[Congressional Record (Bound Edition), Volume 150 (2004), Part 7]
[House]
[Pages 9253-9269]
[From the U.S. Government Publishing Office, www.gpo.gov]




PROVIDING FOR DISPOSITION OF UNUSED HEALTH BENEFITS IN CAFETERIA PLANS 
                   AND FLEXIBLE SPENDING ARRANGEMENTS

  Mr. McCRERY. Mr. Speaker, pursuant to House Resolution 638, I call up 
the bill (H.R. 4279) to amend the Internal Revenue Code of 1986 to 
provide for the disposition of unused health benefits in cafeteria 
plans and flexible spending arrangements, and ask for its immediate 
consideration.
  The Clerk read the title of the bill.
  The SPEAKER pro tempore (Mr. Bonilla). Pursuant to House Resolution 
638, the bill is considered read for amendment.
  The text of H.R. 4279 is as follows:

                               H.R. 4279

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

     SECTION 1. DISPOSITION OF UNUSED HEALTH BENEFITS IN CAFETERIA 
                   PLANS AND FLEXIBLE SPENDING ARRANGEMENTS.

       (a) In General.--Section 125 of the Internal Revenue Code 
     of 1986 (relating to cafeteria plans) is amended by 
     redesignating subsections (h) and (i) as subsections (i) and 
     (j), respectively, and by inserting after subsection (g) the 
     following:
       ``(h) Contributions of Certain Unused Health Benefits.--
       ``(1) In general.--For purposes of this title, a plan or 
     other arrangement shall not fail to be treated as a cafeteria 
     plan solely because qualified benefits under such plan 
     include a health flexible spending arrangement under which 
     not more than $500 of unused health benefits may be--
       ``(A) carried forward to the succeeding plan year of such 
     health flexible spending arrangement, or
       ``(B) to the extent permitted by section 106(d), 
     contributed by the employer to a health savings account (as 
     defined in section 223(d)) maintained for the benefit of the 
     employee.
       ``(2) Health flexible spending arrangement.--For purposes 
     of this subsection, the term `health flexible spending 
     arrangement' means a flexible spending arrangement (as 
     defined in section 106(c)) that is a qualified benefit and 
     only permits reimbursement for expenses for medical care (as 
     defined in section 213(d)(1), without regard to subparagraphs 
     (C) and (D) thereof).
       ``(3) Unused health benefits.--For purposes of this 
     subsection, with respect to an employee, the term `unused 
     health benefits' means the excess of--
       ``(A) the maximum amount of reimbursement allowable to the 
     employee for a plan year under a health flexible spending 
     arrangement, over
       ``(B) the actual amount of reimbursement for such year 
     under such arrangement.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2003.

  The SPEAKER pro tempore. After 1 hour of debate on the bill, it shall 
be in order to consider the amendment printed in part A of House Report 
108-484, if offered by the gentleman from New York (Mr. Rangel) or his 
designee, which shall be considered read, and shall be debatable for 1 
hour, equally divided and controlled by the proponent and an opponent.
  The gentleman from Louisiana (Mr. McCrery) and the gentleman from 
California (Mr. Stark) each will control 30 minutes of debate on the 
bill.
  The Chair recognizes the gentleman from Louisiana (Mr. McCrery).

[[Page 9254]]


  Mr. McCRERY. Mr. Speaker, I yield myself such time as I may consume.
  I rise in support of H.R. 4279, a bill that would update flexible 
spending arrangements, known as FSAs, to allow up to $500 of unused 
health benefits to be carried forward to next year's FSA or transferred 
to a health savings account. Flexible spending arrangements allow 
employees to set aside money in an employer-established benefit plan 
that can be used on a tax-free basis to meet their out-of-pocket health 
care expenses during the year. However, under current law, any money 
remaining in the FSA at the end of the year must be returned to the 
employer.
  Nearly 37 million private sector employees have access to an FSA. 
However, only 18 percent of eligible employees take advantage of the 
pretax health care spending provided by flexible spending arrangements. 
Many employees cite the fear of forfeiting unused funds as the primary 
reason why they elect not to participate in an FSA. Those employees who 
do participate in an FSA often underfund their account rather than risk 
losing the funds at the end of the year.
  Let me expound on that for just a minute because what happens in most 
flexible spending arrangements is that the employee chooses to take 
part of his monthly income, set it aside into one of these flexible 
spending arrangements, and that income that he removes from his 
paycheck is basically tax-free income, and that is a good thing. The 
employee likes that. However, it is still his income. And if he is 
afraid that he will lose some of that income at the end of the year 
because he has not used it for the specified purpose in the account, 
then of course that employee is going to be very reluctant to set aside 
that money.
  This use-it-or-lose-it rule does more, though, than discourage 
widespread participation. It can also lead to perverse incentives such 
as encouraging people to spend money on health care products and 
services that they do not necessarily need. In other words, at the end 
of the year, if there is money left in the account, the employee's 
incentive is to go out and get an extra pair of sunglasses or whatever 
it is and spend that money, and that in turn drives up demand, drives 
up the price of health care for everybody.
  H.R. 4279 provides greater flexibility and consumer choice. The bill 
would allow up to $500 of unused funds at the end of the year to be 
carried forward in that flexible spending arrangement for use in the 
next year, or that employee could begin a new HSA, a health savings 
account, and put up to $500 into that health savings account.
  I believe this bill will encourage greater participation in flexible 
spending arrangements and, to a lesser extent, participation in health 
savings account benefit plans because people will not be afraid of 
losing their hard-earned money. The Joint Committee on Taxation 
estimates that approximately 76 percent of current FSA participants 
will take advantage of the rollover option each year.
  Through this legislation, we can expand access to health care for 
millions of Americans by making it easier for them to save for their 
health care costs. This bill would also reduce end-of-the-year excess 
spending and overuse of health care services, allowing FSA participants 
to benefit from the prudent use of their health care resources.
  Mr. Speaker, I should point out that a nearly identical FSA rollover 
option was approved by the Committee on Ways and Means as part of H.R. 
2351 on June 19, 2003. The provision passed this House last year as 
part of the Medicare Modernization Act.
  Reducing health costs and increasing access to health care are worthy 
goals that every Member of Congress should support. H.R. 4279 takes an 
important step in that direction; so I encourage my colleagues to 
support this legislation.
  Mr. Speaker, I reserve the balance of my time.
  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume.
  I stand here in just abject wonder at having 2 hours and 10 minutes 
to debate this bill over which there is very little controversy, a few 
dollars here and there; and I was going to ask the gentleman from 
Louisiana if he might accept a unanimous consent request that we cut 
the time in half, spend the first hour on this bill and spend the 
second hour debating whether or not Rumsfeld ordered the torture of 
prisoners in Iraq, and then we might have some more fun at least in the 
2 hours we have got.
  Does the gentleman agree?
  Mr. McCRERY. I object, Mr. Speaker.
  Mr. STARK. Mr. Speaker, it is kind of sad that this bill was not 
worked out in committee because the differences, which I will describe 
shortly, are simple and there could have been a compromise, it appears 
to me, and certainly we have a substitute which will come up and we, I 
think, have to discuss both.
  Let us start out by suggesting that I would like to agree with the 
distinguished gentleman from Louisiana that it is probably a good idea 
to not encourage people to spend foolishly, to buy two extra pair of 
eyeglasses or go out for an extra shot of Botox or something at the end 
of the year just to use up the money in their flexible spending 
account.
  The problem, and where we would disagree, is that the gentleman's 
bill is not paid for, and this does push us further into debt; and our 
bill and the differences, and we have some, is paid for. If the 
gentleman wanted to say let us compromise right now and pay for half of 
it, we could get this done in 15 minutes. I am easy. But that is 
basically our difference. The Republican bill creates more of a 
deficit, and it does discourage people from spending foolishly at the 
end of the year and it costs, what, 8 billion bucks over 10.
  Therein is the major difference. I would like to discuss one minor 
difference which is complex and which our substitute drops. The 
gentleman from Louisiana, the Republican bill, allows members of a 
flexible spending account to transfer money into a health savings 
account. The only problem with that is that, insofar as the regulations 
appear now, one cannot have a flexible spending account and a health 
savings account at the same time, so that to transfer the money from 
the flexible spending account into the health savings account, they 
have to drop their flexible spending account, and then the next year 
they would not have 500 bucks to transfer.
  I mean, it is a way to encourage, or perhaps force, people into 
dropping a flexible spending account and move into a health savings 
account. I am not sure that was his intention, but that is the reality. 
And there is almost no one who would qualify to transfer money, the 
$500, say, from the flexible spending account into a health savings 
account. As a matter of fact, it is scored at 20 million bucks over 10 
years; so if it is $20 at maybe 1 million people who would use it, and 
if our purpose is to encourage health savings accounts, I would suggest 
to the gentleman that that is a separate debate and perhaps not really 
pertinent to the question of whether we should allow people this 
carryover and repeal the use-it-or-lose-it provision. Had we had a 
chance to mark this up in committee and work it out in some detail, I 
think we could have worked out a system, perhaps brought two bills to 
the floor.
  The bill, I know, and I hate to be critical, but I know it is 
introduced as a centerpiece of the week for the uninsured, and I am 
afraid that this bill does nothing for the uninsured. We cannot have a 
flexible spending account and not have access to insurance. So we 
really are not dealing with the uninsured here. People who have 
flexible spending accounts, as a matter of fact, probably have very 
generous and good health insurance coverage. So it is somewhat 
disingenuous, and that is the harshest thing I can think of, to suggest 
that this is going to have any effect or impact in Cover the Uninsured 
Week.
  So if I could summarize just for a moment, there is a part of the 
bill which would help people and prevent them from frivolous spending 
from their flexible spending accounts. We concur in that, and our 
substitute includes that. Our major difference is, and we could have a 
vote, is it worth

[[Page 9255]]

increasing the deficit by $8.5 billion. We have some simple ways to pay 
for that. For instance, not letting corporations reincorporate offshore 
and avoid Federal income tax on their corporate income, a theory that 
has some bipartisan support.
  There are some egregious loopholes that were dreamed up mostly by the 
Enron Corporation, which we also closed. I do not think anybody would 
suggest that those loopholes ought to continue. So in a minimal way, we 
changed the Tax Code to make this, and it is a principle, we ought to 
pay for things that we are providing, and that is it. We would leave 
the health savings account portion out. We would allow people to 
transfer the $500 and carry it forward so they would not have a use-it-
or-lose-it, and we would pay for it. Other than that I do not know what 
we could find to disagree about for the next 2 hours, but in my 
inimitable way I will be just as disagreeable as the gentleman from 
Louisiana would like me to be.
  Mr. Speaker, I reserve the balance of my time.
  Mr. McCRERY. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I thank the gentleman for his complimentary remarks 
about expanding, making more versatile the flexible spending 
arrangements. And I would not disagree with him on his comments about 
HSAs to the extent that I would agree that this legislation is not 
designed to encourage HSAs. That is not the intent of this legislation, 
at least not my intent as the author. My intent is, though, to make it 
convenient for employees who just may be in a firm that decides to 
create HSAs, give them kind of a head start on funding their HSA. I 
agree with the gentleman there will not be many instances of that in 
the near future; but in those few instances that there may be and an 
employee has $500 left over in his account, I see no reason why he 
should not be able to take advantage of using that money, transferring 
it to the employer's new choice of health insurance for his employees, 
an HSA.
  Mr. STARK. Mr. Speaker, will the gentleman yield?
  Mr. McCRERY. I yield to the gentleman from California.
  Mr. STARK. Mr. Speaker, if I were to stipulate to the gentleman from 
Louisiana that we keep the HSA portion, would the gentleman agree to 
pay for it or some of it here, and we will have a compromise right now?
  Mr. McCRERY. Mr. Speaker, I believe we will state our objections to 
the substitute during the appropriate debate time on the substitute. So 
I would regretfully reject the gentleman's kind offer at this time.
  Mr. STARK. Mr. Speaker, I thank the gentleman.
  Mr. McCRERY. Mr. Speaker, I yield 3 minutes to the gentleman from 
California (Mr. Royce).
  Mr. ROYCE. Mr. Speaker, I thank the gentleman for yielding me this 
time.
  I have been trying for some years now to push this concept, a bill 
that I introduced a number of years ago. With the knowledge that we 
have got, I do not know, maybe 37 million Americans who do have access 
to these flexible spending accounts, and I think many of us here 
probably know someone who does, maybe a spouse, if he or she is 
employed in the private sector, but the problem is that over half of 
these individuals do not utilize their access to FSAs because of this 
use-it-or-lose-it provision that we are trying to eliminate through 
this measure here today. And as we know, currently, the employer and 
the employee can set aside money before taxes into this flexible 
spending account and then that money can be used just like cash to pay 
for out-of-pocket medical expenses and insurance copayments and 
doctors' visits and even child care. The downside is that if they do 
not spend their money at the end of the year, they lose it, and it goes 
back to their employer.
  I originally introduced this bill as a consequence of a conversation 
I had 4 years ago with my wife, who came home with yet another pair of 
glasses, and Marie said she purchased them not because she needed them 
necessarily. She liked them, but she said she did not want to lose the 
money in her FSA and her employer said that if she does not spend it, 
this money will revert back to the company.

                              {time}  1330

  So the rules governing FSAs force workers who have put in money to 
match the money put in by their employer to scurry around at the end of 
the year and wastefully spend their health care dollars, just so they 
do not have to forfeit it.
  I do not know how many of you have seen the TV ads that run each 
December talking up medical procedures, reminding people to spend their 
unused FSA dollars. Now, that is a wasteful procedure. What is worse 
here is over half of the employees who are eligible do not sign up in 
the first place because they do not want to lose their money. So this 
use-it-or-lose-it is the worst type of economic incentive. It 
discourages savings and, instead, encourages frivolous, needless 
spending.
  So this initiative that I have introduced and has been picked up by 
the committee will allow workers to roll over up to $500 of their own 
money back into their FSA at the end of the year, or, as mentioned, put 
it into a recently created Health Savings Account. I think it is a 
commonsense solution that will give peace of mind and let employees 
save for future expenses.
  I encourage the Senate to take immediate action on this important 
legislation. We have pushed this for some years. We need to get it 
through the process, because FSAs are a commonsense, free market 
approach that allows people to take more control over their health care 
dollars. The use-it-or-lose-it provision must go.
  Mr. STARK. Mr. Speaker, I am pleased to yield 6 minutes to the 
distinguished gentleman from California (Mr. Becerra).
  Mr. BECERRA. Mr. Speaker, I thank my colleague and friend from 
California for yielding me time.
  Mr. Speaker, let us make sure that we do not confuse our colleagues 
or anyone who might be watching this on what we are talking about.
  First, flexible spending accounts, most people who have insurance, 
health insurance through an employer, are eligible to, pretax, ahead of 
time, declare how much they think they are going to spend out of pocket 
that will not be reimbursed by their employer's health plan. That way, 
you are using money that has not yet been taxed to pay for some of 
these services, a copayment that you may have for a service that you 
receive, or vision or dental benefits that are not covered completely 
under your health care plan where you pay out of pocket.
  Those out-of-pocket costs, if you have a flexible spending account 
and you bank money in that account at the beginning, you can then use 
that money, you can bring down the account, and use that money, pre-
tax, to pay for your out-of-pocket costs for your health services that 
are not covered by your employer's health care plan. A great idea, 
pretax dollars to pay for health care services. That is fine.
  Then the notion under the current law, that if you have money in that 
account and you do not spend it down through your out-of-pocket 
expenditures to reimburse yourself for those out-of-pocket 
expenditures, by the end of the year anything left over you lose. So 
you have to calculate how much you think you are going to end up 
spending out of pocket beyond what your employer's health care plan 
would provide, and then hope you spend it all.
  Some folks find themselves in a position where they still have money 
left over in this flexible spending account at the end of the year, and 
they lose that. That is a calculated risk.
  This proposal to try to allow some flexibility in that use-it-or-
lose-it rule says you could carry over a certain sum, I think it is 
about $500, into the next year. So let us say you used up all but $200 
in your flexible spending account; rather than lose it at the end of 
this year, you would get to carry that over into next year's flexible 
spending account. So then you would be able to go ahead and budget 
based on what you think your needs will be next year.
  A great idea. What is the problem? There are two.
  First, you got to ask the question, why complicate such a simple,

[[Page 9256]]

straightforward, and sensible idea to allow us to carry forward a 
portion of that flexible spending account money to the next year and to 
modify that use-it-or-lose-it rule? Why then complicate it by saying, 
by the way, which are going to let you send it over to what are called 
HSAs, these health savings accounts which are principally accounts 
which help wealthy folks or healthy folks when it comes to getting 
access to health care, because these HSAs give you money you can use 
later on to buy these catastrophic care plans for health care, which, 
for the most part, the only folks who can afford to do that, whether 
healthwise afford or monetarily afford, are people who are very wealthy 
or very healthy, because they do not have to worry about trying to find 
a health care plan, because they figure they are 25 years old, they are 
not going to die, or they have so much money they can pay for whatever 
services they need, or they have enough health care through other types 
of plans or insurance.
  HSAs do not help the bulk of Americans. So why complicate this issue 
on a practical idea on giving us some flexibility on the spending 
accounts, the flexible spending accounts.
  The second problem, there are 8.4 billion reasons in the second 
problem. $8.4 billion is the cost this bill. The reason those $8.4 
billion are 8.4 billion reasons there is a problem with this is we are 
$400 billion-plus in deficit this year for the Federal budget.
  So it is something different if you are talking about a Federal 
budget that is balanced and saying we are going to spend $8.4 billion 
more, because this bill does not tell us how we are going to pay for 
it.
  So this is not a case where we are saying, well, the budget is 
balanced at the Federal level. We are taking care of all of our 
expenses. We are taking care of the needs of the soldiers in Iraq, 
which, by the way, the President just told us he needs another $25 
billion as a down payment. That is not saying that is going to cover 
the cost. That is a down payment.
  We are being told in the education committees they are cutting the 
amounts of money we are spending for our kids in schools.
  We are told the that the President's budget proposes cuts in veterans 
services, for people who have served in our Armed Forces and are now 
veterans.
  We are told in health care, believe it or not, the proposal in the 
House is to cut Medicaid spending for aged, blind, and disabled 
individuals in this country more than $2 billion.
  So were we talking about a balanced Federal budget, a proposal that 
costs $8.4 billion and does not tell us how it is going to pay for 
itself, you may want to think about whether we should do that or not. 
But when you are $400 billion in debt, the largest Federal deficit we 
have ever seen in the history of this country, to talk about not paying 
for this is crazy. Especially when it comes to education, veterans 
services, other health care programs, this Congress is requiring that 
there be a pay-for for any proposal that costs money.
  One more time: If I want to increase health care services to aged 
individuals, poor seniors in this country, I have to find a way to pay 
for that proposal before it can get through this House. If I want to 
increase spending for our schools and all the children that go to our 
schools today, I have to find something to pay for that proposal before 
it can get through this House. But this proposal, as sensible as it 
might sound, does not need that. Especially when you add the part about 
sending money off to these HSAs, to these health savings accounts, 
which help wealthy and healthy individuals, it makes very little sense.
  So a good idea, complicated by bad ideas within it, makes it very 
tough. That has sort of marked this whole session of Congress, and I 
hope we find a way to be more sensible about moving forward with ideas. 
The Democratic substitute addresses this, and I hope that we can vote 
for the Democratic substitute.
  Mr. McCRERY. Mr. Speaker, I yield 4 minutes to the gentleman from 
Minnesota (Mr. Ramstad), a distinguished member of the Committee on 
Ways and Means.
  Mr. RAMSTAD. Mr. Speaker, I thank the chairman for yielding me time, 
and I rise as a strong supporter and cosponsor of this important 
legislation.
  Mr. Speaker, it only makes common sense to allow workers to carry 
forward unspent funds in their flexible spending accounts to the 
following year or to allow workers to roll the funds into a new health 
savings account.
  This change is really long overdue. Flexible spending accounts are an 
important vehicle to help workers and their families save pretax 
dollars for medical expenses. Because of the tax savings, families can 
actually save up to 30 percent of the cost of out-of-pocket health care 
expenses by setting aside a portion of their income in a flexible 
spending account.
  American families, families back home in Minnesota, know only too 
well that out-of-pocket expenses for health care have been rising at an 
astonishing rate. In fact, the cost for the average worker and their 
family has spiked over 100 percent since 1998, with no end in sight.
  In spite of the skyrocketing health care costs and the significant 
tax savings associated with the FSAs, relatively few workers choose to 
take advantage of this vehicle to save for health care costs. The 
reason for that is simple: This stupid, arcane, absurd use-it-or-lose-
it rule. This rule, this use-it-or-lose-it rule, makes absolutely no 
sense at all.
  As absurd as it is, Mr. Speaker, workers are required to forfeit all 
unspent funds remaining in their FSA accounts at the end of the plan 
year. This use-it-or-lose-it rule is totally counterproductive, and it 
is a huge gamble to families, especially low- and middle-income 
families who can least afford to guess wrong and lose the unspent 
funds.
  So what is happening is rather than facing that loss, many families 
with these FSAs rush to spend money at the end of the year, as my 
colleague previously expressed, often on high-cost medical items. How 
can we tolerate such a bizarre rule that actually discourages prudent 
spending on health care? It is time to end the use-it-or-lose-it rule.
  Mr. Speaker, Ceridian Corporation, which is the leading administrator 
of FSAs for employers and is based in my district in Bloomington, 
Minnesota, estimates that while some 25 million, listen to this, 25 
million American workers and their families are eligible to participate 
in health care FSAs, fewer than 20 percent actually choose to 
participate. It is obvious why. People do not want to take this gamble, 
and they are not impressed; in fact, they are discouraged by the use-
it-or-lose-it rule.
  This bill, which I applaud the gentleman from Louisiana (Chairman 
McCrery) for bringing to the floor today, is very similar to 
legislation I introduced over 3 years ago, and thanks to the leadership 
of the gentleman from Louisiana (Mr. McCrery), it is finally here 
today.
  So it is high time, Mr. Speaker, that we address this important, 
unfinished business. It is time to help millions of workers and their 
families better afford rising medical costs. It is also time to prevent 
the wasteful end-of-year spending the use-it-or-lose-it rule now 
promotes.
  I urge my colleagues to support this sensible and balanced reform. We 
have got to pass this legislation here today, and encourage the other 
body to follow suit.
  Again, I thank the gentleman from Louisiana (Chairman McCrery).
  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I would like to inquire of the gentleman from Louisiana, 
it is my understanding that you could use a flexible savings account 
to, for example, pay for abortion if your employer's health care plan 
did not provide that benefit. Is that not true?
  Mr. McCRERY. Mr. Speaker, will the gentleman yield?
  Mr. STARK. I yield to the gentleman from Louisiana.
  Mr. McCRERY. Mr. Speaker, a flexible spending account, health 
flexible spending accounts can be used for any health care expenses 
incurred by the employee.

[[Page 9257]]


  Mr. STARK. Mr. Speaker, reclaiming my time, there is nothing in this 
bill that would prohibit a woman from using the benefits of the 
flexible savings account for an abortion; is that correct?
  Mr. McCRERY. Yes, sir.
  Mr. STARK. Mr. Speaker, I yield 3 minutes to the gentlewoman from 
Texas (Ms. Jackson-Lee).
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I thank the gentleman for 
yielding me time and for a very thoughtful substitute. But I might 
associate myself with his earlier remarks.
  There are such important issues of the moment that are confronting us 
today, the abuse of prisoners in Iraq, the tragic loss of life of Mr. 
Berg, and the need to be able to provide for safe passage and safe 
conditions of our United States military.
  I almost feel somewhat shortchanged by discussing this legislation, 
as important as it is, because I think there is necessary leadership 
that is needed on crucial issues facing America, the peace and security 
of Iraq and the peace and security of our military.
  But even though this bill has good intentions, let me argue that this 
bill is only an added burden on America's financial pocketbook. It 
costs $8 billion. It is unpaid for with the bill on the floor.
  The substitute is paid for, but when we add what I have heard in many 
of our metaphors, we add insult to injury by costing $21 million extra. 
We, frankly, have veterans who are not able to get in veterans 
hospitals, and this bill, which serves really no purpose, it will 
actually undermine the health insurance benefits received by millions 
of Americans. It is confusing and complex. It makes a mess of a system 
that needs to be fine-tuned, not destroyed.

                              {time}  1345

  The majority of Americans already receive health care through 
employers, though 44 million are uninsured. That is what I would like 
to be doing here, is finding a way to provide insurance for the 
uninsured. I would like to be able to find a guaranteed prescription 
drug benefit for seniors and not have them use something that is 
confusing.
  This one will offer a tax break, another tax break when we are 
needing monies to ensure the peace in Iraq, monies to keep veterans 
hospitals open, monies to get a guaranteed prescription drug benefit.
  It sounds good. This coverage has a deductible of over $1,000, and it 
sounds good; but think about it. The bill will serve to encourage 
businesses to cut your health insurance programs or raise deductibles 
for their employees. Low- to moderate-income employees and those who 
are uninsured pay all kinds of taxes, payroll taxes, sales taxes, 
property taxes. However, they tend not to pay enough income taxes to 
take advantage of this new Republican give-to-the-rich scheme or get-
what-you-can, or give-to-those-who-already-have.
  Mr. Speaker, I would simply ask that we support the substitute, a 
paid-for program, and we do not give an extra gift of $21 million that 
is unpaid for. Maybe after we do this, we can get to the floor of the 
House and find out how we can provide peace and security in Iraq, how 
we can stop the abuse that is going on, bring our soldiers not in 
harm's way, but away from harm's way, provide for seniors and those who 
are uninsured. I believe that is the right way to go.
  Because, Mr. Speaker, let me say this. In my very district, there is 
a veterans hospital where I have to meet veterans every day who are 
asking why they are denied services at the hospital. And just as a note 
that we should bring to the attention of our colleagues, it is because 
we have a means test for allowing you to go to the veterans hospital 
and get your medical needs taken care of. If you make a certain amount, 
the door is closed.
  My belief is, this Congress's obligation to veterans and those who 
enter the United States military is that we should continue our 
promise, and that is the promise that services will always be there. 
How can we do so if this legislation not only costs money and not be 
paid for, but adds an extra $21 million for the health savings account? 
It would be far preferable to support the substitute which clearly pays 
for it, does not extend it to a health savings account, provides for 
creativity and flexibility, which I support, but focuses our attention 
on paying for those needs that are necessary to take care of those who 
cannot take care of themselves.
  Mr. Speaker, I ask my colleagues to oppose H.R. 4279 and vote for the 
substitute.
  It used to be that the most challenging part of my job here was 
finding meaningful ways of improving quality of life for the people in 
my district. Now it seems the most challenging part is trying to figure 
out how the Republican leadership will next try to deny those same 
people the lives they and their families deserve. Today's bill is one 
of the more creative approaches I have seen by the Republicans to 
advance their goals of giving their rich political donors big tax cuts, 
and denying the poor and middle classes healthcare and the services 
they need.
  This bill serves no one that really needs it, and will actually 
undermine the health insurance benefits received by millions of 
Americans now. It is confusing and complex, and makes a mess of a 
system that needs to be fine-tuned, not destroyed. The majority of 
Americans now receive health insurance through employers. This bill 
will offer a tax break to people who do not have health insurance 
coverage, and those whose coverage has a deductible of over $1,000. It 
sounds good, until you think about it. This bill will serve to 
encourage businesses to cut their health insurance programs, or raise 
deductibles on their employees. Low- to moderate-income employees and 
those who are uninsured pay all kinds of taxes: payroll taxes, sales 
taxes, property taxes. However, they tend to not pay enough income 
taxes to take advantage of this new Republican-give-to-the-rich scheme. 
So the exact people who are now being left out of our healthcare 
system, and who need relief, are being left out of this bill.
  The underlying goal of this bill is to dismantle the employer-based 
health insurance system that the chairman of the Ways and Means 
Committee hates. He has stated that he does not like employer-based 
health insurance because it shields people from the cost of healthcare 
and thus enables people to use health care too much. I don't see that 
Americans have made themselves too healthy. I want to increase access 
to care not decrease it, so I will vote against this bill.
  Not only is this a bad bill, it is an expensive one. It will cost $71 
billion over the next 10 years--all money borrowed from our children 
and granchildren. In the later years of the budget window, this bill 
will cost in excess of $10 billion per year, and will accelerate just 
at the time when the baby boom generation retires, denying resources to 
meet our commitments to the Social Security and Medicare systems.
  Again, it seems this bill was crafted to specifically target and 
destroy the elements of our healthcare system that people know and 
trust--Medicare and employer-sponsored coverage--and use the savings to 
give to CEOs, the healthy, and the wealthy. It is not surprising to 
find that due to the structure of this bill, the same people whose 
children were denied the benefits of a child tax credit will also not 
receive any benefits from this bill.
  Of course they will be allowed to help pay the interest on the 
booming debt that it adds to.
  I will oppose this bill and encourage my colleagues to do the same.
  Mr. McCRERY. Mr. Speaker, I would inform the gentleman from 
California that I now have two speakers that request time on my side, 
in addition to my closing. So I just wanted to let him know.
  Mr. STARK. Mr. Speaker, if the gentleman will yield, I will then 
reserve my time and precede his closing and try and warm up the 
audience for what I know will be eloquent remarks.
  Mr. McCRERY. Mr. Speaker, I yield 3 minutes to the gentlewoman from 
Pennsylvania (Ms. Hart).
  Ms. HART. Mr. Speaker, I rise in support of the flexible spending 
arrangements. I am often baffled in this House when I have the 
opportunity to listen to the debate. We are talking about policy that 
will be far-reaching. Flexible spending accounts, flexible 
arrangements, medical savings accounts, health savings accounts are all 
plans that give flexibility and discretion to employers and employees. 
They give power, economic power, to employers and employees.

[[Page 9258]]

  This is a much larger issue than how much this may cost this year 
because, ultimately, it will save the government money. Ultimately, it 
will save individuals money. And, ultimately, it will save employers 
money which, in the long run, will mean that more people will be likely 
to access health care through their employer. That will, by the way, 
save the government some money.
  One of the first things I heard about as a candidate for Congress was 
from one of the employers in one of the communities I represent. And he 
said to me, I want you to pay close attention to the law around medical 
savings accounts, flexible spending arrangements, the kinds of things 
that are supposed to be flexible for benefits for employees to give 
them economic power, but are not, because there are too many limits on 
them.
  Today's bill removes one of those limits, or at least significantly 
reduces it, and that is this perverse incentive to quickly spend any of 
the unused money in the flexible spending arrangement, the use-it-or-
lose-it rule. We change that today; and we say to the employee, if you 
do not need to use that health care right now, you do not need to. You 
do not need to waste the money. You can roll that over to next year; 
and if something happens next year that you need it, you can use it. 
And if you do not need it next year, you can roll it over. Does that 
not just make sense? Should we not in Congress be the ones who are 
providing the flexibility and the options to the employee, not putting 
crazy limits on them?
  This is a great bill, and we should go even farther than this and 
allow employers and employees to work together to provide more options 
for them to provide health care for their families, not fewer. Fewer 
limits, more options and, ultimately, more opportunity for employers to 
provide health care. Ultimately, it will provide opportunity for us to 
put downward pressure on the costs of health care, also downward 
pressure on the costs of health insurance, because there will be more 
competition, more flexibility, more opportunity, and more coverage. 
More coverage is ultimately what we want, and this bill will help us 
get there.
  Mr. Speaker, I commend the gentleman from Louisiana (Chairman 
McCrery); I commend the members of the Committee on Ways and Means for 
moving this forward. Because that employer back home, he is not by 
himself. He wants to continue to provide good and flexible health 
benefits for his employees. They are like family to him. Most of the 
employers in my district are small employers. They want to provide 
health care. It has become so expensive in what people traditionally 
thought of, they cannot afford it. With flexible arrangements they can, 
and they can continue to provide it into the future.
  Mr. STARK. Mr. Speaker, I reserve the balance of my time.
  Mr. McCRERY. Mr. Speaker, I yield 3 minutes to the distinguished 
gentleman from Iowa (Mr. King).
  Mr. KING of Iowa. Mr. Speaker, I thank the gentleman for yielding me 
this time. I appreciate the opportunity to say a few words about this 
issue of H.R. 4279.
  I am a former employer. I started a business in 1975; and I met 
payroll for 28 years, 1,400-and-some consecutive weeks. I was one of 
the first employers in my industry to provide health insurance for my 
employees. It was a difficult thing to do because of all of the Federal 
constraints that made it difficult for a small business to compete with 
large business. This is rooted back in World War II when there were 
wage and price controls, and employers that tried to find a way to 
offer additional benefits or wages to their employees were able to 
deduct health insurance benefits for them as an expense and then offer 
that as a quasi-raise or in the form of a benefit, an increase in 
compensation for their employees.
  The legacy of that remains today in Federal law. We have legislation 
that continually makes it difficult to have the flexibility necessary 
for businesses to work with their employees so that they can have a 
legitimate health care plan. We have had to find ways around Federal 
regulation to do that. H.R. 4279 helps us so that we do not have to 
jump around that one or find another way to get things done.
  I remember a Congressman coming into my district in the early 1980s 
making a pitch for a national health care act. And I remember in that 
room of about 80 people, in the end I was the only one of the employers 
in the room that provided health insurance for my employees, and I 
remember fighting off that effort of going for a national health care 
because we need more individual responsibility so that we have more 
individual decisions made, in the vision of Adam Smith and the 
invisible hand.
  We have today evolved into a health care system that has more and 
more HMOs, fewer and fewer entities making decisions about more and 
more people, to the point where the patients now have gotten the 
mindset more of sheep of submitting themselves to the process rather 
than making decisions on their health insurance and on their health 
care. H.R. 4279, again, short-circuits some of that, gives us a little 
more freedom and puts flexibility into the process.
  I remember when the previous President was elected in 1992 and the 
First Lady came out with a plan that many of us have described as the 
Hillary Care Plan. I have that flow chart on my wall in my office in 
Iowa that scares me half to death as an employer looking at a national 
health care act versus individual flexibility. We have two choices 
here, and the people that are against this bill are the ones that are 
preserving what they can of the opportunity to build a Federal health 
care Canadian-style plan.
  Mr. Speaker, H.R. 4279 helps us get more decisions in the hands of 
more people so that they make their individual decisions in an 
efficient fashion, the way that the gentlewoman from Pennsylvania (Ms. 
Hart) described. It gets rid of that perverse incentive of spending the 
money at the end of the year because you cannot roll those dollars 
over.
  So I applaud the authors of this bill, the people who worked so hard 
on it. I appreciate the opportunity to speak in favor of H.R. 4279.
  Mr. STARK. Mr. Speaker, I yield 6 minutes to the gentleman from 
Washington (Mr. McDERMOTT), as we are blessed with his late arrival.
  Mr. McDERMOTT. Mr. Speaker, it is always good to come out here and 
talk about an important issue. We have had a wartime President who has 
wanted to talk about war: I am a wartime President, I am doing this, I 
am doing that. I wish we had a domestic President who would 
occasionally think about what needs to be done on the domestic scene.
  This particular little bill is what they are going to hold out for 
their evidence that they care about domestic health problems in this 
country.
  Now, I do not know; it would be laughable if it was not so sad that 
this is the only bill that they can come up with. I know my good 
friend, the gentleman from Louisiana, knows, he and I share the desire 
for everyone to be covered in this country, and the only thing that 
separates us is how to do it. And for this to be offered as one of the 
ways that we are going to make it easier is simply, well, they will 
have to say they have passed something. I think it is called the 
flexible savings and health savings account rollover. That will be a 
title that will certainly sound like they did something.
  The idea of health savings accounts goes against the basic issue here 
in how we ought to be dealing with health care. We do not have any 
problem in thinking that we should do fire departments collectively. We 
do not call them socialistic or whatever. They do not look to Canada 
for how to run a fire department. We started that in 1754, and police 
departments and roads and schools, all of those issues we deal with 
together. But in health care we say, hey, baby, you are on your own. 
You and you and you and you and you, you are on your own.
  Now, if you have a job that takes care of you, oh, well, you are 
lucky; you have the plastic, you are in good shape in the lottery. I 
have a piece of plastic in my pocket. Everybody has one in their pocket 
or in their purse,

[[Page 9259]]

and that plastic keeps you in the game. But God forbid that you do not 
have a piece of plastic.
  Now, the answer for those 40 million people in this country who do 
not have plastic is, well, why do you not have a health savings 
account? Yes, that is a good idea. You can take your money, and you can 
put it in that health savings account and buy yourself a $10,000 
deductible program and everything that comes up you can use the money 
out of the health savings account to pay for it, and it will work 
wonderfully.
  The problem with this whole thing is the idea that people have 
$4,500, or whatever the number is, to put into their health savings 
account is nonsense, and it puts people on their own.
  The idea of putting people on their own works very well for some 
people in this society, people who are rich. I mean, golly, if you are 
the head of Enron, you have a few extra dollars, you can just throw it 
into a health savings account; and if you happen to have a little 
problem that takes your life in some direction that costs a lot of 
money, well, you can take it out of your pocket. But all of those 
employees that were working for Enron that suddenly got dumped out in 
the street because crooks were running the business, they do not have 
anything. They could have their health savings account. Maybe it would 
cover, maybe it would not, but where are they going after that? Enron 
is not coming back, so after the first year, okay, where are you going 
to go?

                              {time}  1400

  How do you cover yourself in a situation when you are out there 
alone? The individual market in this country is a mess. No one can 
afford it because they can look at each one of you and say, well, you 
look to me like you have the possibility of X, Y and Z and we are going 
to charge you $1,000 a month.
  The average person has trouble taking that kind of insurance. So 
having this savings account, I put that $4,500 in I did not have, I put 
that in there and then I get sick.
  I had a friend who went in the hospital with a heart attack. He was 
in the hospital 2 days, and the hospital bill alone was $10,000. So it 
could happen to anybody. Any Member of the Congress, anybody on the 
street can end up in the hospital and spend that deductible just like 
that. Where do they have the money to pay for it? I do not know how 
they are going to get some of it out of this health savings account.
  Now, this bill is predicated on the idea that they will never get 
sick and that at the end of the year they are going to have some money 
left. The idea is at the end of the year you have not been sick so you 
have got this money laying in your account so you can roll it over into 
the next year. Well, that is a nice idea. It would probably help maybe 
15, 20 people in this country, maybe even 1,000, but it does absolutely 
nothing for 40 million people out there with no health insurance, and 
this is why this is a joke.
  We will pass it, of course. Nobody is going to vote against it. Well, 
I do not know, some might, but the fact is that it is not dealing with 
the problem that faces us, and if our war President would pay a little 
more attention to the domestic and not cut taxes everywhere in sight, 
we would have some money.
  Part of the problem is what is happening at the State now, because 
even Medicaid is going away, lots of States do not even put senior 
citizens into their Medicaid program. Only 34 States have a Medicaid 
spend-down for seniors.
  This country is in a mess, and this bill does not do anything.
  Mr. McCRERY. Mr. Speaker, I yield myself such time as I may consume.
  I want to commend the last speaker, the gentleman from Washington, 
for his efforts year after year in trying to solve the problems in our 
health care system. I disagree with him occasionally on how we should 
do that, but I think he is well-intentioned and certainly deserves 
credit for his efforts.
  However, his comments about the Enron employees, I cannot help but 
stand up and point out to him that had those employees had HSAs, 
instead of Enron providing first-dollar coverage insurance, they would 
still have insurance today. They would have their HSAs because they are 
fully portable and an employee can take an HSA from job to job. If he 
loses his job, he can use what is in his HSA to pay premiums on a new 
health insurance policy. So I just wanted to point out to the gentleman 
that those employees would have been a lot better off if they had HSAs 
rather than the Enron-provided health insurance.
  Mr. Speaker, I reserve the balance of my time.
  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume. I 
thank the gentleman for his comments and I would close just briefly.
  I believe that the Enron employee would not have insurance. He would 
have some money in that health savings account, but when Enron folded 
up, the insurance went along with Enron. He could go into the private 
market and try and buy something.
  I would just like to repeat, if I may, that this really does nothing 
to cover the uninsured. So, if this is Cover the Uninsured Week, we are 
burning up a couple of valuable hours that we could be discussing how 
to cover the uninsured with this bill.
  The principal disagreement that we had with the bill is that it is 
not paid for, and we will offer, subsequently to closing this debate, a 
substitute where we pay for it in very patriotic and simple ways. It is 
not a lot of money but it is a principle that we Democrats have long 
adhered to, and that is, that we ought to pay for the wonderful things 
that are available to us in this country and not put the burden on our 
children and grandchildren.
  So, having said that, and without fear of contradiction that I 
probably have more children and grandchildren than the combined 
audience here, I can qualify, if the Speaker will allow me, as an 
expert in that area. And maybe I am a little touchy about it, but will 
conclude our debate on this and I appreciate the gentleman from 
Louisiana. Next time I hope we can resolve these differences in our 
committee and come to the floor, as we did in the good old days, with a 
unified approach to Medicare and health insurance problems.
  Mr. Speaker, I yield back the balance of my time.
  Mr. McCRERY. Mr. Speaker, I yield myself such time as I may consume.
  The bill before us today is a very simple bill. It will provide 
employees, whose employers give them the opportunity to participate in 
flexible spending arrangements, more flexibility to utilize those 
arrangements and, indeed, encourage employees to do just that, and if 
they have money left in their account at the end of the year, under the 
bill, up to $500 can be rolled over into their next year's flexible 
spending arrangements or rolled into a new health savings account, 
thereby avoiding the discouraging factor in the law today of use it or 
lose it.
  Right now, today, if there is money left over at the end of the year, 
the money goes back to the employer. That is why employees do not want 
to participate because they do not want to lose part of their income, 
and that is understandable. It is kind of silly that Federal law would 
dictate that.
  We are trying to correct that today. It is very simple. I urge the 
Members to vote in favor of this good bill today.
  Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Quinn). All time for debate on the bill 
has expired.


      Amendment In The Nature Of A Substitute Offered By Mr. Stark

  Mr. STARK. Mr. Speaker, I offer an amendment in the nature of a 
substitute.
  The SPEAKER pro tempore. Is the gentleman the designee of the 
gentleman from New York (Mr. Rangel)?
  Mr. STARK. I am.
  The SPEAKER pro tempore. The Clerk will designate the amendment in 
the nature of a substitute.
  The text of the amendment in the nature of a substitute is as 
follows:
  Part A amendment in the nature of a substitute printed in House 
Report No. 108-484 offered by Mr. Stark:


[[Page 9260]]

       Strike all after the enacting clause and insert the 
     following:

 TITLE I--DISPOSITION OF UNUSED HEALTH BENEFITS IN CAFETERIA PLANS AND 
                     FLEXIBLE SPENDING ARRANGEMENTS

     SEC. 101. DISPOSITION OF UNUSED HEALTH BENEFITS IN CAFETERIA 
                   PLANS AND FLEXIBLE SPENDING ARRANGEMENTS.

       (a) In General.--Section 125 of the Internal Revenue Code 
     of 1986 (relating to cafeteria plans) is amended by 
     redesignating subsections (h) and (i) as subsections (i) and 
     (j), respectively, and by inserting after subsection (g) the 
     following:
       ``(h) Contributions of Certain Unused Health Benefits.--
       ``(1) In general.--For purposes of this title, a plan or 
     other arrangement shall not fail to be treated as a cafeteria 
     plan solely because qualified benefits under such plan 
     include a health flexible spending arrangement under which 
     not more than $500 of unused health benefits may be carried 
     forward to the succeeding plan year of such health flexible 
     spending arrangement.
       ``(2) Health flexible spending arrangement.--For purposes 
     of this subsection, the term `health flexible spending 
     arrangement' means a flexible spending arrangement (as 
     defined in section 106(c)) that is a qualified benefit and 
     only permits reimbursement for expenses for medical care (as 
     defined in section 213(d)(1), without regard to subparagraphs 
     (C) and (D) thereof).
       ``(3) Unused health benefits.--For purposes of this 
     subsection, with respect to an employee, the term `unused 
     health benefits' means the excess of--
       ``(A) the maximum amount of reimbursement allowable to the 
     employee for a plan year under a health flexible spending 
     arrangement, over
       ``(B) the actual amount of reimbursement for such year 
     under such arrangement.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2003.

             TITLE II--ENRON-RELATED TAX SHELTER PROVISIONS

     SEC. 201. LIMITATION ON TRANSFER OR IMPORTATION OF BUILT-IN 
                   LOSSES.

       (a) In General.--Section 362 of the Internal Revenue Code 
     of 1986 (relating to basis to corporations) is amended by 
     adding at the end the following new subsection:
       ``(e) Limitations on Built-In Losses.--
       ``(1) Limitation on importation of built-in losses.--
       ``(A) In general.--If in any transaction described in 
     subsection (a) or (b) there would (but for this subsection) 
     be an importation of a net built-in loss, the basis of each 
     property described in subparagraph (B) which is acquired in 
     such transaction shall (notwithstanding subsections (a) and 
     (b)) be its fair market value immediately after such 
     transaction.
       ``(B) Property described.--For purposes of subparagraph 
     (A), property is described in this subparagraph if--
       ``(i) gain or loss with respect to such property is not 
     subject to tax under this subtitle in the hands of the 
     transferor immediately before the transfer, and
       ``(ii) gain or loss with respect to such property is 
     subject to such tax in the hands of the transferee 
     immediately after such transfer.

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

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

     SEC. 202. NO REDUCTION OF BASIS UNDER SECTION 734 IN STOCK 
                   HELD BY PARTNERSHIP IN CORPORATE PARTNER.

       (a) In General.--Section 755 of the Internal Revenue Code 
     of 1986 is amended by adding at the end the following new 
     subsection:
       ``(c) No Allocation of Basis Decrease to Stock of Corporate 
     Partner.--In making an allocation under subsection (a) of any 
     decrease in the adjusted basis of partnership property under 
     section 734(b)--
       ``(1) no allocation may be made to stock in a corporation 
     (or any person which is related (within the meaning of 
     section 267(b) or 707(b)(1)) to such corporation) which is a 
     partner in the partnership, and
       ``(2) any amount not allocable to stock by reason of 
     paragraph (1) shall be allocated under subsection (a) to 
     other partnership property in such manner as the Secretary 
     may prescribe.

     Gain shall be recognized to the partnership to the extent 
     that the amount required to be allocated under paragraph (2) 
     to other partnership property exceeds the aggregate adjusted 
     basis of such other property immediately before the 
     allocation required by paragraph (2).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions after the date of the enactment 
     of this Act.

     SEC. 203. EXPANDED DISALLOWANCE OF DEDUCTION FOR INTEREST ON 
                   CONVERTIBLE DEBT.

       (a) In General.--Paragraph (2) of section 163(l) of the 
     Internal Revenue Code of 1986 is amended by inserting ``or 
     equity held by the issuer (or any related party) in any other 
     person'' after ``or a related party''.
       (b) Capitalization Allowed With Respect to Equity of 
     Persons Other Than Issuer and Related Parties.--Section 
     163(l) of such Code is amended by redesignating paragraphs 
     (4) and (5) as paragraphs (5) and (6) and by inserting after 
     paragraph (3) the following new paragraph:
       ``(4) Capitalization allowed with respect to equity of 
     persons other than issuer and related parties.--If the 
     disqualified debt instrument of a corporation is payable in 
     equity held by the issuer (or any related party) in any other 
     person (other than a related party), the basis of such equity 
     shall be increased by the amount not allowed as a deduction 
     by reason of paragraph (1) with respect to the instrument.''.
       (c) Exception for Certain Instruments Issued by Dealers in 
     Securities.--Section 163(l) of such Code, as amended by 
     subsection (b), is amended by redesignating paragraphs (5) 
     and (6) as paragraphs (6) and (7) and by inserting after 
     paragraph (4) the following new paragraph:
       ``(5) Exception for certain instruments issued by dealers 
     in securities.--For purposes of this subsection, the term 
     `disqualified debt instrument' does not include indebtedness 
     issued by a dealer in securities (or a related party) which 
     is payable in, or by reference to, equity (other than equity 
     of the issuer or a related party) held by such dealer in its 
     capacity as a dealer in securities. For purposes of this 
     paragraph, the term `dealer in securities' has the meaning 
     given such term by section 475.''.
       (d) Conforming Amendments.--Paragraph (3) of section 163(l) 
     of such Code is amended--
       (1) by striking ``or a related party'' in the material 
     preceding subparagraph (A) and inserting ``or any other 
     person'', and
       (2) by striking ``or interest'' each place it appears.

[[Page 9261]]

       (e) Effective Date.--The amendments made by this section 
     shall apply to debt instruments issued after the date of the 
     enactment of this Act.

     SEC. 204. EXPANDED AUTHORITY TO DISALLOW TAX BENEFITS UNDER 
                   SECTION 269.

       (a) In General.--Subsection (a) of section 269 of the 
     Internal Revenue Code of 1986 (relating to acquisitions made 
     to evade or avoid income tax) is amended to read as follows:
       ``(a) In General.--If--
       ``(1)(A) any person or persons acquire, directly or 
     indirectly, control of a corporation, or
       ``(B) any corporation acquires, directly or indirectly, 
     property of another corporation and the basis of such 
     property, in the hands of the acquiring corporation, is 
     determined by reference to the basis in the hands of the 
     transferor corporation, and
       ``(2) the principal purpose for which such acquisition was 
     made is evasion or avoidance of Federal income tax,

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

     SEC. 205. MODIFICATION OF INTERACTION BETWEEN SUBPART F AND 
                   PASSIVE FOREIGN INVESTMENT COMPANY RULES.

       (a) Limitation on Exception From PFIC Rules for United 
     States Shareholders of Controlled Foreign Corporations.--
     Paragraph (2) of section 1297(e) of the Internal Revenue Code 
     of 1986 (relating to passive foreign investment company) is 
     amended by adding at the end the following flush sentence:

     ``Such term shall not include any period if the earning of 
     subpart F income by such corporation during such period would 
     result in only a remote likelihood of an inclusion in gross 
     income under section 951(a)(1)(A)(i).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years of controlled foreign 
     corporations beginning after the date of the enactment of 
     this Act, and to taxable years of United States shareholders 
     with or within which such taxable years of controlled foreign 
     corporations end.

TITLE III--PREVENTION OF CORPORATE EXPATRIATION TO AVOID UNITED STATES 
                               INCOME TAX

     SEC. 301. PREVENTION OF CORPORATE EXPATRIATION TO AVOID 
                   UNITED STATES INCOME TAX.

       (a) In General.--Paragraph (4) of section 7701(a) of the 
     Internal Revenue Code of 1986 (defining domestic) is amended 
     to read as follows:
       ``(4) Domestic.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the term `domestic' when applied to a corporation or 
     partnership means created or organized in the United States 
     or under the law of the United States or of any State unless, 
     in the case of a partnership, the Secretary provides 
     otherwise by regulations.
       ``(B) Certain corporations treated as domestic.--
       ``(i) In general.--The acquiring corporation in a corporate 
     expatriation transaction shall be treated as a domestic 
     corporation.
       ``(ii) Corporate expatriation transaction.--For purposes of 
     this subparagraph, the term `corporate expatriation 
     transaction' means any transaction if--

       ``(I) a nominally foreign corporation (referred to in this 
     subparagraph as the `acquiring corporation') acquires, as a 
     result of such transaction, directly or indirectly 
     substantially all of the properties held directly or 
     indirectly by a domestic corporation, and
       ``(II) immediately after the transaction, more than 80 
     percent of the stock (by vote or value) of the acquiring 
     corporation is held by former shareholders of the domestic 
     corporation by reason of holding stock in the domestic 
     corporation.

       ``(iii) Lower stock ownership requirement in certain 
     cases.--Subclause (II) of clause (ii) shall be applied by 
     substituting `50 percent' for `80 percent' with respect to 
     any nominally foreign corporation if--

       ``(I) such corporation does not have substantial business 
     activities (when compared to the total business activities of 
     the expanded affiliated group) in the foreign country in 
     which or under the law of which the corporation is created or 
     organized, and
       ``(II) the stock of the corporation is publicly traded and 
     the principal market for the public trading of such stock is 
     in the United States.

       ``(iv) Partnership transactions.--The term `corporate 
     expatriation transaction' includes any transaction if--

       ``(I) a nominally foreign corporation (referred to in this 
     subparagraph as the `acquiring corporation') acquires, as a 
     result of such transaction, directly or indirectly properties 
     constituting a trade or business of a domestic partnership,
       ``(II) immediately after the transaction, more than 80 
     percent of the stock (by vote or value) of the acquiring 
     corporation is held by former partners of the domestic 
     partnership or related foreign partnerships (determined 
     without regard to stock of the acquiring corporation which is 
     sold in a public offering related to the transaction), and
       ``(III) the acquiring corporation meets the requirements of 
     subclauses (I) and (II) of clause (iii).

       ``(v) Special rules.--For purposes of this subparagraph--

       ``(I) a series of related transactions shall be treated as 
     1 transaction, and
       ``(II) stock held by members of the expanded affiliated 
     group which includes the acquiring corporation shall not be 
     taken into account in determining ownership.

       ``(vi) Other definitions.--For purposes of this 
     subparagraph--

       ``(I) Nominally foreign corporation.--The term `nominally 
     foreign corporation' means any corporation which would (but 
     for this subparagraph) be treated as a foreign corporation.
       ``(II) Expanded affiliated group.--The term `expanded 
     affiliated group' means an affiliated group (as defined in 
     section 1504(a) without regard to section 1504(b)).
       ``(III) Related foreign partnership.--A foreign partnership 
     is related to a domestic partnership if they are under common 
     control (within the meaning of section 482), or they shared 
     the same trademark or tradename.''

       (b) Effective Dates.--The amendment made by this section 
     shall apply to taxable years beginning after the date of 
     enactment of this Act.

  The SPEAKER pro tempore. Pursuant to House Resolution 638, the 
gentleman from California (Mr. Stark) and a Member opposed each will 
control 30 minutes.
  The Chair recognizes the gentleman from California (Mr. Stark).
  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume.
  Our Democratic substitute addresses a real issue of concern with 
respect to flexible spending accounts in the use-it-or-lose-it rule.
  We agree with the author of this legislation that it is unwise to 
create an incentive for people to spend foolishly or frivolously for a 
benefit that they might lose, and we have the Washington Business Group 
and 50 major corporate members are clear on the issue. They want the 
changes and they want the money carried over into FSAs. The position is 
shared by their employees. There is some question, and nobody really 
has raised it previously, as to putting this money into health savings 
accounts, but because that is such a minor issue it could be 
overlooked.
  The real question here is whether we should pay for this. And it will 
be expensive. It is $8 billion. That is money that could be used in 
many programs, education programs, environmental programs, health 
programs, and it is a principle to which we are dedicated, and that is 
that we would like to expand health care in this country, but we have 
never offered a plan that we will not pay for. And I find it sometimes 
difficult when my opponents across the aisle will not even give us a 
plan that costs nothing.
  My Republican friends are opposed to expanding COBRA benefits. They 
are very expensive for people, but some 40 million people have used 
them since we wrote that bill on a bipartisan basis to expand COBRA 
benefits until a person gets another job or until they mature into 
Medicare. Costs zip, nothing, nada. It costs the employer nothing. Why 
do we object to expanding COBRA benefits? Just because it is a 
government plan and obviously people on the other side of the aisle do 
not like the government helping people unless they are very rich, of 
course.
  So here we have just another example of not a bad piece of 
legislation. It could use some improvement, but it is a freebie and 
will predominantly benefit people in good jobs, with good health 
insurance and expand another tax loophole.
  It is a modest one, but it is a principle. Left unchecked, we would 
soon have almost no tax revenue in this country at all, a position 
which the Club For Growth would applaud, but I am sure that those of us 
who are on the Federal salary or those people who are defending us now 
in Iraq would object to.
  So I hope that we could reverse this disastrous rush to the bottom of 
debt and begin to be responsible in how we legislate by paying for 
these provisions. We will hear more later from my

[[Page 9262]]

colleagues on the really very useful ways that it will help our economy 
if, in fact, we did pay for this bill under the provisions of our 
Democratic substitute.
  Mr. Speaker, I reserve the balance of my time.
  Mr. McCRERY. Mr. Speaker, I rise to claim the time in opposition, and 
I yield myself such time as I may consume.
  Before I get into the specifics of objections to the ``pay fors'' on 
the Democratic substitute, I would point out to the gentleman from 
California that it was under the leadership of this committee and on a 
bipartisan basis 2 years ago to, in fact, expand COBRA in the Trade 
Adjustment Assistance Act whereby we, the government, now will pay up 
to I believe 65 percent of the premium for someone's COBRA benefits 
when they are unemployed due to trade adjustments. So, in fact, I agree 
with the gentleman that we should indeed encourage people to continue 
their health insurance when they become unemployed, and we have 
endeavored to do that with taxpayer dollars.
  With respect to the bill at hand and the substitute offered by the 
gentleman from California, it is true that most of the cost of the bill 
is paid for; not all the cost of the bill, but most of the cost of the 
bill is paid for by the minority's substitute, but the manner they 
choose to pay for this health care benefit I think is quite 
objectionable.
  About half, in fact, maybe a little over half, of the revenue that 
would be produced by the Democratic substitute is produced by a 
retroactive application of a change in the law which would affect 
companies that made a determination which was legal 30 or 40 years ago. 
And I do not know of anyone who thinks that that is a fair result, to 
impose suddenly a penalty on a company that in good faith operated 
under a law 30 or 40 years ago and have been operating that way ever 
since. So I would hope that this body would not suddenly choose to use 
a punitive, retroactive change in the law to penalize companies 
operating in good faith for decades under the United States Tax Code.
  So that is the most objectionable part of their ``pay for.'' The 
other parts simply amount to a tax increase on business in this 
country. Those changes, in fact, could result, and it has been 
estimated by Treasury and testified to by Treasury officials, that 
these changes in the Democratic substitute would actually encourage 
foreign takeover of United States companies, and I do not think that is 
the result we want in this body for the American people or for American 
companies.
  So, Mr. Speaker, while I may have some sympathy for the minority's 
desire to pay for legislation, I think the manner they have chosen to 
pay for this particular bill is ill-advised, and I would hope that this 
House would reject the substitute and pass the underlying bill.
  Mr. Speaker, I reserve the balance of my time.

                              {time}  1415

  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume, 
before I recognize the distinguished gentleman from Massachusetts, to 
remind my good friend from Louisiana that the tax provisions in our 
substitute were recommended by the bipartisan, bicameral Joint 
Committee on Taxation; and these provisions have already passed on a 
bipartisan basis in the other body.
  Mr. Speaker, I yield 4 minutes to the distinguished gentleman from 
Massachusetts (Mr. Neal) 2 minutes for economic logic and 2 minutes for 
righteous indignation, for a total of 4 minutes.
  Mr. NEAL of Massachusetts. Mr. Speaker, I thank the gentleman from 
California (Mr. Stark) for yielding me this time.
  One of the problems here in having a dialogue is that sometimes the 
facts do not square with the dialogue. Now, the gentleman from 
Louisiana (Mr. McCrery) is one of the better people in this House; a 
good Member of the Congress and a very nice guy to work with. But where 
is the sympathy for those companies that stayed here? What about those 
companies that pay their taxes every day? What about those who did not 
attempt to escape in the dark of night to Bermuda for the purpose of 
avoiding American corporate taxes? Where is the sympathy for them? 
Their competitors can go offshore with a phony post office box for 
$27,000 a year, and then they avoid any share of the burden that the 
rest of the American taxpayers face for financing small things like 
Social Security and Medicare and paying for this war in Iraq and 
Afghanistan.
  I would like to put this issue in front of those 134,000 troops in 
Iraq for a vote and see where we go on that issue. We hear about these 
companies that have been gone for 30 or 40 years. Let us get something 
straight, Tyco has been gone since 1997, Ma and Pa Tyco, that avoid 
paying $400 million a year in corporate taxes. Tell that to the parents 
of those men and women and wives and husbands of those men and women in 
Iraq and Afghanistan.
  We make it sound as though these companies are under great duress 
when they avoid paying corporate taxes. I would ask this for the 
listening audience today as well. What do you think the IRS would do to 
you on Monday if you got up and said as an individual that you were 
going to Bermuda for the purpose of denying American citizenship, but 
only for the real purpose of avoiding your share of taxes in America? 
That is what we are asking today.
  This is a decent proposal that is before us. All we are saying on our 
side is let us discuss how you pay for it. That is the important 
reminder for all of us.
  The Rangel substitute with flexible spending accounts is not only a 
popular employee benefit because it allows pretax dollars to be used 
for dependent care expenses or medical expenditures not covered by 
insurance, but in fact, except for the staff of this Republican-run 
House, most of the employees of the Federal Government have had the 
opportunity to indeed utilize FSAs.
  But today we could be debating whether FSAs might even be more 
flexible, allowing employees to roll over unused funds from one year to 
the next. But the leadership has decided that once again we are going 
to come to the aid of their favorite constituency, the healthy and the 
wealthy. We never have time in this institution to take up anything 
that might be of benefit to middle-income taxpayers, to the working 
poor of this country every day who do not have any health benefits; but 
we find plenty of time for the purpose of cutting taxes for the 
wealthiest Americans.
  And let me just go back to this subject again, and I hope people are 
paying attention in this sense: we are now fighting two wars, and the 
answer of this Congress to two wars: three tax cuts. We are going to 
come in with a $25 billion request now because we all know what the 
real cost of that incursion into Iraq is going to be, not only in terms 
of human life but, just as importantly, in terms of the financial 
burden it will be to the American people. So we roll it out in small 
increments.
  We should begin to pay for some of these initiatives that come 
through this House. By the way, that used to be the historic position 
the Republican Party adopted. Today, it is borrow and spend.
  The Rangel substitute would allow workers to roll over their FSA 
money from one year to the next without any budget impact that is 
negative. But because this benefit costs money, the Rangel substitute 
would pay for it by closing down a loophole.
  All I ask is this, Mr. Speaker. If the position that I have adopted 
on these companies that go to Bermuda is so bad, why is it that almost 
2\1/2\ years later the majority will not give me an up-or-down vote in 
this institution? Put this in front of the body here. Square it with 
those men and women in Iraq. Close down this Bermuda loophole, and let 
everybody pay what they are supposed to pay.
  Mr. Speaker, I rise today in support of the Rangel substitute. 
Flexible Spending Accounts have proven to be a popular employee 
benefit, allowing pre-tax collars to be used for dependent care 
expenses or medical expenditures not covered by insurance. In fact, 
except for the staff of this Republican-run House, most of

[[Page 9263]]

the employees of the federal government have had the opportunity to 
utilize FSA's. Today, we could have been debating whether FSA's should 
be even more flexible--allowing employees to roll-over unused funds 
from one year to the next. However, the leadership has decided to 
instead to once again prop-up its favorite tax shelter for healthy 
workers.
  The Rangel substitute would allow workers to roll over FSA money from 
one year to the next and would do so without any negative budget 
impact.
  Because this tax benefit costs money, the Rangel substitute would pay 
for this worker benefit by closing the loophole allowing former 
American companies to move their headquarters offshore for tax 
avoidance.
  Corporate expatriation accounts for $5 billion in lost taxpayer 
revenue over the next decade. Today, we debate a substitute that shows 
us exactly what we could be doing with that money: providing greater 
employee benefits. Why should the workers of America be supporting 
corporate tax dodgers? Consider that in 1997, Tyco renounced its 
corporate citizenship and changed its mailing address to Bermuda to 
avoid paying nearly $400 million a year in U.S. taxes.
  While many in the House have expressed outrage since this loophole 
was first exposed two years ago, the Leadership has done nothing but 
cement the loophole with legislation protecting Tyco and those that 
have already left.
  Since I first filed the bipartisan Corporate Patriot Enforcement Act 
to end this tax subsidy, these corporate expatriates have enjoyed 
almost one billion dollars in U.S. federal government contracts 
annually, 70 percent of which are defense or homeland security related. 
Our colleagues in the Senate have passed as recently as yesterday 
legislation to close this loophole affecting those that are considering 
the island tax havens and those that are already exploiting this 
loophole. But in this Congress, we wait.
  For those that profess to care about the exploding budget deficit, 
for those that claim to hear Chairman Greenspan's warning about the 
harm this historical budget deficit is doing to our economy, you must 
at some point decide that bills that pile on more federal debt are 
wrong. I urge my colleagues to support the fiscally responsible Rangel 
substitute, which makes the corporate tax cheats and those that forsake 
America in a time of war pay for improving benefits for American 
workers.
  Mr. McCRERY. Mr. Speaker, I yield 3 minutes to the distinguished 
gentleman from Pennsylvania (Mr. English), a member of the Committee on 
Ways and Means.
  Mr. ENGLISH. Mr. Speaker, it has been fascinating to appear several 
times on the floor during recent weeks to hear the debate on tax bills 
that seem to lurch in the direction of Iraq and wander all over the 
public policy landscape. I would like to bring the debate today back to 
the core issue of the bill that is before us and whether the substitute 
is actually an improvement on it, and I would argue that it is not.
  Mr. Speaker, the underlying bill that we have before us today would 
provide increased medical security, not as my friend, the gentleman 
from Massachusetts, has suggested, for the wealthiest Americans, but 
for many American workers. When flexible spending accounts are offered 
by an employer, their tax-preferred nature offers a powerful incentive 
for workers to contribute to and grow these accounts. Unfortunately, 
current law perversely influences these incentives by pushing workers 
who have built up an FSA to spend the money in the account if they have 
not used it by the end of the year.
  This use-it-or-lose-it policy defeats the positive benefits of an 
FSA, which is why many eligible workers have chosen not to open FSAs. 
When workers use the hard-earned dollars they have contributed 
themselves or earned from their employers, they will ask more 
questions, further inform themselves, and become better consumers, for 
example, of health care products. If they lose these dollars at the end 
of the year by simply not having the necessity for them instead of 
becoming better health care consumers, they become, in a sense, over-
users of health care.
  Through allocating $500 of unused FSA funds to be carried forward or 
rolled over into a health savings account, FSAs and HSAs can thrive and 
become the practical vehicles they were intended to be for working 
families who want to manage their own health care.
  It is important to point out that the substitute, unlike the 
underlying bill, does not allow the unused funds to be transferred to 
the new HSAs. This is an essential component of the legislation because 
it encourages the HSAs, which embody similar pro-consumer and pro-
worker principles as the FSAs.
  Employers are just beginning to offer HSAs, so now is not the time to 
discourage a health savings account, but to promote it. Let us not take 
a step backwards by passing the substitute. It is bad policy, it is 
poorly thought through, and I think that we ought to be looking at how 
we can provide workers with more opportunities to have these kinds of 
accounts, not fewer.
  These are not the wealthiest people in America. These are people who 
want the opportunity to manage their own health care, to manage their 
own resources; and we are giving them an opportunity to accumulate more 
of those resources in this bill.
  Mr. STARK. Mr. Speaker, I yield 5 minutes to the gentleman from Texas 
(Mr. Doggett).
  Mr. DOGGETT. Mr. Speaker, I visited with a group of small business 
people from Texas this morning who came to discuss, among other things, 
their concerns about being able to provide health coverage for 
themselves and for their employees. Their stories were very similar to 
ones I have heard while visiting with small retailers in Phaw and in 
Mission, Texas, and in talking with musicians in Austin, Texas--that we 
have a growing crisis in this country in trying to ensure that working 
Americans can get the health protection and the health insurance access 
that they need.
  As I talked with them, one of the concerns that I raised was this 
need versus another one that is also the tragic result of the 
misleadership of this administration and this Republican Congress. They 
are driving our country into an economic ditch with the largest deficit 
in the history of America last year, to be surpassed this year, and to 
be exceeded in the future under a broken economic scheme.
  In fact, the deficits are rising at such a rate that our Republican 
colleagues are continually coming to ask for an increase in the debt 
ceiling. They will have to do it again in the very near future. I think 
they probably need to keep an extension ladder in this House so that 
they can continue raising the ceiling upward, up to what will become 
$10 trillion or $11 trillion. That is trillion with a ``T'' that they 
will be raising the debt ceiling to as a result of their misguided 
economic policies and their willingness to give tax break after tax 
break to those at the top of the economic ladder without paying for it. 
They get it for free.
  Today, we have another example of that. We have an example of an 
unwillingness to consider the cost and the burden on future generations 
of Americans and the adverse effect on our economy of continuing to 
incur more and more debt, as has been true in the past, by adding more 
and more tax breaks.
  So we have come forward with a substitute and said that if you are 
going to make these changes--even though this is probably not the most 
efficient way to deliver health care and there are much preferable 
approaches--but if you are going to do this, at least pay for it. Do 
not add more and more to the national debt.
  And we have done it in very reasonable ways. One is to deal with 
something that Republicans in this House would like to forget about as 
just ancient history: the scandal called Enron, the scandal that led to 
so much trouble for our economy and to a reduction in the public's 
confidence in our economic marketplace.
  Enron manipulated our tax laws. In fact, as The Washington Post 
reported last year, Enron was turning its tax department into a profit 
center. Its senior executives, along with leading accounting, banking, 
and legal advisers were seeking to manipulate tax laws through complex 
concealed transactions. These were transactions that involved things 
like synthetic leases. These were transactions that, as one of their 
people reported, were so intentionally complicated it would take a year 
or more to construct a single deal.

[[Page 9264]]

  Well, we have adopted in this substitute very modest proposals, 
recommended by the Joint Committee on Taxation and approved 
overwhelmingly in the United States Senate, to do something about those 
Enron tax abuses. What has the House of Representatives done in the two 
years since these abuses were disclosed? Absolutely nothing. The Senate 
was willing to look at the tax returns of Enron to see how these 
manipulations occurred, but the House Committee on Ways and Means was 
afraid to look under that rock because it knew the scandal it would 
find. They have been unwilling to address this problem.
  The same is true of the unpatriotic corporations that retreat to 
Bermuda or Barbados, who basically say that they do not want to pay 
their fair share of our homeland security and defense. Oh, yes, they 
are proud of our flag when they want our fighting men and women 
defending their position. They are so proud of our flag when they are 
being defended by our Armed Forces. They are so proud of our flag when 
they want to do business with the United States Government.
  Some of these same unpatriotic corporations come and ask for hundreds 
of millions of tax dollars in government contracts. In fact, one 
contracts with the Internal Revenue Service. Another one contracts with 
the Department of Homeland Security. On the one hand they will not pay 
their fair share of taxes, but they sure want all the tax money they 
can get in contracts with the government.
  We have a proposal to pay for health care through reforms to prevent 
another Enron scandal and through reforms that simply ask for a level 
playing field. Those corporations that want the protection of the 
American flag ought to be willing to pay their fair share.
  The Committee on Ways and Means and the Republican leadership in the 
House will never make these needed changes unless they are forced to do 
it through proposals just like this. They feel so comfortable with the 
Enron philosophy that a tax department is a profit center that they 
will continue to defend these abuses.
  I ask your support for the substitute.

                              {time}  1430

  Mr. STARK. Mr. Speaker, I yield 3 minutes to the gentleman from 
Michigan (Mr. Levin).
  Mr. LEVIN. Mr. Speaker, there was a story in yesterday's Detroit 
News, Michigan's uninsureds swells by 100,000 last year to 1.2 million 
people. I do not see how this bill will reduce that amount at all. This 
is supposed to be the week where we pay attention to the uninsured, but 
this bill really does not do that. It really turns away from them. I 
think we very much need to keep that in mind. That is the first point.
  Secondly, it allows the transfer to savings accounts which really can 
become a dodge to escape taxation altogether. Even though it is a small 
amount of this, it is a serious mistake. We do not need more tax 
shelters in our Tax Code. We should not be feeding any moneys 
whatsoever into those shelters. This is what this bill in part does.
  My third point, the gentleman from Louisiana (Mr. McCrery) works very 
hard on tax issues and knows the Tax Code well. I think this is a good 
pay-for. I think it is really irresponsible to bring another bill forth 
to this floor and not pay one dime. It is going to add $8 billion plus 
to our deficit.
  And the last aspect of this is the following: If they do not like 
this pay-for, come up with their own, but do not come here without 
anything to say as to how it will be paid for except by our children 
and our grandchildren. I support the substitute.
  Mr. McCRERY. Mr. Speaker, I yield 3 minutes to the gentleman from 
Wisconsin (Mr. Ryan), a distinguished member of the Committee on Ways 
and Means.
  Mr. RYAN of Wisconsin. Mr. Speaker, I thank the gentleman for 
yielding me this time and for bringing attention to this issue.
  I want to make three points. Number one, we are hearing all of this 
hue and cry against allowing people to roll their flexible spending 
accounts $500 a year over into the next year. There is a reason why it 
is important to allow a person to roll their money over from one year 
to the next: We are not getting the kind of consumer activity and 
consumer reforms we want in health care when we deny an employee the 
ability to keep the money in their account from one year to the next. 
What ends up happening with the flexible spending account is when there 
is a balance at the end of the year, the employee goes and buys a 
couple pairs of eyeglasses, gets their teeth cleaned a couple of times, 
more money is spent and it props up health care inflation.
  What this reform does, it lets the employee know this is their money. 
More importantly, what this bill does and what the Rangel substitute 
denies is the ability to roll over $500 from their flexible spending 
account into a health savings account. They say this health savings 
account is a new tax shelter.
  Mr. Speaker, what a health savings account does is it lets people 
spend money on health care tax free. We can deduct the cost of health 
insurance on corporate tax rates when corporations pay for health care 
for their employees; why cannot employees and individuals deduct the 
cost of their health care expenditures on their income taxes? That is 
what HSAs do.
  Take a look at what health savings accounts have already produced, 
only having been in law since January 1; 37 percent of all health 
savings accounts sold went to people who previously were uninsured; 18 
percent of those people had preexisting conditions, people who had 
sicker risk profiles. And 47 years old was the median age of a person 
who bought health savings accounts.
  So to the critics that said only wealthy, only young, only insured 
people would be buying HSAs, all of that is being proven untrue with 
the results that are taking place today in the marketplace. But more 
importantly is the fact that the Mercer Study just did a survey and 
they noted that 73 percent of all firms in America who offer their 
employees health insurance are considering giving an additional option 
of health insurance through a health savings account by 2006. By 
denying your employees the ability to take the money that is in their 
flexible spending account, which is controlled by the employer, and put 
it in their own account, which goes to the employee, is simply saying 
you are not going to let the employers give this money to the employee 
and be part of the employee's property.
  It is very important that we allow the employees to keep this money 
and use this money for their own health insurance and to do so tax free 
so we end the bias in the Tax Code right now that is against giving 
people the ability to spend money on health care on a tax-free basis. 
This is how we get the employee and the consumer back into the business 
of buying health care.
  I urge rejection of the Rangel substitute and adoption of the base 
bill.
  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I would like to suggest to the gentleman from Wisconsin 
(Mr. Ryan) that we do not on this side have any objection to the 
rollover. We think it is a good idea, and all we would suggest is that 
we have to pay for it. That is the only difference.
  Mr. RYAN of Wisconsin. Mr. Speaker, will the gentleman yield?
  Mr. STARK. I yield to the gentleman from Wisconsin.
  Mr. RYAN of Wisconsin. Is the gentleman opposed to rolling over the 
FSA money into an HSA?
  Mr. STARK. Actually, I am opposed to it in general, but I offer to 
the gentleman from Louisiana (Mr. McCrery) that we would accept that if 
he would pay for half of the bill. That is compromise.
  Mr. RYAN of Wisconsin. The vote we are faced with, the Rangel 
substitute, is denying people the ability to keep this money. It denies 
people the ability to put their FSA money into an HSA.
  Mr. STARK. It only denies the HSA, which they think is going to be a 
small number. There is still time to negotiate.
  Mr. Speaker, I yield 4 minutes to the gentlewoman from Connecticut 
(Ms. DeLauro).

[[Page 9265]]


  Ms. DeLAURO. Mr. Speaker, I rise in support of the Rangel substitute. 
Like the underlying bill, the substitute permits up to $500 of unused 
benefits in the employee's health flexible spending arrangement to be 
carried forward to the employee's FSA account for the next plan year. 
However, this substitute does not permit unused benefits to be 
contributed to an employee's health savings account, which in fact we 
know to be a tax shelter for the healthy and for the wealthy.
  This substitute is paid for, which is the principal reason why we 
have this substitute and why we are opposed to the underlying 
amendment, not by driving us deeper into debt. How do we pay for it? We 
eliminate the tax benefits that corporations receive when they 
reincorporate overseas for the express purposes of avoiding U.S. income 
taxes. They do not want to pay taxes to the United States of America. 
These so-called corporate expatriates, they enjoy all of the benefits 
of corporate citizenship in America. They look like U.S. companies, 
their stock is principally traded in the United States, and their 
physical assets are protected by our Armed Forces. They just refuse to 
pay for the benefits as every other American citizen or other companies 
do.
  Countless companies engage in this practice: PriceWaterhouse Coopers 
Consulting, Accenture, Tyco, Foster Wheeler, the list goes on and on. 
These companies go to Bermuda, Barbados, the Cayman Islands. These are 
great vacation spots, particularly for companies who want to live tax 
free.
  Many of us have worked for years to end this practice only to be 
turned back again and again by the Republican leadership which has time 
and again given their approval to corporations who continue to avoid 
living up to their obligations as citizens. Two years ago, this House 
voted overwhelmingly, 318 to 110, to pass an amendment that I offered 
to the Homeland Security Act that would have prohibited corporate 
expatriates from receiving Federal contracts from the Department of 
Homeland Security. The other body followed suit; unanimously, I may 
add. Even the President spoke out in favor of ending this practice. But 
in the dark of night, this Republican leadership gutted the amendment, 
a bipartisan amendment, defying the will of the President and both 
Chambers of the Congress. Now that contracting ban is, for all intents 
and purposes, meaningless.
  What happens is we have a company that goes offshore, pays no taxes, 
takes jobs and technology with them, and then what they want to do is 
to be considered for millions and billions of dollars in taxpayer 
dollars from the Department of Energy, the Department of Defense, the 
Department of Homeland Security; that is what is happening, but they 
pay no taxes in the United States of America.
  With this substitute we say, no more. At a time when we have brave 
men and women putting their lives on the line across the world, we will 
put patriotism before profit. And some of those companies that we are 
talking about are reaping the benefits today in Iraq while our young 
men and women are dying in Iraq. At a time when we have seen the 
greatest fiscal reversal in this country, a $5.6 trillion surplus has 
become a $3 trillion deficit, we are saying with this amendment that we 
have a moral obligation to pay our bills and not pass them on to our 
children and our children's children.
  Mr. Speaker, I support this substitute. It is the right thing to do. 
It is the responsible thing to do. Support the Rangel substitute.
  Mr. McCRERY. Mr. Speaker, I reserve the balance of my time.
  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I would like to close the debate on our side for our 
substitute. My belief is these two tax provisions, modest as they are, 
regardless of the underlying bill, are good tax policy and ought to be 
considered if for no other reason than that they correct some serious 
inequities in our Tax Code which have been described by previous 
speakers.
  We are very close to a compromise with our friends on the other side 
of the aisle. Our substitute would eliminate the health savings account 
issue. But as I said, it is possible to reinstate that in conference, 
and if the gentleman would like to support our substitute, we could do 
the patriotic thing, we could provide good tax policy, we could pay for 
a very good idea, and we could walk out, arm in arm, saying we have 
helped a few people, we have paid for it, and we have brought 
patriotism and corporate responsibility to some of our recalcitrant 
corporate friends who are not doing their share.
  I would urge that this substitute does no harm to the underlying 
philosophy of the bill of the gentleman from Louisiana (Mr. McCrery). 
It does add to the coffers of our Nation when it is so desperately 
needed. This money is contributed by those corporations whose actions 
are I believe indefensible, and particularly at this time of grave 
national emergency.
  I would not want to suggest that anybody who votes against our 
substitute is unpatriotic, but I would suggest that it certainly is 
helpful for our troops and the American economy to support the Rangel 
substitute.
  Mr. Speaker, I yield back the balance of my time.
  Mr. McCRERY. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, while I would relish the opportunity to walk out of the 
Chamber arm in arm with the gentleman from California (Mr. Stark) in 
complete agreement on a compromise on this legislation, I am afraid 
that the ill-advised tax changes contained in the gentleman's 
substitute would likely result in increased takeover of American 
corporations by foreign companies, so I will not be able to do that; 
but perhaps another day.
  This substitute admits that the underlying policy in the bill under 
consideration is appropriate, that is allowing employees to roll over 
up to $500 at the end of the year into next year's flexible spending 
arrangement. They do object to rolling money over into a health savings 
account, but the other part of the substitute which makes dramatic 
changes in tax policy in this country I think are indeed ill-advised, 
and I would urge this House to reject that.
  I just want to go over a couple of things that have been mentioned by 
previous speakers, one of whom said we are now experiencing the largest 
deficit in the history of the country. Of course, he is speaking in 
nominal terms, not in real terms. In fact, the appropriate measurement 
of a deficit is against the national income; what percent of our 
national income is the deficit. And the deficit we are running now is 
not even close to the largest deficit in history measured in those 
terms.

                              {time}  1445

  He also said the economy is in the ditch, or something like that. No, 
the economy was in the ditch in 2000, but we have succeeded in dragging 
the economy out of the ditch thanks to the three tax cuts that another 
gentleman mentioned earlier. We now have a very vibrant, growing 
economy. We now see jobs being created at a remarkable clip for the 
last 2 months, so I would disagree with the gentleman's 
characterization of the economy being in the ditch. In fact, it is very 
much alive, and we hope it will continue that way.
  The subject of American companies moving offshore is indeed a 
delicate one and one that we would like to address. In fact, we do 
address that unfortunate phenomenon in a bill that passed the Committee 
on Ways and Means back in 2002 and a different version was just passed 
yesterday by the Senate, and we will have another opportunity to 
address it here in the House. Since we introduced that bill and passed 
it through the Committee on Ways and Means in 2002, there has not been 
a single company that has gone offshore. So the remedy that we 
prescribed for this deplorable action by some American companies we 
believe to be the correct remedy, the good tax policy remedy, and it is 
already working even though we have not even passed it. We just passed 
it through the Committee on Ways and Means. I would urge this House to 
reject the ill-

[[Page 9266]]

advised course of action in the substitute and instead look forward to 
voting on a much more progressive treatment of that problem which will 
not encourage foreign takeover of American companies.
  Mr. Speaker, while again I commend the minority on supporting the 
major provision of the underlying bill, I am afraid we must ask for a 
rejection of their substitute.
  Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Quinn). All time for debate has expired.
  Pursuant to House Resolution 638, the previous question is ordered on 
the bill and on the amendment in the nature of a substitute offered by 
the gentleman from California (Mr. Stark).
  The question is on the amendment in the nature of a substitute 
offered by the gentleman from California (Mr. Stark).
  The question was taken; and the Speaker pro tempore announced that 
the noes appeared to have it.


                             Recorded Vote

  Mr. STARK. Mr. Speaker, I demand a recorded vote.
  A recorded vote was ordered.
  The vote was taken by electronic device, and there were--ayes 197, 
noes 230, not voting 6, as follows:

                             [Roll No. 161]

                               AYES--197

     Abercrombie
     Ackerman
     Alexander
     Allen
     Andrews
     Baca
     Baird
     Baldwin
     Ballance
     Becerra
     Bell
     Berkley
     Berman
     Berry
     Bishop (GA)
     Bishop (NY)
     Blumenauer
     Boswell
     Boucher
     Boyd
     Brady (PA)
     Brown (OH)
     Brown, Corrine
     Capps
     Capuano
     Cardin
     Cardoza
     Carson (IN)
     Case
     Chandler
     Clay
     Clyburn
     Conyers
     Costello
     Cramer
     Crowley
     Cummings
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     Davis (TN)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Deutsch
     Dicks
     Dingell
     Doggett
     Dooley (CA)
     Doyle
     Edwards
     Emanuel
     Engel
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Filner
     Ford
     Frank (MA)
     Frost
     Gephardt
     Gonzalez
     Gordon
     Green (TX)
     Grijalva
     Gutierrez
     Harman
     Hastings (FL)
     Hill
     Hinchey
     Hinojosa
     Hoeffel
     Holden
     Holt
     Honda
     Hooley (OR)
     Hoyer
     Inslee
     Israel
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     John
     Johnson, E. B.
     Jones (OH)
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind
     Kleczka
     Kucinich
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Lee
     Levin
     Lewis (GA)
     Lipinski
     Lofgren
     Lowey
     Lynch
     Majette
     Maloney
     Markey
     Marshall
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McDermott
     McGovern
     McIntyre
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Michaud
     Millender-McDonald
     Miller (NC)
     Miller, George
     Moore
     Moran (VA)
     Nadler
     Napolitano
     Neal (MA)
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Pomeroy
     Price (NC)
     Rahall
     Rangel
     Rodriguez
     Ross
     Rothman
     Roybal-Allard
     Ruppersberger
     Rush
     Ryan (OH)
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Sandlin
     Schakowsky
     Schiff
     Scott (GA)
     Scott (VA)
     Serrano
     Sherman
     Skelton
     Slaughter
     Smith (WA)
     Snyder
     Solis
     Spratt
     Stark
     Stenholm
     Strickland
     Stupak
     Tanner
     Tauscher
     Taylor (MS)
     Thompson (CA)
     Thompson (MS)
     Tierney
     Towns
     Turner (TX)
     Udall (CO)
     Udall (NM)
     Van Hollen
     Velazquez
     Visclosky
     Waters
     Watson
     Watt
     Waxman
     Weiner
     Wexler
     Woolsey
     Wu
     Wynn

                               NOES--230

     Aderholt
     Akin
     Bachus
     Baker
     Ballenger
     Barrett (SC)
     Bartlett (MD)
     Barton (TX)
     Bass
     Beauprez
     Bereuter
     Biggert
     Bilirakis
     Bishop (UT)
     Blackburn
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bonner
     Bono
     Boozman
     Bradley (NH)
     Brady (TX)
     Brown (SC)
     Brown-Waite, Ginny
     Burgess
     Burns
     Burr
     Burton (IN)
     Buyer
     Calvert
     Camp
     Cannon
     Cantor
     Capito
     Carson (OK)
     Carter
     Castle
     Chabot
     Chocola
     Coble
     Cole
     Collins
     Cooper
     Cox
     Crane
     Crenshaw
     Cubin
     Culberson
     Cunningham
     Davis, Jo Ann
     Davis, Tom
     Deal (GA)
     DeLay
     Diaz-Balart, L.
     Diaz-Balart, M.
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Emerson
     English
     Everett
     Feeney
     Ferguson
     Flake
     Foley
     Forbes
     Fossella
     Franks (AZ)
     Frelinghuysen
     Gallegly
     Garrett (NJ)
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Goode
     Goodlatte
     Goss
     Granger
     Graves
     Green (WI)
     Greenwood
     Gutknecht
     Hall
     Harris
     Hart
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Herger
     Hobson
     Hoekstra
     Hostettler
     Houghton
     Hulshof
     Hunter
     Hyde
     Isakson
     Issa
     Istook
     Jenkins
     Johnson (CT)
     Johnson (IL)
     Johnson, Sam
     Jones (NC)
     Kanjorski
     Keller
     Kelly
     Kennedy (MN)
     King (IA)
     King (NY)
     Kingston
     Kirk
     Kline
     Knollenberg
     LaHood
     Latham
     LaTourette
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas (KY)
     Lucas (OK)
     Manzullo
     Matheson
     McCotter
     McCrery
     McHugh
     McInnis
     McKeon
     Mica
     Miller (FL)
     Miller (MI)
     Miller, Gary
     Mollohan
     Moran (KS)
     Murphy
     Murtha
     Musgrave
     Myrick
     Nethercutt
     Neugebauer
     Ney
     Northup
     Norwood
     Nunes
     Nussle
     Osborne
     Ose
     Otter
     Oxley
     Paul
     Pearce
     Pence
     Peterson (MN)
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Platts
     Pombo
     Porter
     Portman
     Pryce (OH)
     Putnam
     Quinn
     Radanovich
     Ramstad
     Rehberg
     Renzi
     Reynolds
     Rogers (AL)
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Ros-Lehtinen
     Royce
     Ryan (WI)
     Ryun (KS)
     Saxton
     Schrock
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simpson
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Souder
     Stearns
     Sullivan
     Sweeney
     Tancredo
     Taylor (NC)
     Terry
     Thomas
     Thornberry
     Tiahrt
     Tiberi
     Toomey
     Turner (OH)
     Upton
     Vitter
     Walden (OR)
     Walsh
     Wamp
     Weldon (FL)
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Young (AK)
     Young (FL)

                             NOT VOTING--6

     DeMint
     Kolbe
     Regula
     Reyes
     Simmons
     Tauzin


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. Quinn) (during the vote). Members are 
advised there are 2 minutes remaining.

                              {time}  1515

  Messrs. WELLER, CARSON of Oklahoma, FEENEY, KINGSTON, and LUCAS of 
Kentucky changed their vote from ``aye'' to ``no.''
  Messrs. TANNER, PASTOR, and LARSON of Connecticut changed their vote 
from ``no'' to ``aye.''
  So the amendment in the nature of substitute was rejected.
  The result of the vote was announced as above recorded.
  The SPEAKER pro tempore. The question is on the engrossment and third 
reading of the bill.
  The bill was ordered to be engrossed and read a third time, and was 
read the third time.


                Motion to Recommit Offered by Mr. Stark

  Mr. STARK. Mr. Speaker, I offer a motion to recommit.
  The SPEAKER pro tempore (Mr. Quinn). Is the gentleman opposed to the 
bill?
  Mr. STARK. I am, Mr. Speaker, in its present form.
  The SPEAKER pro tempore. The Clerk will report the motion to 
recommit.
  The Clerk read as follows:

       Mr. Stark moves to recommit the bill H.R. 4279 to the 
     Committee on Ways and Means with instructions to report the 
     same back to the House forthwith with the following 
     amendment:
       At the end of the bill, add the following new section:

     SEC. 2. SOCIAL SECURITY AND MEDICARE TRUST FUNDS HELD 
                   HARMLESS.

       Nothing in this Act shall be construed as affecting the 
     amount of transfers to any trust fund established by title II 
     or XVIII of the Social Security Act.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
California (Mr. Stark) is recognized for 5 minutes in support of his 
motion to recommit.
  Mr. STARK. Mr. Speaker, during the past several hours we have had a 
good debate on this bill, and I think we have agreed to some of the 
basic principles that the flexible savings accounts should allow a 
reduction of the use-it-or-lose-it rule. We had attempted to offer a 
compromise to get our Republican colleagues to just pay for half of the 
bill, which was turned down. And the bill has, indeed, many supporters.
  But what we have seen during the course of this current 
administration is indirectly a complete raid on the Social Security and 
Medicare Trust Funds. Basically, the Republicans have spent all of the 
surplus in Social Security and Medicare, and that, in my

[[Page 9267]]

opinion, is indefensible. Whether we agree about flexible savings 
accounts or medical savings accounts is not the issue. This bill 
directly, specifically, transfers out of the trust funds $3.4 billion. 
The Republicans are raiding the Social Security and Medicare Trust 
Funds.
  Now, that may not sound like a lot to my colleagues across the aisle, 
but to the people who depend on Social Security and Medicare, the idea 
that they are stealing money out of the Medicare and Social Security 
Trust Funds blatantly, I think they will find offensive.
  This reduction in receipts should not be permitted to occur. It will 
not harm this bill. The bill will go forward exactly as the 
distinguished gentleman from Louisiana has outlined it and has 
prevailed. The only difference is our motion to recommit asks us all to 
stand up and take the pledge to protect Social Security and Medicare 
and its trust funds for all of those who depend on their benefits in 
this country.
  This bill takes care of well-employed, well-insured individuals. This 
does not help any uninsured people at all. It gives an additional 
benefit to people with first-class medical insurance. Why then should 
we spoil an otherwise decent bill by taking the first step to destroy 
Medicare and Social Security for people who are unable to get health 
insurance? That is wrong.
  We have all committed to protect Social Security and Medicare. You 
cannot oppose this motion to recommit and say you are protecting it. 
You are stealing almost $3.5 billion over the next 10 years out of 
these trust funds.
  To support our motion to recommit would merely say find it someplace 
else; take it out of general revenues, take it out of trade, take it 
out of anything, but do not take it out of the hard-earned benefits 
that our senior citizens are entitled to. This could be the first step 
toward destroying the financial viability of Medicare and Social 
Security.
  If you vote for our motion to recommit, you are standing up and 
suggesting that you will protect the trust funds that underlie Social 
Security and Medicare. If you vote against it, you are saying, ``We 
don't care. Take the seniors' money. What the heck. We can spend it. We 
have spent everybody else's money. We have spent our grandkids' 
money.''
  I ask you, out of compassion, those of us who are seniors might not 
be able to get a job anyplace else if I am not reelected. My Social 
Security, please do not steal it. Do not make my little children go out 
and get an extra paper route to take care of me in my dotage. We need 
this. Our parents need it. We must protect our children.
  So, to repeat, the bill will go through exactly as the Republicans 
have crafted it; but if you vote for our motion to recommit, you get 
the added benefit of saying to every senior in your district, I stood 
up and protected your Social Security and Medicare benefits by 
protecting the trust funds to which this money would go.
  Mr. Speaker, I urge support for the motion to recommit.
  Mr. THOMAS. Mr. Speaker, I rise in opposition to the motion to 
recommit.
  The SPEAKER pro tempore. The gentleman from California is recognized 
for 5 minutes.
  Mr. THOMAS. Mr. Speaker, I hope you all enjoyed that ride through 
very dark woods. Now let me explain what is really going on.
  Return with me to 1945. We were in the middle of a war and a decision 
was made which affects us profoundly today. There was a choice of 
increasing wages or there was an idea that we can snooker workers not 
to ask for more wages if we create a procedure in which employers offer 
fringe benefits for which they will get a tax break.
  Today, a dollar in wages competes against a dollar in fringe 
benefits. A dollar in wages is taxed 100 percent. A dollar in fringe 
benefits does not affect the worker or the employer. We created a 
system that puts a premium on going for fringe benefits over wages.
  The argument the gentleman from California just made is based on that 
concept. He has a letter from Joint Tax that says if you create this 
fringe benefit, flexible spending accounts, in which up to $500 of the 
employee's tax deferred structure is allowed to roll over in the 
employee-controlled structure as an incentive to keep down the fringe 
benefit costs, there is a possibility that these will be successful.
  What happens if they are successful? The dollar in wages is not paid, 
the dollar in fringe benefits is paid, and the payroll tax, which 
otherwise would have gone into the Social Security Trust Fund from the 
wages foregone, is what he is talking about; not enough to modify the 
trust fund one iota over the year in terms of true impact on the Social 
Security Trust Fund.
  It happens with every decision we make in here in choosing either 
wages or fringe benefits. This is worse than a red herring. What it 
does is commit you to say that any change that would save dollars in 
the larger picture, for example incorporating individuals' own 
decision-making in health care where they actually have an investment, 
rather than having $5,000 worth of fringe benefits in which they are 
taking care of themselves, do not get any benefit out of it, and at the 
end of the year they go get eyeglass frames because they are trying to 
get money back out of the fringe benefits; the system we have 
constructed today, that if in fact this is successful and you save 
total money because somebody decides they want to make a prudent 
decision and a couple of hundred dollars roll over into the flexible 
savings account, Joint Tax has said that couple of hundred dollars that 
is in the flexible spending account may have been paid out in wages, 
which means you then lose the payroll taxes in terms of the difference 
between the two.
  The overall cost to the economy, the society, and the taxpayers is 
less. It is a minor accounting procedure which you can not even see. 
And that is the black wood he took you through to buy the concept that 
anytime you want to make an improvement in the overall structure of 
society, taxes and Social Security, you have taken the pledge not to 
have anything happen.
  Do not take this pledge. Understand what they are trying to do to 
you. Reject this gimmick and simply say, look at the larger overall 
society benefit, and do not put on the green eyeshade and do not let 
them tell you that somehow this is going to impact the Social Security 
Trust Fund. In the long run, people helping make their own decisions 
saves money, it does not cost money.
  Vote no on the motion to recommit.
  The SPEAKER pro tempore. Without objection, the previous question is 
ordered on the motion to recommit.
  There was no objection.
  The SPEAKER pro tempore. The question is on the motion to recommit.
  The question was taken; and the Speaker pro tempore announced that 
the noes appeared to have it.


                             Recorded Vote

  Mr. STARK. Mr. Speaker, I demand a recorded vote.
  A recorded vote was ordered.
  The SPEAKER pro tempore. Pursuant to clauses 8 and 9 of rule XX, this 
15-minute vote on the motion to recommit will be followed by 5-minute 
votes, if ordered, on passage of H.R. 4279 and adoption of H. Con. Res. 
352.
  The vote was taken by electronic device, and there were--ayes 202, 
noes 224, not voting 7, as follows:

                             [Roll No. 162]

                               AYES--202

     Abercrombie
     Ackerman
     Alexander
     Allen
     Andrews
     Baca
     Baird
     Baldwin
     Ballance
     Becerra
     Bell
     Berkley
     Berman
     Berry
     Bishop (GA)
     Bishop (NY)
     Blumenauer
     Boswell
     Boucher
     Boyd
     Brady (PA)
     Brown (OH)
     Brown, Corrine
     Capps
     Capuano
     Cardin
     Cardoza
     Carson (IN)
     Carson (OK)
     Case
     Chandler
     Clay
     Clyburn
     Conyers
     Cooper
     Costello
     Cramer
     Crowley
     Cummings
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     Davis (TN)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Deutsch
     Dicks
     Dingell
     Doggett
     Dooley (CA)
     Doyle
     Edwards
     Emanuel
     Engel
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Filner
     Ford
     Frank (MA)
     Frost
     Gephardt
     Gonzalez
     Gordon
     Green (TX)
     Grijalva
     Gutierrez
     Harman
     Hastings (FL)
     Hill
     Hinchey
     Hinojosa
     Hoeffel
     Holden
     Holt
     Honda
     Hooley (OR)
     Hoyer
     Inslee

[[Page 9268]]


     Israel
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     John
     Johnson, E. B.
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind
     Kleczka
     Kucinich
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Lee
     Levin
     Lewis (GA)
     Lipinski
     Lofgren
     Lowey
     Lucas (KY)
     Lynch
     Majette
     Maloney
     Markey
     Marshall
     Matheson
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McDermott
     McGovern
     McIntyre
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Michaud
     Millender-McDonald
     Miller (NC)
     Miller, George
     Mollohan
     Moore
     Moran (VA)
     Murtha
     Nadler
     Napolitano
     Neal (MA)
     Oberstar
     Obey
     Olver
     Ortiz
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Peterson (MN)
     Pomeroy
     Price (NC)
     Rahall
     Rangel
     Rodriguez
     Ross
     Rothman
     Roybal-Allard
     Ruppersberger
     Rush
     Ryan (OH)
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Sandlin
     Schakowsky
     Schiff
     Scott (VA)
     Serrano
     Sherman
     Skelton
     Slaughter
     Smith (WA)
     Snyder
     Solis
     Spratt
     Stark
     Stenholm
     Strickland
     Stupak
     Tanner
     Tauscher
     Taylor (MS)
     Thompson (CA)
     Thompson (MS)
     Tierney
     Towns
     Turner (TX)
     Udall (CO)
     Udall (NM)
     Van Hollen
     Velazquez
     Visclosky
     Waters
     Watson
     Watt
     Waxman
     Weiner
     Wexler
     Wu
     Wynn

                               NOES--224

     Akin
     Bachus
     Baker
     Ballenger
     Barrett (SC)
     Bartlett (MD)
     Barton (TX)
     Bass
     Beauprez
     Bereuter
     Biggert
     Bilirakis
     Bishop (UT)
     Blackburn
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bonner
     Bono
     Boozman
     Bradley (NH)
     Brady (TX)
     Brown (SC)
     Brown-Waite, Ginny
     Burgess
     Burns
     Burr
     Burton (IN)
     Buyer
     Calvert
     Camp
     Cannon
     Cantor
     Capito
     Carter
     Castle
     Chabot
     Chocola
     Coble
     Cole
     Collins
     Cox
     Crane
     Crenshaw
     Cubin
     Culberson
     Cunningham
     Davis, Jo Ann
     Davis, Tom
     Deal (GA)
     DeLay
     Diaz-Balart, L.
     Diaz-Balart, M.
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Emerson
     English
     Everett
     Feeney
     Ferguson
     Flake
     Foley
     Forbes
     Fossella
     Franks (AZ)
     Frelinghuysen
     Gallegly
     Garrett (NJ)
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Goode
     Goodlatte
     Goss
     Granger
     Graves
     Green (WI)
     Greenwood
     Gutknecht
     Hall
     Harris
     Hart
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Herger
     Hobson
     Hoekstra
     Hostettler
     Houghton
     Hulshof
     Hunter
     Hyde
     Isakson
     Issa
     Istook
     Jenkins
     Johnson (CT)
     Johnson (IL)
     Johnson, Sam
     Jones (NC)
     Keller
     Kelly
     Kennedy (MN)
     King (IA)
     King (NY)
     Kingston
     Kirk
     Kline
     Knollenberg
     Kolbe
     LaHood
     Latham
     LaTourette
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas (OK)
     Manzullo
     McCotter
     McCrery
     McHugh
     McInnis
     McKeon
     Mica
     Miller (FL)
     Miller (MI)
     Miller, Gary
     Moran (KS)
     Murphy
     Musgrave
     Myrick
     Nethercutt
     Neugebauer
     Ney
     Northup
     Norwood
     Nunes
     Nussle
     Osborne
     Ose
     Otter
     Oxley
     Paul
     Pearce
     Pence
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Platts
     Pombo
     Porter
     Portman
     Pryce (OH)
     Putnam
     Quinn
     Radanovich
     Ramstad
     Regula
     Rehberg
     Renzi
     Reynolds
     Rogers (AL)
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Ros-Lehtinen
     Royce
     Ryan (WI)
     Ryun (KS)
     Saxton
     Schrock
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simmons
     Simpson
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Souder
     Stearns
     Sullivan
     Sweeney
     Tancredo
     Taylor (NC)
     Terry
     Thomas
     Thornberry
     Tiahrt
     Tiberi
     Toomey
     Turner (OH)
     Upton
     Vitter
     Walden (OR)
     Walsh
     Wamp
     Weldon (FL)
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Young (AK)
     Young (FL)

                             NOT VOTING--7

     Aderholt
     DeMint
     Owens
     Reyes
     Scott (GA)
     Tauzin
     Woolsey


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. Quinn) (during the vote). Members are 
advised there are 2 minutes remaining in this vote.

                              {time}  1547

  So the motion to recommit was rejected.
  The result of the vote was announced as above recorded.

                              {time}  1545

  The SPEAKER pro tempore (Mr. Latham). The question is on passage of 
the bill.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.
  Mr. McCRERY. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. This will be a 5-minute vote.
  The vote was taken by electronic device, and there were--yeas 273, 
nays 152, not voting 8, as follows:

                             [Roll No. 163]

                               YEAS--273

     Akin
     Alexander
     Bachus
     Baker
     Ballenger
     Barrett (SC)
     Bartlett (MD)
     Barton (TX)
     Bass
     Beauprez
     Bereuter
     Berkley
     Biggert
     Bilirakis
     Bishop (GA)
     Bishop (UT)
     Blackburn
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bonner
     Bono
     Boozman
     Boucher
     Boyd
     Bradley (NH)
     Brady (TX)
     Brown (SC)
     Brown-Waite, Ginny
     Burgess
     Burns
     Burr
     Burton (IN)
     Buyer
     Calvert
     Camp
     Cannon
     Cantor
     Capito
     Cardoza
     Carson (OK)
     Carter
     Case
     Castle
     Chabot
     Chandler
     Chocola
     Coble
     Cole
     Collins
     Cooper
     Costello
     Cox
     Cramer
     Crane
     Crenshaw
     Cubin
     Culberson
     Cunningham
     Davis (AL)
     Davis (TN)
     Davis, Jo Ann
     Davis, Tom
     Deal (GA)
     DeFazio
     DeLay
     Deutsch
     Diaz-Balart, L.
     Diaz-Balart, M.
     Dooley (CA)
     Doolittle
     Dreier
     Duncan
     Dunn
     Edwards
     Ehlers
     Emerson
     English
     Everett
     Feeney
     Ferguson
     Flake
     Foley
     Forbes
     Fossella
     Franks (AZ)
     Frelinghuysen
     Frost
     Gallegly
     Garrett (NJ)
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Gonzalez
     Goode
     Goodlatte
     Gordon
     Goss
     Granger
     Graves
     Green (WI)
     Greenwood
     Gutknecht
     Hall
     Harman
     Harris
     Hart
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Herger
     Hinojosa
     Hobson
     Hoekstra
     Holden
     Honda
     Hooley (OR)
     Hostettler
     Houghton
     Hulshof
     Hunter
     Hyde
     Inslee
     Isakson
     Issa
     Istook
     Jenkins
     John
     Johnson (CT)
     Johnson (IL)
     Johnson, E. B.
     Johnson, Sam
     Jones (NC)
     Keller
     Kelly
     Kennedy (MN)
     King (IA)
     King (NY)
     Kingston
     Kirk
     Kline
     Knollenberg
     Kolbe
     LaHood
     Latham
     LaTourette
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     Lipinski
     LoBiondo
     Lowey
     Lucas (KY)
     Lucas (OK)
     Majette
     Maloney
     Manzullo
     Matheson
     McCarthy (NY)
     McCotter
     McCrery
     McHugh
     McInnis
     McKeon
     Meeks (NY)
     Mica
     Miller (FL)
     Miller (MI)
     Miller, Gary
     Mollohan
     Moore
     Moran (KS)
     Moran (VA)
     Murphy
     Musgrave
     Myrick
     Nethercutt
     Neugebauer
     Ney
     Northup
     Norwood
     Nunes
     Nussle
     Osborne
     Ose
     Otter
     Oxley
     Paul
     Pearce
     Pence
     Peterson (MN)
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Platts
     Pombo
     Pomeroy
     Porter
     Portman
     Pryce (OH)
     Putnam
     Quinn
     Ramstad
     Regula
     Rehberg
     Renzi
     Reynolds
     Rogers (AL)
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Ros-Lehtinen
     Royce
     Ruppersberger
     Ryan (WI)
     Ryun (KS)
     Saxton
     Schrock
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simmons
     Simpson
     Slaughter
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Snyder
     Souder
     Stearns
     Strickland
     Sullivan
     Sweeney
     Tancredo
     Taylor (NC)
     Terry
     Thomas
     Thornberry
     Tiahrt
     Tiberi
     Toomey
     Turner (OH)
     Udall (CO)
     Upton
     Visclosky
     Vitter
     Walden (OR)
     Walsh
     Wamp
     Weldon (FL)
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Wu
     Wynn
     Young (AK)
     Young (FL)

                               NAYS--152

     Abercrombie
     Ackerman
     Allen
     Andrews
     Baca
     Baird
     Baldwin
     Ballance
     Becerra
     Bell
     Berman
     Berry
     Bishop (NY)
     Blumenauer
     Boswell
     Brady (PA)
     Brown (OH)
     Brown, Corrine
     Capps
     Capuano
     Cardin
     Carson (IN)
     Clay
     Clyburn
     Conyers
     Crowley
     Cummings
     Davis (CA)
     Davis (FL)
     Davis (IL)
     DeGette
     Delahunt
     DeLauro
     Dicks
     Dingell
     Doggett
     Doyle
     Emanuel
     Engel
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Filner
     Ford
     Frank (MA)
     Gephardt
     Green (TX)
     Grijalva
     Gutierrez
     Hastings (FL)
     Hill
     Hinchey
     Hoeffel
     Holt
     Hoyer
     Israel
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind
     Kleczka
     Kucinich
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Lee
     Levin
     Lewis (GA)
     Lofgren
     Lynch
     Markey
     Marshall
     Matsui
     McCarthy (MO)
     McCollum
     McDermott
     McGovern
     McIntyre

[[Page 9269]]


     McNulty
     Meehan
     Meek (FL)
     Menendez
     Michaud
     Millender-McDonald
     Miller (NC)
     Miller, George
     Murtha
     Nadler
     Napolitano
     Neal (MA)
     Oberstar
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Price (NC)
     Rahall
     Rangel
     Rodriguez
     Ross
     Rothman
     Roybal-Allard
     Rush
     Ryan (OH)
     Sabo
     Sanchez, Linda T.
     Sanchez, Loretta
     Sanders
     Sandlin
     Schakowsky
     Schiff
     Scott (VA)
     Serrano
     Sherman
     Skelton
     Smith (WA)
     Solis
     Spratt
     Stark
     Stenholm
     Stupak
     Tanner
     Tauscher
     Taylor (MS)
     Thompson (CA)
     Thompson (MS)
     Tierney
     Towns
     Turner (TX)
     Udall (NM)
     Van Hollen
     Velazquez
     Waters
     Watson
     Watt
     Waxman
     Weiner
     Woolsey

                             NOT VOTING--8

     Aderholt
     DeMint
     Obey
     Radanovich
     Reyes
     Scott (GA)
     Tauzin
     Wexler


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (during the vote). Members are advised there 
are 2 minutes remaining in this vote.

                              {time}  1555

  So the bill was passed.
  The result of the vote was announced as above recorded.
  A motion to reconsider was laid on the table.

                          ____________________