxpayer which are 
     derived from any engineering or architectural services 
     performed in the United States for construction projects in 
     the United States.
       ``(ii) Applicable percentage.--For purposes of clause (i), 
     the applicable percentage shall be determined under the 
     following table:

``In the case of any taxable year beginniThe applicable percentage is--
  2004, 2005, 2006, 2007, or 2008...............................25 ....

  2009, 2010, 2011, or 2012.....................................50 ....

  2013 or thereafter...........................................100.....

       (b) Limitation of Employer Deduction for Certain 
     Entertainment Expenses With Respect to Covered Employees.--
     Paragraph (2) of section 274(e) (relating to expenses treated 
     as compensation) is amended to read as follows:
       ``(2) Expenses treated as compensation.--Expenses for 
     goods, services, and facilities--
       ``(A) in the case of a covered employee (within the meaning 
     of section 162(m)(3)), to the extent that the expenses do not 
     exceed the amount of the expenses treated by the taxpayer, 
     with respect to the recipient of the entertainment, 
     amusement, or recreation, as compensation to such covered 
     employee on the taxpayer's return of tax under this chapter 
     and as wages to such covered employee for purposes of chapter 
     24 (relating to withholding of income tax at source on 
     wages), and
       ``(B) in the case of any other employee, to the extent that 
     the expenses are treated by the taxpayer, with respect to the 
     recipient of the entertainment, amusement, or recreation, as 
     compensation to such employee on the taxpayer's return of tax 
     under this chapter and as wages to such employee for purposes 
     of chapter 24 (relating to withholding of income tax at 
     source on wages).''.
       (c) Effective Dates.--
       (1) Subsection (a).--The amendment made by subsection (a) 
     shall apply to taxable years ending after the date of the 
     enactment of this Act, and section 15 of the Internal Revenue 
     Code of 1986 shall apply to the amendment made by this 
     subsection as if it were a change in the rate of tax.
       (2) Subsection (b).--The amendment made by subsection (b) 
     shall apply to expenses incurred after the date of the 
     enactment of this Act and before January 1, 2006.

  Mrs. HUTCHISON. Mr. President, this is an amendment that is a matter 
of fairness and equity. It is cosponsored by Senator Landrieu, Senator 
Smith, and myself. It is to put one sector that was in the original 
FSC/ETI coverage back into the bill. It is architects and engineers. We 
know there has been a huge outsourcing of professional jobs overseas. 
This is becoming more common. Our architectural and engineering firms 
are particularly vulnerable to foreign competition. This amendment is a 
pared-down amendment that would give them some of the tax deduction 
back. It is the only sector that was originally covered that is not 
covered in the bill before us.
  My amendment would phase in the coverage over a 10-year period. It is 
offset, so there will be no cost. It is a matter of fairness. We should 
not lose our engineering and architectural jobs in this country. They 
have lost 31 percent of their margins in the last year.
  I hope we will be able to agree to this amendment. It is a matter of 
simple equity. I believe with this phased-in tax deduction we will have 
an incentive to do our designing and engineering in our country, for 
buildings that are in our country. This is not applied to buildings 
built overseas, only buildings built in our country.
  I urge the adoption of the amendment, but if it needs to be set aside 
for further consideration----
  The PRESIDING OFFICER. Is there further debate on the amendment?
  Mr. BAUCUS. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mrs. HUTCHISON. Mr. President, I ask unanimous consent the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Is there objection? Without objection, it is 
so ordered.
  The Senator from Montana.
  Mr. BAUCUS. Mr. President, I ask unanimous consent the amendment by 
the Senator from Texas be temporarily set aside so the Senator from 
Louisiana may offer her amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 3123

   (Purpose: To improve the credit for Ready Reserve-National Guard 
   employees, to provide a credit for replacement employees of Ready 
 Reserve-National Guard employees called to active military duty, and 
                          for other purposes)

  Ms. LANDRIEU. Mr. President, I appreciate the opportunity to speak 
for just a few minutes on a very important amendment to this underlying 
bill, an amendment I offer on behalf of Senator Murray, Senator 
Johnson, Senator Cantwell, Senator Corzine, Senator Kerry, Senator 
Durbin, and Senator Dodd. They offer this amendment with me. It is an 
amendment I understand the chairman and ranking member have looked at 
and both support. In just a moment, I want to ask each of them, if they 
would, to make some comments about this amendment. We have to dispose 
of it one way or the other in the next few minutes. We may not need a 
rollcall vote. I understand their wishes to move through this bill, but 
I am anxious to hear from the chairman and the ranking member about the 
importance of making sure this amendment is carried through the 
process.
  This amendment has to do with the Guard and Reserve and the people 
who employ them stateside. It has to do with our responsibility as a 
government--or our obligation, if you will, our commitment to the 
concept of a total force that relies, now, heavily on our Guard and 
Reserve. This amendment provides some much-needed tax relief to 
patriotic employers who try to help fill the pay gap between what a man 
or a woman might earn when they are stateside at their regular job--and 
then they put on the uniform to defend us and to fight this war that we 
are engaged with today.
  There are maybe 1,000, maybe 2,000, good, compelling stories I could 
share with you about our current situation.

[[Page 8940]]

But let me begin by saying the underlying bill moves around about $120 
billion. The underlying bill doesn't cost the Treasury because we are 
raising some fees and taxes and modifying others.


                           Amendment No. 3123

   (Purpose: To improve the credit for Ready Reserve-National Guard 
   employees, to provide a credit for replacement employees of Ready 
 Reserve-National Guard employees called to active military duty, and 
                          for other purposes)

  Ms. LANDRIEU. Mr. President, I call up amendment No. 3123.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Louisiana [Ms. Landrieu], for herself, 
     Mrs. Murray, Mr. Johnson, Ms. Cantwell, Mr. Corzine, Mr. 
     Kerry, Mr. Durbin, and Mr. Dodd, proposes an amendment 
     numbered 3123.

  Ms. LANDRIEU. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The amendment is printed in today's Record under ``Text of 
Amendments.'')
  Ms. LANDRIEU. Mr. President, the underlying bill moves around about 
$120 billion in tax relief, tax increases, changes in our Tax Code to 
hopefully increase employment opportunities, increase and strengthen 
employment across the board, and strengthen our economy here and 
abroad. That is the intention of the underlying bill.
  This amendment moves around only $2 billion of that $120 billion. 
Every Senator could come here and argue that section A is more 
important than section C or section D. But I can tell you that, to my 
knowledge, this is the only section of $120 billion that deals 
specifically with tax credits for guys and gals who are putting on the 
uniforms, who are not working for the pay but are working because of 
their patriotism, and working in some of the most horrific and very 
difficult situations. The least we can do while we are debating a tax 
bill is to provide some much needed relief.
  I could give you 2,000 stories. Because time is short, let me give 
you 2.
  This is a family from Louisiana. It is the subject of an article. 
There were hundreds of articles written. This one happens to be from 
the Washington Post. Kathy Kiely did a beautiful job of writing this 
article. She starts off:

       Drastic pay cuts. Bankruptcy. Foreclosed homes. They aren't 
     exactly the kind of challenges that members of America's 
     military reserves sign up for when they volunteered to serve 
     their country.
       But for many, the biggest threat to the home front isn't 
     Saddam Hussein or Osama bin Laden. It's the bill collector.

  Janet Wright is from Louisiana.
  Kathy Kiely writes:

       Janet Wright says she ``sat down and cried'' when she 
     realized how little money she and her children, Adelia, 5, 
     and Carolyn, 2, would have to live on when her husband was 
     sent to the Mideast. In his civilian job with an 
     environmental cleanup company, Russell Wright makes $60,000 a 
     year--twice what he'll be paid as a sergeant in the Marine 
     Forces Reserve. Back in Hammond, LA, his wife, who doesn't 
     have a paying job, is pouring the kids more water and less 
     milk. She is trying to accelerate Carolyn's potty training 
     schedule to save on diapers.

  Let me ask: Could we do a little better for our Guard and Reserve 
members who have to take a cut in pay to serve in the military for us? 
They knew the responsibilities when they signed on to the Guard and 
Reserve. They understood their commitment to training. They understood 
their commitment to their monthly responsibilities. And, yes, they 
understood it wasn't going to be a ``paid vacation,'' but because our 
policy in Congress is relying on their work and relying on them for 
longer periods of time than either they or, I might add, at least 
according to the generals who have testified before the Armed Services 
Committee, we anticipated, the least we could do in a tax bill is to 
give them some minimal relief.
  This amendment helps families just like the Wright family in Hammond, 
LA, by allowing the employer to pay the difference between the $30,000 
that this Marine Reserve officer will earn when he is serving our 
country and putting himself in harm's way, and if they pay that gap up 
to $30,000--it is not mandatory; it is voluntary. Many of our 
companies, but not all, are doing it for obvious reasons. There is a 
strain particularly on small businesses. But for those employers that--
and I note Boeing is a good example of a very large employer with a 
wonderful policy, and much better, I might add, than our own Government 
which today has refused to adopt this policy. But at least there are 
some employers out there that are doing more than hanging the flag and 
saying the Pledge of Allegiance. They are actually taking out their 
checkbook in a very patriotic manner and keeping their Guard and 
Reserve families whole. The least we could do is give them a 50-percent 
tax credit, which is what our amendment does.
  Let me read another example. I have 2,000; I am only going to read 2.
  This is a firefighter from the Pacific coast. He earned a decent 
living before being called up in 2002, but active duty meant a $700 or 
a $1,000 a month pay cut and some very painful choices. He said:

       My wife said ``We cannot live here anymore. It is too 
     expensive.''

  He said he rented a 12,100 square foot home. He moved the whole 
family into a two-bedroom apartment where his wife has to sleep on a 
couch.
  I understand we all have to make sacrifices. Most certainly the men 
and women who sign up for our All-Volunteer Force don't sign up because 
they think they are going on vacation or for the pay or the benefits. 
They sign up because they are patriotic. They believe in the ideals of 
this country.
  When we are passing a $120 billion bill, if we can't take $2 billion 
or $3 billion or $4 billion and support the hundreds of thousands of 
men and women who are away from their jobs stateside and away from 
their businesses--not 3 months, not 12 months but 18 months under very 
tough conditions--so their children don't have to drink more water in 
their cereal in the morning and the wives have to sleep on couches, I 
think we can do better.
  That is why I have waited for several months actually to offer this 
amendment and to have support from both sides of the aisle.
  There is a cap on the credit. So the cost is very reasonable. We have 
taken the necessary precautions to make sure this amendment is 
affordable.
  According to DOD, 98 percent of the reservists have a pay gap. 
Sometimes it is only $1,000 a month. Sometimes it could be $500 a 
month. But in some cases it is more than that. But 98 percent have pay 
gaps under $30,000.
  This amendment will cover almost the entire Guard and Reserve 
population. Our Guard and Reserve on deployment would not have to worry 
about their bills being paid and could focus on the job before them, 
and do it well, as the vast majority of them do day in and day out, 
night in and night out.
  That basically is what amendment does.
  There is also a replacement worker tax credit for small businesses, 
many of which would be affected in the State of the Presiding Officer, 
with 50 employees or less. It is not just helping to fill the pay gap 
for employers that continue to pay the salaries, but it also gives some 
help to small business owners that in many instances take the brunt 
from their service, particularly when it is extended.
  I will end my remarks. I see some of my colleagues on the floor who 
may want to add some comments.
  This affects thousands of people in all of our States. I am proud our 
Guard and Reserve are right there stepping up on the front lines.
  We have an outstanding Guard and Reserve unit. In about a month, we 
will have over 5,000, almost 6,000, men and women serving in Iraq; 
again, some of them for much longer periods of time than they were 
initially told.
  I understand the chairman is prepared to accept the amendment. But 
before I waive my right to a recorded vote, I would like to have some 
comments from the chairman, who has negotiated this bill beautifully 
through this process. If he could, I would like for him to comment 
about the importance of this amendment and the outlook for keeping this 
amendment in

[[Page 8941]]

the conference report as we move this bill to the President's desk for 
his signature.
  The PRESIDING OFFICER (Mrs. Dole). The Senator from Iowa.
  Mr. GRASSLEY. Madam President, I can comment very positively about 
the motivation behind the amendment, and the good policy of giving 
equity to people who are called away from jobs and away from family to 
go to a far-off land to defend America in a war against terrorism and 
doing it in a way that has never been done for guardsmen and reservists 
to this extent, I think going back to the Korean war. What we are doing 
now has not been done for a long period of time.
  The Senator from Louisiana needs to be complimented on her efforts to 
recognize that and, particularly, to recognize that through employers 
who show very patriotic fervor in cooperating in this whole program.
  I can say that very positively about the amendment of the Senator 
from Louisiana. She is asking me to predict what might happen in 
conference. It is very difficult to do that. I have a reputation for 
defending the position of the Senate and working as best I can to work 
through this. Obviously, I cannot make any promises to the Senator from 
Louisiana.
  Ms. LANDRIEU. I can appreciate that. I appreciate the comments of the 
chairman. He has shown himself to be a great leader, a man of his word. 
I know he will uphold and fight for our position.
  I think it would be a real shame to move a $120 billion tax bill 
through this Congress at this time and have not a part of it 
specifically directed to some of the men and women who are carrying the 
greatest burden right now.
  I know our businesspeople of all sizes and shapes are contributing to 
the overall economy and creating jobs, but there would not be any 
country to create jobs for if it were not for the men and women in 
uniform who protect us here and abroad.
  I appreciate the remarks of the chairman.
  I ask unanimous consent to have printed in the Record three articles 
involving enlisted reservists of the National Guard, and a letter from 
the National Guard Association that represents thousands of current and 
retired guardsmen and reservists.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                        National Guard Association


                                         of The United States,

                                     Washington, DC, May 10, 2004.
     Hon. Mary Landrieu,
     U.S. Senator, Hart Senate Office Building, Washington, DC.
       Dear Senator Landrieu: On behalf of the membership of the 
     National Guard Association of the United States (NGAUS), 
     thank you for your unwavering support of the men and women of 
     the National Guard. Today, there are more than 94,000 
     National Guard personnel serving on active duty in support of 
     the global war on terrorism. These men and women, who are 
     serving in harm's way, contribute over 40% of our fighting 
     force in the Global War on Terrorism. This number also 
     reflects those personnel serving abroad and away from their 
     families, communities, and employers.
       Members of the National Guard must take time off from their 
     civilian employment to perform military duties. Increased 
     operational tempo dictates that National Guard and Reserve 
     Component members must be placed on active duty ever more 
     frequently. This increased operational tempo places 
     additional financial burdens on employers, to a much greater 
     extent than in past years. We at NGAUS believe employers 
     should not be expected to bear the increased financial 
     burdens that increased Guard deployments place on them.
       Assisting employers with a tax credit provides them the 
     ability to inject those funds back into their businesses in 
     order to offset the effects of the temporary loss of their 
     National Guard employees.
       The National Guard Association of the United States urges 
     the Members of the United States Senate to support your 
     efforts to recognize the civic duty of those employers who, 
     in the face of financial constraint, continue to support 
     their National Guard employees.
           Sincerely,

                                         Richard C. Alexander,

                                        Major General (Ret.), AUS,
     President.
                                  ____


            [From the San Mateo County Times, Dec. 18, 2003]

    War Carries a Hidden Cost; Reservists' ``Pay Gap'' Often Forces 
                     Difficult Choices on Families

                          (By Justin Jouvenal)

       Pacifica.--Scott Hellesto endured snipers and artillery 
     fire, but one of the most difficult battles during the Navy 
     reservist's service in Iraq came on the homefront--losing his 
     three-bedroom home.
       The Pacifica firefighter had earned a decent living before 
     being called up in January 2002, but active duty meant a 
     $700- to $1,000-a-month pay cut--and some painful choices. 
     ``My wife said, `We can't live here anymore, it's too 
     expensive,''' Hellesto said of his rented 2,100-square-foot 
     home in Antioch. ``So we moved the whole family into a two-
     bedroom apartment, where my wife had to sleep on the couch.''
       This ``pay gap'' is a hidden cost of war that likely 
     affects thousands of the state's reservists and National 
     Guard troops as they transition from more lucrative civilian 
     jobs to active duty. It is an extra burden for families 
     already dealing with the pain of separation and the stress of 
     having a loved one in a combat zone.
       ``There's fewer Christmas gifts and other cuts,'' said Lt. 
     Col. Terry Knight, a California National Guard spokesman. 
     ``Often you have a spouse left behind that ends up getting a 
     second job.''
       The pay gap has become especially difficult for reservists 
     and National Guard troops since the 2001 terrorist attacks, 
     as more are serving and many are going for longer stints on 
     active duty.
       About 10,000 California National Guard troops have been 
     deployed since 9/11--the largest mobilization since the 
     Korean War. About 4,000 are currently on active duty, 
     including 1,600 in Iraq. They earn between $1,700 and $2,800 
     a month.
       Hellesto, who served with the 23rd Marines Echo Company, 
     swept into Iraq with the first wave of troops last March. He 
     made it to Nasariyah and helped secure a Baghdad neighborhood 
     on April 9, the day the statue of Saddam Hussein fell in 
     Iraq's capital.
       ``I saw the best and the worst of humanity,'' Hellesto 
     said.
       He ran missions as a decoy to draw out Saddam's Fedayeen 
     soldiers and withstood SCUD missile alerts. Hellesto also 
     recalls with warmth the Iraqi soccer star who gave him his 
     gold medal from the Asian Games because Hellesto cared for 
     the man's son.
       Hellesto said he doesn't want people to think he is bitter 
     about his service--he said he knew what he was getting into 
     and would do it again. Still, the financial strain was 
     difficult.
       He said he could hear the edge in his wife Michelle's voice 
     when he would secretly call home on a satellite phone 
     supplied by a Fox News reporter.
       ``Sometimes, I wondered what I got my family into,'' 
     Hellesto said.
       Hellesto was able to get by with a little help from his 
     friends and family. He turned to fellow firefighters for help 
     when he was buying Christmas gifts for his three children 
     last year.
       The apartment--he dubbed it the ``shoebox''--was in a rough 
     neighborhood, and someone slashed the tires and broke a 
     window on his truck last spring. Fortunately, a friend of 
     Hellesto's was able to pay to fix up the truck.
       Scott Hellesto was called to active duty in January 2002. 
     He served at Camp Pendleton outside San Diego for a year, 
     before his tour of duty was extended and he was sent to Iraq.
       Like many companies and local governments, the city of 
     Pacifica kept up Hellesto's regular salary and health 
     benefits for the first five months he was on active duty, but 
     after that, he was on his own.
       Michelle Hellesto had to go on the Navy's health plan, 
     which meant giving up the family doctors. She also had to get 
     government assistance to pay for formula for her children.
       ``It put a strain on us; it was like supporting two 
     households when he was done at Camp Pendleton,'' she said. 
     ``We couldn't have done it without the help of friends and 
     family.''
       Hellesto estimated that about 30 to 40 percent of the 
     reserves he served with were in the same financial bind, but 
     the pay gap does not affect every soldier. Many earn more on 
     active duty than they do in their civilian jobs.
       The National Guard Association estimates about a third of 
     the Guard earn less on active duty than in their civilian 
     jobs, while another third earn more.
       Congressman Tom Lantos, D-San Mateo, introduced a bill in 
     March that would close the gap for some troops. Specifically, 
     the bill would entitle a reservist who is also a federal 
     employee and on active duty for more than 30 days to receive 
     the difference between his military and civilian pay.
       The bill also would give state and local governments strong 
     incentives to make up the pay and give private companies tax 
     breaks if they continue to pay employees while they are on 
     active duty.
       The bill is currently before the House Subcommittee on 
     Civil Service and Agency Organization. The U.S. Senate passed 
     a pay-gap provision for federal employees, but it was cut out 
     of the final version of a supplemental appropriations bill.
       ``It is a heavy enough sacrifice to pick up and go to 
     Iraq,'' Lantos said. ``There is no reason to have a financial 
     hardship as well.''

[[Page 8942]]

       Fortunately for Hellesto, his financial burden has eased. 
     After returning home in July, he was able to work overtime to 
     get his family's finances back on track. He recently bought a 
     home in Antioch and has a fourth child on the way.
       But he knows things could change quickly again.
       ``If they asked me to go back today, I would do it,'' 
     Hellesto said. ``But if I didn't get my per diem allowance, I 
     would have to sell my house.''
                                  ____


   [From the Silicon Valley/San Jose Business Journal, Apr. 26, 2004]

        He Helped Rebuild Iraq, Now He Must Rebuild His Business

                          (By Timothy Roberts)

       When Army Reservist Michael Malone left his new bride and 
     his home in San Jose for Iraq 16 months ago, his computer 
     business had seven employees and an office on Taylor Street. 
     Today the employees of Star Technologies are gone, and his 
     business partner and he have the furniture from their vacated 
     office stacked in their garages.
       He's still in business, but struggling.
       ``The world came crashing down,'' says Mr. Malone, ``and he 
     (partner Erik Johnson) had to try to hold it up like Atlas.''
       Says Mr. Johnson: ``First we had the tech bust, then the 
     impact from 9/11 and then Mike got call up. That was a whole 
     lot of blows one right after the other''.
       Reservists know they may be called to action at any time, 
     but with military resources stretched thin in Iraq and 
     Afghanistan, the Pentagon is increasingly relying on the 
     reserves to make up for shortages in the regular, volunteer 
     forces. The 34-year-old Mr. Malone, who has served in the 
     reserves for 16 years and holds the rank of captain, 
     anticipated a short-term assignment.
       ``It's one of the challenges of being a small-business 
     owner,'' he said of his Army Reserve commitment. ``You plan 
     for it--just not for 16 months.''
       Naval Reservist Frank Jewett, a small business consultant 
     with Compass Consulting Group in San Jose, is expecting to 
     head overseas for training soon, but wonders if he won't also 
     be deployed for something more than training.
       ``You have to have a plan,'' says Mr. Jewett, who is also 
     the vice president of the Board of Trustees of West Valley-
     Mission College. ``You need to talk with your employer and 
     make sure they will support you.''
       Some companies in the Valley have recently expanded their 
     support of reservists. Up until the war on terrorism, Intel 
     offered full salary to reservists for 30 days a year. Now it 
     offers 180 days a year of full pay. It also has expanded 
     child care benefits, says spokesman Mark Pettinger.
       But the challenge to small businesses became apparent in 
     the late 1990s, when the military began to tap the reserves 
     for troop commitments in the Balkans. In 1999, Congress 
     created the Military Reservists Economic Injury Disaster Loan 
     to be offered by the U.S. Small Business Administration. 
     Business owners with essential employees returning from 
     active duty have 90 days from the reservist's discharge to 
     apply for up to $1.5 million offered at what is now 2.7 
     percent interest.
       The first loans were made in Aaugust 2001. When reserve 
     units were called up for the war in Afghanistan, the loan 
     program was expanded to include reservists from that and 
     subsequent wars.
       Since then the SBA has made $114.5 million in such loans, 
     although according to the SBA's Western District office only 
     $1.2 million in loans has been made to Californians. Only 11 
     loans have been issued to small businesses with California 
     addresses. The only address close to Silicon Valley is in 
     Watsonville.
       ``We've had this program since 2001, and frankly that's not 
     a whole lot of loans for three years,'' says SBA spokesman 
     Karl Whittington in the Sacramento office, which handles 
     disaster loans for the Western states.
       Mr. Malone went to the University of Washington to earn a 
     degree in mathematics on a ROTC scholarship. He was committed 
     to at least eight years of reserve service. Liking the 
     camaraderie of what he describes as the ``entrepreneurs and 
     go-getters'' among the troops, he stayed in for twice that 
     long. He serves in the 1397 Terminal Transport Brigade, which 
     is based in Mare Island, although he was assigned to the 368 
     Engineer Battalion, based in Londenderry, N.H., in Iraq.
       Mr. Malone started Star Technologies in 1995 with Mr. 
     Johnson. They began with tech support and later expanded to 
     include Web hosting, a move that helped give them a steady 
     source of revenue. In 2000, a client came to them and asked 
     them to solve a problem: keeping track of real estate 
     appraisals. With that inquiry, Star Technologies launched 
     into software development and created eAppraisal Flow.
       Today, however, Mr. Malone is focused on just getting word 
     out that Star Technology is still around and looking for 
     customers. He just joined the San Jose Silicon Valley Chamber 
     of Commerce and has been making visits to small businesses to 
     offer his Web hosting and tech support services.
       ``You have to talk to people,'' he says. ``That's how you 
     get business.''
       In his spare time he's giving thought to designing a 
     battle-ready lap-top computer that would allow officers to 
     connect to secure and standard networks at the same time and 
     provide position data with map overlays.
       He still likes the Army, although with a new wife and three 
     children from a previous marriage and a business to rebuild, 
     he's not eager for any more overseas assignments.
       ``If Uncle Sam calls again, I'll go,'' says Capt. Malone. 
     ``But it would be the last time--if it's any time soon--
     because I have to rebuild my business.''
                                  ____


                    [From USA Today, Apr. 22, 2003]

                     Reservists Under Economic Fire

                            (By Kathy Kiely)

       Washington.--Drastic pay cuts. Bankruptcy. Foreclosed 
     homes. They aren't exactly the kind of challenges that 
     members of America's military reserves signed up for when 
     they volunteered to serve their country.
       But for many, the biggest threat to the home front isn't 
     Saddam Hussein or Osama bin Laden. It's the bill collector.
       Four in 10 members of the National Guard or reserves lose 
     money when they leave their civilian jobs for active duty, 
     according to a Pentagon survey taken in 2000. Of 1.2 million 
     members, 223,000 are on active duty around the world.
       Concern is growing in Congress, and several lawmakers in 
     both parties have introduced legislation to ease the 
     families' burden.
       Janet Wright says she ``sat down and cried'' when she 
     realized how little money she and her children, Adelia, 5, 
     and Carolyn, 2, would have to live on when her husband was 
     sent to the Middle East. In his civilian job with an 
     environmental cleanup company, Russell Wright makes $60,000 a 
     year--twice what he'll be paid as a sergeant in the Marine 
     Forces Reserve. Back in Hammond, LA, his wife, who doesn't 
     have a paying job, is pouring the kids more water and less 
     milk. She is trying to accelerate Carolyn's potty training 
     schedule to save on diapers.
       She doesn't know how long she'll have to pinch pennies. 
     Like his fellow reservists, Russell Wright has been called up 
     for one year. he could be sent home sooner, or the military 
     could exercise its option to extend his tour of duty for a 
     second year. Even so, Janet Wright considers her family 
     lucky: She can still pay the mortgage, and the children's 
     pediatrician accepts Tricare, the military health plan.
       Ray Korizon, a 23-year veteran with the Air Force Reserve 
     and an employee of the Federal Aviation Administration, says 
     his income will also be cut in half if his unit ships out. 
     Korizon, who lives in Schaumburg, IL, knows the financial 
     costs of doing his patriotic duty from bitter experience. 
     Before the Persian Gulf War in 1991, he owned a Chicago 
     construction company with 26 employees. He was sent overseas 
     for six months and lost the business.
       Still, he never considered leaving the reserve. Korizon 
     says he enjoys the work and the camaraderie. But he worries 
     about whether his two kids can continue to see the same 
     doctor when he shifts to military health coverage. ``It's 
     hard to go out and do the job you want to do when you're 
     worried about things back home,'' he says.
       Once regarded as ``weekend warriors,'' they have become an 
     integral part of U.S. battle plans. Call-ups have been longer 
     and more frequent.
       ``The last time you'd see this type of mobilization 
     activity was during World War II,'' says Maj. Charles Kohler 
     of the Maryland National Guard. Of the Maryland Guard's 8,000 
     members, 3,500 are on active duty. Kohler knows several who 
     are in serious financial trouble. One had to file for 
     bankruptcy after a yearlong deployment, during which his 
     take-home pay fell by two-thirds.
       Stories like that are the result of a shift in military 
     policy. Since the end of the Cold War, the ranks of the full-
     time military have been reduced by one-third. The Pentagon 
     has increasingly relied on the nation's part-time soldiers. 
     More than 525,000 members of the Guard and reserves have been 
     mobilized in the 12 years since the Persian Gulf War. For the 
     previous 36 years, the figure was 199,877.
       The end of fighting in Iraq isn't likely to lessen the 
     pressure on the Guard and reserves. They'll stay on with the 
     regular military in a peacekeeping role. Nobody knows how 
     long, but in Bosnia, Guard members and reservists are on duty 
     seven years after the mission began.
       Korizon, who maintains avionics systems on C-130 cargo 
     planes, has been told his Milwaukee-based reserve unit may be 
     called up for humanitarian missions.
       Some of the specialists who are in the greatest demand--
     physicians and experts in biological and chemical agents--
     command six-figure salaries in civilian life. The average pay 
     for a midlevel officer is $50,000 to $55,000.
       ``They were prepared to be called up. They were prepared to 
     serve their country,'' Sen. Barbara Mikulski, D-Md., says. 
     ``They were not prepared to be part of a regular force and be 
     away from home 200 to 300 days a year.''
       Concerns are growing on Capitol Hill. As the nation's 
     reliance on the Guard and reserves has increased, ``funding 
     for training

[[Page 8943]]

     and benefits simply have not kept up,'' says Republican Sen. 
     Saxby Chambliss of Georgia, a member of the Armed Services 
     Committee.
       The General Accounting Office, Congress' auditing arm, is 
     studying pay and benefits for Guard members and reservists. A 
     report is due in September. Meanwhile, members of Congress 
     are pushing several bills to ease the burden:
       Closing the pay gap. Some employers make up the difference 
     in salary for reservists on active duty. But many, including 
     the federal government do not. A bill sponsored by Democratic 
     Sens. Mikulski, Dick Durbin of Illinois and Mary Landrieu of 
     Louisiana would require the federal government to make up 
     lost pay. Landrieu is doing that for one legislative aide who 
     has been called up for active duty.
       She has also introduced a bill to give private employers a 
     50% tax credit if they subsidize reservists' salaries.
       Closing the health gap. Once on active duty, reservists, 
     Guard members and their families are covered by Tricare.
       But for the 75% of reserve and guard families living more 
     than 50 miles from military treatment facilities, finding 
     physicians who participate in Tricare can be difficult.
       A measure sponsored by Sen. Mike DeWine, a Republican from 
     Ohio, would give reservists and Guard members the option of 
     making Tricare their regular insurer or having the federal 
     government pay premiums for their civilian health insurance 
     while they are on active duty. Several senior Democrats, 
     including Senate Minority Leader Tom Daschle of South Dakota 
     and Sen. Edward Kennedy of Massachusetts, support the idea.
       Keeping creditors at bay. The Soldiers and Sailors Relief 
     Act caps interest rates on mortgages, car payments and other 
     debts owed by military personnel at 6% while they are on 
     active duty. But Sen. Lindsey Graham, a South Carolina 
     Republican who is the Senate's only reservist, says the act 
     doesn't apply to debts that are held in the name of a spouse 
     who is not a member of the military. He plans to introduce 
     legislation to cover spouses.
       Despite a groundswell of support for troops, none of the 
     bills is assured of passage. There's concern among some 
     administration officials about the cost of some of the 
     proposals. In addition, some at the Pentagon think morale 
     would be hurt if some reservists end up with higher incomes 
     than their counterparts in the regular ranks.

  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Madam President, I compliment the Senator from Louisiana. 
This is a very important amendment. The reservists clearly, 
particularly under the current circumstances, deserve at least the 
provision suggested by the Senator from Louisiana. The Senator can be 
assured this Senator will fight vigorously for her amendment in 
conference. It is a very important amendment.
  Madam President, I believe there is no more debate on this amendment.
  The PRESIDING OFFICER. Do the parties yield back all time?
  Mr. BAUCUS. All time is yielded back.
  (At the request of Mr. Daschle, the following statement was ordered 
to be printed in the Record.
   Mr. KERRY. Mr. President, the continuing activation of 
military reservists to serve in Iraq and the war on terror has imposed 
a tremendous burden on many of our country's businesses, especially our 
small businesses. Too many small businesses, when their employees are 
asked to leave their jobs and serve the Nation, are unable to continue 
operating successfully and face severe financial difficulties, even 
bankruptcy. That is why I am pleased to join Senator Landrieu to 
provide all American businesses with a tax credit to help them continue 
to pay their employees who are called to active duty and to help small 
businesses temporarily replace reservists who are called up.
  This amendment expands upon the Small Business Military Reservist Tax 
Credit Act that I introduced last year which provides help to small 
businesses in paying the difference in salary for their reservist 
employees called up to active duty. My legislation, S. 1595, also 
provided a tax credit to help small businesses cover the cost of 
temporarily replacing that employee while he or she is serving our 
Nation.
  I worked with Senator Landrieu to develop this amendment which honors 
all patriotic employers who continue to pay the salaries of their 
employees who are members of the National Guard and Reserve and are 
called up to active duty in the war on terror in Afghanistan, Iraq and 
elsewhere. I believe this amendment will encourage all employers, 
especially small businesses, to pay their reservist employees when they 
face a reduction in salary due to their activation. Employers who 
continue to pay their reservists will be eligible to receive a tax 
credit up to $15,000 of the wages they pay to members of the Guard and 
Reserve for as long as the reservist is on active duty status. The JOBS 
Act, which we seek to amend, only provides a tax credit for reservists 
on active duty status for 1 year and does not provide any assistance 
for small businesses to help temporarily replace their reservists. I 
believe this approach is insufficient and that our amendment is needed 
to help reservists for each day of their service to our Nation and to 
provide important assistance to small businesses.
  I am very pleased that Senator Landrieu has included provision of my 
bill to help small businesses cover the cost of temporarily replacing 
the reservist employee while he or she is serving our Nation. Today, 
many small employers are currently having a difficult time hiring 
temporary workers to replace their employees who have been called up to 
active duty in the national Guard or Reserve. The United Sates Chamber 
of Commerce estimates that 70 percent of military reservists called to 
active duty work in small- or medium-size companies. The Landrieu-Kerry 
amendment will provide a tax credit of 50 percent up to $6,000 to help 
small employers defray the costs of hiring a worker to replace a 
guardsman or reservist who has been called up to active duty. Small 
manufacturers will be eligible for a tax credit of 50 percent up to 
$10,000 to assist in hiring a temporary worker.
  To fight our wars and meet our military responsibilities, the United 
States supplements its regular, standing military with reservists, 
citizen soldiers who serve nobly. Not since World War II have so many 
National Guard members been called to serve abroad. President Bush 
authorized the activation of up to 1 million military reservists for up 
to 2 years of active duty. Today, there are about 170,000 reserves on 
active duty in the war against terrorism--nearly half of the more than 
350,000 called to duty since the attacks of September 11, 2001. Many 
are serving admirably around the world, performing critical wartime 
functions in Iraq, Afghanistan, and elsewhere. Our Nation does not go 
into battle without members of the National Guard and Reserve, and we 
are all grateful for their service.
  Just this week, the Bush administration authorized the activation of 
an additional 47,000 reservists. The extension will cause significant 
economic difficulties for the reservists, their families and their 
employers that are left behind. Beyond the hardship of leaving their 
families, their homes and their regular employment, more than 41 
percent of military reservists and National Guard members face a pay 
cut when they are called for active duty in our Armed Forces. Many if 
these reservists have families who depend upon that paycheck to survive 
and can least afford a substantial reduction in pay.
  The large number of reservists being called up to active duty has 
hurt many small businesses across the Nation and may impact the number 
who are willing to re-enlist in the National Guard and Reserve in the 
future. In January, the Commission of the Army Reserve, Lt. General 
James R. Helmly, warned of a recruiting-retention crisis in the future 
for the National Guard and Reserve. A recent U.S. military 
questionnaire of returning Army National Guard soldiers projected a 
resignation rate of double what it was back in November 2001. From 
October to December 2003, almost one-quarter of the Guard members who 
have had the opportunity to re-enlist have opted not to do so. 
Recently, the U.S. Army developed a plan to pay reservists up to 
$10,000 to re-enlist to stop a developing problem.
  That is why the Federal Government must take action to help 
businesses weather the loss of an employee to active duty and protect 
employees and their families from suffering a pay cut to serve our 
Nation. It is imperative that we help families of reservists

[[Page 8944]]

maintain their standard of living while their loved one serves our 
Nation. We must also ensure that the cost of that service does not 
force businesses into financial ruin. We must ensure that our great 
tradition of citizen soldiers does not fade or cease because of the 
effect that service has on work and family. The Landrieu-Kerry 
amendment will help achieve their important goals and I urge my 
colleagues to vote in favor of this amendment.
  Mr. McCAIN. Mr. President, we continue to be increasingly reliant on 
the men and women of our Reserve forces and National Guard. In fact, 40 
percent of all the ground troops in Iraq and Afghanistan are composed 
of National Guard and Reserve forces as well as nearly all of the 
ground forces in Kosovo, Bosnia, and the Sinai. Many of these soldiers, 
sailors, airmen, and marines leave behind friends, families, and 
careers to defend our Nation. Accordingly, it is the responsibility of 
policy makers to ensure we look after the needs of our patriots.
  Many reservists that are called to active duty end up making less 
money with the military than they did in their civilian job. This drop 
in pay has placed a hardship on many of the men and women serving in 
the Reserve components who are called to active duty. When the military 
calls reservists and guardsmen to active duty, the last thing our 
Nation wants is to hurt the reservist's families as a result. This 
amendment is designed to address this problem by allowing private 
companies to pay the difference between the servicemember's Reserve pay 
and his civilian pay. If the employer chooses to pay this benefit, the 
Federal Government will give the company a tax credit of 50 percent of 
the difference in pay, up to $3,000.
  Our Nation's reservists and guardsmen are an amazing resource of 
experience, knowledge and dedication. If we are going to continue to 
rely on our citizen soldiers, we must make sure that they receive their 
fair share of benefits and that their families are provided for in 
their absence. I will always support responsible legislation that 
accomplishes this important goal.
  The PRESIDING OFFICER. The question is on agreeing to the Landrieu 
amendment.
  The amendment (No. 3123) was agreed to.


                           Amendment No. 3138

  Mr. BAUCUS. I call for regular order with regard to the Hutchison 
amendment.
  The PRESIDING OFFICER. That is the regular order. Is there further 
debate on the amendment?
  Mr. BAUCUS. I believe there is no further debate.
  The PRESIDING OFFICER. The question is on agreeing to the Hutchison 
amendment.
  The amendment (No. 3138) was agreed to.
  Mr. GRASSLEY. I ask unanimous consent Senators Hatch and Pryor be 
added as cosponsors to the Hutchison amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. BAUCUS. Madam President, I move to reconsider the vote on the 
previous two amendments en bloc.
  Mr. GRASSLEY. I move to lay the motions on the table en bloc.
  The motions to lay on the table en bloc were agreed to.
  Mr. GRASSLEY. I promised the Senator from South Carolina we would 
have a little colloquy on an issue he was concerned about. Could we do 
that right now?
  Mr. NICKLES. Sure.
  Mr. GRASSLEY. I ask the Senator from South Carolina be recognized.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRAHAM of South Carolina. I thank Senator Grassley.


                            chinese currency

  I rise today to express my deep concern about the Chinese 
government's continued manipulation of its currency. In my mind, the 
Chinese government's adherence to a currency valuation system that does 
not rest on market-based principles is wrong and constitutes an unfair 
competitive advantage. It is time for the unfair valuation of the yuan 
to stop. I understand the administration has taken steps to address the 
problem and some progress has been made. But this is a serious problem. 
Clearly more needs to be done.
  Mr. GRASSLEY. As Chairman of the Senate Finance Committee, I join my 
colleague from South Carolina in expressing concern about the way in 
which the Chinese currency is valued. I certainly agree that it is a 
serious problem that needs to be taken seriously. A fairly valued 
currency is in China's own long-term interests, and is key for moving 
to a market driven economy. I was pleased to hear that Secretary Snow 
was assured that interim steps are being taken and that progress in 
this area will continue.
  Mr. GRAHAM. I appreciate the fact that the Chairman recognizes the 
serious nature of this problem. Unfair manipulation of currency cannot 
be tolerated. I would like to see additional progress on this issue in 
the next 60 to 90 days. If progress is not forthcoming, I hope the 
Chairman would join me in supporting Senate hearings. However, these 
hearings should only be the first step. Should China fail to make 
substantial progress and the Senate fail to address this issue 
substantively, appropriate and responsible legislation may then be 
necessary, and I reserve the right to attach our China currency 
amendment to any available legislation that comes before the Senate.
  Mr. GRASSLEY. I do appreciate the importance of this issue. If we do 
not see substantial progress toward adoption of a market-based currency 
valuation system, I would support Senate hearings at the appropriate 
time.
  Mr. GRAHAM. I thank the Senator from Iowa, and look forward to 
working with him to continue to pressure the Chinese government to 
adopt a market-based currency valuation system.


                               section 29

  Mr. SANTORUM. Mr. President, my amendment, cosponsored by Senators 
Voinovich and DeWine, extends the Section 29 credit to new coke 
facilities to encourage the construction of new facilities. This 
provision is important because the U.S. currently produces below the 
domestic demand for coke, and the situation will likely worsen in the 
future. Much of the country's coke capacity is over 20 years old, and 
most existing ovens are near the end of their useful lives. I 
understand that the Finance Committee chairman, Senator Grassley, 
prefers to address this issue during conference and not at this time. I 
thank the chairman for his commitment to this provision and urge his 
strong support for extending the Section 29 credit to new coke 
facilities in conference.
  Mr. GRASSLEY. Mr. President, I would like to thank the Senator from 
Pennsylvania for his commitment to the Section 29 extension to new coke 
facilities. Although I am supportive of the provision, the most 
appropriate time to address it is during the conference. I look forward 
to working with Senator Santorum and the two Senators from Ohio to 
include this amendment in the conference report.


                                privacy

  Mr. BAUCUS. Mr. President, my colleague from New York and my 
colleague from Minnesota have filed a noteworthy amendment to the 
Jumpstart Our Business Strength Act, S. 1637. The amendment raises the 
very important issue of how in this global economy we can protect the 
privacy of personally identifiable information that is transmitted 
abroad. Senator Clinton and her staff have worked diligently with me 
and my staff to find a way for the Senate to address these issues. The 
amendment raises significant issues that I believe will benefit from 
being made part of any appropriate hearing this session in the Finance 
Committee. They have graciously recognized the importance of moving 
forward on the JOBS bill. That is why I have agreed to invite Senators 
Clinton and Dayton to testify on this issue during the Senate Finance 
Committee's hearing on offshoring. My hope is that we will schedule 
that hearing soon.
  Mrs. CLINTON. Mr. President, I compliment my colleague from Montana 
for his legislative skill and determination in managing the JOBS bill 
on this side of the aisle. I also thank him for

[[Page 8945]]

the patience and consideration he and his staff have shown in working 
with me on the Clinton-Dayton privacy amendment. I and my colleague 
Senator Dayton look forward to testifying on this issue in front of the 
Finance Committee because it is vitally important to maintain the 
privacy of our constituents and Americans throughout the Nation.


         New Markets Tax Credit and Economic Substance Doctrine

  Mr. ROCKEFELLER. Mr. President, I would like to enter into a colloquy 
with my good friend, Senator Baucus, regarding the economic substance 
provision of the Jumpstart Our Business Strength, JOBS Act, S. 1637.
  I ask my colleague to explain what, if any, impact the codification 
of economic substance doctrine would have on the new markets tax 
credit.
  As my colleague knows, the new markets tax credit, NMTC, was signed 
into law in 2000 and is the largest Federal economic development 
initiative to be authorized in 15 years. The credit promises to spur 
some $15 billion in new private sector investment in economic 
development activity in poor communities throughout the country.
  The idea behind the credit is that there are good viable business and 
economic development opportunities in poor communities that lack access 
to capital. The NMTC is designed to address this capital gap by 
providing the incentive of a Federal tax credit to individuals or 
corporations that invest in Community Development Entities, CDEs, 
working in these communities.
  While many of the businesses that receive financing through the 
credit will present good business opportunities, it is possible that 
some projects, because of their market, will present only limited 
economic return on top of the credit. In many cases, the investor's 
chief incentive will be the tax benefit available through the new 
markets tax credit.
  There is some concern among investors and potential NMTC investors 
that legislation crafted to codify the economic substance doctrine and 
curtail transactions that are simply motivated by tax incentives would 
apply to and have negative impact on the NMTC.
  With $2.5 billion in new markets tax credits having been allocated to 
CDEs around the country and another $3.5 billion expected to be awarded 
within the next several months, it is critical that the investor 
markets get some clarification on this issue.
  The NMTC holds great promise for communities throughout West Virginia 
where economic revitalization and business development are sorely 
needed. It is my understanding that the economic substance doctrine 
contained in S. 1637 does not apply and I would appreciate my 
colleague's comments on this issue.
  Mr. BAUCUS. I appreciate the comments of the Senator and share his 
commitment to the new markets tax credit.
  The Senator is correct. The intent of the economic substance 
provision in the JOBS bill is clearly to uphold and protect 
congressionally mandated tax benefits while curtailing unintended 
abuses of the tax code. I assure the Senator that the new markets tax 
credit would not be adversely affected by this provision.
  As the Senator knows, our intent in codifying the economic substance 
doctrine is to curtail the use of abusive tax shelters that have no 
economic substance or business purpose other than reducing the Federal 
tax liability of the taxpayer. This is clearly not the case of the new 
markets tax credit.
  We attempted to clarify the intent of this provision in the Finance 
Committee report, 108-192, in a footnote that states:

       If tax benefits are clearly contemplated and expected by 
     the language and purpose of the relevant authority it is not 
     intended that the tax benefit be disallowed if the only 
     reason for the disallowance is that the transaction fails to 
     meet the economic substance doctrine as defined in this 
     provision.

  The report also specifically identifies the low income housing tax 
credit and the historic rehabilitation credit as examples of tax 
benefits that would not be taken into account in measuring potential 
tax benefits. These credits were noted as examples of the types of tax 
benefits that would not be considered in applying the economic 
substance doctrine.
  The new markets tax credit was authorized with the clear intent of 
using a tax subsidy to attract private investors to business and 
economic development opportunities in poor communities--investment 
opportunities that otherwise might not be able to secure such 
investment capital. It is our intent that the NMTC be treated like the 
LIHTC and the HRTC and protected as a congressionally mandated tax 
benefit.


                    canadian softwood lumber dispute

  Mr. SMITH. I came to the floor today to introduce an amendment to the 
FSC/ETI bill relating to the U.S. approval of NAFTA panel decisions. 
The handling of the current case before the NAFTA panel regarding 
Canadian softwood lumber imports gives me cause for concern. There are 
substantial allegations that one panelist judging the case is, at the 
same time, appearing as a private lawyer in two other antidumping cases 
before the International Trade Commission which involve similar issues 
as the Canadian lumber case. This creates at the very least the 
appearance of impropriety and a conflict of interest. Indeed, the USTR 
has taken the position that the panelist is in violation of the code 
established to prevent conflicts of interest involving panelists. 
However, it seems that Canada has been able to block any action to 
remove this panelist from the case.
  This situation is unacceptable and indicates that fundamental reform 
of the NAFTA panel process is required. We cannot allow NAFTA panelists 
with a conflict of interest to rule in these cases, especially since 
their rulings are equivalent to a Federal Court order. At the very 
least, such panel decisions should be subject to Presidential review 
before being implemented. I have an amendment that would implement such 
a review procedure. However, while this is an urgent matter that 
affects the outcome of the largest trade case in U.S. history, I 
recognize that the Senate is close to completing the FSC/ETI bill. I do 
not want to beleaguer that eventuality, so I am willing to withdraw 
this amendment, and agree instead to work with my colleagues, 
particularly on the Senate Finance Committee, to have this issue firmly 
addressed by the Senate in the near future.
  Mr. BAUCUS. I want to join my colleague from Oregon in support of 
this amendment, which cannot be considered for inclusion in the 
legislation at hand. I concur that action must be taken to ensure the 
integrity of the Chapter 19 Panel Process. There is a clear breakdown 
of due process with respect to Chapter 19. The decision by the NAFTA 
Panel to reject the UTC's injury analysis in the softwood lumber 
dispute between the U.S. and Canada proves to me that the credibility 
of the NAFTA Panel process is in serious jeopardy. By imposing an 
impossible standard for proving ``material injury'', this NAFTA Panel 
seems to be saying that it will reject any antidumping or 
counterveiling duty in any circumstance. If the ANFTA dispute panel 
process wants to maintain its credibility, the panelists themselves 
must respect the limits of their responsibility. No country will allow 
the dispute panel process to undermine the integrity of perfectly valid 
trade remedies. Action must be taken to address this situation, and I 
can give my colleague my assurance that I will work to find an 
opportunity for the Senate to consider his amendment in the near 
future.
  Mr. CRAIG. I want to echo the concerns my colleagues from Oregon and 
Montana have on this issue. Resolution of the Canadian softwood lumber 
dispute has gone on far too long. Meanwhile our domestic industry 
continues to suffer from subsidized and dumped Canadian lumber.
  Mr. CHAMBLISS. The forestry industry is important to the State of 
Georgia. Let's take a look at the facts: Georgia's total land area 
covers 36.8 million acres of which 66 percent of that is forested; my 
home State has the sixth largest percentage of forested

[[Page 8946]]

lands in the country which is twice the national average; and, 
commercial forest land in Georgia covers approximately 23.8 million 
acres, more than any other state. Georgia's forest industry generates 
177,000 jobs where employees directly or indirectly work in industries 
supporting forest products manufacturing.
  This is why I sponsored a resolution in the House of Representatives 
in 2001 that highlighted the problems associated with the importation 
of unfairly subsidized Canadian lumber and urged the administration to 
vigorously enforce U.S. trade laws with regard to the importation of 
Canadian lumber. One of my highest priorities has been to see this 
trade issue resolved and limit the injuries caused to the U.S. timber 
and lumber industries by the importation of unfairly traded lumber.
  Today, Georgia's forestry industry is in serious jeopardy. That is 
why I echo the comments of my colleagues regarding the conflict of 
interest involving a NAFTA Panelist who will be hearing the Canadian 
Softwood Lumber case. This case is very important to the future of 
Georgia's forestry industry. This issue and the need to reform the 
NAFTA panel process must be handled in an expedient manner. I urge my 
colleagues to address this issue as soon as possible.
  Mr. SMITH. I thank my colleagues. This is a critical matter that the 
Senate needs to exercise its oversight responsibilities upon. If this 
issue cannot be addressed in the very near future, my colleagues and I 
will have no choice but to bring this amendment back to the floor on 
another bill to have an forthright discussion about ensuring the 
constitutionally afforded due process U.S. citizens and interests must 
have in NAFTA disputes. I also want to applaud the administration in 
particular the U.S. Trade Representative, as well as the International 
Trade Commission, for acting steadfastly to enforce U.S. trade law. But 
their efforts are being thwarted by the current NAFTA Panel rules. This 
must be changed.
  Mr. SMITH. I would like to engage the Senator from Iowa in a colloquy 
regarding section 102 of the bill in order to clarify the Senator's 
intentions.
  Mr. GRASSLEY. I would be pleased to engage in a colloquy with the 
Senator from Oregon.
  Mr. SMITH. I want to thank you for your strong leadership on this 
very important piece of legislation and call your attention to one 
specific provision in S. 1637 known as the domestic production 
activities deduction. As you know, your bill includes a provision that 
allows for a deduction for income from manufacturing done in the United 
States. However, as I understand, the provisions phases in the 
deduction much more slowly for companies that also manufacture abroad. 
At a time when American manufacturing jobs are leaving our country in 
record numbers, we need to support all companies that employ Americans, 
not penalize them. I know that we agree that multinational companies 
should not be penalized merely because they also manufacture abroad. 
Thus, I would like to clarify that it is your intent to urge your 
colleagues during the Senate/House conference deliberations on this 
bill to eliminate this penalty in the final bill that is sent to the 
President for his signature.
  Mr. GRASSLEY. The Senator is correct. It is my intent to urge my 
colleagues to minimize this penalty in the final bill that is sent to 
the President for his signature.


                    income forecast method provision

  Mr. BREAUX. Mr. President, I would like to engage in a brief colloquy 
with the distinguished chairman and ranking member of the Finance 
Committee, Senator Grassley and Senator Baucus, regarding a provision 
in the bill that provides needed clarification and helps to insure an 
accurate reflection of taxpayers' income.
  The provision I refer to resolves certain uncertainties that have 
arisen recently regarding the proper application of the income forecast 
method, which is the predominant cost recovery method for films, 
videotapes, and sound recordings. The provision merely reinforces the 
continued efficacy of existing case law and longstanding industry 
practice. For example, the provision clarifies that, for purposes of 
the income forecast method, the anticipated costs of participations and 
residuals may be included in a property's cost basis at the beginning 
of the property's depreciable life. This was the holding of the Ninth 
Circuit in Transamerica Corporation v. U.S. (1993). The provision also 
clarifies that the Tax Court's holding in Associated Patentees v. 
Comm., 4 TC 979 (1945), remains valid law. Thus, taxpayers may elect to 
deduct participations and residuals as they are paid. Finally, the 
provision clarifies that the income forecast formula is calculated 
using gross income, without reduction for distribution costs.
  I would like to confirm my understanding with Senator Grassley and 
Senator Baucus that by providing these clarifications and eliminating 
uncertainty the provision was intended to put to reset needless and 
costly disputes.
  Mr. GRASSLEY. I am happy to confirm the understanding of the 
distinguished Senator from Louisiana. The provision was adopted to 
provide needed clarifications in order to eliminate the uncertainties 
that have arisen regarding the proper application of the income 
forecast method. I believe the disputes that have arisen regarding the 
mechanics of the income forecast formula are extremely unproductive and 
an inefficient use of both taxpayer and limited tax administration 
resources. By adopting these clarifications, I believe the committee 
intended to end any disputes and prevent any further waste of both 
taxpayer and Government resources in resolving these disputes. Any 
existing disputes should be resolved expeditiously in a manner 
consistent with the clarifications included in the bill.
  Mr. BAUCUS. I agree with the distinguished chairman of the Finance 
Committee, Senator Grassley. The disputes resulting from any 
uncertainty regarding the proper application of the income forecast 
method are extremely unproductive and wasteful. To avoid further waste, 
resolution of any disputes must be resolved in a manner consistent with 
the clarifications contained in the bill.
  Mr. BREAUX. I thank both of my distinguished colleagues for this 
important clarification. I hope this puts to rest any uncertainty and 
wasteful disputes regarding the proper application of the income 
forecast method.


                               kiddie tax

  Mr. FRIST. In February of this year, a constituent wrote me to 
express his concerns about the negative impact expansion of the 
``kiddie tax'' would have upon his family, and more specifically his 
quadriplegic daughter. His daughter's assets are in a trust 
administered by an independent third party trust department of an 
investment firm. The assets were awarded to his daughter by a court by 
law pursuant to a settlement agreement after she suffered from injuries 
at birth. The assets in his daughter's trust are to be used to provide 
her income after she should have been able to move into the work force. 
The funds will help pay for medical care and personal caregiver 
services.
  The situation is described in more detail in a letter to me from my 
constituent, Mr. Gary Domm. At this time, I ask unanimous consent this 
letter be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                            Gary W. Domm, CFP,

                                Germantown, TN, February 10, 2004.

Subject: The planned continuation of the U.S. ``Kiddie Tax'' laws until 
  age 18. How Tennessee Individual Income Tax is more fair. Enough is 
                                Enough!

                     Attention: Legislative Staff.

     Dr. Bill Frist, MD,
     Memphis, TN
       Dear Dr. Frist: As you are surely aware, the Internal 
     Revenue Code has a provision taxing unearned income of 
     children under age 14 at their parents upper tax rates. This 
     regulation is often referred to as the ``Kiddie Tax.'' 
     Obviously, the whole theory behind this law is to stop 
     investments from being transferred to the children at a lower 
     tax rate by the parents or maybe grandparents. Fair enough. 
     However, the law as interpreted in a court case in 1992, said 
     that it did not matter what the source or the purpose of

[[Page 8947]]

     those assets were. This is a court ruling that needs to be 
     overturned by legislation. If the ``Kiddie Tax'' is suppose 
     to be a tax on assets transferred from relatives, then it 
     should be administered in that way but not applied to all 
     unearned income owned by children.
       My quadriplegic daughter, who can not speak and will always 
     be dependent on full time care, is subject to the ``Kiddie 
     Tax'' law. My wife and I would be considered to have above 
     average income, both earned and unearned. Therefore my 
     daughter's unearned income is taxed at a much higher tax rate 
     than if she was the child of lower income parents. My 
     daughter's assets are in a trust administered by an 
     independent third party trust department of an investment 
     firm. These assets were awarded to my daughter by a court of 
     law. My daughter's assets were never mine or under the 
     control of relatives. I probably need not mention that the 
     federal trust tax rates are even higher so there is no 
     benefit to these assets being taxed instead in a trust tax 
     return.
       In my case, the assets in my daughter's trust are to 
     provide her income after she should have been able to move 
     into the work force under normal circumstances. They will pay 
     for her medical care, personal caregiver services, and other 
     expenses that most people do not have to endure until late in 
     life but certainly not for their entire life. My wife and I 
     rarely request reimbursement of expenses from these assets 
     for the extra care that our daughter requires. Our plan is to 
     financially provide for our daughter until she is at least 21 
     years old. Yet, my daughter's assets are not allowed to grow 
     based on their own tax level. They are instead subjected to 
     usurious tax rates rather than progressively higher tax rates 
     as the income increases.
       The State of Tennessee has had an exemption to state income 
     tax since the mid 1990's on unearned income derived from 
     assets for a quadriplegic person. Apparently, the state 
     recognized that people that are disabled and incapable of 
     ever working, need a tax break in order not to be more 
     dependent on government and its agencies.
       It is my understanding that Congress is now considering 
     extending the age for the ``Kiddie Tax Law'' until age 18. 
     Enough is enough. I have waited patiently for my daughter to 
     reach the age of 14. She will be 14 this year and will no 
     longer be subject to being taxed at a rate higher than her 
     income level. That is, unless Congress changes the laws.
       In my case, leaving the ``Kiddie Tax'' regulations alone 
     would solve my problem, but that would avoid collecting the 
     extra tax dollars for four more years on families that have 
     transferred wealth to their children. My problem can also be 
     solved by removing the ``Kiddie Tax'' in the case of 
     quadriplegics and other people that will never be able to 
     work and support themselves. The federal tax laws need to 
     consider the Tennessee tax regulations and provide exemptions 
     where needed. I have no doubt that if my daughter could, she 
     would gladly give away her investments in exchange for a 
     normal life. Instead the government is subjecting her 
     investment income to highest taxes just because of her 
     parents.
       Correcting this injustice will not gain many votes 
     politically, but I am sure you can see that it is the right 
     thing to do. I am more than willing to discuss this by 
     telephone with anyone who wishes more specific information. 
     Being a Tennessee resident and senator, I am sure you can 
     obtain copies of the exemption regulations for the state. It 
     is item 3, under the exemption section in the rules mailed 
     with the Tennessee tax forms. Also the exemption box is 
     clearly shown on the first page of the Tennessee Tax Return.
           Sincerely,
                                                        Gary Domm.

  Mr. FRIST. According to Mr. Domm, current tax law permits taxation of 
this unearned trust income in excess of $1,600 at the child's tax rate 
upon the child's 14th birthday. Up until the age of 14, the income was 
taxed at the parent's rate of taxation. This year, Mr. Domm's daughter 
will turn 14 and will no longer be subject to a tax rate higher than 
her income level.
  Unfortunately, however, a proposed change in S. 1637 would call for 
taxing any unearned income in excess of $1,600 at the parent's income 
tax rate until the age of 18 instead of 14. I ask my colleague from 
Iowa, is that accurate?
  Mr. GRASSLEY. Yes.
  Mr. FRIST. Thank you for confirming that, Mr. Chairman. I believe 
that it would be good policy to provide some type of exemption to this 
so called ``kiddie tax'' for Mr. Domm's daughter and others like her. 
That way, we encourage independence and self-sufficiency and do not 
penalize individuals who have already had to overcome tremendous 
obstacles. Based on that assumption, Mr. Chairman, would you be willing 
to work with me and my staff to create an exemption from this tax for 
Mr. Domm's daughter and others similarly situated?
  Mr. GRASSLEY. I agree with the Senator from Tennessee that such an 
exception to the ``kiddie tax'' would be good public policy. I commit 
to you that my staff will work with the Treasury Department, the Social 
Security Administration and your staff during conference negotiations 
to craft language that addresses Mr. Domm's concerns but also contains 
solid anti-abuse language. My hope is that we could place such language 
in the final version of S. 1637 or another appropriate tax bill.
  Mr. FRIST. I thank the Chairman for that commitment both personally 
and on behalf of my constituent.


                       Brownfield Revitalization

  Mr. LAUTENBERG. Mr. President, I rise to engage several of my 
colleagues in a colloquy regarding an important provision in the 
manager's substitute amendment to S. 1637. Section 641 of the manager's 
amendment was filed by me as an amendment to S. 1637, and it was co-
sponsored by Senators Chafee, Dole and Lieberman.
  The language of my amendment is based on S. 1936, the Brownfield 
Revitalization Act of 2003, a bipartisan bill that was introduced last 
year by Senator Baucus and cosponsored by Senators Inhofe, Dole and 
Rockefeller. However, the version of my amendment that is included in 
the manager's substitute contains several modifications which improve 
it.
  My amendment relieves tax-exempt entities that invest in, clean up, 
and then re-sell certain brownfield properties from an obscure but 
significant provision in the Internal Revenue Code.
  First, what is a ``brownfield?'' There are various definitions of 
this term. In the Federal Superfund law, a ``brownfield'' is defined as 
``real property, the expansion, redevelopment, or reuse of which may be 
complicated by the presence or potential presence of a hazardous 
substance, pollutant, or contaminant.''
  My own State of New Jersey uses a different definition. It defines a 
``brownfield'' as ``any former or current commercial or industrial site 
that is currently vacant or underutilized and on which there has been, 
or there is suspected to have been, a discharge of a contaminant.''
  Brownfields are not necessarily highly contaminated sites. Often, 
they are moderately or lightly contaminated industrial and commercial 
sites that could be productively re-used if they were cleaned up. In 
fact, the perception of contamination might be the only thing holding 
back a brownfield site from redevelopment.
  Reuse of a brownfield site is desirable because it preserves an open 
``greenfield'' and can provide an economic stimulus to an inner city or 
close-in suburban area.
  Our colleague, Senator Dole, is fully aware of how serious the 
problem of brownfields is across the nation.
  Mrs. DOLE. Mr. President, the North Carolina Department of 
Environment and Natural Resources estimates that there are tens of 
thousands of potential brownfield sites in North Carolina. To date 44 
of these sites have $600 million in committed private investment which 
was raised with less than $500,000 in Federal funds. These 44 sites 
represent a good step forward to address this issue; however, there are 
many more steps necessary before we can declare victory. The critical 
component to this equation is the greater availability of private 
capital. Currently, the State of North Carolina has 55 more brownfield 
sites in the pipeline for remediation and the availability of private 
capital will be essential to this effort.
  The Nation's mayors have estimated that there are half a million 
brownfield sites in the United States. Others have said that there may 
be as many as a million such sites. EPA, in an analysis conducted with 
George Washington University, has estimated that remediation costs for 
all brownfield sites in the country exceed $650 billion. The Chamber of 
Commerce estimates that, at the current rate of cleanup, it could take 
ten thousand years to clean up all these sites.
  According to Environmental Defense, a leading environmental group, 
New York City alone has over 4000 acres of vacant industrial lands, the 
equivalent

[[Page 8948]]

of almost four Central Parks' worth of land lying unused in the core of 
our largest metropolitan area.
  That is why I am a strong supporter of legislation to make available 
greater sums of private capital to brownfield remediation efforts. This 
is why I am proud to join with my colleagues, especially Senators 
Lautenberg, Chafee, Lieberman and Jeffords to support this proposal to 
allow non-profits to invest in brownfield remediation efforts. I yield 
back to Senator Lautenberg.
  Mr. LAUTENBERG. In fact, in my own State of New Jersey, the 
Department of Environmental Protection oversees ten thousand potential 
brownfield sites, but admits that many more sites may exist in the 
State that have not yet been identified.
  I ask Senator Lieberman if he is aware of any barriers in our Tax 
Code that may be hindering the remediation of brownfields sites.
  Mr. LIEBERMAN. As my colleagues know, much has been done at both the 
national and State levels, including our own States, to help clean up 
contaminated brownfield properties. However, the Federal Tax Code 
contains a potential roadblock.
  Section 512 of the Internal Revenue Code establishes an unrelated 
business income tax, or UBIT, on the income that a tax-exempt entity 
derives from a trade or business that is not substantially related to 
its exempt purpose.
  The UBIT applies to gains from the sale or exchange of property held 
primarily for sale to customers in the ordinary course of such a trade 
or business. The UBIT also applies to gains from the sale or exchange 
of any debt-financed property.
  These UBIT provisions have reduced the economic attractiveness of 
investments in remediation and redevelopment of the nation's brownfield 
sites by tax-exempt entities like university endowments and private 
pension funds.
  According to the Chamber of Commerce, tax-exempt entities hold about 
$7 trillion in financial assets. This is a very large pot of money that 
could be tapped for brownfield cleanups.
  Mr. LAUTENBERG. This large potential funding source for brownfields 
remediation is what my amendment will address by removing one barrier 
to brownfields redevelopment.
  My amendment allows tax-exempt entities to invest in brownfield sites 
without the risk of incurring UBIT liability, provided that certain 
conditions are met.
  First, the appropriate State environmental agency must certify that 
the property is a brownfield site within the meaning of the Federal 
Superfund definition.
  The amendment does not set up a new certification procedure for this 
purpose, but rather piggybacks on a process already in place under 
section 198 of the Tax Code to provide tax incentives for commercial 
brownfield developers. In fact, another provision of the manager's 
substitute amendment extends section 198 through the end of 2005.
  Second, the remediation effort must be a significant one. It must 
cost more than $550,000, or 12 percent of the fair market value of the 
site, determined as if the site were not contaminated. By establishing 
relatively high thresholds for eligibility, the amendment excludes 
incidentally contaminated property and focuses new capital investment 
at sites that are most in need of assistance.
  Third, the site must be cleaned up to comply with all environmental 
laws and regulations.
  Finally, after the cleanup the state environmental agency or EPA must 
certify that the property is no longer a brownfield site. In requesting 
such a certification, the tax-exempt entity must attest that the 
anticipated future uses of the property are more economically 
productive or environmentally beneficial than the previous use of the 
property. The tax-exempt entity must also attest that it has given 
public notice of its request for certification.
  Senator Jeffords, the ranking member on the Environment and Public 
Works Committee, has been very helpful in developing modifications to 
this amendment. Could the Senator from Vermont describe the 
modifications we have made that are designed to prevent abuse?
  Mr. JEFFORDS. I am happy to fully support this amendment, as 
modified. There are three significant modifications:
  First, a savings clause has been added to make clear that this 
amendment to the Tax Code has no impact on anyone's liability under the 
Superfund statute or any other Federal or State environmental law. Just 
because a tax- entity receives a tax certification signifying that it 
is not subject to the UBIT tax does not mean that it can avoid 
environmental liability.
  Second, the amendment has been modified to include a definition of 
``substantially complete.'' An entity is eligible for a tax 
certification if its remedial actions at a brownfield site are complete 
or substantially complete. As originally drafted, the amendment did not 
include a definition of the key term ``substantially complete.'' This 
could have created a loophole that allowed entities to get a tax 
advantage without fully cleaning up a property. The modification we 
have made fixes this problem by borrowing EPA's definition of 
``construction complete'' from the Superfund program to define this 
term.
  The third modification expands the public notice provision that was 
already in the amendment. It makes clear that not only must there be 
public notice, there must also be a meaningful opportunity for public 
comment. In addition, it makes clear the agency that makes the tax 
certification, whether EPA or a State agency, must respond to any 
significant public comments.
  In addition, the amendment has been carefully drafted to prevent 
abuse. For example, the taxpayer cannot be the party that caused the 
pollution and cannot be otherwise related to the polluter. In addition, 
all transactions, such as purchase and sale of the property, must be 
made at arms-length with parties unrelated to the taxpayer.
  Mr. LAUTENBERG. I thank the Senator for that explanation and for his 
help in crafting the amendment. As I mentioned earlier, my amendment is 
based on S. 1936, a bipartisan bill introduced by Senator Baucus last 
year. That legislation was endorsed by groups as diverse as the Chamber 
of Commerce, Environmental Defense, the National Taxpayers Union, and 
the U.S. Conference of Mayors. I yield the floor.


                         energy tax incentives

  Mrs. LINCOLN. Mr. President, I want to congratulate Chairman Grassley 
and Senator Baucus on their decision to include a package of energy tax 
incentives in this bill. These tax incentives will promote the future 
development and production of renewable fuels, which we hope one day 
will lessen our dependency on foreign oil.
  The package of energy tax incentives now before us was first reported 
by the Finance Committee last year as part of H.R. 6, the Energy Tax 
Policy Act of 2003, and the Senate considered H.R. 6 in July of 2003. 
During floor debate of that legislation, I raised two concerns that I 
hoped would be addressed in the House-Senate conference of the energy 
bill. Chairman Grassley agreed with my points and assured me he would 
use his best efforts to resolve these matters. True to his word, as 
always, the chairman addressed my concerns in the conference version of 
H.R. 6. But as we all know, the conference version of H.R. 6 failed to 
gain enough votes to pass the Senate.
  Now, the chairman has decided to move a text that is essentially the 
same finance Committee package of energy tax incentives, not the 
conference version of the bill, as part of the FSC/ETI bill. One of my 
concerns, relating to the definition of a landfill gas facility, has 
been resolved by virtue of the fact that the provision in the Finance 
Committee package has been dropped. But the other concern remains. So 
now again, I feel compelled to raise this concern, and once again, 
request the chairman's assistance to address it in a House-Senate 
conference. So please bear with me again while I explain my concerns 
for the record.
  On February 11 of 2003, I introduced S. 358, the Capturing Landfill 
Gas for

[[Page 8949]]

Energy Act of 2003. The bill is cosponsored by Senators Santorum and 
Hatch and would provide a credit under either Section 29 or 45 of the 
tax code for the production of energy from landfill gas, or LFG.
  In the past, Congress recognized the importance of LFG for energy 
diversity and national security by providing a Section 29 credit in 
1980 and extending it for nearly two decades. However, the Finance 
Committee bill before us fails to recognize the importance of LFG in 
its creation of a new Section 45 credit. In contrast, the President 
proposed a generous Section 29 credit for LFG, and the House has passed 
a Section 45 credit for LFG as part of its energy bill. Both of these 
proposals would provide meaningful tax incentives to encourage the 
collection and use of LFG. Thus, this version of energy tax incentives 
falls well short of recognizing the importance of dealing with LFG, and 
I urge the chairman to address this shortfall in the House-Senate 
conference by affording the same incentive for LFG that other renewable 
energy sources are given under the final legislation.
  The potential energy and environmental benefits of future LFG 
projects are substantial, but they will be lost if we do not provide 
adequate provisions to support project development. I want to thank 
Chairman Grassley and Senator Baucus for their past work and support in 
addressing these important concerns. Further, I hope and request that 
they once again work with me to make sure Americans garner all of these 
important benefits.
  Mr. GRASSLEY. Mr. President, I want to assure Senator Lincoln that I 
will continue to work with her to make sure adequate incentives for LFG 
are included in any final package from the upcoming House-Senate 
conference. Her concerns are my concerns as well. She has stated them 
well and I will devote my best efforts to resolving them as we move 
forward on discussions and deliberations with the House of 
Representatives.


                             car provision

  Mr. BAUCUS. Mr. President, I raise an issue with regard to the car 
donation provision included in the JOBS bill. Under the provision 
donors are limited to deducting the actual sale price of the vehicle 
that is donated to charity, unless the charity uses the car, in which 
case donors a get fair market value deduction. This is a good rule. It 
will cut out abuse of this charitable giving device, and make it easier 
for donors to comply with the tax law. However, I am also concerned 
about the potential for charities that intentionally sell/transfer 
donated vehicles at a low or no cost to low-income recipients as part 
of a charitable program to be unintentionally hampered from doing so. I 
believe the law is written in such a way that if the car is given by 
the charity to a low income family, or used for parts to repair a 
different car, there is no sale that triggers the sales proceeds limit, 
and the donor gets a fair market value deduction. I agree with some 
folks' suggestions that the sales to needy families case does not fit 
within the ``use by the charity'' rules as presently drafted. But 
trying to modify the proposal to move away from the sale bright line 
rule can be tricky, and I fear we would be opening up the proposal to 
abuse. I pledge to charities that do sell cars to low-income or needy 
individuals at reduced prices as part of a charitable program, that we 
will expand regulatory authority during conference or a preconference 
period with the House to permit Treasury to issue rules excepting 
certain sales from the sales proceeds limit and certain reporting rules 
if the sale furthers a charitable purpose.
  Mr. GRASSLEY. I agree with your concerns, Senator Baucus, and I also 
am in favor of giving Treasury this expanded authority.


                         irs free file program

  Mr. ALLEN. Mr. President, I commend the chairman and ranking member 
of the Finance Committee, Senators Grassley and Baucus, for their work 
on the Tax Administration Good Government Act. The legislation provides 
taxpayer safeguards, streamlines tax administration, and simplifies the 
tax code. I do have some concern with one provision in the bill. 
Specifically, the bill also includes a provision on the IRS Free File 
Program. The Free File Program is the result of a public-private 
partnership agreement between the IRS and the Free File Alliance, LLC, 
a group of tax software companies managed by the Council for the 
Electronic Revenue Communication Advancement, CERCA. It is important to 
continue to promote these types of public-private partnerships and it 
is my hope that we can work together on this provision as we move to 
conference with the House of Representatives.
  Mr. GRASSLEY. I thank the Senator from Virginia. The IRS Free File 
Program is a direct result of the goal that Congress set for the IRS to 
have 80 percent of returns filed electronically by 2007. The 
partnership agreement calls for the Free File Alliance to provide free 
tax preparation and filing to at least 60 percent of all taxpayers or 
approximately 78 million individuals who file an individual tax return. 
Each participating software company has its own eligibility 
requirements. The eligibility requirements ensure that lower income, 
disadvantaged and under-served taxpayers benefit from the free file 
program with the Free File Alliance, LLC. The provision in the bill was 
intended to ensure that the taxpayers participating in the Free File 
Program were affirmatively consenting to solicitation for other 
products or services. I look forward to working with him to ensure that 
we continue to promote such public-private partnerships.
  Mr. BAUCUS. I agree with Chairman Grassley. It is our intent with the 
Free File provision to protect the integrity of our voluntary tax 
system by providing lower income, disadvantaged and under-served 
taxpayers the ability to meet their filing obligation without 
subjecting themselves to unwanted marketing. I also commit to work with 
Senator Allen as we conference with the House.
  Mr. ALLEN. I thank the chairman and ranking member.


                       continuing care facilities

  Mr. GRAHAM of Florida. Mr. President, I want to thank the chairman 
and ranking member of the Finance Committee, Senators Grassley and 
Baucus, for including a provision that I supported as part of the Tax 
Administration Good Government Act to level the playing field for 
residents of qualified continuing care retirement communities.
  Continuing care retirement communities, or CCRCs, are the oldest form 
of seniors housing in America, dating back to the late 1800s--offering 
a variety of living arrangements and services to accommodate residents 
of all levels of physical ability and health. The goal of a CCRC is to 
accommodate changing lifestyle preferences and health care needs. In 
general, CCRCs make independent living, assisted living, and skilled 
nursing available all on one campus. The CCRC approach offers residents 
the pyschological and financial security of knowing that, should they 
require increased levels of care, it is readily available at one 
location. As a private pay option, CCRCs also play an important role in 
the Nation's long-term care delivery system because very few, if any, 
CCRC residents will ever require Medicaid funding for their long-term 
care.
  Mr. GRASSLEY. I thank the Senator from Florida for his comments. This 
is a provision that I have also supported. The provision included in 
the bill will go a long way for those seniors who live in the affected 
CCRCs. I also want to clarify one point with Senator Baucus. It is my 
understanding that the purpose of the amendment is to bring the tax 
treatment of those CCRCs described in section 7872(g) into alignment 
with the treatment that has historically been afforded to those CCRCs 
that are not described in section 7872(g). In other words, there is no 
intent to alter the treatment that the IRS has historically provided 
for CCRCs that are not described in section 7872(g). I am committed to 
working with Senator Graham as we move this legislation forward.
  Mr. BAUCUS. I agree with the chairman. There is no intent to alter 
the

[[Page 8950]]

treatment that the IRS has historically provided for CCRCs that are not 
described in section 7872(g). This is a critical point that could 
affect a large number of seniors. We do not want there to be any 
misunderstanding on this issue since the immediate consequences could 
be significant--with large numbers of seniors potentially having to pay 
additional taxes. I also know that Senator Mikulski has expressed an 
interest in this provision. I give my commitment to both Senators 
Graham and Mikulski to work with them on this provision as we go to 
conference with the House.
  Mr. GRAHAM of Florida. I thank the chairman and ranking member for 
clarifying the intent of this provision.
  Mr. BURNS. Mr. President, I rise today to discuss one small piece of 
this legislation which will make a big difference in rural States such 
as Montana. I am talking about the broadband expensing provision, which 
would encourage broadband providers to extend their networks to 
underserved areas, and to upgrade their networks to ``next-generation'' 
speeds so that they can deliver a full complement of voice, video and 
data services. We have been working on this legislation since 2000--
Senator Rockefeller, Senator Baucus, Senator Grassley, Senator Clinton. 
There are a lot of us who feel strongly about this issue. It has passed 
the Senate twice now, but, unfortunately, we have been unable to 
persuade our friends on the other side of the Capitol to support it. So 
I want to thank the Finance Committee for including it again in this 
bill, and I am going to push my colleagues on the House side to get 
behind it this time because it is very important. It is important for 
rural areas, for underserved inner city areas, for education, for 
health care, for energy savings, for a whole list of reasons. And I 
want to say this. It is fitting for this broadband incentive to be 
included in the FSC/ETI bill because this provision will have a big 
effect on international competitiveness. We are hearing a lot about 
``offshore outsourcing'' these days, and broadband is a response to 
that. If we have a robust high-speed network all over this country, 
companies will not need to send jobs to India--we can do them in 
Montana, and in Iowa, and in West Virginia, and in communities all 
across the nation where costs are lower. So this is about providing an 
infrastructure that makes us more productive, just as the Interstate 
highway system, and rural electrification, and the transcontinental 
railroad all made the Nation more productive. Broadband is a key 
infrastructure of the 21st century, and we need to construct it as 
quickly as possible. I believe this provision will help do that, and I 
look forward to working with my colleagues to ensure its enactment this 
year.
  Mr. ROCKEFELLER. Mr. President, I am extremely pleased at the 
progress that the Senate has made this week on the legislation before 
us, known as the JOBS Act. Like most of my colleagues, I support this 
bill, because I believe that Congress must respond to the increasingly 
difficult competitive position of our manufacturing industry. I urge my 
colleagues to continue working on this bill, debate and vote on the 
relatively few remaining amendments, and then pass this bill.
  For generations, American manufacturing has been a tremendous source 
of pride and a ladder to the middle class. Unfortunately, over the last 
3 years, the manufacturing sector of our economy has suffered 
disproportionately and millions of good jobs have been lost. Tomorrow 
the Labor Department will announce new statistics on employment for the 
month of April. I understand that many experts expect tomorrow's news 
to be positive. And certainly, we were all very glad to hear that 
308,000 jobs had been created in March.
  A couple months of strong job growth should not lull this Congress 
into believing that the manufacturing sector is enjoying a healthy 
recovery. Indeed, in March no new manufacturing jobs were created at 
all. Nationwide almost 3 million manufacturing jobs have been lost 
since January 2001. In my home State of West Virginia, more than 10,000 
manufacturing jobs have disappeared in that time.
  Regardless of tomorrow's news, this Congress must stay focused on the 
task at hand. We must eliminate the European tariffs that are currently 
imposed on many of our goods, and we must enact a fair tax policy that 
will shore up our manufacturing base. The JOBS Act is accomplishes 
these goals.
  The JOBS Act repeals the foreign sales corporation/extraterritorial 
income provisions in our current tax code in order to comply with the 
ruling of the World Trade Organization. Regardless of whether I agree 
with the obligations that the WTO has ascribed to the U.S., I believe 
that Congress must act quickly to resolve this impasse and restore good 
trade relations with Europe. Because repealing these provisions would 
impose a new tax burden on American manufacturers just at a time when 
they are already struggling to compete globally, the JOBS Act would 
create a new deduction for our manufacturers to reduce the cost of 
doing business in the U.S. In that regard, this legislation is very 
similar to a bill I introduced last year, the Security America's 
Factory Employment Act. I know that many of the CEOs in my home state 
find it difficult to offer good wages, provide health insurance and 
retirement benefits, pay taxes, and still make a reasonable profit. 
Passing the JOBS Act will dramatically reduce the tax burden these 
businesses face, helping them succeed and grow.
  Indeed, while the name of this legislation is certainly awkward, the 
Jumpstart Our Business Strengths Act, the acronym JOBS is fitting. 
There are a number of very promising provisions in this bill that can 
offer hope to struggling businesses and the millions of Americans 
looking for work. In addition to lowering the tax rate on domestic 
manufacturing operations, this bill extends valuable tax provisions on 
which American companies depend.
  For example, this legislation would improve and extend the research 
and development tax credit. By spurring investment in innovation this 
tax credit helps our companies stay competitive and helps keep 
exciting, well paid jobs in the U.S. The bill also extends tax 
incentives for the hiring of those who might otherwise depend on public 
assistance. The work opportunities tax credit and the welfare to work 
tax credit have been extraordinarily successful, and Congress should 
ensure that businesses can continue to use them.
  I am also very pleased to have worked with my colleagues to provide 
assistance to companies that are subject to alternative minimum tax 
obligations by enabling them to take advantage of the legitimate tax 
benefits of bonus depreciation and general business credits even if 
their AMT liability would otherwise prevent such benefits. While I wish 
we could have made this provision even more substantial, this 
assistance creates incentives for companies to invest in new projects 
and purchase new equipment in--other words, it helps those companies 
contribute to our economic recovery.
  Another key to our Nation's economic vitality is technological 
development and deployment. When the Senate Finance Committee 
considered the JOBS Act last fall, I was very pleased that the 
committee accepted my amendment to provide tax incentives for the 
deployment of cutting edge broadband technology. The United States 
currently ranks eleventh in the world in broadband availability. 
Millions of Americans, especially in rural areas, do not have access to 
broadband. We must remedy this situation so that everyone can benefit 
from activities such as telemedicine, telecommuting, and distance 
learning. Widespread broadband technology is critical to increasing our 
productivity and keeping America competitive with nations that offer 
technology-savvy workforces. I thank my colleagues who have worked with 
me to include the broadband tax incentives in this legislation, and I 
look forward to getting these provisions enacted this year.
  I am gratified also that the managers of this bill and the leaders on 
both sides of the aisle have seen their way to including the energy tax 
provisions that many of us in the Senate have been working to enact for 
many years. In particular, I am happy to see the Senate working to 
pass, once again,

[[Page 8951]]

meaningful incentives to promote the development of clean coal 
technologies and the expanded development of oil and gas from 
nonconventional sources. These particular incentives are crucial to 
meeting our Nation's future energy needs, and I cannot emphasize 
adequately how important they are to my state of West Virginia.
  As the high price of gasoline at the pump continues to set new 
records, the inclusion of new incentives for the use of alternative 
fuels and the vehicles that use them are especially timely. I am proud 
to have worked for many years with a bipartisan group of Senators on 
these provisions, and I join them in hoping our action on the JOBS Act 
will lead, finally, to their enactment.
  I have been a long-time advocate for a responsible energy policy for 
this nation. I am frustrated that the current political mindset of some 
in the House leadership prevents us from getting a final comprehensive 
bill that can pass the Senate. Still, I am pleased that the Senate has 
again demonstrated with these tax provisions, including important 
incentives for energy efficiency and conservation, the genuine 
bipartisan consensus the country needs to secure our energy supply and 
lessen our dependence on foreign sources of energy.
  Because of the many important provisions I have described, I am 
looking forward to supporting this bill. As can be said about almost 
all legislation, this bill is not perfect. Rather it is the result of 
compromises. I was very disappointed that my colleagues did not agree 
to add Trade Adjustment Assistance for service workers or to improve 
the health care tax credit available to workers who lose their job as a 
result of our trade policies. In addition, I do not believe it is good 
policy to allow companies who have deliberately avoided U.S. taxes by 
keeping their profits overseas to now enjoy a tax break on repatriated 
income. Yet, on balance, this legislation will be beneficial for our 
manufacturing companies and our economy as a whole.
  We have made substantial progress this week. I look forward to voting 
on the few remaining amendments, including a very worthy proposal to 
extend unemployment benefits for those workers who have been hardest 
hit in this economy. I urge my colleagues to continue to make progress 
on this legislation and work with our counterparts in the House of 
Representatives so that we can send this to the President.
  Mr. FEINGOLD. Mr. President, while I strongly supported a timely 
finish to debate on this measure, I voted against the motion to invoke 
cloture on S. 1637. The debate over the past few days leading up to 
this vote has made it clear that the total time needed to consider the 
amendments remaining on this measure totaled less than 2 hours. So 
there was no need to invoke cloture on this legislation. Unfortunately, 
cloture does mean that critical amendments, including my own amendment 
to strengthen our Buy American law, would no longer be in order.
  To be clear, I do not support delaying consideration of the 
underlying bill. As I indicated to both leaders, I was willing to enter 
into a short time agreement for consideration of my amendment, and I 
understand that others who were offering amendments were also willing 
to limit the time on their amendments. But cloture not only limits the 
time available to debate this bill, it also means that the Senate will 
not be able to consider my amendment, as well as other worthy proposals 
that relate directly to the loss of manufacturing jobs that has wracked 
so many communities in Wisconsin and across the country.
  Mr. KENNEDY. Mr. President, all of us are pleased by Department of 
Labor reports showing that the economy has finally had two months of 
good job growth. It is welcome news. However, that news must be viewed 
as part of the overall economic picture. Job growth is still far behind 
what President Bush predicted when his tax cuts were enacted last 
summer--two million jobs behind. Employment in the manufacturing sector 
is still anemic. The pace at which American jobs are being shifted 
overseas is still accelerating.
  Working men and women in America are facing an economic crisis which 
threatens their job security and their families' well-being. Since the 
beginning of 2001, there has been a net loss of nearly two and a half 
million private sector jobs. In prior economic downturns, most of the 
job loss was the result of temporary layoffs. As the economy picked up, 
workers returned to their old jobs. Unfortunately, that is no longer 
the case. Economists tell us that most of the millions of jobs lost in 
the last three years are gone for good. With each job lost, a family is 
placed in jeopardy. We must look behind the statistics to the people 
who, through no fault of their own, are now facing hardship and 
uncertainty.
  Unfortunately, the Bush administration's response to these people has 
been weak and ineffective. Huge tax cuts heavily skewed to the wealthy, 
and rosy predictions that have consistently proven false. Long term 
unemployment has nearly tripled under President Bush. Unemployed 
workers remain without jobs longer than at any time in the last 20 
years. Nor is there any basis to conclude that the hemorrhaging of jobs 
in the manufacturing sector is at an end. And the relatively small 
number of new jobs that are being created pay, on average, 21 percent 
less than the jobs that have been lost. The Republican strategy of tax 
breaks for the rich and platitudes for the public will not solve the 
ongoing economic crisis. We need new leaders who will give us a new 
economic plan.
  The so-called JOBS bill which the Senate is finally considering does 
not provide that new economic plan. Rather, it is a hodge-podge of 
unrelated and sometimes inconsistent provisions. Some of them--
principally the new deduction for domestic manufacturing and the 
extension of the research and development tax credit--will help to 
create jobs. However, there are many other provisions in the bill which 
could actually make the job loss worse.
  This legislation is really schizophrenic. On the one hand, it creates 
over $65 billion in new tax benefits for domestic manufacturers to help 
them maintain, and hopefully add, jobs here at home. On the other hand, 
it provides nearly $40 billion in new and expanded tax breaks for 
companies doing business abroad. Many of these international provisions 
will actually make the exporting of American jobs more financially 
attractive to multinational corporations.
  Providing assistance to domestic manufacturers is the right thing to 
do. We have lost more manufacturing jobs in the last three years than 
in the preceding twenty years--a net loss of nearly 3 million jobs 
since 2000. This is a genuine crisis for working families across 
America. They are looking to us for help, and we owe them a strong, 
unambiguous response.
  Unfortunately, the legislation as reported from the Finance Committee 
does not provide that strong, unambiguous response that American 
workers are looking for. It contains deep internal contradictions which 
will seriously hamper its effectiveness in preserving domestic 
manufacturing jobs.
  Providing more tax breaks for multinational corporations is the wrong 
thing to do. It's more than the loss of $40 billion in tax revenue that 
could be used for many better purposes that is troubling. What is most 
disturbing is the fact that many of these international provisions will 
actually encourage companies to shift even more American jobs to low 
wage countries.
  The international provisions should be removed from the bill, and the 
tax dollars saved should be used to increase the tax benefits for 
domestic manufacturing.
  It is outrageous that this bill proposes to expand the value of the 
foreign tax credits which multinational corporations receive. Under the 
legislation, these companies would pay even less in U.S. taxes on the 
profits they earn from their business abroad than they do today--$40 
billion less. This will create further incentives for them to move jobs 
abroad, undermining the intent of the legislation.
  From the perspective of preserving American jobs, one of the worst 
features of corporate tax law is a special

[[Page 8952]]

tax subsidy for multinationals known as ``deferral.'' If a U.S. company 
moves its operations abroad, it can defer paying U.S. taxes on the 
profits it makes overseas until the company chooses to send those 
profits back to America.
  In essence, it allows the corporation to decide when it will pay the 
taxes it owes to the U.S. Government. That is a luxury that companies 
making products and providing services here at home do not have. This 
is an enormous competitive advantage which the tax code gives to 
companies doing the wrong thing--eliminating American jobs--over 
companies doing the right thing--preserving jobs in the United States.
  We should be eliminating this special tax break for multinationals. 
Instead, this bill proposes to expand it. It makes changes in the 
deferral rules which will actually encourage companies to keep profits 
earned on foreign transactions abroad longer. As a result, the return 
of working capital to the U.S. will be delayed even further, and the 
payment of corporate taxes owed to the public Treasury will be 
postponed even longer.
  This legislation would extend from 5 years to 20 years the amount of 
time which a foreign tax credit can be carried forward. Often it is 
concern about losing foreign tax credits which leads a corporation to 
return foreign earned profits to the United States. By extending the 
carry forward period to 20 years, corporations will lose one of the 
strongest incentives to bring the money home. The bill also narrows 
what is known as Subpart F, which currently prevents the deferral of 
American taxation on the profits from certain types of passive 
investment income. It would change Subpart F to allow deferral of 
income from investment activities, such as commodity hedging 
transactions and aircraft and vessel leasing. The location of these 
activities can be easily manipulated for tax avoidance purposes. The 
bill also removes limitations on the use of foreign tax credits against 
the corporate alternative minimum tax, and allows companies to take 
advantage of foreign interest payments to make their foreign tax 
credits even larger. All of these provisions move the tax code further 
in the wrong direction, increasing the profitability of shifting jobs 
abroad.
  If enacted, these provisions greatly enhancing the value of foreign 
tax credits will inevitably lead to the export of more American jobs. 
That is not just my opinion. Let me cite a statement from the Finance 
Committee Democratic staff's analysis of the bill:

       [A] dollar of taxes paid today is more costly than a dollar 
     paid next year. Thus, on a present value basis, deferral 
     represents significant tax savings--and the savings are 
     greater the longer taxes are deferred. Accordingly, as a 
     general matter, the tax burden on investment abroad is lower 
     than on identical investment in the United States in any case 
     where the tax rate imposed by the foreign host government is 
     lower than the U.S. tax rate on identical investment. As a 
     consequence, deferral poses an incentive for U.S. firms to 
     invest abroad in low-tax countries.

  Creating ``an incentive for U.S. firms to invest abroad in low-tax 
countries''--worth billions of dollars--just what we should not be 
doing, making an already bad situation for American workers worse!
  Not surprisingly, the proponents of this legislation all want to talk 
about the tax benefits it will provide for domestic manufacturers, 
helping them pressure American jobs. However, the multi-national tax 
breaks in Title II will seriously undercut that goal. They will cost 
jobs, reducing the net benefit that American workers receive from this 
bill. Our corporate tax laws should be rewritten to increase the cost 
of exporting jobs and decrease the cost of maintaining jobs in America. 
Title II does the opposite. These international provisions should be 
removed from the bill, and the tax dollars saved should be used to make 
the tax benefits for domestic manufacturing more robust. That would 
truly make this legislation a JOBS bill we could all be proud of.
  Mrs. FEINSTEIN. Mr. President, I rise in favor of the Jumpstart Our 
Business Strength (JOBS) Act.
  This is far from a perfect bill.
  But without this legislation, U.S. companies will face increasing 
tariffs as a result of a World Trade Organization ruling that 
determined that significant portions of our Federal tax code ran 
counter to international trade laws.
  Additionally, I voted for it because on balance it provides important 
tax relief for California businesses and labor protections for 
California workers.
  This bill will: effectively provide a 3 percent tax cut for 
manufacturers; give manufacturers a 50 percent tax credit for the cost 
of adding jobs; extend the research tax credit through 2005; protect 
hundreds of thousands of workers from cuts in Federal overtime 
protections; prevent the Federal Government from spending taxpayer 
dollars on contracts with companies that use foreign labor when there 
are domestic alternatives; provide a tax credit for companies which 
produce energy by using underbrush and other potentially hazardous 
fuels found in our forests; provide a tax credit for consumers who buy 
hybrid vehicles; and protect the California film industry and the jobs 
it creates.
  Since January 2001, California has lost 350,000 manufacturing sector 
jobs.
  A 3 percent tax cut for manufacturers, coupled with a 50 percent tax 
credit for the cost of adding new jobs, will help us create more jobs 
in California.
  The research tax credit will also help California, potentially more 
than any other State. Productivity growth in recent years has been 
driven by the combination of new technology and investments in capital 
goods, research and development, workers, and public infrastructure.
  To continue this pattern of growth, the focus must now be on 
providing incentives to companies that invest, innovate, and create the 
new capital and knowledge that drive the U.S. economy.
  Since its enactment in 1981, the research tax credit has provided a 
powerful and effective incentive for firms to increase research 
spending.
  The tax credit lowers the cost of conducting research in the United 
States.
  This credit makes a real difference in the amount of research 
undertaken and jobs created in the U.S.
  I also support the Harkin amendment which was adopted as part of this 
legislation. This amendment will prevent the White House from 
implementing changes in existing overtime laws that reduce the number 
of workers protected by labor laws.
  Last year the White House proposed redefining the job descriptions of 
millions of workers, thereby eliminating their right to Federal 
overtime protection.
  After many in this chamber raised serious concerns over such a 
change, the administration released final rules that made a 
significant, yet insufficient, change to those draft rules.
  Unless we act, these rules will take effect later this year.
  If the Department of Labor's own numbers are correct, then more the 
117,000 individuals could lose overtime protection. If they are wrong, 
it could be millions.
  These rule changes would wipe out overtime pay protections and 
increase work hours. In California alone, several hundred thousand 
workers could lose their Federal overtime protection. However, State 
law will continue to protect most workers from the most harmful effects 
of this rule change.
  But, some public employees and many in the film industry won't be so 
lucky.
  Although most workers in California will maintain their right to 
overtime through protections granted by State law, the rule change 
represents a movement in the wrong direction when it comes to 
protecting working families.
  I also support provisions in the bill that will prevent the Federal 
Government from spending taxpayer money on contracts that use labor 
located outside of the United States.
  Although our Nation has entered a period of economic recovery with 
significant productivity gains in the last several quarters--it is 
clear that a great deal of this productivity comes from two things: 1. 
downsizing of employees, and 2. outsourcing--turning to foreign labor 
in foreign countries.

[[Page 8953]]

  In the past decade, General Electric sent 10,000 information services 
jobs to India; Electronic Data Systems exported 13,800 jobs to several 
nations; Microsoft spent $100 million on a new call center in the 
Philippines; and Citigroup and Bank of America both sent software 
development jobs to India.
  And while corporate earnings are up and the stock market remains 
high, we are continuing to lose service sector and manufacturing jobs.
  I realize that many firms benefit greatly from outsourcing, but it 
damages the long term health of our communities unless we vigorously 
support new job growth.
  We must give companies incentives to keep jobs here, and we must 
ensure that taxpayer money is not used to subsidize outsourcing.
  This legislation will also help protect our environment by providing 
tax credits that encourage companies to produce energy by using 
underbrush and other hazardous fuels from our forests.
  By providing an incentive to companies to remove these hazardous 
fuels from our forests, we will reduce the chance of forest fires in 
the western United States and provide much needed energy to this region 
of the Nation.
  Additionally, this bill contains tax credits directly to consumers 
who purchase hybrid vehicles. These vehicles reduce air pollution and 
cut ozone in California.
  Having said this, however, I recognize that there are significant 
problems with this bill.
  For instance, it is clear that multinational corporations are not 
paying their fair share of taxes.
  This bill allows companies to bring foreign-earned profits back into 
the United States at a greatly reduced tax rate--reduced from the 
current 35 percent to 5.25 percent. This is half as much as the lowest 
personal tax rate paid by individuals--10 percent.
  Under an amendment which I sponsored with Senator Breaux, companies 
would have been allowed to bring foreign-earned profits back to this 
country at the reduced 5.25 percent rate provided that they use those 
repatriated profits for activities that promote job growth or benefit 
employees.
  Sadly, a lobbying effort by large multinational companies helped to 
defeat that amendment.
  What is disturbing about this provision is that an unconscionable 
number of American companies are taking advantage of loopholes in U.S. 
tax law and paying no taxes.
  According to a recent Government Accounting Office report, entitled 
``Comparison of the Reported Tax Liabilities of Foreign and U.S. 
Controlled Corporations, 1996-2000'', 61 percent of U.S.-controlled 
corporations and 71 percent of foreign-owned corporations operating in 
the U.S. reported no tax liability during the period studied.
  This means that approximately two-thirds of all companies operating 
in the U.S. paid absolutely no corporate income taxes between 1996 and 
2000.
  This is stunning.
  Corporate tax receipts used to account for a much greater percentage 
of Federal revenues than they currently do.
  According to the Brookings Institution, in 1945, income taxes from 
corporations accounted for 35.4 percent of Federal receipts. In 1970, 
income taxes from corporations accounted for only 17 percent of Federal 
revenues.
  Today, however, corporate income taxes account for only 7.8 percent 
of Federal revenues.
  This means that corporations are paying a smaller percentage of taxes 
than they have in the past five decades.
  We have got to change the way we tax corporations in America. We have 
got to provide incentives to encourage corporate responsibility.
  Corporations have got to worry about more than just the bottom line. 
They have got to become good corporate citizens. Unfortunately, this 
bill does not do enough to encourage that kind of corporate 
responsibility.
  Going forward, I will seek to return balance to our tax system.
  The middle class is being squeezed, while multi-nationals continue to 
outsource jobs and receive tax breaks for doing it.
  Nevertheless, I will vote to protect California workers by helping to 
foster an environment where manufacturers can hire again. I will 
support research and development in our labs and factories. And, I will 
support protecting overtime protections for California citizens.
  This is by no means a perfect bill.
  But taken as a whole, I believe it is worthy of passage.
  The PRESIDING OFFICER. The Senator from Oklahoma.
  Mr. NICKLES. Madam President, I wish to make a few comments regarding 
the bill.
  First, I compliment my colleagues, Senator Grassley and Senator 
Baucus. We will be successful in passing a bill today. I compliment 
them for it. I believe we have been on this bill for about 14 days, 
maybe 15 days. They have considered hundreds of amendments. In my 
opinion, this bill has gotten pretty expensive and I want to talk about 
it a little bit.
  Senator Kyl and I voted against the bill reported out of the Finance 
Committee primarily because the committee-reported bill had a 
differential rate for manufacturers than other corporations. It said 
manufacturers should have a rate of 32 percent and other corporations 
have a rate of 35 percent.
  Prior to my coming to the Senate, I ran a manufacturing company. I 
should be saying, Thank you very much. I may be going back to a 
manufacturing company. So maybe I should say, Thank you very much. But 
this is terrible tax policy. The Senate and the Congress, if it becomes 
law, will regret it.
  Members might say, Why is that? First, who is a manufacturer? You 
would think it would be very obvious who is a manufacturer but, 
frankly, it is not. The only thing that is certain out of this bill, 
there will be lots and lots of lobbyists lining up to be defined as 
manufacturers because if you are defined as a manufacturer, you get a 
10-percent lower rate than all the other corporations. As a matter of 
fact, the bill defines manufacturers as, obviously, manufacturers, but 
also agriculture. So I have a lot of wheat farmers in Oklahoma who will 
now be manufacturers--software producers, movie producers. Now 
architects and engineers are going to have a lot of people asking they 
be defined as manufacturers.
  Maybe manufacturing employment will rise as a result of people 
redefining themselves as manufacturing, but other than that, I am not 
sure it makes sense.
  We also have a lot of large corporations that do a lot of things. 
They may have a manufacturing division but they also have services or 
they also have financials. Probably one of the biggest beneficiaries 
dollarwise in this bill, it is my guess, would be a company such as 
General Electric or maybe it would be a company such as Boeing or a big 
manufacturer. But General Electric, I would guess their financial 
services are bigger than their manufacturing.
  We will say for part of your corporation you get a corporate rate of 
32 percent, but the rest of your corporation gets 35 percent. Guess 
what. Where you allocate those expenses will make a difference in your 
bottom line. You could have an enormous amount of internal complexity 
trying to decide, Should this be allocated to manufacturing? Should it 
be allocated to our financial services? Should it be allocated to our 
maintenance services? And if you make a mistake, you cannot only be 
audited, but you can be fined. But there is a great incentive to crowd 
as much income, as much profit into the manufacturing sector, and as 
much expenses into the nonmanufacturing sector.
  With the complexity of it--albeit we are all trying to help 
manufacturers, and I think maybe this is very well intended--I think it 
is faulty economic policy.
  Canada tried a differential rate, a lower rate, for manufacturers 
than other corporations, and they did it in 1982. They repealed it in 
2001. I will make a statement on the floor: If this becomes law, we 
will repeal it. Congress will repeal it at some point, because our 
colleagues are going to hear

[[Page 8954]]

from people in the field that it does not work, or that they have been 
audited and the complexity is too much.
  The Treasury Department made these comments:

       Taxpayers will be required to devote substantial additional 
     resources to meeting their tax responsibilities. . . .The 
     resulting costs will reduce significantly the benefits of the 
     proposal. . . .
       It will be difficult, if not impossible, for the IRS to 
     craft simplified provisions tailored to small businesses. . . 
     .
       Significant additional IRS resources will be needed to 
     administer the [manufacturing deduction] provision. . . .
       By distinguishing ``production'' from other activities, the 
     provision places considerable tension on defining terms and 
     designing anti-abuse rules.

  In other words, I have heard lots and lots of people say they are for 
tax simplicity. This is just the opposite, and we are going to regret 
it. I want people to know that. I would like for them to know it before 
it becomes law so we do not make a mistake, because I believe it will 
be a mistake.
  I asked the Congressional Budget Office for the economic analysis of 
this. I would love for the sponsors of the amendment to know this. CBO 
estimates the efficiency gains to the economy are $4 to $7 billion per 
year from an across-the-board rate cut. In other words, if we are going 
to cut corporate taxes, let's cut all corporate taxes the same. You 
could probably do that to a rate of about 33 percent or maybe 33.5 
percent or something. But all corporations would be taxed the same.
  We have always taxed all corporations the same. To have a 
differential rate for manufacturing is a mistake. CBO says the cost--
well, I will finish that. They say: The gains to the economy are $4 to 
$7 billion per year from an across-the-board rate cut. That is $40 to 
$70 billion over the next 10 years. That is a significant amount, given 
the fact the entire bill was $110 billion. Now that was $110 billion 
when we reported it out of committee. The bill now moves around not 
$110 billion, not $120 billion, but $170 billion. It is a big bill. It 
adds a lot of miscellaneous provisions. A lot of them, in this 
Senator's opinion, should not be in the bill.
  I hope and expect to be a conferee, and I will tell our conferees, I 
will always work with my colleague from Iowa because I have great 
respect for him. I think the differential rate is a mistake. I also 
think there are a lot of extraneous provisions that were put into the 
bill that should not be that are bad tax policy, and maybe they need to 
be reviewed very closely before they become law.
  I plan on being pretty active in the conference, to try to accept 
amendments that make sense, to try to make us more competitive, to try 
to avoid the fines and the penalties and the tariffs that are being 
imposed by the EU. I very much agree with the objective of the bill. 
Let's avoid those penalties. Let's not get in a trade war. Let's not 
have countervailing tariffs. But let's not add a bunch of junk to the 
tax policy.
  The table of contents, when the bill passed the Finance Committee, 
was about 5\1/2\ pages. The table of contents usually has about 15 or 
maybe 20 amendments on a page. There are now about 11 or 12 pages on 
the table of contents. In other words, this bill has hundreds of 
provisions and a lot of them have nothing to do with manufacturing. A 
lot of them have nothing to do with being compliant with WTO, being 
compliant with trying to eliminate trade tariffs that are imposed on 
the United States.
  So again, I regret I could not support the bill when it came out of 
the Finance Committee. I know it is going to pass by a big margin 
today. I compliment the sponsors of the amendment, Senator Grassley and 
Senator Baucus. I compliment them for their work and patience and 
tenacity in getting us here. I look forward to working with them in 
conference to hopefully make a better bill, compliant with WTO, 
something we can afford, and something that will not add 1,000 pages to 
the IRS Code.
  I yield the floor.
  Mr. GRASSLEY. Madam President, Senators Kyl and Nickles say that a 
lower rate just for manufacturing is ``bad tax policy and is virtually 
without precedent in our history.''
  Well, this is just wrong and the evidence is staring them in the 
face. FSC/ETI itself is a tax cut for manufacturing. FSC/ETI keeps U.S. 
manufacturing competitive by lowering tax rates on exports. 
Manufacturers could lower their rates by 3 to 8 points.
  The Joint Committee on Taxation says that 89 percent of all FSC/ETI 
benefits go to manufacturing companies. The Kyl-Nickles Treasury 
proposal would take money from FSC/ETI and spread it to other industry 
sectors.
  Kyl-Nickles will be a $50 billion tax increase on manufacturing. It 
will not send the FSC/ETI repeal money back to manufacturing. It is 
mathematically impossible for their proposal to work any other way.
  We know that tax increases do not create jobs. So why would Senator 
Kyl and Nickles increase manufacturing taxes by $50 billion?
  There are other reasons why we did not go the route of the Kyl-
Nickles approach. First, their top-level rate cut would only go to the 
biggest corporations in America. It would not go to family-held S 
corporations, partnerships, or smaller corporations.
  Under the Finance Committee bill, all manufacturers in America, 
regardless of size, get a 3-point rate cut, including S corporations 
and partnerships.
  S corporations and partnerships benefit under current FSC/ETI law, so 
the Kyl-Nickles bill takes a benefit away from them and gives it to 
large corporations.
  Kyl-Nickles claim that a manufacturing tax cut ``penalizes all other 
U.S. businesses.'' I think just the opposite is true. The manufacturing 
sector should not be a revenue offset to give investment bankers a tax 
cut. Kyl-Nickles claim that our definition of manufacturing is too 
difficult to understand. But the definition we use in the JOBS Act is 
the same definition used for both FSC and ETI. It covers property that 
is manufactured, produced, grown or extracted within the United States.
  This definition is 20 years old, but suddenly no one understands what 
it means. We did confirm that manufacturing includes computer software, 
films, and processed agricultural goods. Kyl-Nickles claim that these 
are special interest definitions of manufacturing. However, all of 
these activities qualified as manufacturing under the FSC/ETI rules, 
which have been in place for 20 years.
  We also ensured that farm co-ops get the same benefit that they do 
under current law.
  In response to our energy crisis, we provided that refining oil 
pulled from American wells would qualify as manufacturing.
  They claim it is too difficult to allocate income and expenses in 
determining the amount of manufacturing income. But for 20 years, 
Treasury has had administrative pricing rules on its books that tell 
taxpayers how to allocate expenses in figuring FSCETI benefits. Our 
JOBS bill grants Treasury broad latitude to revise the cost allocation 
rules, based on existing tax principles.
  Kyl-Nickles also claims that Canada recently gave up a similar 
manufacturing rate cut because it did not work. This is not correct. 
For many years, Canada had a special lower rate for their manufacturing 
sector. Canada created their manufacturing rate cut in reaction to the 
U.S. creating FSC back in 1982. They reduced their rate on 
manufacturing so they could stay competitive with the U.S. Canada 
recently repealed that provision because they reduced all their 
corporate rates to the lower manufacturing rate.
  Canada did not repeal their manufacturing rate cut because of its 
complications. Canada ended their manufacturing regime because it 
worked so well, that they extended it to all sectors. But when Canada 
reduced their overall tax rates, they did not do so at the expense of 
their manufacturing sector.
  We put together a strong bipartisan bill, with a 19-to-2 vote out of 
committee, that will cut our manufacturing tax rate this very year. 
There is no purpose in blocking such a strong bipartisan bill. These 
days, is it rare that we can reach such strong agreement on anything.

[[Page 8955]]

  Mr. President, the CBO report says the flat corporate rate cut would 
yield slightly more long-term growth than the JOBS bill. But the reason 
has nothing to do with our manufacturing tax cut.
  CBO says the antitax shelter provisions and Senator Smith's and 
Senator Ensign's homeland reinvestment provisions are the cause.
  CBO says that because we shut down shelters, corporations' taxes 
won't be as low and, therefore, their long-term growth is not as high.
  CBO also concludes that Senators Smith's and Ensign's temporary 1-
year rate cut won't help in the long-term.
  The CBO concludes that a flat rate cut could be more ``efficient'' 
than a manufacturing rate cut. So what do they mean by ``efficient''? 
They said it means that a manufacturing rate cut would cause more 
capital to flow into the manufacturing sector.
  So I have to ask, what is the problem?
  I thought tax cuts were designed to increase capital investment. 
Isn't that what we want for manufacturing?
  If we increase taxes on manufacturing, then capital should flow out 
of the manufacturing sector. Is that what we want?
  The PRESIDING OFFICER. The Senator from Michigan.


                    Amendment No. 3120, As Modified

  Mr. LEVIN. Madam President, I ask unanimous consent that our 
amendment No. 3120 at the desk be modified and called up.
  The PRESIDING OFFICER. Is there objection to the amendment being 
modified?
  Without objection, it is so ordered.
  The clerk will report the amendment.
  The legislative clerk read as follows:

       The Senator from Michigan [Mr. Levin], for himself, Mr. 
     Coleman, and Mr. Harkin, proposes an amendment numbered 3120, 
     as modified.

  Mr. LEVIN. Madam President, I ask unanimous consent that further 
reading of the amendment, as modified, be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment, as modified, is as follows:

       (Purpose: To restrict the use of abusive tax shelters to 
    inappropriately avoid Federal taxation, and for other purposes)

       On page 204, strike lines 3 through 15, and insert the 
     following:

     SEC. 415. PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS.

       (a) Penalty for Promoting Abusive Tax Shelters.--Section 
     6700 (relating to promoting abusive tax shelters, etc.) is 
     amended--
       (1) by redesignating subsections (b) and (c) as subsections 
     (d) and (e), respectively,
       (2) by striking ``a penalty'' and all that follows through 
     the period in the first sentence of subsection (a) and 
     inserting ``a penalty determined under subsection (b)'', and
       (3) by inserting after subsection (a) the following new 
     subsections:
       ``(b) Amount of Penalty; Calculation of Penalty; Liability 
     for Penalty.--
       ``(1) Amount of penalty.--The amount of the penalty imposed 
     by subsection (a) shall not exceed 100 percent of the gross 
     income derived (or to be derived) from such activity by the 
     person or persons subject to such penalty.
       ``(2) Calculation of penalty.--The penalty amount 
     determined under paragraph (1) shall be calculated with 
     respect to each instance of an activity described in 
     subsection (a), each instance in which income was derived by 
     the person or persons subject to such penalty, and each 
     person who participated in such an activity.
       ``(3) Liability for penalty.--If more than 1 person is 
     liable under subsection (a) with respect to such activity, 
     all such persons shall be jointly and severally liable for 
     the penalty under such subsection.
       ``(c) Penalty Not Deductible.--The payment of any penalty 
     imposed under this section or the payment of any amount to 
     settle or avoid the imposition of such penalty shall not be 
     deductible by the person who is subject to such penalty or 
     who makes such payment.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to activities after the date of the enactment of 
     this Act.
       On page 207, strike lines 1 through 18, and insert the 
     following:

     SEC. 419. PENALTY FOR AIDING AND ABETTING THE UNDERSTATEMENT 
                   OF TAX LIABILITY.

       (a) In General.--Section 6701(a) (relating to imposition of 
     penalty) is amended--
       (1) by inserting ``the tax liability or'' after ``respect 
     to,'' in paragraph (1),
       (2) by inserting ``aid, assistance, procurement, or advice 
     with respect to such'' before ``portion'' both places it 
     appears in paragraphs (2) and (3), and
       (3) by inserting ``instance of aid, assistance, 
     procurement, or advice or each such'' before ``document'' in 
     the matter following paragraph (3).
       (b) Amount of Penalty.--Subsection (b) of section 6701 
     (relating to penalties for aiding and abetting understatement 
     of tax liability) is amended to read as follows:
       ``(b) Amount of Penalty; Calculation of Penalty; Liability 
     for Penalty.--
       ``(1) Amount of penalty.--The amount of the penalty imposed 
     by subsection (a) shall not exceed 100 percent of the gross 
     income derived (or to be derived) from such aid, assistance, 
     procurement, or advice provided by the person or persons 
     subject to such penalty.
       ``(2) Calculation of penalty.--The penalty amount 
     determined under paragraph (1) shall be calculated with 
     respect to each instance of aid, assistance, procurement, or 
     advice described in subsection (a), each instance in which 
     income was derived by the person or persons subject to such 
     penalty, and each person who made such an understatement of 
     the liability for tax.
       ``(3) Liability for penalty.--If more than 1 person is 
     liable under subsection (a) with respect to providing such 
     aid, assistance, procurement, or advice, all such persons 
     shall be jointly and severally liable for the penalty under 
     such subsection.''.
       (c) Penalty Not Deductible.--Section 6701 is amended by 
     adding at the end the following new subsection:
       ``(g) Penalty Not Deductible.--The payment of any penalty 
     imposed under this section or the payment of any amount to 
     settle or avoid the imposition of such penalty shall not be 
     deductible by the person who is subject to such penalty or 
     who makes such payment.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to activities after the date of the enactment of 
     this Act.

  Mr. LEVIN. Madam President, I am offering this amendment along with 
our colleague, Senator Coleman. I understand the amendment has been 
cleared now on both sides of the aisle. I very much appreciate the 
effort that has been put into this matter by Senator Grassley and 
Senator Baucus. They have been battling abusive tax shelters for years 
now, and it is a privilege to join them in this fight by providing the 
IRS with stronger enforcement tools.
  Abusive tax shelters are undermining the integrity of our tax system, 
robbing the Treasury of tens of billions of dollars each year, and 
shifting the tax burden from high income corporations and individuals 
onto the backs of the middle class.
  The bill before us contains a host of important reforms to combat 
abusive tax shelters, including codifying and strengthening the 
definition of when a shelter has ``economic substance.'' But there is 
an area where the underlying bill falls short and unnecessarily so. 
That's on the penalties for the people who design and sell the abusive 
shelters. The bill sets the penalty at 50 percent of the fees earned by 
these promoters, meaning they get to keep half of their ill-gotten 
gains.
  That is the provision that our amendment addresses, but we 
significantly toughen this provision in a way which I think this body 
will totally approve.
  The amendment I originally filed proposed raising the penalty on 
abusive tax shelter promoters and those who aid or abet tax evasion to 
150 percent. Today we have reached a compromise, agreeing to set the 
penalty at 100 percent, which will ensure that those who peddle abusive 
tax shelters will not get to keep a single penny of their ill-gotten 
gains.
  The issue is whether when you have an abusive tax shelter, one which 
robs the Treasury of millions of dollars, the people who cook up those 
tax shelters are going to be penalized in any significant way. Will the 
accountants or the lawyers or the investment bankers--the people who 
design these deceptive and sham tax shelters, which are abusive and 
have no economic purpose, except to avoid taxes--will they be deterred 
from doing this? And if they do it, will they be penalized, at least to 
the extent of having their ill-gotten gains being taken back from them? 
That is the issue.
  The current law is like a slap on the wrist. It is like a parking 
ticket. These abusive tax shelters, which have been designed by the 
banks and the accounting firms, and which have made them millions of 
dollars, result in a maximum fine of $1,000 under current law.

[[Page 8956]]

  What our amendment does is say, if you design and promote an abusive 
tax shelter which has no economic substance and you are found 
responsible for doing that, the IRS can get all of your fee that is 
ill-gotten and wrongfully obtained for cooking up that tax shelter--not 
$1,000 of the fee, not half of the fee, as was originally proposed in 
the bill, but the entire fee is going to be recoverable by the IRS.
  We can take a quick look at one of these tax shelters. This is called 
Flagstaff. I am not going to try to explain what that tax shelter you 
are looking at does. It is obviously inexplicable. It has all of this 
mumbo jumbo, all of these boxes and arrows that were intended by JP 
Morgan Chase to create an impression of economic activity when there 
was none. That is what this bowl of spaghetti is all about: to create a 
sham impression that there was some economic substance to these 
transactions when, in fact, there was no economic substance. They were 
cooked up in order to create the appearance of economic substance and, 
thereby, obtain a tax deduction for them.
  The question is, when that happens, whether we are going to say to 
these firms that design these tax shelters for Enron, or for whoever: 
We are not going to let you, the designers, the perpetrators--who are 
called aiders and abettors in the law, but are really the promoters of 
the tax shelters--we are not going to let you keep those ill-gotten 
fees. We are going to recover those for the Treasury of the United 
States.
  That is the only real deterrent we have.
  I want to quickly show how some of these firms analyze these fees 
they get. Again, we are talking about millions of dollars in fees. 
These are cookie-cutter tax shelters that are designed and sold by the 
hundreds to people who can use a tax deduction for, usually, their 
capital gains, but are not engaged in economic activity which would 
justify the non-payment of tax on these capital gains.
  This is what KPMG did when analyzing one of their phony tax shelters: 
First, they look at the financial exposure to the firm. It is minimal. 
So what they are saying is: Hey, we can engage in this. We can get away 
with it because there is no financial exposure.

       . . . we conclude that the penalties would be no greater 
     than $14,000 per $100,000 in KPMG fees. . . . For example, 
     our average deal would result in KPMG fees of $360,000 with a 
     maximum penalty exposure of only $31,000.

  They do a cost-benefit analysis.
  They cook up and design an abusive tax shelter and then say: Now 
should we really go with this? Shall we peddle this, promote it, look 
for people who can benefit from it, sell it for hundreds of thousands 
of dollars and take the risk that we will be caught? Because what 
happens if we are caught? We are going to be paying a few thousand 
dollars in penalties and making $100,000. Our maximum exposure, our 
financial exposure, is minimal.
  That is what this amendment changes.
  Last November, the Permanent Subcommittee on Investigations, on which 
Senator Coleman is the chairman and I am the ranking member, held 
hearings that provided an inside look at how respected accounting 
firms, banks, investment advisors, and lawyers have become high-powered 
engines behind the design and sale of abusive tax shelters.
  These hearings were the culmination of a year-long investigation into 
abusive tax shelters, which first began by pulling the curtain away 
from one of Enron's sham tax transactions. At the November hearings, we 
released a report by my subcommittee staff on four case histories of 
abusive tax shelters developed and marketed by KPMG. At the hearings 
themselves, we heard from a number of accounting firms, banks, 
investment firms, and others.
  One of the key findings of the subcommittee investigation was that it 
was not taxpayers visiting their tax advisors that provided the engine 
for the creation of abusive tax shelters, but rather hordes of tax 
advisors cooking up one complex scheme after another, and then peddling 
them to potential customers. There are legitimate tax shelters and 
abusive ones. The abusive shelters are marked by one characteristic: 
there is no real economic or business rationale other than a tax 
reduction. We found the abusive shelters being packaged up as generic 
``tax products'' with boiler-plate legal and tax opinions, followed by 
elaborate marketing schemes to peddle these products to literally 
thousands of taxpayers across the country.
  It is the insight gained during our close look at these shelters that 
led me and Senator Coleman to introduce the Tax Shelter and Tax Haven 
Reform Act, S. 2210. While the Levin-Coleman bill addresses a wide 
range of tax shelter issues, our amendment focuses on one key issue: 
the woefully inadequate penalties that are now on the books for the tax 
shelter promoters who concoct and peddle abusive shelters.
  Existing tax shelter penalties are a joke. They provide no deterrent 
at all. The story begins with Enron, and I think the Enron scandal has 
shown us one reason this amendment is so important. The Flagstaff 
example I talked about earlier was designed to save Enron more than $60 
million in taxes. The whole scam was built around a sham $1 billion 
loan that was issued to Enron but was repaid in nanoseconds, and then 
used to claim various tax benefits as well as creating a false 
impression of profits on the balance sheet. JP Morgan Chase designed 
and sold this concoction to Enron for more than $5 million. After Enron 
collapsed and this scam came to light, we learned that JP Morgan had 
sold the same abusive tax shelter to at least one other company as 
well.
  Under Section 6700 of the tax code prohibiting the promotion of 
abusive tax shelters, JP Morgan was subject to a whopping $1,000 
penalty. Let me repeat: For one tax shelter which was abusive because 
it was a sham and a deception, JP Morgan Chase's ill-gotten gain from 
one company, Enron, was $5 million. Its penalty exposure to the IRS 
under current law was $1,000.
  As IRS Commissioner Mark Everson said when he testified at our tax 
shelter hearings, the current tax shelter promoter penalty is ``chump 
change.'' To continue quoting Commissioner Everson: ``We need 
significantly increased penalties to hit the promoters who don't get 
the message where it counts, in their wallets.''
  Our tax shelter investigation found some fascinating documents as 
well, including one I have shown here today in the KPMG memo that shows 
a particular tax shelter promoter performing a specific cost-benefit 
analysis when deciding whether or not to take the risk of peddling an 
abusive shelter. The third paragraph of this KPMG memo says:

       First, the financial exposure to the Firm is minimal. Based 
     upon our analysis of the applicable penalty sections, we 
     conclude that the penalties would be no greater than $14,000 
     per $100,000 in KPMG fees. . . . For example, our average 
     deal would result in KPMG fees of $360,000 with a maximum 
     penalty exposure of only $31,000.

  The fact that all KPMG could lose if caught was a small part of its 
fee was a driving consideration in KPMG's decision to take the risk. 
This memo is proof that weak penalties encourage tax shelters and that 
tough penalties would deter them. Congress needs to enact meaningful, 
tough penalties to deter promoters from pocketing any gains from 
designing and peddling abusive tax shelters. We need to deter folks 
from making a cost-benefit analysis that encourages the promotion of a 
tax shelter they know is not likely to withstand scrutiny.
  Our amendment would do just that by strengthening penalties for 
promoting abusive tax shelters.
  Our amendment focuses on two key penalties. The first is the penalty 
for promoting an abusive tax shelter under Tax Code section 6700. The 
second is the penalty for aiding and abetting tax evasion under Tax 
Code section 6701. It would increase the penalty for both types of 
misconduct.
  Currently, the penalty under section 6700 of the Tax Code is the 
lesser of $1,000 or 100 percent of the promoter's gross income derived 
from the prohibited tax shelter. That means in most cases, the maximum 
fine is $1,000. That figure is laughable, when many abusive tax 
shelters are selling for $100,000 or

[[Page 8957]]

$250,000 apiece. Our investigation uncovered tax shelters that were 
sold for millions each. The Enron tax avoidance scam sold for more than 
$5 million. We also saw instances in which the same so-called tax 
product was sold to more than 100 clients. A $1,000 fine is like a 
parking ticket for raking in millions illegally.
  The bill before us is an improvement over the status quo, but an 
unnecessarily modest one. It would increase the penalty for promoting 
an abusive tax shelter to 50 percent of the promoters' gross income 
from the prohibited tax shelter. Why should anyone who pushes an 
abusive tax shelter--an illegal tax shelter that robs our Treasury of 
much needed revenues--get to keep half of his ill-gotten gains? And 
what deterrent effect is created by a penalty that allows promoters to 
keep half of their fees if caught, and all of them if they are not? 
That half-hearted penalty is not tough enough to do the job that needs 
to be done.
  At the very least, a meaningful penalty for those who peddle abusive 
tax shelters must ensure that the tax shelter promoter does not profit 
from its wrongdoing. It must require the wrongdoer to disgorge every 
penny of the income obtained from selling the shelter. Our amendment 
would do just that.
  My original amendment would have gone further. It would have created 
a maximum penalty equal to 150 percent of the promoter's gross income 
from the prohibited tax shelter. Under that penalty, the first 100 
percent would have forced the disgorgement of the ill-begotten gains, 
and the remaining 50 percent would have imposed what I consider to be 
an actual penalty on top of that. But today, our amendment does not go 
that far. It stops at 100 percent. While that is not as tough as called 
for in the Levin-Coleman bill, it is a reasonable compromise and will 
ensure that those who promote abusive tax shelters will lose 100 
percent of their ill-gotten gains.
  The underlying bill has the same problem in the way it addresses many 
professional firms the accountants, law firms, banks, and investment 
advisors that aid and abet the use of abusive tax shelters and enable 
taxpayers to carry out abusive tax schemes. The underlying bill takes 
the same half-hearted approach of denying only 50 percent of the gross 
income obtained by the aider and abettor, and allowing the wrongdoer to 
keep half of its ill-gotten gains. Just as we do with tax shelter 
promoters, our amendment would raise the penalty under tax code section 
6701 to 100 percent of the aider or abettor's gross income, thereby 
denying them 100 percent of their ill-gotten gains. In addition, our 
amendment would make an important change to section 6701 itself by 
eliminating a provision which limits the penalty to persons who prepare 
tax returns. Instead, our amendment would apply the penalty to all 
wrongdoers who knowingly aid and abet the understatement of tax 
liability, not just tax return preparers.
  Finally, while I am pleased that today we have reached agreement to 
accept a 100 percent penalty, I would like to take this opportunity to 
observe that penalties that cause wrongdoers to not only disgorge their 
ill-gotten gains, but also pay a monetary fine on top of that are fair 
and provide a meaningful deterrent.
  There is no reason why those who concoct and peddle these shenanigans 
should get off any easier than the taxpayers who use them. Just last 
week the IRS came out with an initiative to allow taxpayers who used a 
tax shelter known as ``Son of Boss'' to come clean. This tax shelter 
was marketed beginning in the late 1990s and was one of the tax 
shelters we looked at during our investigation. Under the terms of the 
IRS initiative, taxpayers are required to come forward and pay 100 
percent of the tax they tried to escape. On top of that, the IRS can 
impose a penalty that ranges up to an additional 40 percent. That means 
the taxpayer faces up to a 140 percent penalty.
  Son of Boss is a hellaciously complicated tax shelter that was 
dreamed up and carried out by tax shelter promoters and other 
professionals. The taxpayers who bought this shelter have to cough up 
100 percent plus. It is only fair that the tax shelter promoters who 
made so many millions of dollars in profit on these schemes should do 
no less.
  It is also important to realize that Congress has frequently set 
penalties for corporate misconduct and financial crimes that require 
wrongdoers to disgorge 100 percent of their ill-gotten gains plus pay a 
penalty on top of that, and courts have upheld those penalties as both 
constitutional and enforceable. For example, under current law, 
violation of the federal securities laws results in 100% disgorgement 
plus a civil fine of up to 100 percent, for a total civil penalty equal 
to 200 percent. In the special case of insider trading, violations 
result in 100 percent disgorgement plus a civil fine of up to 300 
percent, for a total civil penalty equal to 400 percent. Manipulation 
of commodity markets results in a civil fine of up to 300 percent. 
False claims submitted to the Federal Government result in a civil fine 
of up to 300 percent. Even the tax code has penalties of this 
magnitude; for example, personally profiting from a charity results in 
a civil fine of up to 200 percent.
  Men and women in our military are putting their lives on the line 
every day for our nation. To make sure we can provide them with the 
resources they need, all Americans need to contribute their fair share 
in taxes. While the bill before us improves the tax shelter penalties 
over current law, we can and should do much better. We need penalties 
that truly deter those who make a profit from peddling abusive tax 
shelters and aiding and abetting tax evasion, not penalties that would 
allow the promoters to keep half of their ill-gotten gains.
  It is long past time to stop in their tracks the shelter abusers and 
the promoters who push them. This amendment would send the message to 
promoters that their tax schemes are unfair and unpatriotic. Again, I 
appreciate the bill managers accepting it into the bill.
  I also thank Senator Coleman for being such a strong advocate of this 
approach, putting in the law a real deterrent to end these abusive tax 
shelters which have cost the Treasury and the average taxpayers of this 
country, who have to share the burden, so many tens of billions of 
dollars. That is now hopefully going to end.
  Again, I thank the chairman and ranking member of the Finance 
Committee for the way they have worked with us to adopt this amendment.
  The PRESIDING OFFICER (Mr. Alexander). Who yields time?
  Mr. LEVIN. I yield the balance of my time to my friend from 
Minnesota.
  The PRESIDING OFFICER. The Senator from Minnesota.
  Mr. COLEMAN. Mr. President, I commend my friend, the Senator from 
Michigan, for his leadership in protecting the interests of all 
taxpayers by originally bringing to light the nature of these abusive 
tax shelters. I had the opportunity to work with him to make a 
difference, to help shape this amendment.
  I also thank Chairman Grassley and Senator Baucus for accepting this 
amendment and for their leadership on this issue. I am glad the Senator 
from Michigan didn't try to explain and walk through all the details of 
his chart of these sham tax shelters. The bottom line is very clear: 
The Government gets ripped off. The taxpayers get ripped off. These 
abusive tax shelters were established for the purpose of avoiding tax 
liability. Those who suffer are all the taxpayers. By this amendment, 
by substantially increasing the penalties, by putting some real 
deterrent in place, I believe public trust in our laws will be 
restored.
  In November, as chairman of Permanent Subcommittee on Investigations, 
I held two hearings on abusive tax shelters. The permanent subcommittee 
spent one year investigating the tax shelter industry. It became clear 
to the subcommittee that some tax avoidance schemes are clearly 
abusive. These abusive shelters relied on sham transactions with no 
financial or economic utility other than to manufacture tax benefits.
  According to GAO, abusive tax shelters robbed the Treasury of $85 
billion over 6 years. The use of these tax shelters exploded during the 
high flying

[[Page 8958]]

1990s, when many firms were awash in cash and more concerned with 
generating fees than being compliant with the Code. The lure of 
millions of dollars in fees clearly played a role in the decision on 
the part of tax professionals to drive a Brinks truck through any 
purported tax loophole.
  Abusive tax shelters require accountants and financial advisors who 
develop and structure transactions to take advantage of loopholes in 
the tax law. Lawyers provide the cookie-cutter tax opinions deeming the 
transactions to be legal. Bankers provide loans with little or no risk. 
Yet the amount of the loan creates a multimillion-dollar tax loss.
  This became a game. Otherwise reputable professionals were able to 
earn huge profits by providing services that offered a veneer of 
legitimacy to the transactions. The parties were careful to hide the 
transaction from IRS detection by failing to register and failing to 
provide lists of clients who used the transactions to the IRS.
  It was clear to the subcommittee that the promoters of these tax 
shelters failed to register with the IRS partly because the penalties 
for failing to register were so low compared to expected profits. As my 
colleague from Michigan noted, with the risk-benefit ratio, it was 
worth avoiding the law because if you got caught it didn't matter; you 
made so much money. The penalties were so little that you took the risk 
of avoiding the law. In fact, the benefits were great.
  This amendment changes that. Current provisions of the JOBS bill 
provide for increased penalties to address abusive tax shelters. 
However, I agree with Senator Levin that even stronger penalties are 
needed. The provision to substantially increase penalties to promoters 
who manufacture these sham transactions so they must give back all of 
their ill-gotten gains is vital to restoring the integrity of our tax 
laws and deterring future avoidance.
  This amendment also increases the amount of penalties for persons who 
knowingly aid and abet a taxpayer in understating their tax liability. 
Current law and the JOBS bill only apply this penalty to tax return 
preparers. We now get the aiders and abettors. However, the close 
collaboration between the lawyers, accountants, financial advisors, and 
banks requires us to apply penalties to all material aiders and 
abettors, not just those who prepare the tax returns.
  This is not a victimless crime. It is not the Government that loses 
the money. It is the people of America, average working families who 
will bear the brunt of lost revenue so that a handful of lawyers and 
accountants and their clients can manipulate legitimate business 
practices to make a profit. Abusive transactions are used to avoid 
detection by the IRS. This amendment sends a clear message that this 
Congress intends to put an end to abusive sham transactions.
  With the passage of this amendment, the price to be paid for 
participating and for promoting abuse will be very steep indeed--all of 
your profits.
  I am appreciative that the managers have joined me in supporting this 
amendment.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. I urge adoption of the Levin-Coleman modified 
amendment.
  The PRESIDING OFFICER. Is there further debate? If not, the question 
is on agreeing to amendment No. 3120, as modified.
  The amendment (No. 3120) was agreed to.
  Mr. GRASSLEY. Mr. President, I move to reconsider the vote.
  Mr. BAUCUS. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. GRASSLEY. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                       Ambassadorial Appointments

  Mr. REID. Mr. President, I was in the Chamber this morning when the 
distinguished Senator from Tennessee, the majority leader, complained 
about our holding up--the Democrats, the minority--appointments to our 
ambassadorial corps. I thought that doesn't sound right, but I wanted 
to make sure I had my facts right, even though I had a tremendous 
impulse to say: Mr. Leader, you are just wrong.
  After having looked at the facts, I can say now: Mr. Leader, you were 
wrong this morning.
  This is an important issue. I have been fortunate to have started off 
in the House of Representatives, and being on the Foreign Affairs 
Committee, one of my assignments was to travel. I have had the good 
fortune of being able to travel, in the more than two decades I have 
been in Congress, all over the world. I am tremendously impressed with 
the places I go, where we have young men and women who serve, as 
Senator Dodd did. I think he went to the Dominican Republic. We have 
had other examples, but that is the only one I know of people who 
served in the Peace Corps. This is a wonderful organization. They do 
wonderful things for the country. I admire so much what they do.
  But there is no one I admire as much as our career Foreign Service 
officers, our diplomatic corps. They do such wonderful work, without 
any notoriety at all. So any time we talk about our State Department, 
our diplomatic corps, I want to defend them. So I know this is an 
important issue raised by the majority leader this morning. But I 
thought it would be important for me to respond to some of the current 
concerns I have heard expressed this morning.
  I was on the Senate floor last Thursday, and I was pleased that the 
Senate confirmed 20 Ambassadors that day, including the Ambassador to 
Iraq, Ambassador Negroponte, whose assignment will begin after June 30 
of this year. His nomination was completed with near record speed, 
given that he was confirmed 1 week after he was nominated by the 
President of the United States. The other 19 Ambassadors confirmed that 
day were confirmed less than a week after they were reported out of the 
Foreign Relations Committee. That is remarkably good work.
  By confirming these 19, the Senate filled 3 vacant U.S. Embassies. We 
had hoped to confirm other career Foreign Service officers that day. 
For example, Nepal--I have been there. There are very important events 
going on in that country now that we have an Ambassador there. As we 
know, this has been a site of considerable violence.
  Unfortunately, I have been advised that the objection to the 
confirmation of James Frances Moriarity, of Virginia, a career Foreign 
Service officer, doesn't come from us; it comes from the majority, 
meaning this Embassy will continue to be vacant for the foreseeable 
future.
  At the moment, I am told by the State Department that out of the 
nearly 170 Embassies we have around the world, 8 are vacant. So that 
means 162 of the 170 are filled. Eight are vacant, meaning they have no 
confirmed Ambassador. The President has chosen not to fill two of them. 
So now we are down to six. We have two that are too dangerous to fill, 
for reasons that are apparent--what is going on in the world. That 
knocks us down to four. One is awaiting action in the Foreign Relations 
Committee. The Republicans objected to filling another. The last two, 
Sweden and Finland, are vacant because President Bush's political 
appointees--not career Foreign Service officers, which I have no 
objection to because we need a mix--his political appointees decided 
they could not stand being there much longer and they left.
  So my dear friend, for whom I have so much respect, the majority 
leader, better have his staff give him better facts because he is 
absolutely, totally wrong, for the reasons I have just indicated.
  Last week, some of our friends on the majority side noted that the 
vacancies

[[Page 8959]]

send a negative signal to these countries. Let the President move with 
dispatch to fill them then.
  I also hope the President will work out another problem. We have 
Ambassadors who have been confirmed by the Senate to posts around the 
world, but they are not doing their work in the countries to which they 
were sent. They have been sent to Iraq. Ambassadors assigned to the 
Philippines, Kuwait, and Bahrain are in Iraq, not in the countries to 
which they were assigned. I know it is important that they help out in 
Iraq, but that is not the way it should be. At least, it should not be 
that people are complaining about these Ambassadors not having jobs and 
the ambassadorial corps being empty and that we are holding it up.
  I recognize the jobs these men are doing in Iraq are important. The 
things they are performing in Iraq are obviously important or they 
would not have been sent there. But don't complain about the minority 
holding up Ambassadors because we are not, for the simple math I have 
given you. So I hope we can consider the whole picture and not come to 
the floor and complain and cry and whine about the Ambassadors not 
being confirmed because of us. It is simply not true.
  If there is other business to come before the Senate, I will withhold 
suggesting the absence of a quorum.
  The PRESIDING OFFICER. The Senator from Iowa is recognized.


                           Amendment No. 3133

  Mr. GRASSLEY. Mr. President, I ask unanimous consent to call up 
amendment No. 3133 and ask for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Iowa [Mr. Grassley] proposes an amendment 
     numbered 3133.

  Mr. GRASSLEY. Mr. President, I ask unanimous consent that further 
reading of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The amendment is printed in today's Record under ``Text of 
Amendments.'')
  The PRESIDING OFFICER. Is there further debate on the amendment?
  If there is no further debate, without objection, the amendment is 
agreed to.
  The amendment (No. 3133) was agreed to.
  Mr. GRASSLEY. Mr. President, I move to reconsider the vote.
  Mr. REID. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. GRASSLEY. Mr. President, I think this is going pretty well now. 
We expect a vote around 6:30.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                    Amendment No. 3040, As Modified

  Mr. GRASSLEY. Mr. President, on behalf of Senator Nickles, I call up 
amendment No. 3040 and send a modification to the desk.
  The PRESIDING OFFICER. Without objection, the clerk will report.
  The legislative clerk read as follows:

       The Senator from Iowa [Mr. Grassley], for Mr. Nickles, 
     proposes an amendment numbered 3040, as modified.

  Mr. GRASSLEY. Mr. President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

 (Purpose: To treat electric transmission property as 15-year property)

       At the end of title VIII, add the following:

     SEC. __. ELECTRIC TRANSMISSION PROPERTY TREATED AS 15-YEAR 
                   PROPERTY.

       (a) In General.--Subparagraph (E) of section 168(e)(3) 
     (relating to classification of certain property), as amended 
     by this Act, is amended by striking ``and'' at the end of 
     clause (iii), by striking the period at the end of clause 
     (iv) and by inserting ``, and'', and by adding at the end the 
     following new clause:
       ``(v) any section 1245 property (as defined in section 
     1245(a)(3)) used in the transmission at 69 or more kilovolts 
     of electricity for sale the original use of which commences 
     with the taxpayer after the date of the enactment of this 
     clause.''.
       (b) Alternative System.--The table contained in section 
     168(g)(3)(B) is amended by inserting after the item relating 
     to subparagraph (E)(iv) the following:

``(E)(v)..........................................................30''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act and prior to July 1, 2006.

  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, we have looked at this amendment on this 
side, and we are agreeable that this amendment should be adopted.
  Mr. GRASSLEY. On this side, too.
  The PRESIDING OFFICER. Without objection, the amendment is agreed to.
  The amendment (No. 3040), as modified, was agreed to.
  Mr. BAUCUS. I move to reconsider the vote.
  Mr. GRASSLEY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. BAUCUS. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 3143

  Mr. GRASSLEY. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. Without objection, the clerk will report.
  The legislative clerk read as follows:

       The Senator from Iowa [Mr. Grassley] proposes an amendment 
     numbered 3143.

  Mr. GRASSLEY. Mr. President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The amendment is printed in today's Record under ``Text of 
Amendments.'')
  Mr. GRASSLEY. I ask for consideration of the amendment.
  The PRESIDING OFFICER. If there is no further debate, without 
objection, the amendment is agreed to.
  The amendment (No. 3143) was agreed to.
  Mr. BAUCUS. Mr. President, I ask for the yeas and nays on the bill.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The question is on the engrossment and third 
reading of the bill.
  The bill was ordered to be engrossed for a third reading and was read 
the third time.
  The PRESIDING OFFICER. The bill having been read the third time, the 
question is, Shall the bill, as amended, pass? The clerk will call the 
roll.
  Mr. McCONNELL. I announce that the Senator from Arizona (Mr. McCain) 
is necessarily absent.
  Mr. REID. I announce that the Senator from North Carolina (Mr. 
Edwards) and the Senator from Massachusetts (Mr. Kerry) are necessarily 
absent.
  The result was announced--yeas 92, nays 5, as follows:

                      [Rollcall Vote No. 91 Leg.]

                                YEAS--92

     Akaka
     Alexander
     Allard
     Allen
     Baucus
     Bayh
     Bennett
     Biden
     Bingaman
     Bond
     Boxer
     Breaux
     Brownback
     Bunning
     Burns
     Byrd
     Campbell
     Cantwell
     Carper
     Chafee
     Chambliss
     Clinton
     Cochran
     Coleman
     Collins
     Conrad
     Cornyn
     Corzine
     Craig
     Crapo
     Daschle
     Dayton
     DeWine
     Dodd
     Dole
     Domenici
     Dorgan
     Durbin
     Ensign
     Enzi
     Feingold
     Feinstein
     Fitzgerald
     Frist
     Graham (SC)
     Grassley
     Hagel
     Harkin
     Hatch
     Hutchison
     Inhofe
     Inouye
     Jeffords
     Johnson
     Kennedy
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     Lott
     Lugar
     McConnell
     Mikulski
     Miller
     Murkowski
     Murray
     Nelson (FL)
     Nelson (NE)
     Nickles
     Pryor
     Reed (RI)
     Reid (NV)
     Roberts
     Rockefeller
     Santorum
     Sarbanes
     Schumer
     Sessions
     Shelby
     Smith
     Snowe

[[Page 8960]]


     Specter
     Stabenow
     Stevens
     Talent
     Thomas
     Voinovich
     Warner
     Wyden

                                NAYS--5

     Graham (FL)
     Gregg
     Hollings
     Kyl
     Sununu

                             NOT VOTING--3

     Edwards
     Kerry
     McCain
  The bill (S. 1637), as amended, was passed, as follows:
  (The bill will be printed in a future edition of the Record.)
  Mr. GRASSLEY. I move to reconsider the vote.
  Mr. WARNER. I move to lay that motion on the table.
  The PRESIDING OFFICER (Mr. Talent). The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, now that this bill has finally passed 
the Senate, I take the opportunity to thank several people.
  First and foremost, I thank Senator Baucus. I am very certain we 
would not be here without his good work and his cooperation. In fact, 
as I have said so many times in speeches, this whole effort started 
when Senator Baucus was chairman of the committee in the last Congress. 
He held hearings and started this process going. He has not only 
cooperated and put in good work during this Congress, but it all 
started under his leadership.
  I also need to thank all the other members of the Finance Committee 
for their time and energy in making this bill a reality. I thank my 
staff on the Finance Committee: Mark Prater, chief tax counsel, and the 
other tax counsels, Ed McClellan, Elizabeth Paris, Dean Zerbe, Christy 
Mistr, and John O'Neill as well as John's predecessor, Diann Howland. 
These individuals, along with Adam Freed, the staff assistant for the 
tax team, have been real workhorses for the committee, keeping the 
lights burning long into the night to make this bill possible.
  For the record, as evidence of the work effort, this bill was 
introduced on the day Hurricane Isabel blew into town. Because of hard 
work, the markup of the bill occurred in a calm environment.
  I also thank the trade staff, particularly Everett Eissenstat, chief 
Trade Counsel, and his team of David Johanson, Stephen Schaefer, Daniel 
Shepherdson, and Zach Paulsen. I also thank Carrie Clark who recently 
left our trade staff. Thanks also needs to be paid to our 
administrative staff, including Carla Martin, Amber Williams, Geoff 
Burrell, and Mark Blair. From my personal staff, I thank Sherry Kuntz 
and Leah Shimp. Also helpful were our Finance Committee press team of 
Jill Kozeny and Jill Gerber, known around the committee as the 
``Jills.'' Lastly, on my side, I thank Kolan Davis and Ted Totman, the 
Committee's staff director and deputy staff director for riding herd on 
all this work.
  In addition, this bipartisan bill would not have been possible 
without close work and cooperation at the staff level. I appreciate and 
thank the minority staff for their good work. I particularly note Russ 
Sullivan, Democratic Staff Director, as well as Pat Heck, Democratic 
Chief Tax Counsel, Matt Stokes, Matt Jones, Matt Genasci, Judy Miller, 
Jon Selib, Liz Leibschutz, Matt Stanton, Dawn Levy, and Anita Horn 
Rizek. In addition, I thank Tim Punke and his trade team, along with 
John Angell, Bill Dauster, and Mike Evans, former Deputy Staff 
Director, for their time and energy.
  I extend my thanks also to George Yin and his staff at the Joint 
Committee on Taxation for providing their extensive knowledge and 
guidance to this effort. I particularly point out the good work of Ray 
Beeman, David Noren, and Brian Meighan. Brian recently left Joint Tax 
for the private sector.
  I also thank Acting Assistant Secretary for Tax Policy, Gregory 
Jenner, and his staff for their assistance on the so-called SILOs tax 
shelter provision of this bill.
  I thank the majority leader, Senator Bill Frist, and his leadership 
staff for all their assistance. The majority leader backed me and 
Senator Baucus all the way on this bill. We would not have the result 
today but for the majority leader's patience, determination, and 
dedication. It was tough going at times, but he and I knew we would get 
the right result. From Senator Frist's staff, I thank Lee Rawls, Eric 
Ueland, Rohit Kumar, and Libby Jarvis.
  I also thank our Senate leadership team and their staffs, especially 
our able whip, Senator McConnell.
  Finally, my thanks go to Jim Fransen, Mark Mathiesen, Mark McGunagle, 
and their capable staff at Legislative Counsel for taking our ideas and 
drafting them into statutory language.
  I would like to tell them all to go home and get a good night's rest 
because the bill has been a very long time working its way through the 
Senate.
  Now, I urge our friends in the other body to pass a companion bill. 
Hopefully, when that bill passes the House, our friends in the Senate 
Democratic leadership will not resist our efforts to go to conference. 
Every month of delay is another month where the Euro tax ratchets up 
another percentage point on our products going to Europe.
  I thank everyone for their cooperation in allowing us to get to this 
point this evening. This, of course, is not the final step in the 
process. The House has not passed their version of the FSC legislation. 
I anticipate the House will send a bill to the Senate at some point. 
When that happens, I hope we will be able to proceed to conference so 
that we are able to get a final product.
  I appreciate the assistance of Senator Baucus throughout this process 
and hope we will be able to send a bill to committee.


                           Order Of Procedure

  Mr. President, following Senator Baucus's remarks, I ask unanimous 
consent that the Senate proceed to a period of morning business, with 
Senators permitted to speak for up to 10 minutes each.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  Mr. GRASSLEY. I yield the floor.
  The PRESIDING OFFICER. The Senator from Montana.
  Mr. BAUCUS. Mr. President, I am very proud of the Senate. The Senate 
worked its will through a very involved and complex tax bill. I might 
add--I don't have the final figures here, but in the case of first 
impression, this probably is one of the largest tax bills the Senate 
has taken up and passed, outside of reconciliation--we don't know yet--
in maybe a decade, or maybe close to two decades.
  I say that because of the importance of protecting Senators' rights. 
I know this sounds like a little inside baseball, but when I say 
``outside reconciliation,'' all of us in the Senate know this means the 
bill was taken up under the usual Senate process, which means Senators 
have the right to offer amendments, have the right to speak as long as 
they can stand on their own two feet, and have the rights Senators 
usually have in taking up bills. Whereas, if this were to be taken up 
under the process we call ``reconciliation,'' then amendments would 
have to be passed very easily; that is, there is no right for extended 
debate. Germaneness rules do not apply; that is, unless cloture is 
invoked.
  So the main point I want to make is that the Senate has done a good 
job. The Senate has taken up a very complicated, very large tax bill, 
and done it the way the Senate should ordinarily do business; that is, 
outside of reconciliation. We are responsible. We can do it. We did it.
  I very much thank my good friend and colleague, the chairman of the 
Finance Committee, who led us in a way to help make that happen. He 
basically did it by being so gracious, by being so fair. He has a 
reputation, we all know, of being one of the most honest and fair 
persons you would ever have the privilege to meet, not only in the 
Senate but in life. His credibility is unquestioned. That is a 
substantial reason why we were able to pass such a messy bill outside 
reconciliation. I thank my friend for his leadership, for his 
friendship, and for all he has done.
  I also especially thank Senator Reid of Nevada. We all know Senator 
Reid is probably one of the masters of the floor. He knows procedure, 
and his main goal is to get things done. He, too, is a man whose word 
is his bond.

[[Page 8961]]

He is invaluable here. If not for the efforts of not only the chairman 
but Senator Reid, I am not so sure we would be here today. He has done 
a super job.
  It is also very appropriate to thank a lot of my staff, and Senator 
Grassley's staff, and many others, which I will do. But before I do 
that, I would like to do something a little bit differently and thank 
some people who helped me with this bill; that is, the people I talked 
with back home who provided ideas on how to structure the FSC/ETI 
replacement bill in a way that made the most sense for our 
manufacturers, not only throughout the country but in my home State of 
Montana.
  This was a great chance for me to learn even more about manufacturing 
in my State, by going to manufacturers in my State and saying: What do 
we need? What can we do to help make this happen?
  Let me give you a few examples.
  The timber industry, for example, has faced very tough economic times 
during the last several years. In the years 2000 and before, many of 
these businesses paid very high taxes on solid profits.
  So a provision in this bill will permit businesses in industries with 
cyclical profits to smooth out their tax rates. This is accomplished by 
permitting a loss to be carried back for up to 5 years. That will help 
a lot.
  I thank Jim Hurst at Owens & Hurst, a small timber company located in 
Eureka, MT, for helping us better understand the economics of the 
timber business. The JOBS bill will help this company and many other 
companies that have very cyclical incomes.
  I might add, too, that the people at Mountain Harvest Pizza Crust 
Company, from Billings--that does not sound like a huge American 
manufacturing company but they are extremely important to Montana, to 
Billings, and to me--helped educate me about the challenges of rising 
costs facing small businesses, and about how the cost of health care 
was getting to be too much to handle.
  I might say, too, not all exporters are large corporations. We 
learned this from Sun Mountain Sports in Missoula. They are an S 
corporation. They export golf bags and other sports equipment. They are 
just the kind of company we want to stay strong so they can keep those 
manufacturing jobs here in the U.S. and so they can continue to export 
overseas.
  Because of discussions with many small businesses such as Mountain 
Harvest Pizza Crust and Sun Mountain Sports, I made sure that every 
manufacturer would get this deduction. So we in the Finance Committee 
produced a bill that gives a deduction not only to C corporations but 
to S corporations, to partnerships, and to sole proprietorships so they 
all could have help and not be left behind by this legislation. The tax 
relief they are getting in this bill will help defray those and other 
rising costs.
  Again, by consulting with the people at home, we were able to realize 
what the FSC/ETI replacement bill should be. It should not be just for 
big C corporations--those are large, publicly held corporations--but, 
rather, for any organization that manufactures, including 
proprietorships, small businesses, et cetera.
  I also thank the people at CHS--that is Central Harvest--who showed 
us the role that cooperatives play in rural America and helped us 
better understand the importance of making this tax deduction pass 
through to the members of cooperatives. Agricultural cooperatives are a 
crucial part of the economy of my State and a lot of the West, and, I 
might add, a lot of other rural parts of America.
  CHS helped to make sure their important contributions were not 
overlooked in this bill. I wanted, as I said, the bill to include all 
American manufacturers, and I have made sure the bill includes the 
agricultural cooperatives that are so important to so many States.
  Also, I thank Elvie Miller at Mountain Meadow Log Homes, who talked 
to us about how integral good research and design is to their business. 
Frankly, with the addition of the amendment by the Senator from Texas, 
we were able to add that provision.
  I also want to thank Leland Griffin and the good folks at Montana 
Refining Company in Great Falls. They pointed out that under the export 
credit this bill will repeal, oil refining operations are not eligible 
for tax benefits. But Montana Refining pointed out that if we are 
converting the laws to a manufacturing deduction, then it should cover 
oil and gas refining operations. Those operations are manufacturing. 
They take raw material, crude oil, and convert it to a usable product--
gasoline and other petroleum products. I offered an amendment in 
committee to include refining operations in the definition of 
manufacturing.
  All of these companies, and many more, were invaluable in passing 
such a strong bill in the Senate. I thank them. I thank them very much 
for adding their part to this bill. Were it not for their very valuable 
contributions, this legislation would not be as good.
  I also thank a lot of people from my office. I don't have the whole 
list. There are so many of them. If we turned the camera over, we could 
see them lined up against the wall over there. Starting with Brian 
Pomper on the far right, he does a very good job, handles a lot of 
trade work. We have Pat Heck over there; Russ Sullivan; Matt Genasci; 
Liz Liebschutz, Matt Stokes, Jon Selib. We have Scott Landes there in 
the corner, Simon Chabel, many others. Wendy Carrey is there; Mac 
Campbell. They are our folks. They do the work. My guess is that if I 
talk much longer, they are going to fall asleep, they are so tired. We 
all very much appreciate, deeply appreciate what they do.
  I have often said that the most noble human endeavor is service--
service to church, to community, to mankind, service to whatever makes 
the most sense to us as human beings. A lot of us who run for public 
office get some of the psychic rewards of service. We see our names in 
newspapers and on TV. Usually that is good, not always but usually.
  However, the folks who work in the Senate, on Joint Tax and 
elsewhere, work harder. And they don't get public recognition for what 
they do. They are the real servants. They are the ones who really 
provide the most noble kind of service. I know I speak for everyone 
listening, for everyone else who stops and thinks about these things if 
only for a nanosecond, when I say how true that last statement is. They 
are the most wonderful folks. I take my hat off to all of them.
  I yield the floor.
  Mr. GRASSLEY. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. McCONNELL. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. McCONNELL. Mr. President, I, too, congratulate Chairman Grassley 
and Senator Baucus for their great work in moving this JOBS bill to 
completion. I certainly express the hope that once the House acts, we 
will be able to go to conference in the normal way that legislation is 
handled and get this important piece of legislation on the President's 
desk at the earliest possible time to prevent further penalties from 
being levied against our companies here in the United States.


                    Amendment No. 3143, As Modified

  Mr. GRASSLEY. Mr. President, I ask unanimous consent, notwithstanding 
the adoption of amendment No. 3143, that the modification which is at 
the desk be agreed to.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment (No. 3143), as modified, was agreed to, as follows:

       ``(ii) there shall be disregarded any item of income or 
     gain from a transaction or series of transactions a principal 
     purpose of which is the qualification of a person as a person 
     described in this paragraph.
       ``(C) Related person.--For purposes of this paragraph, the 
     term `related person' has the meaning given such term by 
     section 954(d)(3).''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

[[Page 8962]]

       On page 335, strike lines 4 through 10, and insert the 
     following:
       (2) Leases to foreign entities.--In the case of tax-exempt 
     use property leased to a tax-exempt entity which is a foreign 
     person or entity, the amendments made by this section shall 
     apply to taxable years beginning after January 31, 2004, with 
     respect to leases entered into on or before November 18, 
     2003.

  Mr. SMITH. Mr. President, I rise today to praise the Senate for its 
passage of S. 1637, the Jumpstart Our Business Strength Act, which 
includes my provision lowering the corporate tax rate on repatriated 
profits. In one short year, this provision will bring $400 billion into 
our economy. This money is going to create over 650,000 new jobs and 
get our economy moving again. At the same time, it's going to help 
reduce the federal deficit.
  I believe this is one of the most important provisions of the JOBS 
Act regarding job growth and strengthening our economy. This provision 
would require that repatriated funds be reinvested in the United States 
for hiring workers and worker training, infrastructure, R&D, capital 
investment, or financial stabilization for the purposes of job 
retention or creation. It is my understanding that the concept of 
financial stabilization, for this purpose, encompasses use of the 
repatriated funds to repay debt of the U.S. parent corporation. Use of 
these funds to pay down debt is a qualified use for purposes of the 
provision. In fact, debt repayment will strengthen U.S. corporate 
balance sheets, which will improve a company's ability to employ and 
hire workers.
  I thank the chairman for his strong support of this repatriation 
provision and look forward to swift action by the House.

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