Congressional Record (Bound Edition), Volume 152 (2006), Part 6 - Congressional Record (Bound Edition), Volume 152 for May 9, 2006

[Congressional Record (Bound Edition), Volume 152 (2006), Part 6]
[Issue]
[Pages 7265-7518]
[From the U.S. Government Publishing Office, www.gpo.gov]

[[Page 7265]]
SENATE--Tuesday, May 9, 2006

The Senate met at 9:45 a.m. and was called to order by the President
pro tempore (Mr. Stevens).
______

prayer

The Chaplain, Dr. Barry C. Black, offered the following prayer:
Let us pray.
O God, our Father, the way, the truth, and the life, lead us to Your
truth. Keep us from twisting the truth to conceal our mistakes. Keep us
from evading the truth we do not wish to see. Keep us from silencing
the truth because we are afraid of people.
Infuse Your Senators today with a passion for truth that will save
them from false words or cowardly silence.
Teach us all to speak Your truth in love.
We pray in Your holy Name. Amen.

____________________

PLEDGE OF ALLEGIANCE

The PRESIDENT pro tempore led the Pledge of Allegiance, as follows:

I pledge allegiance to the Flag of the United States of
America, and to the Republic for which it stands, one nation
under God, indivisible, with liberty and justice for all.

____________________

RESERVATION OF LEADER TIME

The PRESIDENT pro tempore. Under the previous order, leadership time
is reserved.

____________________

RECOGNITION OF THE MAJORITY LEADER

The PRESIDENT pro tempore. The majority leader is recognized.

____________________

SCHEDULE

Mr. FRIST. Mr. President, in just a few minutes, at 10 a.m., the
Senate will proceed to the vote on invoking cloture on the motion to
proceed to the small business health plan bill. Chairman Enzi is here,
and there will be a few minutes for closing remarks before that vote.
If cloture is invoked, I hope we will be able to proceed to the bill
today and begin debate on the substance of the legislation.
Today, the two party policy luncheons will occur between the hours of
12:30 and 2:15 p.m. Once we determine when we will be able to proceed
to the small business health plan bill, we will then set up a recess to
accommodate those two meetings.

____________________

HEALTH INSURANCE MARKETPLACE MODERNIZATION AND AFFORDABILITY ACT OF
2006--MOTION TO PROCEED

The PRESIDENT pro tempore. Under the previous order, the Senate will
resume consideration on the motion to proceed on S. 1955.
The legislative clerk read as follows:

Motion to proceed to Calendar No. 417, a bill (S. 1955) to
amend title I of the Employee Retirement Income Security Act
of 1974 and the Public Health Service Act to expand health
care access and reduce costs through the creation of small
business health plans and through modernization of the health
insurance marketplace, and for other purposes.

The PRESIDENT pro tempore. Under the previous order, the time until
10 a.m. shall be equally divided between the Senator from Wyoming, Mr.
Enzi, and the Senator from Massachusetts, Mr. Kennedy, or his designee.
The Senator from Wyoming is recognized.
Mr. ENZI. Mr. President, I am here this morning to ask this body to
support the motion to proceed to the debate. All we are voting on is
whether we are going to get to debate, not whether we are going to have
health insurance for small businesses. But if this vote does not get 60
votes, we will not have the opportunity in this Congress to see whether
we can help out small businesses across this country.
The bill before us will provide for small businesses to be able to
join across State lines to negotiate against the insurance companies
with enough power to make a difference. This is something which the
small businesses have been asking for for almost 15 years. In the last
12 years, it has passed the House eight times but has never even gotten
out of committee in the Senate until this year. The reason it got out
of committee is because we have drastically changed the bill. We are
not talking about the old association health plans we had in the past.
This is one which has had some modifications that have been helped with
insurance companies and State insurance commissioners. It still keeps
the power of oversight and consumer protection in the hands of the
State insurance commissioners, but it does allow the ability to unify
things so that we can get across State lines.
How is it doing? Well, the Washington Post says it went too far. The
Wall Street Journal says it didn't go far enough. So maybe we are
somewhere right there in the middle. But unless we get to debate this
issue, we will never know until we can get through the motion to
proceed and possibly 30 hours of still debating whether we are going to
debate before we ever get to a motion. So I am hoping that this morning
we can pass this motion to proceed.
I can't believe that any Senator here hasn't heard from enough small
businessmen that he wouldn't allow us to proceed to the debate. I am
hoping that following that motion to proceed to debate, we can limit
the hours of debating that particular motion and get on with the
substance of trying to perfect a bill.
In my 9 years in the Senate, I have never seen a perfect bill. I am
not saying this is a perfect bill. I am saying it is one that has come
out of compromise, long discussions, and has moved away from the point
of huge objection on the Senate side to less objection on the Senate
side. It is a bill that can be worked out, can be passed, and can have
a significant difference for small companies across the United States.
Will it make a difference? There are several surveys that say it will
make a difference. I am saying that from the amount of advertising
which was done before we even had the motion to proceed, there must be
a lot of big bucks in savings in this thing to have the kind of
opposition we have already had on it. But we will never know unless we
get the right to debate. So I am asking my colleagues to vote aye on
the motion to proceed so that we can proceed to a debate, sometime
within the next 30 hours, hopefully.
Mr. President, I reserve the remainder of my time.
The PRESIDENT pro tempore. The Senator from Massachusetts is
recognized.
Mr. KENNEDY. Mr. President, I ask the Chair to let me know when I
have 1 minute remaining.
Mr. President, this should be a historic week. The Senate has the
opportunity at last to have a debate on the basic questions of health
care. Senator Enzi has put forward a proposal that deserves debate and
the opportunity for amendment, and I commend him for his diligence in
bringing forward his proposal. But after careful study and debate, I
believe the Senate will conclude that the course laid out in this
proposal is the wrong one for health care.
The legislation will make health care coverage less affordable and
less accessible for millions of Americans. It will raise premiums for
Americans when they are older or when they fall ill. It will mean the
end of laws to guarantee coverage for cancer, for diabetes, for

[[Page 7266]]

mental health parity, and other essential services. It will undermine
the laws that protect consumers from fraud and abuse, and it will give
no real help to the self-employed.
We have a better approach. The proposal offered by Senators Durbin
and Lincoln will allow small businesses to band together to get the
same low rates offered to larger employers. It provides real help for
small businesses with the high costs of health care through tax credits
and reinsurance programs to defray the cost of the most expensive
claims.
When our debate concludes, I believe the Senate will agree with the
over 200 organizations that have written letters of opposition to this
legislation. These organizations represent patients with diabetes and
cancer and mental health needs. They represent older Americans,
workers, health care professionals, small businesses, and Americans in
all walks of life. They represent the over 15,000 Americans who have
called the Senate to ask this body to oppose legislation that will take
a step backward from our commitment to quality health care, and they
represent the millions more who will be harmed if we do not reject the
legislation before us.
We have heard from Governors, insurance commissioners, and attorneys
general from Maine to Hawaii and from Florida to Alaska, and all of
them--all of them--have urged the Senate to reject this bill.
I urge my colleagues to oppose the current legislation, but I hope
they will vote to proceed to consideration of this bill. The Senate has
been denied the chance to take action on major health priorities for
too long. Next week, seniors will be forced to pay a steep penalty if
they are unable to navigate through the tangle of confusing Medicare
plans and options. The Senate ought to vote on Senator Nelson's
proposal to let seniors make their choice without the threat of heavy
fines if they do not meet this arbitrary deadline.
The Republican Medicare law also includes a provision so contrary to
commonsense that people hardly believe you when you tell them it was
included. The legislation makes it illegal for Medicare to bargain for
discounts on drugs for seniors. We have a proposal to end that shameful
prohibition, and we should vote on that proposal.
On Medicaid, we should take action to end the cruel cuts imposed on
the poorest of our fellow citizens by the Deficit Reduction Act, which
paid for tax cuts for the wealthy through health cuts for the poor.
We have been promised and promised that the Senate would vote on drug
importation, but the vote never comes. Senator Dorgan, Senator Snowe,
Senator McCain, and I have a proposal that will allow safe importation
of lower cost medicines from Canada and elsewhere. Surely, Health Week
is the time for a vote.
Before the week is out, the Senate should see that the promise of
stem cell research--stem cell research--is no longer denied to the
millions of patients and their families who look on with anger and
bewilderment as the bill passed by the House languishes for month after
month after month in the Senate. And we have failed year in and year
out to fulfill the promise of this century of the life sciences by
making quality care a right for every American. Let us at long last
take action to extend quality care to every American.
So I say to my colleagues: Vote for cloture on this motion. Vote for
a health care debate. Vote for a chance to go on record with your
answer to these important questions on Medicare, on Medicaid, on stem
cell research, on drug importation, on coverage, and on many other
health priorities. Let's have a debate, and let's let the Senate decide
where it stands.
Mr. President, I reserve the remainder of my time.
The PRESIDENT pro tempore. Who yields time?
Mr. ENZI. Mr. President, I thank the Senator from Massachusetts for
his encouragement on his side of the aisle to vote for the motion to
proceed. I think that will get us into a debate that will make a
difference for the working people of America, the people up the street
and across the street, the working families that are a part of small
business.
Today, there are 45 million people in the United States who are
without health insurance in this country. Twenty-two million people own
or work for small businesses or live in families that depend on small
business wages, and another 5 million are unemployed. Those are the 27
million people we are talking about whom this health care bill will be
making decisions for in the next few days.
It is long past time for Congress to take some action. The American
people aren't going to accept excuses any longer. It has been a long
time getting to this debate. I am pleased that it sounds like we will
be able to have it. I welcome any amendments that are alternate
approaches or improvements to this bill. I know what the complaints are
out there, I know what the counters to those are, and I know what the
concerns are. It is very important that when we walk away from this
week, we walk away with a plan which will help the small business
people of the United States, the ones working for small businesses, the
ones owning them, and their families who need the help.
Mr. President, I reserve the remainder of my time.
The PRESIDENT pro tempore. Who yields time? Each side has 1 minute
remaining.
Mr. KENNEDY. Mr. President, I will mention at this time some of the
organizations. We will have a chance during the course of the debate to
get into the reasons why. The American Academy of Pediatrics; the
American Cancer Society; the Diabetes Association; the Nurses
Association; Families USA; the lists of Governors--and I will include
those--more than probably 15, 18 Governors; the attorneys general. I
think there are probably close to 40 of the attorneys general
representing States North, South, East, and West who have opposed this
bill. The Insurance Commissioners of the States--a whole list of those.
At the appropriate time, I will include those in the Record.
I hope our colleagues will put their ear to the ground and find out
what people are saying back home, what your cancer society, diabetes,
pediatric nurses and doctors are saying about this, what the attorneys
general are saying about this, and what those in the medical profession
are saying about this. We think we have a better way to help small
business, and during the course of the debate, we will show how that
can be done.
Mr. President, I yield the floor.
The PRESIDENT pro tempore. The Senator from Wyoming has 56 seconds.
Mr. ENZI. Mr. President, I thank the Senator from Massachusetts for
listing those 200 organizations. I have never done a count on them, and
I am not familiar with quite that many; I am only familiar with about
40 that have expressed some concern that I suspect will be taken care
of in amendment if we can get to the amendment process.
I would like to mention that there are over 200 business
organizations that are looking forward to being able to unite these
people across State lines to get lower rates for their people. There
are actually 80 million employees in those businesses, in those
organizations. The realtors are going to be here with 9,000 people next
week, expecting that we will have already taken action. The National
Federation of Independent Businesses is another big one that is
supporting this. I could mention a lot more. Even some of the
associations that have concerns about it want to be sure that this bill
passes so their employees can be covered.
I yield the floor.

Cloture Motion

The PRESIDENT pro tempore. By unanimous consent, pursuant to rule
XXII, the chair lays before the Senate the pending cloture motion,
which the clerk will report.
The legislative clerk read as follows:

Cloture Motion

We the undersigned Senators, in accordance with the
provisions of rule XXII of the standing rules of the Senate,
do hereby move to bring to a close debate on the motion to
proceed to Calendar No. 417, S. 1955, Health Insurance
Marketplace Modernization and Affordability Act of 2005.
Bill Frist, Johnny Isakson, Sam Brownback, John Thune,
Thad Cochran, Wayne Allard, John Ensign, Richard
Shelby, Larry Craig, Ted Stevens,

[[Page 7267]]

John McCain, Lamar Alexander, Norm Coleman, Judd Gregg,
Pat Roberts, Craig Thomas, Richard Burr.

The PRESIDENT pro tempore. By unanimous consent, the mandatory quorum
call has been waived.
The question is, Is it the sense of the Senate that debate on S.
1955, the Health Insurance Marketplace Modernization and Affordability
Act of 2005, shall be brought to a close? The yeas and nays are
mandatory under the rule.
The clerk will call the roll.
The legislative clerk called the roll.
Mr. DURBIN. I announce that the Senator from West Virginia (Mr.
Rockefeller) is necessarily absent.
I also announce that the Senator from North Dakota (Mr. Conrad) is
absent due to illness in family.
The PRESIDING OFFICER (Mr. DeMint). Are there any other Senators in
the Chamber desiring to vote?
The yeas and nays resulted--yeas 96, nays 2, as follows:

[Rollcall Vote No. 117 Leg.]

YEAS--96

Akaka
Alexander
Allard
Allen
Baucus
Bayh
Bennett
Biden
Bingaman
Bond
Boxer
Brownback
Bunning
Burns
Burr
Byrd
Cantwell
Carper
Chafee
Chambliss
Clinton
Cochran
Coleman
Collins
Cornyn
Craig
Crapo
Dayton
DeWine
Dodd
Dole
Domenici
Dorgan
Durbin
Ensign
Enzi
Feingold
Feinstein
Frist
Graham
Grassley
Gregg
Hagel
Harkin
Hatch
Hutchison
Inhofe
Inouye
Isakson
Jeffords
Johnson
Kennedy
Kerry
Kohl
Kyl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Lott
Lugar
Martinez
McCain
McConnell
Menendez
Mikulski
Murkowski
Murray
Nelson (FL)
Nelson (NE)
Obama
Pryor
Reed
Reid
Roberts
Salazar
Santorum
Sarbanes
Schumer
Sessions
Shelby
Smith
Snowe
Specter
Stabenow
Stevens
Sununu
Talent
Thomas
Thune
Vitter
Voinovich
Warner
Wyden

NAYS--2

Coburn
DeMint

NOT VOTING--2

Conrad
Rockefeller

The PRESIDING OFFICER. On this vote, the yeas are 96, the nays are 2.
Three-fifths of the Senators duly chosen and sworn having voted in the
affirmative, the motion is agreed to.
Mr. ENZI. Mr. President, I ask unanimous consent that the postcloture
debate on the motion to proceed be divided as follows: From now until
11 a.m. will be under majority control; from 11 to 11:30 will be under
minority control; 11:30 to 12 will be under majority control; and noon
to 12:30 will be under minority control.
The Senate will stand in recess from 12:30 to 2:15 p.m. I ask that
time count under the provisions of rule XXII. The time from 2:15 to
2:30 will be equally divided between the majority and minority; from
2:30 to 3 we begin majority control, with the next 30 minutes under
minority control, and each 30 minutes rotating in this format until the
hour of 5:30 p.m.
Before the Chair rules, we would like to make out a time certain to
begin consideration of the bill. In the interim, this unanimous consent
allows the Senate to have an orderly debate for speakers.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. ENZI. Mr. President, I thank virtually all Members in the Senate
for their help in getting the motion to proceed. That will allow us to
do 30 more hours of debate before we actually get into the substance of
making any changes in the bill. I hope we can work out a unanimous
consent agreement that will shorten that time and get us into the meat
of the debate. I will push for some rapid consideration of some
amendments so we can get this resolved for the small businessmen of
this country in short order.
I will address some of the charges made against this bill. I listened
yesterday and the day before to the minority leader's speech to the
Senate on Friday. I was surprised by several of the statements he made
regarding this bill. If I had not already known that he was talking
about S. 1955, I would never have guessed it.
The first comment the minority leader made was that our bill
threatens the coverage of those who have insurance now and does nothing
to extend coverage to those who need it. I make two points in response
to that. First, it seems to me the status quo is what is truly
threatening the coverage of those who are insured now. Prices are going
up dramatically. Small business has no leverage. No one can afford more
of the same or more excuses from Washington.
Blocking an honest debate on this bill is a vote for more of the
same. It is a vote for health insurance costs continuing to rise
dramatically, for more small businesses dropping coverage for their
employees, and for more uninsured American families. Year after year of
more of the same is what is truly threatening America's health care
security.
Second, this bill will indeed extend coverage to more people who need
health insurance. If you do not believe me, listen to our nonpartisan
CBO. The CBO says this bill will reduce health insurance costs for
three out of every four small businesses. The CBO also said the bill
will extend private health coverage insurance to 750,000 more people
than have it today.
Is that a comprehensive solution to the problems of health care and
the uninsured? Of course not. I understand this is not a comprehensive
solution to the problem of health care costs and the uninsured, but it
is definitely a step in the right direction and a building block for
the future.
I have more comments about statements made about the bill in ads and
in editorials, but at this point, I release the remainder of our time
until 11 o'clock to the Senator from Missouri who has been working on
this in the House for years in a totally different version but has
brought his expertise, talent, and knowledge to this side of the
building. He has been a strong advocate for doing something for small
businesses. He has been extremely cooperative in finding ways to do
things so we can have something for small businesses.
I relinquish the floor to the Senator from Missouri, Mr. Talent.
Mr. TALENT. Mr. President, I thank the Senator from Wyoming for his
kind words and his great work and his comments regarding my involvement
with the idea of small business health plans. What he said is true
regarding my involvement. I am not the father of this idea, but I think
I probably ``midwifed'' it years and years ago when I served in the
House in 1997. It has passed the House on a regular basis ever since
then and, as the chairman knows, on a very strong bipartisan basis
because the idea of small business health plans is fully within the
mainstream of both parties' thinking which is one of the very powerful
arguments in favor of it.
The No. 1 issue facing small business today as a whole is not energy
costs, although certainly they are too high. It is not immigration,
although that is definitely an issue. It is not taxes, although we all
hear our share of complaints from small business people about that. It
is the rising cost of health insurance and the number of people who do
not have health insurance. That is largely a small business problem.
There are 45.8 million Americans who are uninsured today, 4 million
more than 2001. That number has grown every year, in years of
prosperity or recession. The vast majority of those uninsured people
are working people. And most of those working people are people who
work for a small business. They work for a small business, they own a
small business, or they are dependents of someone who works for or who
owns a small business.
The smaller the business is, the worse the problem gets. Only 40
percent of businesses with 3 to 6 employees today have health insurance
for their employees and that number is down from 52 percent in 2004 and
58 percent in 2002.
We are entitled to ask ourselves, Why? I have heard a lot of
explanations over the years. Why does small business have a problem
providing health insurance for its employees whereas bigger companies
don't? You would be

[[Page 7268]]

surprised at the explanations offered. I had one witness from the
Government Accountability Office tell me that he did not think
employees of small business wanted health insurance. I have other
people speculate that small employers did not care as much about their
people who work for them as big companies do. That certainly will come
as a revelation to Senators that big corporate employers care more
about their employees than the small business owners and managers do--
the small business people who work on a daily basis with their
employees, the small business people who would like to get health
insurance themselves from the small business if they could figure out a
way for the small business to provide that health care to the
employees.
It is not a question of the small business people caring enough. The
problem is, the cost and complexity of getting health insurance for a
small business is greater than it is for a big business. It will
surprise no one who has common sense that it is harder to insure a
small market, a small group, than a big group. The cost of insurance is
less if you can spread it across a bigger pool of people. This has been
studied extensively, and that very commonsense conclusion has been
validated.
I will go over some of the figures for the Senate. Health insurance
premiums for small business people increased by 10.9 percent in 2001,
12.9 in 2002, 13.9 in 2003, 11.2 percent in 2004, and 9.2 percent in
2005.
The smallest firms have always seen bigger increases in premiums.
Why? Well, the SBA's Office of Advocacy has found that small businesses
typically spend much more than large businesses for the same benefits.
Not that the benefit packages are different, not that small businesses
are trying to buy more expensive benefit packages; they have to spend
more to get the same benefits because the administrative costs of some
benefits are almost 14 times more for the smallest firms than for their
largest counterparts.
According to the Government Accountability Office, from 20 to 25
percent of small employer premiums typically go toward expenses other
than benefits compared with about 10 percent for large employers. The
small business people are paying more to get the same benefits because
they have higher overhead costs and higher administrative costs. They
do not enjoy the same economies of scale the big companies enjoy.
The American people know this. I have a lot of stories from Missouri
I could tell. I do not have the time. But the American people are
living with this every day.
Jim Henderson is the president of Dynamic Sales in St. Louis. It is a
third-generation family business that sells welding accessories and
other products. It is a small business. He has eight employees. Health
insurance has been a problem for 16 years for Jim. He spoke with his
insurance agent, who suggested raising the deductible to keep the
premium the same, so he has raised the deductible. It has gone from
zero to a $1,000 deductible in the last 10 years. So despite that huge
increase in the deductible, to this day, he experiences huge increases
each time he tries to renew the policy. When he asked his carrier about
the enormous increases and why they are raising his premiums so much,
the carrier responded: Well, because we can.
Tammy Herbert is a certified optician from Farmington, MO. She is a
cancer survivor. She had breast cancer. She is a single, working mom.
She is an inspiration when you talk to her. She told me because of her
history of breast cancer, 2 years ago her employer's insurer canceled
all the individual policies for her and her colleagues.
People talk about small business health plans resulting in cherry-
picking. They ought to see what is happening today in the small group
market.
Renee Kerckhoff is the second generation owner of Rudroff Heating &
Air Conditioning, in Belton, MO. She can only afford to cover a small
portion of employee insurance premiums--about $150 a person per month.
As a result, and despite her best efforts, her employees are having to
drop their health insurance because they cannot afford the copays and
the premiums they have to make and are going on public assistance.
These stories are happening all over Missouri and all over the
country. Sometimes I will get with a group of people and ask them:
Look, if you had a history of medical illness, and you had the choice
of working for a big company or a small company, and all you cared
about was health insurance, and all you knew about the companies was
that one was a big Fortune 500 company and the other was a small
company, which one would you work for? I have never had anybody raise
their hand and say: I would work for the small company because the
assumption is I am going to get better health insurance from the small
business.
They know, because it is a matter of common sense, insuring a large
pool of people is more efficient, more economical and, therefore, less
expensive than insuring a small group of people.
Just look at the people who are insured in the country. Virtually
everybody who has health insurance, except for the employees of small
business people, have it as part of a big national pool. It may be
public, it may be private, but it is a big national pool. They work for
a big company. They are in a labor union. They are on Medicare or
Medicaid or they are a Federal employee or a retired Federal employee
or in the VA.
All these other organizations could insure on a small group basis if
they wanted to. The Federal Government could go out and take each
section of Federal employees in different cities and divide them all up
and insure them in a small group. There is no law against that.
Microsoft could do the same thing. Hallmark in Missouri could.
Anheuser-Busch in Missouri could. They could insure each little section
if they wanted to. Well, they do not because it does not make any
sense. It would cost them more money to do it. Yet small business
people have to do that every day.
So what is the answer? Well, there is a simple answer that is out
there. Everybody tries to make it more complicated than it is, but it
is simple: Empower the small business people to do what the big
business people can already do. Allow them to pool together through
their trade associations and get health insurance as part of a big,
national, voluntary, efficient, economical pool.
I give an example: I think it is the best way to describe it. Take a
restaurant owner such as my brother, who owns a little restaurant. It
is kind of a tavern restaurant. It is a great place. It has great
chicken sandwiches. And I highly recommend it to you if you get to
Missouri. He does not have health insurance for his people. It is too
expensive. It is complex and foreboding for him. He and my sister-in-
law run the business. They do not want to have to wrestle with big
insurance companies. They are afraid if something goes wrong, they
could get sued. He would like to have health insurance. Then he could
get it through the business, too.
Now, what if the National Restaurant Association could contract with
big insurance companies? They could be his employee benefits section,
just like big companies have an employee benefits section. By joining
the National Restaurant Association, he automatically would have the
right to join the big pool. They would send him the papers. They would
show him the options he has, and he could decide how much he wants to
pay. He could let his employees pay the rest and join the pool. He
could have health insurance as part of a big pool. It would be must-
offer, must-carry. They would have to let him join the National
Restaurant Association and would have to offer the health insurance to
him.
When I chaired the Small Business Committee in the House, we studied
this issue. And I have seen a lot of other studies since then. The best
estimates I saw were that it would reduce premiums for small employers
by 10 to 20 percent; a recent study came out and said 12 percent. There
would be a million fewer people uninsured.

[[Page 7269]]

It costs the taxpayers nothing. It is not a Government program. It is
empowering small business people to do what big business people already
can do. I think the impact would be much greater than the studies have
shown because right now the psychology of health insurance, if you are
a small business, is so negative. I think you would see whole segments
of the economy, which traditionally have not provided health insurance
to their employees, begin to provide health insurance. And the
restaurant business is one of them. It is one of the reasons the
National Restaurant Association is so strongly in favor of this
concept.
Now I have talked about this for almost 10 years. I lay it out for
people, and they say to me: Well, who would oppose this? I actually get
that question a lot: Who is opposed to it? And that is a good question.
It is fully within the mainstream of both parties' philosophy. It is
empowering the little guy, just like farm co-ops. It passes the House
with a strong, bipartisan majority every year. And why shouldn't it?
What is the downside of it? The downside is: It does not work as well
as we hope it is going to work. Not as many people go into it as we
hope and believe will go into it.
It is not as though the taxpayers are going out on a limb. So who is
opposed to it? Well, nobody will be surprised to hear that the big
insurance companies have opposed it, and they have come up with all
sorts of excuses over the years. I am not going to go heavily into it
because the chairman has worked very hard to get as much consensus as
he can get. But I will say this. I think they oppose it not because
they are afraid it will not work but because they believe it will work.
And they control most of the small group market now. I do not have time
to go through those figures. But the concentration of the small group
market within the five largest carriers has grown and grown and grown.
And small business health plans would be a powerful, new competitive
force in that market.
The State insurance commissioners have been concerned because these
small business health plans would be national and they felt the State
would not be able to regulate it. In fairness, I have to say, I have
never agreed with that. Remember, the big companies already operate
free of State regulation. That has been the law for 30 years. And we
have not had any disasters as a result of that. I do not believe
anything that has happened in the last 10 years or so is proof that we
can trust the big companies more than we can trust the small companies.
If I had to decide who was going to be free of State regulation, I
think I would rather have the small businesses free of that. And it is
not as though the market the States have regulated never has any
problems. There are a lot of insurance companies that go bankrupt, and
the States have to take them over.
But the good news is that the chairman has squared this circle. He
has worked out an arrangement for the regulation of small business
health plans where many of the State regulations and much of the State
regulatory authority will still apply. I am not saying the State
insurance commissioners are standing up for his bill, but I think it is
safe to say that many of their objections have been ameliorated, and
the chairman has made much progress on that front.
Folks who tend to be sincerely on the ideological extreme on health
care issues--and maybe ``extreme'' is the wrong word, but they want to
go one way or the other--have been lukewarm about small business health
plans. There are some who wish to eliminate the employer system and
take the Federal tax deduction and pass it through to individuals and
let them go out and buy health insurance on their own, and there are
others who want a total Government solution. And this is not any one of
those things.
It is a substantial and important and meaningful but incremental
change in the world we are in. It makes things better for people on a
day-to-day basis who are out struggling in the real world. Maybe it is
not the reform that any of the think tanks on the right or left would
come up with, but it makes a difference. It will help. There is little
or no downside to it. We need to help the real people who are really
hurting.
Finally--and this I understand entirely; I struggled with this myself
in the years I had this bill--the groups that have worked to get
various disease mandates in the States have been concerned. Because if
you worked hard to get a mandate so that mammogram screening is covered
in your State as a matter of right, and small business health plans go
into a national pool, just like the big companies, if we do not do
something, they would not be subject to those State mandates.
I have made a point in talking with these groups over the years
saying that, look, the big company plans, the big pools that exist out
there--the labor unions, the company plans, the Federal employee plans;
all those sorts of things--they usually cover all those mandated
coverages, anyway, because most of them are pretty common sense.
Again, remember, if you have been sick, and you have a choice of
working for a big company that is not covered by the State mandates or
a little company that is, which do you think has the better health
insurance? The folks I have talked to over the years say: Well, we
would go with the big company.
But I think we are going to be able to square that circle as well.
Senator Snowe is going to offer an amendment which will represent
progress in this area. It will provide that if 26 States cover a
mandate, that mandate applies to small business health plans, and it is
protected in the States that have it. So this is progress. It is not
just net progress; it is absolute progress for these various groups
that have sought these protections because they are going to have, if
that amendment passes--and, certainly, I am going to support it--they
will have protections on the Federal level for the first time for these
various coverages.
So I am very hopeful they will take a look at this. I believe with
the amendment Senator Snowe is going to offer, the concerns they had
not only do not apply anymore, but actually they are going to be better
off because for the first time we are going to have national pools set
up under Federal law with certain basic patient protections and
coverages that are guaranteed. As I said, I do not think those would be
necessary because I think the pools would cover them, anyway. Most of
those are pretty common sense. But we can put them in the law and
reassure everybody. And I think we can make the bill better if we do
that.
I see my time is running out, Mr. President.
So what is left? Why should we oppose this? I do not want to be
presumptuous. I have lived with this bill for so long that maybe there
are weaknesses I do not see. But this is something we can do for
people. It passes the House regularly. They like it over there. It has
a strong measure of bipartisanship, anyway. There is no real downside
to it.
Let's debate the bill, and let's resolve that we are going to debate
it with a view toward actually voting on it.
I hope nobody filibusters this bill. We can work out agreements about
debate, work out agreements about amendments, and have a chance to help
people. This is a problem. This is a case where people are hurting. I
know politics is important here; I know this is an election year; I
know all of that. But we can make a difference for real people on the
ground every day who are worried about losing their health insurance or
who do not have health insurance and are worried about getting sick. We
ought to do it.
I thank the Senator for yielding. It looks as though my time has
expired. I yield the floor.
The PRESIDING OFFICER (Mr. Sununu). The Senator from Connecticut.
Mr. DODD. Mr. President, I yield myself 20 minutes. Senator Kennedy
is not here right now, but pursuant to previous agreement, I would like
to be notified when 15 minutes expires so I can conclude my remarks in
the 20 minutes.
I spoke yesterday about this legislation. I want to begin by saying
to my

[[Page 7270]]

friend from Wyoming, the chairman, I have a great deal of regard for
him. I have enjoyed working with him on the HELP Committee. We do a lot
of work together. I have enjoyed that relationship. It is with a note
of sadness that I disagree with him about this bill. We had a lengthy
markup. He was very patient to listen to all of our ideas and the
amendments we offered during the markup. I appreciated his willingness
to do so. But as happens from time to time, we have disagreements. They
are not personal. They are ideas on which we have a different point of
view. Today is one of those occasions. These remarks are in no way
intended to denigrate the work of the chairman of the committee or
those who agree with him.
There are those of us who believe strongly that this proposal would
do a lot more harm than good, that, in fact, the cure being proposed
with this legislation creates far more problems than presently exist,
as bad as the present situation is. We know, as a matter of fact, that
over the last 3 years, the premium cost for health care has risen: 9
percent in 2005, 11 percent in 2004, 14 percent in 2003. These costs
continue to rise. A family of four today is paying about $11,000 in
premiums for health care coverage. The problem is significant.
I regret in some ways--and this is not the fault of the chairman of
the committee--that we are not debating in a broader sense how we might
address the far more significant issue, as important as this one is,
when we have 45 million fellow Americans with no health care coverage
at all. I regret that we are not having a larger debate on that issue.
Secondly, I believe it is a legitimate issue to raise the issue of
how small business is dealt with when it comes to insurance. In the
next 2 days, we will offer a substitute to the proposal authored by the
chairman of the committee, the Senator from Wyoming, that we believe
will deal far more thoroughly with the legitimate issues that smaller
businesses face. In fact, we redefine small business to mean businesses
not with 50 employees or less but 100 employees or less, thereby
covering more small businesses than would be covered by the legislation
before us.
The problems are huge in the area of health care. If you do surveys
of the American public and ask them to identify what are the largest
concerns they have, if not the No. 1 issue--from time to time other
issues may be more important to people--consistently year in and year
out, people will tell you their great concern is about the fear of
watching a family member or themselves be hit with a major health care
crisis and not having the resources to pay for it, not being able to
get the doctors, not being able to have the kind of care they would
want for their families because they cannot afford the premiums that
would provide them broader coverage, if they have any kind of coverage
at all. They may not have any kind of health care. This is a major
problem. We ought to be spending a lot more time addressing this issue
than we are.
Having said that, let me talk about this proposal. I am deeply
worried about it. It isn't just my concern. Many Governors, more than
three-quarters of the attorneys general of the States which we
represent, not to mention the health insurance commissioners of many
States, have raised very serious concerns about this legislation. They
are very worried about what this bill will do to their constituents,
the States that we represent as Senators.
Let me share a letter from the Connecticut Business and Industry
Association. This association represents 5,000 small employers in my
State. This is not an organization that is known for its liberal
tendencies. Quite the contrary, it is a very conservative business
group. Listen to what my business group that represents the small
businesses of my State has to say about this bill.

We believe that in Connecticut federally certified AHPs
would destabilize the small business insurance marketplace,
erode carefully crafted consumer protections and raise
premium rates for small businesses with older workforces and
those that employ people with chronic illnesses or
disabilities.

The letter goes on to say:

Although the passage of AHP legislation would present us
with opportunities to expand our CBIA health connection's
product customer base as a regional offering, we do not
believe that the proposed legislation represents a sound
public policy for providing more affordable coverage or
access to health care benefits. The proposed legislation does
little to address the underlying causes of health care
inflation, which is the most important barrier to small
employers providing health care benefits.

That is a strong letter from an organization that represents 5,000
small employers in the State of Connecticut. They are worried about
what this bill will do to smaller employers in my State in terms of
their costs. They are deeply worried about this legislation and what it
may mean.
Let me also share with my colleagues a second chart. This was a chart
that was produced by Families USA, with estimates from the Agency for
Health Care Research and Quality, a medical expenditure panel, and from
the U.S. Census Bureau. It tells us the number of people that will be
losing State regulatory protections if this bill is passed. What we are
doing is shrinking the amount of benefits that can be offered. In my
State, we offer a range of 30 different benefits--that was passed by my
State legislature--that insurance companies must cover. If you are
going to do business in my State, then you have to provide coverage for
these 30 areas that we believe are important.
I note this morning an editorial in the Wall Street Journal that
criticizes those of us who have raised issues about this bill. They say
in one paragraph:

Some provider groups are opposed for nakedly self-interest
reasons since it would allow plans to bypass state
regulations mandating coverage for, say, chiropractors.

Chiropractors provide some decent services to people. But with all
due respect, I would suggest that it is a lot more than chiropractors
who get bypassed with this legislation. It is things such as diabetes,
cancer screening, infant health care, mental health care, pregnancy,
Lyme disease, to mention a few. I know several of my colleagues have
had family members affected by Lyme disease. My State thinks that is an
important area to provide coverage. This bill would eliminate coverage
for Lyme disease because this legislation would mandate that Federal
law would supersede State law. Regardless of what your State thinks is
important, this bill will decide what will be covered. Everything else
goes. That is an overreach, in my view. As a result, the analysis of
the legislation presented on this chart suggests that in the State of
Alabama, 1.7 million people who would be adversely affected if this
legislation is passed. In Connecticut, more than a million people would
lose benefits that the State legislature requires the insurance
industry to cover. In State after State, the numbers are at least in
the six-figure category. In California, 12 million people would be
adversely affected, Kentucky over a million people, Kansas over a
million people, Illinois almost 4 million people, and the like.
I will leave this chart so my colleagues will be able to see how many
people will be affected in their States, according to data collected by
those who have examined what it would mean to a Federal mandate that
tells every State in the country: We don't care what you have done, we
don't care what benefits you think are important, this bill will tell
you what kind of coverage you are going to have.
We also prohibit the States by preempting their ratings rules, which
is my second point. This legislation preempts the States from having
rating rules that will actually determine what the difference in cost
would be between young and healthy workers and older, sicker workers,
to make sure they are not going to price the product so beyond the
reach of an older, less healthy person that it would be unaffordable.
It is de facto exclusion if you allow the insurance industry to set
that price by preempting the States from determining whether there
ought to be a cap on how much an insurance company can charge. By
limiting benefits and by

[[Page 7271]]

preempting the States from determining rates and holding them down, we
make it very difficult for literally millions of people to be
positively affected by this legislation.
Those are the two major concerns we have. There are other areas that
we will certainly raise. I mentioned earlier in my State, more than a
million people will lose access to cancer screening, well childcare,
diabetes supplies, alcoholism treatment, mental health care, the
treatment for Lyme disease, to mention some. The list goes on with my
State.
In addition to seeing their benefits disappear, millions of Americans
will see their health insurance premiums skyrocket as well. This bill
preempts State laws that currently protect older workers, those with
serious illnesses such as diabetes, cancer, and heart disease, even
expectant mothers, from seeing their premiums increase. This bill will
allow the insurance industry to charge people more based on the fact
that they are sick or pregnant or simply older.
I have many insurance companies in my State, as my colleagues know,
that do a wonderful job in many ways. But don't have any illusions
about this. They are going to be offering as few benefits as they can
get away with and charge as much as they can. That is what they are in
business for. This is not the Vista Program or AmeriCorps. These are
private companies. If we give them a green light to limit the benefits
you can provide and take the caps off what they can charge, then,
obviously, they are going to take advantage of it. I am greatly
concerned, as the major business organization in my State warns. When
the Connecticut Business and Industry Association says this bill would
hurt the businesses in my State, we ought to take note of it. This
organization has a strong record of protecting the interests of smaller
businesses.
It doesn't take an expert to predict what will happen. Insurance
companies are going to offer plans with minimal or no benefits, hoping
to attract young and healthy workers. Older, sicker people are going to
be left without a plan that meets their needs. Every analysis of this
bill reaches the same conclusion.
Listen to what the Congressional Budget Office says. They found the
bill ``would tend to reduce health insurance premiums for small firms
with workers who have relatively low expected costs for health care and
increase premiums for firms with workers who have relatively high
expected costs.
In other words, instead of attacking the real problem, the rising
cost of health care, this legislation would simply shift costs to small
businesses with older and less well workers.
In fact, another study commissioned by the supporters of this
legislation concluded this bill ``is not going to address the
underlying causes of high health insurance premiums, which are high
health care costs.''
Again, Governors, State attorneys general, the State insurance
commissioners have all reached the same conclusion, as have an enormous
number of groups representing health care providers and patients. All
of them say the same thing. They all can't be wrong. When your
Governors, attorneys general of the States, insurance commissioners,
not to mention almost every single health care group in the country
warns about the passage of this bill, then we ought to take note of it.
When you hear that you will have literally millions of people losing
benefits passed by State legislative bodies that require the insurance
industry to cover them, then we ought to take note of that as well.
I know my colleagues will be offering amendments to allow lifesaving
stem cell research to go forward, to strengthen Medicaid, reduce
prescription drug prices, and ensure access to mental health care. I
look forward to having an opportunity to debate those amendments, many
of which I will be supporting. We should also consider an amendment to
extend the Medicare prescription drug plan enrollment deadline which is
causing a huge problem. These are the kinds of issues that ought to be
part of our debate today. Medicare beneficiaries have only until this
coming Monday, May 15, to enroll in a prescription drug plan, if they
are to avoid financial penalty. Why don't we take that as an amendment
and extend that time to allow people to come forward. As we are all
aware, for many of the Nation's 41 million Medicare beneficiaries, the
new prescription drug plan offers more confusion than assistance and,
frankly, extending that date would make sense.
I intend to offer an amendment to protect newborns and children from
the damage inflicted by this legislation. Right now, 25 states have
enacted mandates requiring insurers to provide benefits to the children
of their enrollee; 31 States require insurers to cover the cost of
childhood immunization.
I am going to ask my colleagues to support language that would see to
it that newborns and children are protected in every State, instead of
allowing the insurance industry to pick plans that would exclude child
immunization and well-child care.
This legislation would completely preempt these State laws, leaving
babies and children unprotected. That is a major step backward.
Instead, families will be faced with health insurance that doesn't
cover routine care for children. They might be forced to pay out of
pocket, drastically driving up health care costs, or to forego care
entirely. My amendment would ensure that those State laws not be
preempted by this Federal mandate that we are about to adopt.
I will also offer an amendment that would prevent health insurers
from deciding how much to charge a person for health insurance based on
how healthy they are. That is something we have done across the country
in State after State.
Many States, including my own, have laws preventing the insurance
industry from charging more based on health status. Unfortunately, this
legislation would remove those State protections. It would allow the
insurance industry to charge more based on health status. We ought to
make sure we don't allow that to occur in this bill.
Without these protections in place, it just makes good business sense
for an insurance company to increase premiums for people with diabetes,
HIV/AIDS, cancer survivors, pregnant women, or anybody with health
needs that are outside of the ordinary. As a result, the people who
need insurance the most will find they would be the first to lose it.
Finally, I will offer an amendment to protect those patients that
admirably choose to participate in clinical trials from undue costs
resulting from their routine care. Currently, 19 States, including my
own State of Connecticut, have enacted mandates requiring insurers to
provide coverage for routine patient care costs while those patients
are participating in potentially lifesaving clinical trials. But this
legislation, as crafted, would completely preempt these State laws,
leaving patients without needed coverage for items such as blood work
and physician visits. And this legislation would preempt States like
mine that provide benefits for people who are willing to become part of
a clinical trial.
Clinical trials save lives. Just 50 years ago, less than one in four
women with breast cancer survived for 5 years or more. Compare that to
today when 96 percent of women with localized breast cancer reach the
5-year mark. This legislation would create a powerful disincentive to
patients weighing the option of whether to participate in a clinical
trial. Tragically, we know that only 3 percent of adults suffering from
cancer participate in clinical trials. Compare this to the 60 percent
of children with cancer that enroll in a trial.
Mr. President, there are a number of amendments we would offer to try
to improve this piece of legislation. While I respect the intent of the
authors, the bottom line is that it would do great damage to the gains
that have been made in State after State across the country, by
controlling the costs of premiums and seeing to it that benefits are
offered to people out there. The States made these decisions, and the
insurance industry, if they want to do business in their States, should
comply.

[[Page 7272]]

This legislation would mean that the Federal Government would wipe
out protection in State after State that has provided for the
protection of its people--listen to your Governors, your attorneys
general, your health commissioners, insurance commissioners; listen to
the groups out there that pay attention to this kind of legislation.
Listen to the business groups that have warned what this would do to
smaller businesses across the country.
Mr. President, I hope that when the appropriate time comes, we will
either adopt amendments that will improve the bill substantially or,
more important, adopt the substitute that will be offered by Senator
Lincoln of Arkansas and Senator Durbin, which would allow people to
have the same kind of benefits each and every one of us have as Members
of Congress, as part of a Federal health benefit program here that
allows for the pooling of people, that would cover 100 employees or
less, far beyond what this bill would cover with 50 or less. It would
not mandate that benefits provided by States be eliminated, and it
would not preempt the States from setting caps on premiums when it
comes to older and sicker workers. That is the way to go.
If you really want to make a difference, why don't we adopt this
alternative. That would be a major gain for smaller businesses and
people who work with them. I understand this is an important issue.
Small businesses could use help, but we are not helping them with this
bill, with all due respect. We can help them if we take the right
steps.
I urge my colleagues to adopt the alternative, or at least improve
the bill with the amendments we will be offering in the next few days.
I yield the floor.
The PRESIDING OFFICER. The Senator from Massachusetts is recognized.
Mr. KENNEDY. Mr. President, as I understand it, we are rotating back
and forth. Could the Chair tell us how much time we have on this side?
The PRESIDING OFFICER. Nine minutes remain.
Mr. KENNEDY. Well, Mr. President, I thank my friend from Connecticut
for an excellent presentation and summation of the principal concerns
about this legislation. I ask the Chair to let me know when there is 1
minute remaining.
The PRESIDING OFFICER. The Chair will do so.
Mr. KENNEDY. Mr. President, I thank the chairman of our committee,
Senator Enzi, for his diligence in the development of the legislation.
It is legislation that I cannot support. But the chairman of our
committee has put his finger on an area of health policy, which is
enormously important for us to consider, and that is the general kind
of challenge that is out there for small businesses in this country. By
and large, they pay two or three times higher premiums than many of the
very large businesses in their States, and they are also seeing a
turmoil in the market.
More often than not, they are changing companies every year, or every
other year, and increasing numbers of those small businesses have to
drop coverage. This is a real problem.
If the proposal that is before us, the Enzi bill, was only to deal
with that particular issue, it ought to be given focus and attention
and full debate and support. But his bill goes far beyond that.
Fortunately, we have an alternative, as the closing remarks of my
friend and colleague from Connecticut pointed out, in the Durbin and
Lincoln legislation, which addresses the small business needs. It does
it creatively and effectively, and it does it without threatening the
health protections that are there for States. The message and word
ought to go out to all those who support the Durbin-Lincoln proposal
that workers in those small businesses will effectively have the same
kind of health care coverage that we have in the Senate of the United
States. That has been certainly a goal of mine for all Americans in the
time I have been in the Senate, and it still is.
We have an opportunity for the small business community, and for the
workers in those companies of 100 or less, to provide for them the same
things that we have for the Members of the U.S. Congress and Senate.
That statement cannot be made by the Senator from Wyoming. His bill
does not do that. It has all kinds of adverse impacts in terms of
workers and health care protections.
So as we start this debate, we ought to recognize that there is an
alternative which we on this side strongly support which will focus and
give attention to the small business community. The other proposal by
Senator Enzi does not do that.
Mr. President, I am going to take a few minutes, because that is all
I have, to review what I think are the most dangerous aspects of this
legislation. The fact is, today, as has been pointed out, there are
some 85 million Americans who have protections that will be effectively
lost with the Enzi proposal. Those are protections for screening on
cancer, for help and assistance in terms of diabetes, for medicines.
There are different protections that are given to other diseases that
are threatened, and it threatens American families. Those have been
discussed in local communities and in States that are now providing
those protections; and effectively, under the Enzi bill, those will be
prohibited. There are a number of groups.
First of all, this is what the State insurance commissioners say, and
why they are important is because they have a responsibility in terms
of protecting consumers. This is what they have pointed out, Mr.
President:

Standardizing the rating laws among States will do little
or nothing to reduce health insurance costs.

And also:

S. 1955 will result in older and less healthy employees
being priced out of the market as a result of expanding the
rate bands.
Small New Jersey employers with older and sicker employees
would see a dramatic rise and increase under the Federal
approach, effectively driving them from the insurance market
and leaving them vulnerable citizens without adequate health
coverage.

They are talking about ratings. Insurance companies are going to be
able to charge for the proposal that the Senator from Wyoming has
talked about. They are going to have a flexibility of up to 26 percent
difference--26 times the difference in terms of premiums. Do you
understand that? If you are an older worker and have had sickness in
your family, you will pay a rating that will be up through the roof.
That is not true in Massachusetts. In Massachusetts, no matter how
sick or young you are, you are still within a 3-point or 3 times rating
increase. That has worked very effectively. That is something that
every older worker, every family that has had some kind of health
challenges ought to recognize--that they, under the Enzi bill, could
well be priced out of the market.
This is what the attorneys general have said:

The Health Insurance Marketplace Modernization And
Affordability Act should be more appropriately labeled the
Health Insurance Cost Escalation Act.

That was the attorney general from Minnesota.
The attorney general of New York said:

This legislation is not the answer here. It eliminates many
of the protections that consumers enjoy, without addressing
the underlying problem of cost containment.

They are also eliminating protections, as we have mentioned, for
breast cancer and diabetes.
Another one by the attorneys general:

There are no legitimate grounds for exempting the type of
insurance plan for State laws that provide essential
safeguards for persons covered by insurance.

It is not just Democrats, but Democrats and Republicans; 41 out of
the 50 attorneys general charged with protecting consumers are saying
this bill doesn't get it.
Mr. President, this is very interesting by the New Hampshire Governor
on S. 1955:

In 2003, New Hampshire passed a law establishing rating
rules similar to those contemplated under S. 1955.

New Hampshire passed almost the identical bill that is now being
considered in the Senate.

With the rules allowing insurance companies to discriminate
against businesses with

[[Page 7273]]

sick workers, or based on geography, this law sent small
business health insurance costs skyrocketing across New
Hampshire. Small business could not grow, could not hire new
workers, and some considered ending their health insurance
plans altogether.

They have done it. It is rare around here when you have a new
proposal that you have had experience with--and the State of New
Hampshire has it--and they ended up withdrawing that proposal.
Finally, we have the various patient groups. Here is the American
Diabetes Association:

S. 1955 would result in millions of Americans with diabetes
losing their guarantee of diabetes coverage.

The Cancer Society said:

Passage of this legislation would represent a retreat in
this Nation's commitment to defeat cancer.

The National Partnership for Women and Families said:

Instead of making health care more affordable for those who
need it most, S. 1955 would roll back the reforms adopted by
many States to require fair pricing.

We look forward on this side to debating these issues--the Durbin-
Lincoln proposal and the Enzi proposal--and we also look forward to
debating stem cell research, the real Medicare alternative in the
prescription drug debate, the ability of Medicare to be able to
negotiate lower prices for our senior citizens, and drug importation.
If we are going to have a health care debate, let's make sure we are
going to deal with many of the issues that people in our country want
us to deal with.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The time of the Senator has expired.
Mr. ENZI. Mr. President, as we wait on a couple of people to speak, I
would like to make a few comments on the comments that have been made.
I do appreciate the spirit in which they have been made. I know there
are amendments waiting to modify several of the things that have been
suggested, but my biggest concern is that there were some comments
about the Attorneys General of the United States and the insurance
commissioners who are against it, and even the Connecticut business
associations who are apparently saying they are against the bill.
But what I need to correct is the comments they are making are not on
this bill. What they are talking about is the bill that the House has
passed eight separate times: the associated health plans bill.
Associated health plans are different than this bill. It would be nice
if some of the people who are going national and public on this would
actually check with us on some of their comments to see if they are
remotely right.
We have put forward a solution which they said that 85 million people
would lose their benefits from. That would be just as ridiculous as me
saying that all 27 million people who are uninsured who work for small
business would be covered by this bill. Neither of those things is
going to happen. There is a medium in there where there will be more
people who are insured. The difficult parts that were talked about
concerning things being taken away from people I am confident are not
going to happen. There are a couple of reasons they are not going to
happen.
First of all, there are experiments across the country which in a
small way have done what we are talking about in the small business
health plans, and in those experiments, they have worked: Taking away
the mandates that States have and actually making a point of mandating
that we take away the mandates. Around here, ``mandates'' is a bad
word. Mandates means you are forcing somebody to do something and you
are not paying for it. You are saying you have to have this, and
whether you can afford it or not, we are going to make you do it. So
your choice is to take the mandate or drop your insurance.
When we are talking about these mandates, a lot of them we are
talking about are regular maintenance of your body, and we ought to be
having everybody do those. It shouldn't matter whether they are covered
by insurance or otherwise. In fact, in Wyoming, we have gone to great
lengths to have more things done by public health for free. That means
your insurance doesn't have to pay for it and you don't have to pay
your insurance company for it and you don't have to pay your insurance
company for the administration of that service. But you can get that
service. Then we have some other screenings that are covered in a very
reasonable way. We have a program in Wyoming trying to get everybody to
have mammograms, and it is focused on Mother's Day, which is coming up
this next weekend: Get a mammography for your mom. Show that you care.
And thousands of people in Wyoming do exactly that.
I will cover some of the other issues, but I see that Senator Hatch,
the Senator from Utah, has arrived and has some comments in this
regard, and he has been a very diligent worker on all of the small
business problems. So I yield time to the Senator from Utah.
Mr. HATCH. Mr. President, I thank my distinguished chairman who I
think has done a terrific job on this bill. I understand the
distinguished Senator from New Hampshire needs about 3 minutes, so I
ask unanimous consent that he be given 3 minutes, and then the time be
returned to me.
The PRESIDING OFFICER (Mr. Alexander). Without objection, it is so
ordered.
Mr. SUNUNU. Mr. President, I wish to speak to the legislation before
us and in particular to address some of the remarks that were made
earlier by Senator Kennedy from Massachusetts. He raised concerns about
the State of New Hampshire and suggested that this legislation would be
bad for the State of New Hampshire and that the State of New Hampshire
had already enacted legislation identical to this. I think it is wrong
for someone to provide information that is not entirely accurate. I
think that is inaccurate, and it is not inaccurate in some very key
areas.
First, the bands that were discussed that were enacted in the State
of New Hampshire were much smaller than the rating bands contemplated
in this legislation, and they did it in New Hampshire without any
transition period. Those are two very significant, specific differences
between this legislation and what was attempted in New Hampshire.
Second, as with any legislation, it cuts both ways. There were some
employers that saw increases in their premiums 2 and 3 years ago that
some claimed were a result of the legislation in New Hampshire, but
many businesses--in fact, the NFIB would suggest the majority of
businesses--in New Hampshire saw some great relief because they are the
smaller businesses that we are talking about, those who would be
allowed to improve their negotiating position through the provisions in
this bill. Moreover, this isn't a debate about one State. This is a
debate about providing increased access--increased access--to plans
that are negotiated by associations, by the members of small businesses
and, as a result, negotiating lower prices.
Finally, there was discussion about community rating and how
objectionable it is that there will be an ability to differentiate on
price based on a number of factors. I think the truth is, when you
force that kind of price control, you force adverse selection because
if I tell you that you have to charge the exact same price to anyone,
no matter what region, circumstance, or situation, then the insurer
will automatically market to the healthiest people because they won't
want to take on the additional costs associated with those who might
have significant needs that result in higher prices.
So if you go to price control, which is exactly what the other side
is suggesting, forcing the same price for everyone no matter who is
covered, businesses will naturally--naturally--only market to those who
are healthy and, as a result, reduce the accessibility and availability
of health insurance to those who might need it most.
It is a dramatic, unintended consequence, and that is the exact
outcome that will be the result of the policies that are being
suggested by the other side. We need to be accurate in what we
represent. This is a good bill for small business and, as a result, it
is an excellent bill for New Hampshire because in New Hampshire, small
businesses make up over 95% of all firms

[[Page 7274]]

with employees. If we want to do something about the uninsured, the
majority of whom are working as self-employed or for small businesses,
we need to take up the exact kind of provisions that are in this bill:
Increased access of health insurance for those working in the smallest
firms.
Mr. President, I yield the floor.
The PRESIDING OFFICER (Mr. Sununu). Senator Hatch is recognized.
Mr. HATCH. Mr. President, I rise in support of S. 1955, the Health
Insurance Marketplace Modernization and Affordability Act. This is a
good bill, with good intentions. The lack of health insurance,
particularly for employees of small businesses, is a significant
problem in Utah and throughout the Nation.
We cannot afford to sit by the sidelines and bemoan this problem,
taking little action while millions of American families suffer. The
House of Representatives has acted and we should do the same.
Immediately upon its passage though, we were besieged by complaints
about House legislation, principal among them the complaint that it
overrides State insurance law.
I give the Health, Education, Labor and Pensions Committee Chairman
Mike Enzi a lot of credit.
Chairman Enzi didn't sit idly by.
He studied the House bill, he held extensive hearings, and then he
drafted a compromise that resolved many of the concerns expressed about
the House bill. This was no easy job.
Immediately, the HELP Committee effort--a solid effort I might add--
was besieged by criticism. Much of this criticism I must hasten to add,
is not valid.
``It isn't going to cover cancer care,'' the naysayers decry.
``It isn't going to cover diabetics and their supplies,'' they
allege.
``It isn't going to cover prenatal care or OB/GYN care for women,''
is a recent complaint.
``It is going to run chiropractors, podiatrists and optometrists out
of business,'' say hundreds of form letters that have flooded our
offices.
The problem is, these complaints aren't even true. While the standard
plan employees must be offered under this bill may not cover all those
things, S. 1955 clearly provides an alternative. Employees must be
offered an enhanced plan, based on the coverage that public employees
receive in the five most populous States, if their employer's standard
plan is not consistent with State law.
Most, if not all, of these services would be included in those
enhanced plans that employers must offer under S. 1955.
But, let's talk about our basic goal here.
We want to provide affordable health insurance coverage to those who
currently do not have coverage.
If we could afford to give them coverage for every possible illness,
condition, or procedure, if small businesses could afford to give them
coverage for every possible illness, condition or procedure, don't you
think it would have been done by now?
Of course it would.
That is the genius of the Enzi bill. It allows a basic level of
coverage--perhaps not every single service imaginable, but good solid
health care insurance--and for those who want to pay more, there is a
plan with more coverage.
In that way, the millions of Americans without health insurance will
have access to coverage.
You may ask yourself, ``Who doesn't have health insurance coverage?''
Today, over 45 million Americans do not have health insurance.
Over 25 percent of self-employed individuals are uninsured.
Over 30 percent of people who work for small businesses with fewer
than 25 employees are uninsured.
Over 20 percent of the people who work for small businesses with
fewer than 100 employees are uninsured.
Something clearly needs to be done.
And that's why we are here, today, debating S. 1955.
I want to illustrate why passage of this legislation is necessary.
Ramona Rudert and her husband, Michael, have owned Professional
Automotive Equipment in North Salt Lake for 28 years. They have 12
employees and they offer health insurance to them.
The Ruderts contribute $200 per month to their employees' health care
premiums.
Their employees have to pay approximately $500 per month for family
coverage.
Their health insurance plan has a $1000 deductible.
So at least there is potential coverage. But here's the kicker: only
one of Professional Automotive Equipment's 12 employees decided to be
covered by their company's health policy, besides the Rudert family.
The rest of their employees cannot afford it.
The interesting twist about this story is that Ramona and Michael
have a daughter with juvenile diabetes. They recognize that the basic
plan may not cover all the services their daughter needs.
But when asked why she supports S. 1955, Mrs. Rudert replied that she
is ``always looking for ways to improve her employees' access to health
care'' and that while she has a daughter with Type 1 diabetes, her
greatest concern is about the affordability of insurance premiums for
her employees.''
Passage of this bill is the top priority for Mr. and Mrs. Rudert, and
thousands of Utah businesses. They recognize that affordability is a
key component to making that happen.
Let us not make perfect the enemy of the good.
It is an economic fact of life that a Federal requirement for small
businesses to cover every small business employee for every possible
health care-related service is neither appropriate nor affordable.
Those who decry this bill because it does not guarantee small
business employees a comprehensive plan, must be reminded that most
employees of small businesses do not have a choice today, if they are
fortunate to have health insurance coverage. The legislation before the
Senate will create new options for small businesses and, the potential
for more choices.
Today, smaller employers do not have the purchasing power of larger
employers. If they offer different types of health plans to their
employees, the administrative costs of offering these choices are much
higher for small employers.
But by leveraging their combined purchasing power, some local small
business associations are offering plans that give employers more
choice. I believe that similar models could be created regionally and
nationally through S. 1955 through regional and national associations.
The goals of S. 1955 are simple. We want to create more affordable
health insurance options through choice and competition.
And we want to end the decades-long deadlock and give real relief to
America's small businesses and working families.
Who can argue with that?
And small businesses support the freedom to band together across
state lines, even without self-funding. Insurance companies support the
creation of a level playing field with Small Business Health Plans.
Most important, according to a Mercer study released on March 7,
2006, it is predicted that costs will go down 12 percent for small
employers and coverage of the working uninsured will go up 8 percent,
approximately 1 million more working Americans.
An added benefit is that the Congressional Budget Office, CBO,
believes that passage of S. 1955 will reduce net spending in the
Medicaid Program. This is due to the enrollment in employer-sponsored
insurance plans of people, who under current law, would be covered by
Medicaid.
CBO estimates that enacting S. 1955 would reduce direct spending for
the Federal share of Medicaid expenditures by $235 million over the
2007-2011 period and $790 million over the 2007-2016 period. In
addition, the bill would result in estimated Medicaid savings to States
totaling $180 million over the 2007-2011 period and $600 million over
the 2007-2016 period.
CBO estimates that by 2011, approximately 600,000 more people would
have

[[Page 7275]]

health insurance coverage. The majority of these newly covered
individuals would be employees of small companies and their dependents.
S. 1955 has been endorsed by a host of organizations: The Small-
Business Health Plan Coalition; the National Association of Realtors;
the Chamber of Commerce, the National Federation of Independent
Business; the National Restaurant Association; the National Association
of Manufacturers; the Associated Builders and Contractors; the National
Association of Home Builders; the National Retail Federation; the
Association Healthcare Coalition; the Textile Rental Services
Association of America; the Motor & Equipment Manufacturers
Association; the Precision Metalforming Association; the American
Council of Engineering Council; Women Impacting Public Policy; National
Association of Wholesaler-Distributors; Wendy's International which
includes Tim Hortons, Wendy's, Baja Fresh and Cafe Express; Cendant
Corporation; American Institute of Architects; Federation of American
Hospitals; National Funeral Directors Association; HR Policy
Association; Motor & Equipment Manufacturers Association; and the
Society of American Florists.
Mr. President, that is an impressive list of supporters.
And I believe that the main reason that we have such an impressive
list is due to the leadership of the Chairman Mike Enzi.
He and his staff did something that the Senate has not been able to
do for over a decade report small business health legislation out of
the Senate HELP Committee.
For months, Chairman Enzi spearheaded meetings with the major
stakeholders of this legislation the insurance companies, the small
business groups, and the insurance commissioners. These meetings
produced the bill that we are considering today.
Again, my colleagues may ask themselves, is this bill really needed?
Will it truly make a difference?
Just last week a 42-year-old woman from Provo, Utah called my office.
Both she and her 9-year-old daughter are diabetics. And she had heard
from the American Diabetes Association that S. 1955 would hurt their
health coverage.
But as my staff explained the bill's important role in allowing small
businesses to provide insurance for their employees, including
diabetics, she became very emotional. She recalled how, several years
ago, she had her own small business. And buying health care for her
employees was forcing her toward bankruptcy. So my constituent had to
take away their health insurance. This was extremely difficult for her
because she herself had a chronic illness and fully understood the
implications. She ended up with an individual health insurance policy.
And she found that for the same insurance coverage that she had had in
her group insurance policy, she had to pay nearly twice as much.
This happened for two reasons. First, as an individual, she was not
eligible for the tax benefit that supports the cost of insurance paid
through employers. And, second--because she had diabetes, a chronic
illness, her insurance rating caused her to pay significantly more than
someone without that disease. There was no risk pool for her to join.
Passage of S. 1955 could have prevented these problems.
I urge my colleagues to think about the health care needs of small
business employees in their states before voting on this legislation.
This legislation will improve their health care options. Today, they
rarely have options when it comes to health insurance and when they do,
it is extremely expensive.
Let me conclude by sharing the sentiments of Chris Kyler, the CEO of
the Utah Association of Realtors.

Small business owners in Utah are facing a growing crisis
with health care availability and affordability. Our
profession represents 17% of Utah's gross state product and
yet we're arguably the most uninsured working segment in our
state simply because we're small business people. As
productive contributors to the economy, as a younger,
healthier populous, we're supportive of S. 1955 because it
will provide us with the opportunity to purchase affordable
health insurance.

I believe that Mr. Kyler's sentiments sum up why the Senate needs to
pass this legislation as soon as possible. I urge my colleagues to
support this legislation so that employees of small business will have
access to affordable health care.
I yield the floor.
Mr. ENZI. Mr. President, I yield the remainder of the time to the
Senator from Maine.
The PRESIDING OFFICER (Mr. Burr). The Senator from Maine.
Ms. SNOWE. Mr. President, how much time will that be?
The PRESIDING OFFICER. The majority has 9 minutes remaining.
Ms. SNOWE. Mr. President, I thank Chairman Enzi for yielding the time
as well as for his leadership in bringing this legislation to the
floor, legislation that is so critical and vital to the future well-
being of small businesses, I know in my State and across America.
As chair of the Small Business Committee, I know firsthand that this
crisis is real. It is an undue burden on entrepreneurs throughout this
country, and it certainly didn't develop overnight. Now we have a
solution at hand, if we are all willing to forge the consensus
necessary to make it happen.
This issue is all the more critical when you consider the fact that
today nearly 46 million Americans are uninsured. That is an increase of
over 4 million people since 2001. According to the Employee Benefit
Research Institute, of the working uninsured, who make up 83 percent of
our Nation's uninsured population, 60.6 percent either work for small
business with fewer than 100 employees or are self-employed.
There should be no doubt or question that the time has long since
come to pass this legislation that will at once assist our small
businesses in accessing affordable health insurance for their employees
and their families while assuring more of those employees can actually
have health insurance.
For this past decade, health insurance premiums have exploded at
double-digit percentage levels and far outpaced inflation and wage
gains, and Congress has failed to act. Study after study has confirmed
beyond a doubt that fewer and fewer small businesses are able to offer
health insurance to their employees. Little has been done to alleviate
the problem. Quite simply, it has been an abrogation of responsibility.
As chair of the Senate Committee on Small Business and
Entrepreneurship, I have held hearings on this question. Small business
owners in Maine and across America have consistently and repeatedly
begged Congress for relief. They need competition in the market. They
need to be able to offer this to their own employees and their
families.
That is why I originally introduced the Small Business Health
Fairness Act which would have allowed the creation of association
health plans to offer uniform health plans across the country, allowing
small businesses to leverage their purchasing power on a national
basis. This week, for the first time, thanks to the leadership of
Chairman Enzi in bringing this legislation to the floor from his
committee, the full Senate will be trying to resolve many of the
issues, many of the differences of positions and perspectives everybody
has on this question.
I thank the majority leader for making this legislation the key
component of Health Week in the Senate.
I also thank my friends on both sides of the political aisle, Senator
Byrd, who has cosponsored my initiative originally, Senator Talent, who
initiated this effort when he was chair of the Small Business Committee
in the House, and the same is true for my predecessor, Senator Bond,
when he was chair of the Small Business Committee, for helping to move
this issue to the pivotal point where we are today.
I also thank Senator Kerry as ranking member of the Small Business
Committee because we also modified my original bill, worked on another
consensus bill that would have been a modification based on regional
association health plans. I thank him for his

[[Page 7276]]

effort. Again, that was another attempt to bridge these efforts across
the aisle.
But I most especially recognize Senator Enzi's work and his
commitment in moving this bill, holding the hearings, trying to
reconcile the differences.
This week is not about engaging in heated partisan debate to create
issues for the upcoming election. What this should be all about is
providing solutions to small businesses and America's uninsured for the
much needed relief they certainly deserve.
We are trying to do everything we can to resolve some of the issues.
I know there are some concerns, as there were with my initial
legislation and as there is with Chairman Enzi's bill now before the
Senate. A couple of those issues are, of course, preemption of mandated
benefits. I hope to be able to address that question with an amendment
so, hopefully, we can reconcile some of the differences across party
lines, across philosophical perspectives, so we can get the job done.
There are some concerns about the changes in community ratings. I
know that is a particular issue for my State as well. I understand the
chairman will address that issue in his managers' amendment.
What we are all here about today is what can we do to address the
underlying concern that small businesses have across America. This is a
summary of their foremost concern--increasing health insurance costs
for themselves and for their employees and their families to the point,
as I think we all recognize, small businesses are unable to offer this
crucial benefit at a time when they need to be competitive with larger
companies because they cannot afford, they simply cannot afford to
provide health insurance.
If they can afford it, it is catastrophic coverage, it is a $5,000 or
$10,000 or $15,000 deductible at best that they are able to offer. That
is why I introduced the initial association health plans, to give
fairness to the market, especially to the small group markets such as
the State of Maine. The State of Maine is a small group market and,
guess what, there is no competition. No competition means higher
prices. Higher prices means virtually no health insurance.
That is why I offered the association health plan. That is why
Chairman Enzi is doing what he is doing here today, to try to bridge
the differences so we can move and advance this process forward because
it is good for all of America.
Small business is the engine that is driving the economy. Two-thirds
of the job growth occurring in America today is emanating from small
businesses. So it is important to ensure their well-being.
By offering the mechanisms that are proposed in Chairman Enzi's
legislation, the small business health insurance plan will help with
uniformity as well. Because 50 States have 50 sets of administrative
rules, regulations, and mandates, it is virtually impossible to have a
uniform standard nationwide. This will allow small businesses to be
basically on par with Fortune 500 companies and unions. After all, no
one is ever complaining about Fortune 500 companies and unions' plans.
In fact, they are the most generous in America. So if they are good for
Fortune 500 companies, if they are good for unions, why can't they be
good for small businesses? That is what it is all about.
Now people say these associations will not design good plans. If you
want to attract members to the plan, if you want people to join your
plan, obviously you are going to ensure that you design these plans
which will be the most attractive to the greatest number of people who
join up in these associations. After all, it is in the interests of
small businesses to have attractive plans for their employees because
they have to compete with large employers to get good employees, to get
skilled employees. If they don't have this crucial and vital benefit,
they do not attract the kind of employees they need to make their
business successful. That is what it is all about.
I hope we can reconcile our differences through the amendment
process, with what I hope to offer as amendments and what others will
offer, that can lead us to our goal of addressing the fundamental
question for small businesses in America that ultimately will help
mitigate the problem of the uninsured that is ever growing in America
as well.
As we engage in this debate this week, in the end I hope we can come
to a conclusion with a reasonable compromise that will become law. That
is what it is all about. I know people have differences of opinion. But
I don't think there ought to be a difference of opinion in the final
analysis when we address all the issues--the ones that Chairman Enzi
addressed to bridge the gap, the ones that my amendment will do, and
others might do--which will ultimately get us to the point of beginning
to resolve this crisis.
The fact remains that we are seeing fewer and fewer small employers
that are providing health insurance for their employees.
If you look at this chart, only 47 percent of the smallest businesses
in America--those with three to nine workers--offer health insurance.
It is on a declining trend--down to 52 percent, and down to 58 percent
in 2002--in sharp contrast to the 98 percent of larger businesses with
200 or more workers that are offering health insurance as a benefit.
For small businesses, things are trending in the wrong direction.
Then you look at the small group marketplaces in States such as Maine,
which is what this essentially is all about. As we learned from the
Government Accountability Office study that Senator Talent and I
requested, Blue Cross-Blue Shield is actually consolidating their
market share in a number of States across the country. In fact, 44
percent are in group markets.
I hope we can begin to reconcile these differences and do what I
think this Congress can do for the first time that we have had the
opportunity to do. Let us not deny small businesses and their employees
this one chance to do it. Time has long since passed for action.
The PRESIDING OFFICER. The Senator from Oregon.
Mr. WYDEN. Mr. President, before she leaves the floor, I want to
express my thanks to the distinguished Senator from Maine for working
so closely with me on health care issues. I expect that before long
Senator Snowe and I will be offering our bipartisan amendment to lift
the restriction on Medicare that bars Medicare from bargaining to hold
down health care costs. Senator Snowe and I have worked on this for
over 3 years. We recently got 54 votes in the Senate to win passage of
this bipartisan effort. I thank her for all the good work she is doing
in the health care field and look forward to when she offers our
bipartisan amendment before too long and to prosecuting this cause on
behalf of senior citizens and taxpayers alike.
Mr. President and colleagues, no other health policy in America is
more objectionable to the people of this country than preventing
Medicare from bargaining to hold down health care costs.
This restriction that bars Medicare from bargaining to hold down
health costs simply defies common sense. The restriction that bars
Medicare from bargaining to hold down health costs is contrary to what
goes on in the private sector of this country every single day. It
certainly is contrary to the needs of this program and the taxpayers of
this country when we see the Federal budget deficit exploding every
time we turn around.
It seems to me that to have Medicare actually barred from bargaining
to hold down prescription costs simply defies the sensible approaches
that we have always taken in holding down health costs. That approach
is to use your bargaining power and the capacity to argue on behalf of
large numbers of people. That is using marketplace forces to really
make a difference.
The way Medicare is buying prescription drugs under this program is
like somebody going to Costco and buying toilet paper one roll at a
time. Nobody would ever go shopping that way. Certainly when steel
companies, auto companies, any major manufacturing concerns first sit
down with a vendor, they

[[Page 7277]]

ask: What kind of deal will you give me on the basis of the large
volume of this product that I am going to be purchasing? Not Medicare.
Medicare won't do what everyone else does all across this country every
single day.
It is especially important that Medicare use this bargaining power,
given what the American Association of Retired Persons has found
recently in a report they released to us on the cost of prescription
drugs. The AARP released a report in February of 2006 that found brand
name medications most commonly used by older people rose almost twice
the rate of inflation in other areas of health care.
So here is a chance to actually save money for senior citizens and
taxpayers. We can especially expect to see savings when you have
single-source drugs for which there is absolutely no competition. There
are concrete cases where the Federal Government says we are not going
to allow price controls, we are not going to allow the establishment of
a one-size-fits-all formulary, but we are going to say that the
Government is going to be able to bargain, and that approach will make
a real difference.
I know some colleagues think any effort by the Government to allow
bargaining to hold down the cost of medicine will lead to price
controls. The amendment which Senator Snowe and I expect to file before
long is very clear. It does not permit price setting or the creation of
a formulary. All it says is the Federal Government, and in effect the
seniors of this country, would be able to go into the market and use
their clout just like any other big purchaser could to hold down the
cost of medicine using marketplace forces.
As colleagues consider this particular approach I hope--I know the
distinguished President of the Senate has a great interest in
pharmaceuticals and prescription drugs--that colleagues will look at
what Senator Snowe and I advocate. In that amendment, on page 3, lines
2 through 8 make it clear that we are opposed to price controls. We
have continually tried to address this. We are not in favor of price
controls. We are not in favor of establishing a one-size-fits-all
formulary or instituting a uniform price structure of any kind. All we
are saying is that the Federal Government ought to have a chance to do
some hard-nosed bargaining the way everybody else does to hold down the
cost of prescription drugs.
Secretary Tommy Thompson, former Secretary of Health and Human
Services, said that the one power he wanted as he left office and was
denied by the Congress was the opportunity to negotiate when necessary
to hold down the cost of prescription drugs.
This amendment would ensure that the prescription drug benefit is
sustainable without interfering with marketplace forces and would
simply say that the Federal Government could leverage the marketplace
just as any other big buyer of a product does.
To date, millions of seniors have enrolled in this program and, of
course, they are realizing some savings on their prescription drugs. We
are glad to see that, but it has come about primarily through the
infusion of taxpayer money.
What I and Senator Snowe would like to do is bring about some
savings--not just by pouring more and more taxpayer money into this
program but by using marketplace forces to protect the interests of
seniors and our taxpayers.
Prohibiting Medicare from negotiating for drug prices was an
overreach. I know of no other industry in the United States that has
power like this. We don't see any other industry that does business
with the Federal Government in which discussions and negotiations with
the Federal Government is specifically barred. Everybody else has to
sit down across the table from the Government representing the
interests of our taxpayers and get into the nuts and bolts of
negotiating the best deal for a particular group of Americans. We need
to end this special treatment, this favoritism, this unwarranted
preference that only the prescription drug industry has and give our
Government the bargaining power that is needed so that seniors and
taxpayers can be protected through marketplace forces.
Some who are opposed to what Senator Snowe and I want to do have said
that we are already seeing some negotiations. Of course, that is true.
Having voted for this program and wanting to see it work--I have welts
on my back to show for that--I am pleased that we are seeing some
discussion among health plans and others. But I think we will see a
whole lot more opportunity to contain costs and contain them through
marketplace forces if we untie the hands of the Secretary, as the
previous Secretary of Health and Human Services, Tommy Thompson, sought
to do. I believe we ought to take every possible step to save every
possible nickel to protect seniors and taxpayers, and lifting this
absurd restriction on Medicare bargaining power will do just that.
I cannot for the life of me conceive of a rational reason Medicare
should not have the same power to negotiate just the way other smart
shoppers do across this country. Every smart shopper in the private
sector--every single one--wants the kind of opportunity that I and
Senator Snowe are advocating.
I don't know of any private entity, whether it is a timber company in
my home State or a big auto company or anybody else who doesn't sit
down across the bargaining table and ask, what are we going to do to
work something out that reflects the fact that I am going to be buying
a lot of something? Why shouldn't Medicare, if it believes it is
warranted, have that authority in effect as a standby?
Senator Snowe and I have been crystal clear in saying that there is a
difference between negotiating and bargaining and price controls and
uniform formularies. We would say to our colleagues: Look at our
proposal just as we did in the one that received 54 votes recently. We
spell it out. We lay it out on page 3 of our amendment, lines 2 through
8. We stipulate no price controls, no uniform formulary, no particular
kind of one-size-fits-all price structure in any way.
I would like to, along with Senator Snowe, offer a market-based,
comprehensive cost containment to help hold down the cost of
prescription drugs in our country.
I am glad we are discussing Medicare this week. I think it is high
time. I tell colleagues that no other health policy in America is more
objectionable than the one that prevents Medicare from bargaining to
hold down health care costs. It is time to inject some common sense
into the Medicare drug benefit. Giving Medicare bargaining power to
millions of senior citizens through Medicare is economics 101. If it is
important to the seniors of this country, it is important to taxpayers.
We expect to bring a bipartisan proposal to the floor of the Senate
this week. We all know we could sure use some bipartisanship around
here at this critical time. I hope colleagues will, as they did a few
weeks ago, show strong bipartisan support for our proposal. If we are
serious about reining in health costs, and the American people say it
is at the top of their agenda, you have to lift this restriction that
bars Medicare from bargaining. We expect to be filing the bipartisan
Snowe-Wyden amendment before long.
We hope, as we did on the last occasion when we voted on this, we
will have a strong majority in the Senate in support of a commonsense,
practical way to protect senior citizens who are buying prescription
drugs and are taxpayers at the same time.
I yield the floor.
The PRESIDING OFFICER. The Senator from Michigan.
Ms. STABENOW. Mr. President, I thank my colleague from Oregon for his
incredible leadership on something that makes so much sense,
negotiating group prices under Medicare.
Why in the world wouldn't we want to get the best price? Taxpayers
want us to get the best price. Seniors want us to get the best price.
The disabled want us to get the best price. Why in the world wouldn't
we want to do everything possible to have a Medicare prescription drug
benefit that offers the very best prices so we can offer as much
coverage as possible? One of the things we know, the gap in coverage is
partly because we are paying so much

[[Page 7278]]

for the whole plan. We could give people more coverage and spread it
out differently if we were, in fact, negotiating group prices.
I thank my colleague who has come to the Senate floor on so many
occasions. He always makes so much sense. I know the people in Oregon
are proud of what he has done.
To add to the discussion on Medicare, I am pleased we have Health
Week. Even though I will speak at some later time in terms of the
concerns I have about the underlying bill, we all chose to vote to
proceed to debate on health care because there is nothing more
important to the people we represent, whether it is the manufacturers I
represent who are having to compete in a global economy and figure how
to do that while paying so much of the cost of health care or whether
it is small businesses, self-employed people who cannot find coverage
at affordable prices, whether it is our seniors or whether it is women
and children who need care.
We have a serious issue when we spend twice as much on health care in
this country than any other country and still have 46 million people
with no insurance, 80 percent of them working.
This is an important debate. Part of that debate, I believe because
of the timing, needs to be to address what is happening with Medicare
prescription drug coverage. Unfortunately, we are 6 days away from a
Medicare prescription drug deadline. Right now, 6 days from now, folks
are going to be penalized if they have not signed up for a Medicare
prescription drug plan, even though they are having to wade through a
lot of information and misinformation in order to be able to figure out
what to do, if anything.
I am sure my colleagues have received as many calls as I have
received, thousands of calls and letters from people all across
Michigan about the trouble they are having related to this Medicare
prescription drug program--calls from pharmacists trying to help people
figure what to do, spending hours on the phone, being put on hold,
unfortunately, receiving inaccurate information too much of the time.
We know there are serious issues that have come about because the
Government has not gotten its act together, as we should, to be able to
present them to people in a way they can understand and make sure it
works for seniors and disabled.
We know choosing a plan is extremely challenging and confusing. We
have an obligation on our end to do something about that, not wait 6
days and penalize people because they have not signed up for a plan
that they may not be able to figure out.
This is not because people are not bright. In Michigan alone there
are at least 79 different plans to choose from. Each plan has a
different premium, a different copay, covers different medicines. Under
the current law, as I indicated before, anyone who does not go through
these 79 plans, or whatever number they have in their State, by next
Monday will find themselves paying a lifetime penalty, more for
prescription drugs than they would if they signed up before then.
A decision about something that is so fundamental to a person's
health as their medicine should not be rushed. We should not be scaring
seniors into picking a plan that may not work for them because of a
penalty they will receive after next Monday. Unfortunately, that is
exactly what is happening.
Unfortunately, I continue to believe the ``D'' in Medicare Part D
stands for disaster. That does not mean some people are not getting
helped. We want people to be helped. We want people who have not
otherwise had help to be able to receive it. That is a very important
point in this process because the administration has been talking about
the 29.7 million seniors who are now covered, seniors and disabled who
now have drug coverage under Part D.
But what they are not saying, of the 29 million, 20 million already
had coverage. They were covered under Medicaid, they were covered under
private insurance, under a Medicare HMO. We are talking about less than
30 percent of those who have not had any help with their medicine, less
than 30 percent, have actually signed up so far.
Is it because they do not want help? Of course not. It is because
they are having challenges getting through the bureaucracy and trying
to figure out what works for them and what does not work for them?
I will share a story of a woman who called me yesterday. This
exemplifies the thousands of calls and stories I receive in Michigan. A
member of my staff spoke with Shirley Campbell from Midland, MI,
yesterday, not far from my hometown. Shirley told my staff about the
experience she and her sister had enrolling in Part D. First, they had
a terrible time getting through to the so-called ``help'' line.
By the way, the Government Accountability Office says almost 60
percent of the time folks trying to get through to the 1-800 Medicare
number are getting incomplete or inaccurate information. That is
stunning. We have to get our act together before we penalize people for
not signing up for a program.
She kept trying. Shirley kept trying. Once she got through, in
response to her question, she was told, ``I can't answer that question
because the site is down.'' She did not give up. She called back the
next week and she called back the following week. Each time she had the
same experience. She could not get an answer to her question because
``the site is down.'' This is the administration's idea of a ``help''
line? It is not much help.
Because Shirley could not get the information she needed from the
administration, she called several plans and asked them all to send her
their information. Imagine how big that mailbox was. Then she and her
sister sat down and spent more than 10 hours sifting through all the
information they had received. They narrowed it down to six plans and
began a thorough analysis.
What did they find? From the six plans, all of the plans would cost
Shirley more than she is currently paying for the medications necessary
for her rheumatoid arthritis. Six plans she narrowed it down to, and
all of them would cost her more than what she is currently paying.
Shirley currently does not have any coverage. Yet she would end up
paying more under any of the six plans she studied.
Think of that. We are trying to help people who do not have coverage,
and less than 30 percent of the folks who have signed up have been
people who did not have help before. Maybe it is because they were like
Shirley, when they tried to find someone to help them, they found out
they would be paying even more under this privatized scheme that has
been set up than they are currently paying.
She also told my staff that most of the plans would have cost her
twice as much as she is now paying. But she ended up choosing a plan
that would cost her more than what she is currently paying, even though
she currently does not have any coverage. She says she signed up
because she was worried about the looming May 15 enrollment deadline
and the prospect of paying a penalty for the rest of her life.
What sense does this make? Folks are seeing the clock count, 6 days
away, until the May 15 deadline and penalty. And Shirley is so worried
about what that means down the road, the cost she would be paying and a
lifetime penalty, she signs up for a plan that costs her more than she
is currently paying. I don't believe Shirley or any senior should be
rushed into a premature decision because of an arbitrarily determined
deadline. That is all this is. There is nothing magical about May 15,
nothing at all.
Shirley worked in middle management all her life. She had the ability
to spend hours and hours wading through the plan, the brochures, the
paperwork. In the end, she had to make a decision that leaves her worse
off than she is today.
Shirley wrapped up her experience of choosing a Part D plan by
saying, ``I never in a million years would have done anything like this
to my staff.''
She then asked my health legislative assistant to deliver the message
to me that the Medicare Part D Program needs to be fixed. Amen. I could
not agree more with Shirley.

[[Page 7279]]

This is Health Week. This is the time to fix it. The first thing we
need to do to fix it is to give folks more time.
I am proud to be joining Senator Bill Nelson on legislation to extend
the deadline to the end of the year. If given the opportunity, and I
hope we will have the opportunity, we intend to offer that as an
amendment, as we proceed with Health Week. People should not be
penalized because the Government cannot get its act together. People
should not be penalized when almost 60 percent of the time when they
call a hotline they cannot get the information they need, it is
inaccurate or incomplete. That is not their fault.
The whole point of this was to make sure we were helping people who
were choosing between food and medicine, people who were choosing
between medicine and paying the rent, the electric bill or gas prices
right now. If that is not happening, why are we moving full steam ahead
with some arbitrary deadline? Six days from now, folks are going to be
penalized because the Government has been slow to get its act together,
and they will be permanently penalized by paying more.
Less than 30 percent of the people who do not currently get help
paying for their medicines have actually signed up. That should say
something. It should either say, it is not a good deal, and they found
out they would be paying more, and they said forget it or it says to us
that maybe we need to go back to the drawing board and make sure the
right information, in the right way, is given out to people so they can
make the best decision for themselves.
I am also extremely concerned that in my home State of Michigan only
22 percent of the 256,000 seniors eligible for low-income help, only 22
percent of those whom we said we wanted to help the most by waiving the
premium and the copay, only 22 percent have signed up to get that extra
help.
Unfortunately, our low-income seniors are caught twice because they
have to pick a plan. They have to, similar to Shirley, wade through all
kinds of plans. Then they have to sign up separately to be able to get
low-income help.
I am pleased the administration has said they will allow low-income
seniors to be able to sign up after May 15. I appreciate that. That is
a good start. Unfortunately, the penalty is not waived. Our lowest
income seniors, even though they may be able to sign up in June, July,
and August--and that is a good thing and I appreciate the
administration doing that--I urge them to waive that penalty. It makes
no sense if you allow people to sign up for extra help and then take it
away through a penalty for signing up late.
The final issue is our poorest seniors, our lowest income seniors in
Michigan and individuals making less than $14,700 a year, our lowest
income seniors or the disabled, in too many instances are actually
paying more under this plan than they were before. Why? Because they
were on Medicaid before for the low-income health care. In Michigan,
that meant paying a $1 copay for a prescription, and that has doubled,
tripled or gone higher. This also makes no sense.
On top of that, those who were in Medicaid, our lowest income
seniors, many in nursing homes, were automatically enrolled sometime in
the last few months, into a plan, regardless of whether it covered the
medicines. We have said to the lowest income seniors, many of them in
nursing homes, you are signed up for a plan, and you have to go figure
out whether it even helps you and how you are going to get out of it if
it doesn't help you. And, by the way, you are going to pay more.
We can do better than this. I believe No. 1 is to stop the 6-day
count. No. 1, we have to give folks more time to wade through all of
this, to figure out what is going on, and we have to give some more
time to the Government to get its act together. The administration is
doing a disservice to people by the way this has been handled. Giving
more time will allow that to happen.
I am also very hopeful we are going to come back and come together
and give people the one choice they really want. People do not want 70
plans. They are not saying: Oh, please, give me a whole bunch of
insurance papers to wade through. Give me increased premiums. Give me
all kinds of deadlines to deal with. What they said was: I need help
with my medicine.
We are blessed in this country to have more medicine available as a
part of the way we allow ourselves to live healthier lives, longer
lives, to be able to treat cancers, to be able to treat other chronic
illnesses. Medicines are available now. But they are not available if
they are not affordable. We can do better.
Mr. President, I am hopeful at some point we are going to come back
to this floor and give people the choice they want: A real Medicare
benefit through Medicare, with a reasonable copay and premium, where
you sign up and you can go to your local pharmacy, and Medicare
negotiates good prices. That is what we ought to be doing.
In the meantime, let's stop the countdown to May 15.
Thank you, Mr. President.

____________________

RECESS

The PRESIDING OFFICER. Under the previous order, the hour of 12:30
p.m. having arrived, the Senate stands in recess until 2:15 p.m.
Thereupon, the Senate, at 12:32 p.m., recessed until 2:15 p.m. and
reassembled when called to order by the Presiding Officer (Mr.
Voinovich).

____________________

HEALTH INSURANCE MARKETPLACE MODERNIZATION AND AFFORDABILITY ACT OF
2006--MOTION TO PROCEED--Continued

The PRESIDING OFFICER. Under the previous order, the time until 2:30
shall be equally divided.
The Senator from North Carolina.
Mr. BURR. Mr. President, I am going to be here numerous times this
week. This legislation is too important to have it shortcut. There is
not enough time in the debate to say it all at one time.
Last night, this body had the opportunity to vote on proceeding to
changes to the liability crisis that exists in health care today, but
the minority denied us the ability to move forward. They denied the
ability of the American people to hear an honest debate, to consider
thoughtful amendments, and then to judge up or down on the content of
the legislation.
They had two opportunities: liability that was reform for all medical
professionals; and, then, liability that was only changed for those who
are OB/GYNs--that next generation of medical professionals who are
going to deliver our grandchildren and our great-grandchildren, that
profession that is going to regenerate the population of this country
and, in fact, is suffering today because of the high rate of liability
costs for the premiums they have to have.
Now we are here. We are in debate--30 hours of debate--to see if we
can proceed on a bill to bring small business group health insurance
reforms into law, to enable small businesses in America to be able to
price insurance for their employees in the same way large corporations
are able to produce products for their employees.
Today, small businesses' choice is between nothing and nothing. It is
not something and something. It is nothing and nothing. And what will
we do? We will debate, for 30 hours, whether we should proceed. Some
don't believe this is important enough or, if it is important enough,
that there ought to be all sorts of changes to it that are unrelated to
these millions of Americans for whom their employer cannot afford to
provide health care. Why? Because they are not big. The marketplace
discriminates because they are small.
Let me give you some statistics about North Carolina. In North
Carolina, 98 percent of firms with employees are small businesses.
Ninety-eight percent of my employers are shut out of the ability to
negotiate a reasonable cost of health care for their employees. Because
of that, their employees have a choice between nothing and nothing.
We will have 30 hours of debate to see if we are going to proceed in
this body to provide something versus nothing--not something and
something. How can anybody object to providing a choice of something
for those who do not have an option today?

[[Page 7280]]

Additionally, in North Carolina, we have 1.3 million uninsured
individuals. And 898,000--almost 900,000--North Carolinians are
uninsured individuals in families or on their own with one full-time
worker. Those are all individuals who potentially could be covered
under an individual or a family plan.
Of the 1.3 million who are uninsured in North Carolina, 900,000 could
be affected with this one piece of legislation in the Senate. But for
the next 30 hours, we will debate whether we proceed or never get to
the process of an up-or-down vote; in other words, it is a choice as to
whether we keep them with nothing and nothing and the uninsured numbers
stay at 1.3 million or, in fact, we are going to provide something for
North Carolina--900,000 people who today have nothing provided for
them.
Later today, I am going to come to this floor, and I am going to read
for my colleagues real letters, handwritten letters--handwritten
letters--from people who live in North Carolina, whose choice is
nothing and nothing. These are individuals who have the same health
needs, individuals who would like to have health insurance but whose
employers cannot afford it today, who want the opportunity in employer-
based health care, but because of the way the system is designed today,
it is not achievable because it is not affordable for them.
We are here today and tomorrow, and we ought to be here as long as it
takes to make sure Americans at all levels have choices between
something and something. These 30 hours will determine, in fact,
whether this historic institution will provide that for the American
people or we will walk away; whereby, once again, the American people
will be denied because some in this body do not believe there is a
responsibility to move to a point where there is an up-or-down vote.
Truly, people can look and say: You have my future in your hands. My
health security is in the hands of the Senate, the Members of the
Senate, and whether they are going to, in fact, respond to that.
Well, I think people in North Carolina desperately want choice. I
think they desperately want this bill. They want their employers to
have the opportunity to be able to look at health insurance and to find
it affordable. Why? Because that is their security. That is their
ability to have coverage.
My hope today is that the outcome of this legislation will not be a
quick death such as last night with medical liability reform. We all
agree health care is too expensive. We disagree on what the solutions
are. But to end up with nothing, to deny the ability to move forward,
to deny the ability for the American people's voice to be heard through
the amendment process on this floor is disgraceful.
My hope is after these 30 hours we will proceed, we will have a
robust debate on the amendments, and, at the end of the day, the
American people will have an opportunity for an up-or-down vote in the
Senate.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from New Jersey.
Mr. MENENDEZ. Mr. President, today we are here in the middle of what
is being called Health Week in the Senate. But rather than debating
important lifesaving, life-enhancing legislation that has bipartisan
support and could actually deliver hope and promise to millions of
Americans, the Republican leadership in the Senate has, instead,
decided to continue their political posturing, business-as-usual
approach to governing.
It is no wonder the American people have become disillusioned with
the leadership in Washington. Instead of debating and passing stem cell
legislation that will end suffering and extend lives, we are again
focusing on a partisan proposal to limit patient options, even when
they are harmed, for example, through medical malpractice.
Instead of passing stem cell legislation that will provide new
treatments and cures for debilitating diseases, such as Alzheimer's,
juvenile diabetes, spinal cord injuries or cancer, we are debating a
bill that would actually eliminate--eliminate--the health coverage that
many States currently provide to cover some of these very diseases,
that will cherry-pick, pitting the healthy versus older workers or
those who have some chronic disease or illness. And where there is no
insurance regulation, prices go up, insurance companies pick the
healthy, and they discriminate against older workers and those who are
less healthy.
And they can deny coverage that States have thought important to have
to meet the challenges of their individual States, sometimes very
uniquely so.
So instead of wasting an entire week debating legislation that I
believe ultimately has no chance of passing, we owe it to the American
people--to the millions of Americans and their families suffering from
life-altering disabilities and diseases--to demonstrate our Nation's
full commitment to finding a cure and doing all we can to help their
hopes and dreams come true.
It has been almost 1 year since the House of Representatives passed
the Stem Cell Enhancement Act, and yet the Senate still has not passed
this vital legislation. I rise to urge the majority leader to do the
same and bring this important legislation to a vote in the Senate.
I was fortunate to have had the opportunity to vote in favor of the
bill as a Member of the House, where we had broad bipartisan support
for the proposal. I believe that same bipartisan support exists in the
Senate, which makes it even more difficult to understand why we cannot
come together and do something meaningful for those who are suffering.
My support of stem cell research is partially a reflection of my home
State's commitment to innovation and discovery. In 2004, New Jersey
became the second State in the Nation to enact a law that specifically
permits embryonic stem cell research. We know that embryonic stem cells
have the unique ability to develop into virtually every cell and tissue
in the body. And we know that numerous frozen embryos in fertility
clinics remain unused by couples at the completion of their fertility
treatments. Why shouldn't they be allowed to donate those embryos to
Federal research to save lives? We allow people to donate organs to
save lives. Why couldn't a couple, if they so chose, donate their
frozen embryos instead of simply discarding them?
The great State of New Jersey offers more scientists, engineers, and
technicians per capita than any other State, and I am proud to
represent the innovation and research taking place in New Jersey. Our
State is not only known as the Garden State but also as America's
``Medicine Chest.'' But for our State and our country to continue to
compete globally with health care breakthroughs, it is going to take
more than private and State support. It is going to take the support of
our Nation. It is going to take leadership that looks beyond politics.
But, to me, similar to countless Americans and New Jerseyans, this
issue is about more than our ability to compete as a nation. The
promise of stem cell research is painfully personal. It means hope and
promise--hope that people such as my mother who suffer from advanced
Alzheimer's disease might one day be cured from the loneliness and
confusion caused by this horrible disease and the promise that future
generations of families will not have to see their loved ones enter
into a world of dementia that robs them of the best years of their
lives.
We hold the key to unlock that door. It is shameful that we have let
partisan politics stand in the way of medical progress. We owe it to
our parents, to our children, and our grandchildren to unlock that
door.
Diabetes, Alzheimer's, cancer, Parkinson's--none of these diseases
boast a party affiliation. And we cannot let ours keep us from doing
what is right.
Today we have an opportunity to do what is right. But it is clear to
me that the majority will again let that opportunity pass them by. I
will continue to fight, along with many of my colleagues, to see that
this bipartisan bill is debated on the Senate floor and becomes law. We
can no longer afford to delay this bill when it holds the key to curing
some of the most devastating and debilitating diseases of our day. As

[[Page 7281]]

the bill waits in the wings of the Capitol, children and adults alike
wait for the cure they have been praying for.
This is Health Week. What could better demonstrate our commitment to
the health of this country than full Federal support for embryonic stem
cell research? This bill has the potential to make a profound and
positive impact on the health of millions of Americans. All we need is
the leadership to bring the bill to the floor for a vote for the
humanity of our Nation and for the mothers, fathers, brothers, sisters,
sons, and daughters across this country who are suffering or watching a
loved one suffer.
This bill means so much more than ending restrictions placed on stem
cell research. This bill means hope and promise to countless Americans.
I yield the floor.
The PRESIDING OFFICER. The Senator from Kansas.
Mr. ROBERTS. Mr. President, like many of my colleagues, I rise today
in support of S. 1955, the Health Insurance Marketplace Modernization
Act. As a member of the Health, Education, Labor, and Pensions
Committee, I am proud to have worked on this legislation and to lend my
support as a cosponsor.
First and foremost, I thank Chairman Enzi and Senator Ben Nelson, who
have worked so hard on this legislation. The chairman and Senator
Nelson did what many thought was impossible: they got the health
insurers, State insurance commissioners, and the small business
community to sit down together and work to find a compromise for small
businesses. After over 10 years of deadlock, the Senate is finally
considering a solution that will provide real relief to small
businesses. This is truly a milestone. It has been said before, I am
sure many times, that the House has passed this eight times, and we
have yet to find a solution. Now is the time.
Like many rural States, the Kansas economy is built on thousands of
small businesses. Whether it is the farm implement store or the local
pharmacy, the beauty salon or the downtown coffee shop, these small
businesses and their employees are the backbone of our communities.
They are what we are all about. But one nagging problem for virtually
every small business owner is the high cost of providing health
insurance. Most small businesses can't even afford to offer health
insurance to their employees, forcing many to go without health
coverage.
In Kansas, only about 41 percent--not even 50 percent, not even
half--of our small businesses offer any health insurance coverage. This
is in stark contrast to the 97 percent of our larger businesses that
offer health insurance to their employees. Without such health
insurance coverage, employees are vulnerable to huge health care debts
of their own, and it is harder for small employers to attract a good
worker. I have literally heard from hundreds of Kansas small business
owners and entrepreneurs, local Chamber of Commerce members over the
years who say they are forced to choose between staying in business or
providing the health care they deserve to their hard-working employees.
Take for example Kimberly Smith of Andover, KS. Kimberly has three
children, including a 3-year-old with a mild heart condition. She is
self-employed. She is a realtor. She is a good realtor. Like many, she
does not have access to affordable health insurance. Because of this,
Kimberly and her family have been forced to go without health insurance
coverage, and now she must pay all of her medical costs out of her
pocket.
Denise Breason from Lawrence, KS, is also facing the same crunch to
find affordable health care. Even though Denise is a hard-working small
business employee, she has been without health insurance for over a
year and a half and had to stop taking all of her medications because
she could no longer afford them without health insurance.
Denise Hulse and her husband went without health insurance for their
family for years. They prayed their children would remain healthy so
they would not have to make a visit to the doctor or the emergency
room. In the end, her husband was forced to let his small business go
and take a low-paying job, just because it came with health insurance.
To quote Denise:

It is sometimes very hard just making it in the small
business community, and very few small business owners are
rich enough to be able to afford the high costs of health
insurance for their families.

Another small business owner in Kansas told me he is paying over
$2,000 a month each month in premiums alone for health insurance for
his family. This is more than his house payment, more than his utility
bills and grocery expenses, all combined.
These stories go on and on, not limited to my home State of Kansas. I
heard these stories when I had the privilege of serving in the House of
Representatives. Eight times we approached this issue. Eight times we
passed a bill. Now it is our turn in the Senate, and it is long
overdue. I hear these stories from small business owners and employees
across the country. Small businesses all share one main concern:
finding affordable health care insurance.
This is why I am asking my colleagues today to support and pass the
Health Insurance Marketplace Modernization Act. The real question is,
Do we take it up? Do we vote for cloture? Or do we let the House pass
the bill the ninth time while we sit in the Senate and do nothing for
those who cannot afford health insurance? I cannot imagine us doing
that at this particular time.
This legislation allows small businesses to pool together through an
association and offer health insurance. Everything has to have an
acronym in Washington. This one does, too. It is SBHP. I won't venture
into what that acronym will be called, but it stands for small business
health care plan. It is going to give small businesses an affordable
choice for health care.
The legislation is built on the fact that small businesses, unlike
large companies such as Microsoft or others, or unions, do not have the
power to negotiate affordable prices for health care.
The concept of small business pooling together is not new. I
supported legislation when I served in the House. In fact, the
association health plan legislation has passed the House numerous times
over the years without any action in the Senate. Now we finally have a
solution that will provide meaningful relief to small businesses across
Kansas and the country. We all know small businesses face many
pressures in running the businesses. I believe we must enact
commonsense policies to overcome these hurdles. We should allow the
local farm implement dealer to pool together with other dealers in
Kansas and across the Nation to purchase affordable care.
Kimberly Smith should no longer have to worry about finding
affordable health insurance for her children. Denise Breason should not
have to stop taking her medications just because she works for a small
business and cannot afford her care. Denise Hulse and her husband
should not have been forced to let go of their small business, their
dream they loved, just to find affordable health coverage. Instead, we
need to find these hard-working folks affordable options that allow
them to continue to contribute to our small communities, rural and
smalltown America. This is why I support the legislation.
As I stand before my colleagues today, I know there have been strong
concerns expressed about this and previous association plan proposals.
However, the small business health plans that are created under this
bill have the necessary protections in place to address these concerns.
I would like my colleagues who have concerns to please pay attention.
The small business health plans will be regulated by the States, not
the Federal Government. The small business plans will have to play by
the same set of rules as other small group health plans. They must
purchase their insurance through the regular insurance market. They
cannot self-insure. Finally, the SBHPs may offer coverage

[[Page 7282]]

that varies from State benefit mandates, but they must also offer an
alternative plan that provides comprehensive coverage. This gives the
consumer a choice in choosing a health plan that best fits their needs,
and that is the key.
I have heard concerns from organizations and individuals who fear
this bill will take away their coverage for cancer screenings, mental
health benefits, or any other mandates required by State law. However,
I stress that this is simply not true. Small business, under this bill,
will have access to a more comprehensive plan which will cover
screenings, mental health services, or numerous other benefits.
However, it is up to the small businesses to decide whether such a
comprehensive plan is right for them.
The purpose of this language is to give small businesses the option
of choosing comprehensive benefits but not requiring them to buy such a
rich package or a package they cannot afford. Simply put, this
legislation trusts small businesses to choose a health care plan that
best fits their needs and puts these small businesses, not health
insurers or the Government, in the driver's seat when choosing their
health care coverage. If a small employer wants to choose a more
affordable plan for himself, his family, and his employees, he should
have that option. Under this legislation, he has that option. However,
he should not be forced by law to buy benefits that may be beyond what
he can afford or beyond what he and his employees really need.
I want to put the problem of mandating coverage in perspective. While
small employers want to provide affordable health insurance for their
employees, expensive and burdensome benefit mandates make doing so very
difficult. Small firms and self-employed people have almost no leverage
with insurance companies. In addition, they have to deal with an
enormous array of State-level health insurance regulations. I don't
think you read them; I think you weigh them. All of the benefit
mandates, all of these regulations add to the cost and the complexity
of the coverage.
In contrast, however, big businesses generally don't have to deal
with burdensome regulations. Federal law lets large companies, such as
Microsoft and GM, and unions bypass expensive State benefit mandates to
provide affordable comprehensive coverage for their workers. I ask my
colleagues, why shouldn't small businesses be able to enjoy these same
opportunities?
Today, there are more than 1,800 State mandates, making it nearly
impossible for associations to offer uniform and affordable benefit
packages on a regional or national basis. Taken together, these benefit
mandates create a confusing web, an unfunded mandate that prices many
Americans out of the health insurance market. The Congressional Budget
Office and the Government Accountability Office and others have found
that State-imposed benefit mandates raise the cost of health insurance
anywhere from 5 to 22 percent. In addition, CBO estimates that every 1-
percent increase in insurance costs results in 200,000 to 300,000 more
uninsured Americans. In reality, benefit mandates represent an unfunded
mandate on employers because insurance companies simply pass the cost
of each mandate along. When the cost goes up, the coverage goes down.
You have more uninsured.
The legislation we are debating today simply provides an opportunity
for a small business health plan to relax these burdensome mandates to
offer affordable health insurance to small businesses on a regional or
national basis, just like the big businesses and unions currently do.
We should not be forcing small businesses to choose between staying in
business or offering health insurance to their employees. Boy, that is
a Hobson's choice. Instead, we need to give them more affordable health
insurance choices and be willing to trust them to choose the option
that makes the most sense for themselves, their families, their
employees, and the future of their businesses.
I know this bill is not perfect. Seldom do we or the other body pass
a bill that is perfect. I have long said that we usually achieve the
best possible bill, but sometimes must settle for the best bill
possible.
I appreciate the concerns that have been expressed with this
legislation. However, I express to my colleagues that I think this bill
is the best opportunity we have for easing the burden on our small
businesses and allowing them to finally offer affordable health care
insurance to their employees. I am proud to support this legislation. I
urge my colleagues to do the same and vote for cloture. Eight times in
the House, zero in the Senate. That should not be a moment of pride for
this body. Let us vote for cloture and let us support this bill.
I yield back my time.
The PRESIDING OFFICER. The Senator from New Hampshire is recognized.
Mr. GREGG. Mr. President, I rise to associate myself with the remarks
of the Senator from Kansas, and especially with the efforts of the
Senator from Wyoming who brought this bill to the floor of the Senate.
This is a very significant piece of legislation in our efforts to try
to make sure more Americans have the opportunity to get fair,
affordable, and good health care insurance. It is a piece of
legislation about people. It is directed at people who work in what is
termed ``small business.'' That is the person who works as a cook in a
local family restaurant or a person who works as a mechanic in a garage
or a person who runs a mom-and-pop real estate agency.
Literally, there are tens of thousands, millions of these small
entrepreneurial centers throughout this country. Most of these folks
don't make a great deal of money. They work very hard. They are taking
care of their families. One of their biggest concerns is whether they
can get health insurance so if somebody should get sick who works with
them or should somebody in their family get sick, they will be able to
have adequate care. But too many of them are not able to afford health
insurance. Approximately 22 million people who are in these small
businesses, these small retail businesses, small manufacturing
businesses, small entrepreneurial shops, don't have insurance. Another
5 million people, who are sole proprietors and work by themselves, do
not have a number of employees working with them, also don't have
insurance. That is 27 million people who fall into this category. So
Senator Enzi has brought forward a bill to try to address that problem.
It is going to try to make it possible for these people who work so
hard and who would like to have insurance policies that are affordable
to get them. By allowing them to band together in trade groups, so
realtors can come together, as well as automobile dealers, garage
owners, restaurant associations, and hotel associations can come
together and form a large enough group so that they can create enough
of a mass of interest and buying power so that they can go out and
purchase insurance. That is something they cannot do today as
individuals. This bill allows them to do that.
It is hard to understand how anybody could oppose this concept. But
people do oppose it, and I think most of the opposition comes from
folks who either misunderstand the bill or who are using the bill as a
way to energize their constituencies with information that is at the
margin of believable, to be kind. The biggest opposition today to this
bill, other than insurance companies who might see this as a
competitor, comes from these groups that represent various different
diseases and have compelling stories to tell about their diseases. They
have gone to the State legislatures and they have gotten them to put in
place what is known as mandates so any policy sold in that State has to
cover that disease.
As was pointed out by the Senator from Kansas, every time that
happens that increases the cost of the insurance in that State. For
every 1 percent increase in the cost of insurance--and some of these
specific mandates are expensive enough so they by themselves represent
a 1-percent increase in insurance premiums. But there are 200,000 to
300,000 people who cannot afford insurance because the insurance bills
go up and 200,000 or 300,000 people fall off the rolls.

[[Page 7283]]

What this bill tries to do is address the issue of the person who has
fallen off the rolls, the person who hasn't been able to get the
insurance, by giving them an option that they can buy, which they feel
is adequate to their needs--it may not have a specific mandate in it
because maybe they don't need those mandates to be covered, but at
least it gives them the basic coverage they need in order to get
through their health insurance risks.
The flip side of this coin, which isn't talked about much but which
is fairly obvious, is that these people have no insurance at all. When
these mandate groups argue, if you pass this bill, you are going to
undermine the capacity of people to get insurance for this disease
group, that is a totally misleading presentation because the people
this is focused on don't have insurance to begin with. You cannot take
something away from somebody who doesn't have it. If a person doesn't
have an insurance policy, he doesn't have the mandates that the
insurance policy requires.
If a cook working in a restaurant or a garage attendant working at a
gas station or a realtor working in a small mom-and-pop real estate
agency doesn't have any health insurance, you cannot take away from
them mandated coverage for health insurance because they don't have it
to begin with.
What this bill tries to do is allow that individual to participate in
a group where they will have health insurance as an option. And if they
have that option of health insurance, without mandates, they also have
to have--that group, that restaurant, that real estate agency, that
garage the option to purchase a fully mandated policy. In other words,
it is a policy that is, for lack of better terms, a higher option
policy, where you have everything covered. It has to track the five
States in this country which have the most mandates on their insured.
So the bill is balanced in that area of mandates.
A second opposition to this bill has been the fact that it moves from
community rating to a banding system. What does that mean? It
essentially means that on a community rating you basically force
everybody to be rated the same, no matter their health risk or age
group or occupation. With a rating system, you adjust marginally for
what health experience it may be or what age it is. Adjustments can be
made, but they are limited by the State. If you have a community-rated
system, you inevitably have a much higher cost going in for a lot of
those people who are banding together in groups, who maybe don't have
as much risk as others. But if you have a rating system, some people
are going to be lower in insurance costs and some people will be
higher. They are going to be within a relatively narrow band.
So this bill allows these policies to be offered with a rating
system, with a band. In New Hampshire--and this has been referred to on
the floor by the Senator from Massachusetts--they had a very bad
experience because, regrettably, New Hampshire did it the wrong way. We
had a community rating system and then we went to a band rating system
because we recognized that was better policy. I congratulate the State
for that, but they didn't go to it correctly. They went sort of cold
turkey. The practical effect was that one day people got one type of
bill, and the next day they got a different type of bill. For some
people it went up, for some people it went down, and it was a rather
startling event for them. We looked at that experience in committee and
said we don't want to emulate what happened in New Hampshire. We want
to make this a much more responsible approach. We put into place a
glidepath, 5-year phasing, so there will be plenty of time to adjust
and to be able to handle this.
That type of opposition to this bill, clearly, in my opinion, has
been addressed. It has been addressed specifically because of the New
Hampshire experience. So it is a misrepresentation to say that
continues to be a major issue with this bill. As a practical matter,
there are about 85 million people in this country who work in small
businesses. That is a huge number. They deserve the opportunity to have
this type of insurance made available to them. They should have the
same opportunity as big businesses--the IBMs, the Microsofts, the major
manufacturers--in our country, if for no other reason than they happen
to be the engine of economic activity in this country. Most of the new
jobs are created by small businesses, the moms and pops who are willing
to build that restaurant, take on that exciting opportunity, start
small and grow. When they do that, they ought to have the opportunity
to also have an insurance option available. But many of them don't
because it is not affordable, because of the way the States work the
system, and because of that these small groups, as individuals, have no
buying power. So this bill has addressed that need.
It is not the answer. This isn't a magic wand, but it is another
opportunity put on, let's say, the cafeteria line of insurance that
gives a small businessperson the chance to go down that cafeteria line
and say: Yes, this plan works for the five people who work for me, and
I am going to buy into the plan because I can afford it. Today, most
people who walk down that cafeteria line, if they are small
businesspeople, don't choose anything because they cannot afford the
price of anything, or many of them are in that capacity, that 22
million. This will take a fairly significant number of those folks and
give them the opportunity to purchase health insurance.
So it will take people from a noninsurance status to an insured
status, from a situation where if they get sick, they don't know how
they are going to pay for it, to a situation where if they get sick,
they will have coverage. It is very important financially to most
people and, obviously, it is important psychologically to everybody. So
it is a good bill, something we should support.
I do think much of the opposition to it is misguided because it
doesn't recognize that the basic goal is to take people who don't have
insurance today and get them insurance. Therefore, the arguments around
mandates are irrelevant to that group of people and the argument of
community rating as I think we will address.
I congratulate the Senator from Wyoming for bringing this bill
forward. I look forward to working with him on this bill.
I want to speak on another matter briefly because there is a lot
going on that is very good in this country relative to the economy, and
it is not being highlighted.
Today, there was an editorial in the New York Times that said we
should not extend the tax cuts put into place in 2003. They say those
tax cuts should not be extended in the areas of capital gains and
dividends. That argument is good in 1930s economics. It is the old left
theory of tax policy, which is that you increase revenues by constantly
increasing taxes on people. It has been proven wrong this year, last
year, and the year before. It was proven wrong by John Kennedy when he
put in place the first tax cut. It was proven wrong by Ronald Reagan
when he put in place the tax cut of 1980. And it has been proven wrong
again.
In fact, in the first 6 months of this year, tax revenues jumped 11
percent, $134 billion, and a large percentage of that is the increase
in tax revenues from capital gains and the fact that we have reduced
the rate on capital gains which causes people to free up assets. Over
the last 3 years, revenues have jumped dramatically--in fact, last year
by 14 percent, and the year before by 7 percent, and next year they are
projected to jump again. Why is that? It is because we are seeing an
economic boom which has created 5.3 million new jobs since those tax
cuts were put into place. There have been more jobs added in the United
States in that period than Europe and Japan combined have created. And
those jobs have led to economic activity and, in turn, have led to
revenues to the Federal Government.
Revenues to the Federal Government are dramatically increasing
because the economy is growing, and the economy is growing because the
burden on those people who go out and are willing to take risks through
capital investment, dividend activity, through income tax activity--
those people are taking risks and creating economic activity and, as a
result, creating jobs

[[Page 7284]]

which, in turn, create taxpayers, which, in turn, increases the Federal
revenues.
The numbers don't lie. They are huge, significant, and they confirm,
once again, that John Kennedy was right, Ronald Reagan was right, and
George Bush was right. By making tax rates fair, especially on capital
formation, you energize economic activity and, in turn, you create
massive increases in Federal revenues. Regrettably, I must say the New
York Times is wrong.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Arkansas is recognized.
Mrs. LINCOLN. Mr. President, I am so happy to come to the floor today
because the Senate is finally debating how we can help small businesses
across our country afford health care for their employees. Just as
Senator Gregg has mentioned how important it is to provide benefits to
groups who want to invest, and to individuals and companies who want to
invest and grow the economy, so too it is critically important that we
provide small businesses the ability to invest in themselves. That is
what I want to talk about today.
Small businesses are critical to this country. They are critical to
rural States such as mine in Arkansas, but they are the engine of our
economy in this great Nation. They are the No. 1 employers. That is why
it is so important that we get this right, that we provide them with a
tool that will allow them to reinvest in themselves and their employees
and their communities, so that we can keep that engine going.
I applaud my colleague from Wyoming, Senator Enzi, for all he has
done in bringing about this debate. He has worked hard and genuinely on
this issue, and I appreciate very much what he has put into this. He
has helped us make sure this is not a debate about whether this is a
critical issue.
This reminds me of something I was taught by my father who said: If
it is worth doing, it is worth doing right. It is worth doing
correctly. That is what we are here to talk about today.
I believe very strongly that our small businesses are so important to
us--our self-employed individuals in this country have the greatest
spirit in the world--and it is so important that we should not offer
them a second-rate opportunity. We should offer them the same
opportunity we have as Federal employees and Members of Congress: The
opportunity to build a pool that will offer them greater access,
greater choice at a lower cost, by pooling all of themselves together
across this great country, while maintaining the quality, which is what
we do for ourselves. We maintain the quality of the product of the
health insurance we receive or have access to as Federal employees and
Members of Congress, and we should do no less for the small businesses
and the self-employed individuals in this great country.
So I hope, as we continue this debate, we will remember those hard-
working American families who are depending on us not just to do
something, but to do what is right and fair, and offering what we see
as fair tax policy and offering what we see as fair access to the same
quality product of health care and health insurance that we as Members
of Congress get.
The small business health care crisis is undoubtedly one of the
issues I hear the most about when I return home to Arkansas. In fact,
in every community in our Nation, as well as millions of working
families across this country, we are seeing the difficulty of having
access to quality health care and health insurance and the ability to
pay for that.
There are approximately 46 million Americans currently without health
insurance, including 456,000 Arkansans whom I am responsible for in
terms of producing a product that is worthy of those individuals. Small
businesses are the No. 1 source of our jobs in Arkansas. Yet only 26
percent of the businesses with fewer than 50 employees offer health
insurance coverage. Workers at these businesses, which again are the
engine of our economy, are most likely to be uninsured. In fact, 20
percent of working-age adults are uninsured in Arkansas. This number is
alarming, and addressing this problem should be a national priority,
and we should approach it as if we are going to do the best job that we
are capable of doing. That is why we are here today, to talk about
that.
Mr. President, 224 major organizations are opposed to the proposal
that Senator Enzi has brought before us. Two hundred-and-twenty-four is
a huge number: everywhere from diabetes to mental illness to hospital
federations. These individuals understand how important the years have
been in allowing State insurance commissioners to be able to set
mandates in order to cover what is important to individuals in their
States, and what is important to small businesses and everyone in those
States. Those States have the right and the ability to figure out what
is important to them, and the majority of them have agreed on many of
these major issues.
Those who lack health insurance do not get access to timely and
appropriate health care. We know that, and we see it. We see it in the
cost of Medicare when people don't get health care for 20 or 25 years
when they are in the working marketplace as a small business owner or
employee, and then they become more costly to us when they hit Medicare
age because they haven't received the screenings, the timely visits to
the doctor, and they haven't been getting the kind of health care they
truly need. They have less access to these important screenings. They
don't have access to the state-of-the-art technology that exists or
prescription drugs, which is another piece of what can help keep down
the cost of health care.
Working families need help with this problem. The Institute of
Medicine has reported that 18,000 people die each year because they are
uninsured. The fact is, being insured does matter. It makes a big
difference. It makes a difference in our health care costs. It makes a
difference in whether you are going to survive--longevity, the ability
to care for your family. It makes a big difference. We have reached a
juncture where we are going to debate how we deal with those who are
uninsured, whether we are going to give them substandard coverage or
whether we are going to give them the coverage that we have.
Again, I commend my colleagues, Senator Enzi from Wyoming and Senator
Nelson from Nebraska, for their leadership. I appreciate their hard
work on this issue. But I do disagree, because I believe that the devil
is in the details on this issue, and I am deeply concerned about the
very harsh and unintended consequences that will occur if S. 1955 were
to become law.
Senator Durbin and myself have been working together for several
years to come up with what we believe is a better health care plan for
America's small businesses. What we have done is looked to a 40-year-
old tested delivery system, and it is the one that we ourselves use. It
is a Federal plan that takes the best of what Government can do and
combines it with the best of what private industry can do. The private
marketplace and the competition that it can create allows the
Government to pool all of its Federal employees and use that pool as a
negotiating tool to bring us greater choice at a lower cost.
About 3 years ago, I suppose it was, my staff and I were discussing
the way we could help small businesses, and I thought about the way my
Senate office operates. It operates much like a small business in my
home State and here. As I looked at my employees, I saw that I had two
employees, one with 26 years with the Federal Government, another with
30 years with the Federal Government. I had two women who had delivered
babies and were on maternity leave. I had some, such as myself, with
small children and a husband that is on my plan, and then I had a host
of young, healthy staffers who were single. But I had a whole array of
different individuals who needed a tailor-made insurance plan for their
needs. While there are similarities in our Senate office and small
businesses, there are also some obvious differences. One of the most
glaring contrasts is access

[[Page 7285]]

to affordable and quality health care. I saw what my office went
through and realized that is what small businesses are going through. I
knew we could do better. I knew we could take the plan of what we have
and apply it to small businesses.
Last year, more than 8 million people were banded together in the
Federal employees purchasing pool, and that gave us choices among 10
national health insurance plans and a variety of local insurance plans,
and a total of 278 private insurance plans from the private
marketplace. Not government-run--not government-run health care at
all--but health care from the private industry, health insurance from
the private industry that was created by competition of the multiple
Federal employees across the country. It offered us greater access,
greater choices at a lower cost.
So I am here to ask this question: Why don't we try to give small
businesses access to that same type of private health insurance option
that Members of Congress and Federal employees enjoy today? Rather than
reinvent the wheel, why don't we create a program for small businesses
that is based on our Federal Employees Health Benefit Plan, through the
FEHBP, by pooling them, the small businesses, together in one
nationwide pool. That is exactly what Senator Durbin and I have
proposed in our Small Employers Health Benefit Program. By pooling
small businesses across America into one risk and purchasing pool
similar to the FEHBP, our program will allow employers to reap the
benefit of group purchasing power and streamline administrative costs
as well as access to more plan choices. The SEHBP, as we have
introduced, lowers costs for small businesses in two key ways: It pools
them into one national pool across the country, therefore spreading the
risk between the healthy and the sick, the young, the old, those who
live and work in the remotest parts of this great land and those who
work in the most urban areas. Second, our plan significantly lowers
administrative costs for small businesses.
Two economists have estimated that SEHBP would save small businesses
between 27 and 37 percent annually, even if they don't take advantage
of the tax cut that we offset costs with by insuring lower income
workers. We provide a tax cut to small businesses, and for the life of
me, I can't figure out why those on the other side of the aisle, for
the first time I have ever noticed, will fight a tax cut for small
businesses. Providing small business a tax cut to be able to engage in
what is such an important tool in getting themselves and their
employees insured makes good sense. What a great investment.
Senator Gregg was talking about balancing all of that and the
economy. What a great way to balance what corporate America gets and
their ability to deduct health insurance costs that they have and small
business getting a tax cut for investing in their employees and health
benefits for them. Under our bill, employers will receive an annual tax
credit for contributions made on behalf of their workers who make
$25,000 per year or less. And if the employer contributes 60 percent or
more to the health insurance premium of an employee making $25,000 or
less, the employer will receive a 25-percent tax credit. And the tax
credits increase with the number of people covered and the proportion
of premium the employer chooses to cover. Also, the employer receives a
bonus tax credit for signing up in the first year of the program,
because we know from the example of the Federal employees that the more
employees who are in the pool, the greater advantage to everyone
concerned. Small businesses will save thousands of dollars--even more--
under our plan.
Segmenting the market into different association pools, as S. 1955
does under Senator Enzi's bill, will not achieve these savings that
would be created by instituting one large pool with all of those small
businesses and self-employed individuals. Each association will be
administering to a separate group with a different administrative
structure and different costs, obviously. More funds would be going to
administrative costs as opposed to serving the people with a quality
health plan. Our SEHBP would have one administrative structure and
could pool approximately 53 million workers together, therefore
balancing the risk of sick and healthy, young and old, rural and urban,
for affordable rates for everybody. Why wouldn't we want to make our
pool as big as it possibly could be, as we do with the Federal workers?
I believe our plan takes a real moderate and balanced approach that
combines the best of what Government can do with the best of what the
private sector can do, and preserving important coverage for preventive
health care treatment such as diabetes supplies, mammograms, prostate
screening, maternity and well-baby care, immunization, things that
States themselves have decided are important enough to mandate coverage
for and ensure that the people of their State are going to get the safe
and important coverage of illnesses that are critical to them in their
State.
Like the FEHB Plan, our program does not promote Government-run
health care, but it harnesses the power of market competition to bring
down health insurance costs using a proven Government negotiator in the
Office of Personnel Management, OPM, which is the negotiator for our
plan. We, once a year, as Federal employees, can choose among 270-plus
plans. We are able to actually benefit from that proven Government
negotiator and the harnessing of that power.
Our legislation, S. 2510, has been endorsed by many organizations--
the National Association of Women Business Owners, Small Business
Majority, the American Medical Society, the American Diabetes
Association, the National Mental Health Association, the Cancer
Society, and many more that have realized how important it is to use a
proven example, a proven structure that maintains quality but helps by
pooling and bringing down those costs.
The Mental Health Liaison Group, representing over 35 national mental
health organizations, wrote to us and said about our bill:

S. 2510 does not sacrifice quality of coverage for
affordability or allow the offering of second class health
insurance to small businesses. Within the FEHBP program,
small business owners, employees and their family members
would be covered by all the consumer protections in their
home states--including hard-won state mental health parity
laws and mandated benefit laws.

The American Academy of Pediatrics, writing to us on behalf of over
60,000 primary care pediatricians and pediatric specialists, wrote:

Through the benefits of pooling small businesses and
providing tax cuts to small employers, small pediatric
practices will be assisted in the health insurance market
without sacrificing health care services for children.

The American Diabetes Association wrote to us and said:

While other proposals seeking to provide health benefits
for small businesses . . . have exempted or eliminated
coverage for important diabetes care protections, [our bill,]
S. 2510, will allow individuals with diabetes to receive the
important health care coverage they require to remain healthy
and productive members of the workforce.

This is not just about quality of life, although many of us believe
that is very important. We as Members of Congress enjoy a quality of
life because of the very healthy health insurance program we are
offered. We want our small businesses that are vital to our economy to
enjoy that same opportunity. But it is also about economics. It is
about making sure we keep our workforce, particularly our small
businesses and their workforce, healthy and thriving and productive and
in the workplace. It is about making sure America's working individuals
and working families get the health care they need before they reach
65. When they hit 65 in the Medicare Program, then they are going to be
more costly to Government because they are not going to have gotten the
health care they needed and deserved in their working years.
I believe our plan is better in so many ways. I am proud we are
having this debate, and I hope so many people will realize we can do
better. We can do better and make sure we truly elevate

[[Page 7286]]

small businesses and self-employed people to the same level we hold
ourselves, in providing them the access to the same quality type of
health care.
Our SEHBP bill offers tax cuts for small employers. Senator Enzi's
bill does not. SEHBP relies on a proven program. It is based on the
successful Federal Employees Health Benefit Program which has
efficiently and effectively provided extensive benefit choices at
affordable prices to Members of Congress and Federal employees for
decades. For decades, we have had a proven program out there that
proves you can harness the competitive nature of the marketplace, and
with the oversight of Government and the State mandates, you can
actually provide that quality of health insurance at a lower cost. By
pooling small businesses together and allowing OPM to negotiate with
private health insurance companies on their behalf, they, too, could
have access to this wide variety.
On the other hand, Senator Enzi and Senator Nelson's bill establishes
a new set of responsibilities at the U.S. Department of Labor, to
administer an untried and an untested program. We don't reinvent the
wheel. What we do is use what already exists. To invent a new section
of the Department of Labor to administer Senator Enzi's bill is going
to take time and money. We are not going to know how it needs to be
administered through the Department of Labor. They have never done it
before. Even the Department of Labor employees currently enjoy benefits
from the health insurance program that is negotiated by the Office of
Personnel Management. So it is hard to believe they are going to want
to go to another system.
SEHBP offers individual self-employed workers the same access to
health insurance that is offered to group businesses. SEHBP defines
small businesses as groups of 1 to 100, so an individual self-employed
person will be treated exactly as a business with 2 or more people. Any
business with 1 to 100 employees is eligible to participate in what we
are trying to do.
Under Senator Enzi's bill, the self-employed people are not pooled
with the small businesses, unless they are mandated by State law. And
there are not that many State laws that actually mandate that. But the
self-employed people in 36 States, including Arkansas, will not have
access to the same negotiated rates of businesses with 2 or more
people. They will be pulled out of that pool and rated on their own.
That means, if they are younger women of childbearing years or perhaps
they are older workers at 50 or 55 and are diabetic, they will be rated
completely separate from the pool, which means they will be segregated
and treated differently. They don't get to enjoy the benefit of a
larger risk pool which could bring down their costs and offer them
greater choice.
Our bill also ensures access to health care specialists. Many States
have passed laws requiring insurers to cover certain health care
providers, including dentists or psychologists or chiropractors. All
three of these and many more are required by our State of Arkansas law.
I know the people of my State enjoy the assurance they have of knowing
that their State regulator, their State insurance commissioner, is
looking out for their needs. They can do that better on a State level.
That is why we have always left those types of regulatory issues up to
our State--because they know and can work.
Can you imagine being a small business, or better yet an employee of
a small business, having to call some big, huge, Federal bureaucratic
office to request or to complain or to have your concerns heard about
what is not covered under your insurance plan? No, they call the State
insurance commissioner today, and that is the way it should be. The
State insurance commissioner can then respond to the concerns of their
constituency and has done so very well over many years.
The coverage for diabetes supplies, mammography, and other important
screenings are mandated by State law which would be preempted by what
Senator Enzi is trying to do. Many States have passed laws requiring
health insurance companies to cover these benefits because insurers
simply were not doing it. It did not happen because the insurance
commissioners just decided on a whim to do it; it is because the
insurers were not covering it. Why do we have to go back and relearn
that lesson?
For 40 years, the Federal Government has used the effectiveness of
the pool of the 8 million Federal employees and been able to enjoy the
protections that are there, guided by State insurance commissioners.
Our bill also prevents unfair rating on gender and health status.
Under our bill, health insurers will be prohibited from ratings based
on health status--whether you happen to be diabetic, whether you happen
to have eating disorders--your gender, or the type of industry in which
the employees are working. Under Senator Enzi's rules, that will be all
preempted, even for the 15 States that don't allow ratings on these
factors.
Our bill also frees employers to focus on running their businesses.
They don't have to go and negotiate these plans through their
association or with their association. They are going to get sent a
booklet just as we do, once a year, to review all that is available to
them, and choices, and then figure out what is best for them. My
employees--each of them picks something different. I pick coverage for
a family with children. Some of them pick a PPO or an HMO. Some of them
pick all different kinds of State plans and others that are offered to
them in that process.
Mr. CARPER. Will the Senator yield?
Mrs. LINCOLN. Absolutely.
Mr. CARPER. Mr. President, how much time is left on our side during
this period of debate?
The PRESIDING OFFICER. There is 5 minutes remaining.
Mr. CARPER. How much longer does the Senator expect to speak?
Mrs. LINCOLN. How about if I just go ahead and yield to the Senator
from Delaware because as a former Governor, he has some incredible
stories to tell, and I think they really add to this debate. I will
simply say to my colleagues that I hope they follow this debate very
closely and certainly appreciate how important this is to the working
families of all of our States.
Mr. CARPER. I thank my colleague for yielding. I ask if she would
stay on the floor.
I commend Senator Lincoln for actually coming up with this idea. It
is an idea for which she and Senator Durbin share credit. When you
think of some of our options, the options basically are do nothing,
maintain the status quo, continue to make the cost of insurance very
steep and rising for small businesses or to adopt the proposal of our
colleagues, Senator Enzi and Senator Nelson, whom I believe are two of
the most thoughtful Members of the Senate. They have worked hard to try
to make a not very good idea--the original association health plan--a
better idea. But between doing nothing and the modified HP legislation
from Senators Enzi and Nelson is a third way. The third way has already
been outlined here by Senator Lincoln.
I wish to ask my colleagues to think about it. I don't care whether
it is a Democratic idea or Republican idea. It is actually an
opportunity to take the best from what the Government, the public
sector, can bring and to take maybe the best the private sector can
bring.
One of the common values that are shared by the Enzi-Nelson
legislation and the Lincoln-Durbin legislation is the notion that we
have a lot of smaller employers, they have a lot of employees, and
together is there some way we could pool their purchasing power? Maybe
we could increase the number of health insurance options available to
them and maybe we could bring down the cost of those options. They
propose to do it in one particular way which, as Senator Lincoln
pointed out, has a number of problems, one of which affects us
negatively in Delaware.
We have had a very high rate of cancer mortality. Finally, we have
brought it down over the last 10 years or so, in part by having
mandatory cancer screening--mammography, for cervical cancer, prostate
screening, for colorectal cancers--and that has helped to bring down
our cancer mortality rate. From the top in the country, we

[[Page 7287]]

have finally now dropped to the top five. We are moving in the right
direction. I will talk about that tomorrow, and I will even bring some
charts to rival the chart of my colleague, I hope.
But I suggest to my colleagues, think about this. We have all these
disparate Federal agencies across the country. Collectively, we have a
couple of million employees, family members, and retirees, and all we
do through the Federal health benefit plan is we pool our collective
purchasing power. It doesn't matter if you work for the VA or Homeland
Security or some other Federal agency--EPA--basically we could come
together and use our collective might to negotiate better rates and,
frankly, better coverage than would otherwise be the case if we were
just negotiating for ourselves. We do it all through the Office of
Personnel Management.
What Senator Lincoln is suggesting is it works great for us, provides
reasonably good coverage for Federal employees, including us as U.S.
Senators. We have to pay our portion. It is not that we get it for
free. We have to pay our share. But it works pretty darn well. She has
come up with a way where we take that Government idea and transpose it
and transfer it to the private sector. She would have the Office of
Personnel Management effectively provide the service or play the role
in the private sector that it currently plays in the public sector, to
allow a lot of employees, whether you work for the local hardware store
or restaurant or small manufacturer or technology company, to say: We
would like our employees to be able to pull together from Arkansas,
from Delaware, even from Minnesota, in order to get a chance to buy
better insurance products, have more variety, and bring down our costs
to our small business employees.
It has worked. It is proven. It is time tested, and I believe it is
worth trying. The worst thing that I think could happen, coming out of
this week, is for us to do nothing.
It is a big problem. It is a big problem for small employers, and it
is a big problem for large employers. It is a big problem for America.
I think what would be the worst thing that could happen, and what
would basically ensure that we do nothing is for our Republican friends
to basically allow no amendments to the Enzi-Nelson legislation. I
think that would be awful. That would be a huge mistake. It would
pretty much basically ensure we end up not getting this bill done or
some variation and not even having a chance for debate and vote on the
Lincoln-Durbin legislation. We can do better than that.
Frankly, the Senate deserves a lot better than that.
I say to my colleague from Arkansas, who has been good enough to
relinquish her time, I thank her on behalf of all us for pointing out a
different course, a third way in this regard. I thank her.
Mrs. LINCOLN. Mr. President, I thank my colleague from Delaware.
The PRESIDING OFFICER. Minority time has expired.
Mrs. LINCOLN. Thank you, Mr. President.
I ask unanimous consent to continue until other Members arrive.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
Mrs. LINCOLN. Thank you, Mr. President.
I will be glad to yield the floor when others are ready to speak.
I would like to add that the experience of many of our colleagues,
whether they are former insurance commissioners, former Governors and
others, brings to this table the understanding what the American people
want, what our working families want. I think the debate is that small
businesses definitely want more affordable health care. They also want
to make sure that what they are providing for themselves and their
families and their employees is quality service, quality coverage. That
is what they deserve. That is what they want.
Even for those who feel so young and invincible, we also know that
they may be one car accident or one diagnosis away from needing more
comprehensive health insurance for the rest of their lives.
That is why we want to make sure--as I said in the beginning--that
whatever we do is right, that we don't move forward on something that
is going to be less productive and in the long run, unfortunately, put
more people at risk.
My goal is to help small businesses while not jeopardizing the
quality of health care for the 68 million Americans in State-regulated
group plans that are already out there. We don't want to do harm there.
The fact is if we move forward on what Senator Enzi wants to do,
which is preempting those State regulations and State mandates, we
could do tremendous harm for those who are currently insured and the
16.5 million Americans with individual health insurance coverage who
would probably lose some quality of coverage which they have.
If it is good enough for Federal employees, and if it good enough for
Members of Congress, I think it should be good enough for millions of
small business employees who are the economic backbone of communities
throughout this Nation.
I applaud my colleagues for coming to the floor for this debate, and
I hope we will have a serious debate so we can move forward and
actually do what is right for the American people.
Mr. CARPER. Mr. President, will the Senator yield once again?
Mrs. LINCOLN. Yes, absolutely.
Mr. CARPER. Mr. President, we do not often think of the Federal
Government in the way we are trying to harness market forces and
competition and put them to work. We try to hold down Federal outlays.
That is what we do with respect to the Federal. It is literally what we
do with respect to the Federal Employee Health Benefit Plan. What we
are trying to do, with respect to what the Senator has outlined, is
harness market forces and competition and put them to work for small
businesses as well.
Mr. ENZI. Mr. President, reclaiming our time, I didn't realize they
would be allowed to use part of it.
It would be helpful if the other side would actually share the
details of their amendment with us so that we can take a look at it.
The details of our bill have been through the committee, out here, and
had hearings. We don't know what is going to be in there. The last time
I looked at it, there was, I think, $9 billion of cost in it each year,
and the huge bureaucracy that would be built up. I make that request to
the other side--that we sure would like to take a look at their bill.
It is hard to do until we have a copy.
The PRESIDING OFFICER. The Senator from Alaska is recognized.
Mr. STEVENS. Mr. President, I thank the Chair.

Cape Wind Facility in Nantucket Sound

Mr. President, I am here to discuss the provision in the Coast Guard
and Maritime Transportation Act of 2006 and the provision which allows
the State of Massachusetts to have a say in the siting of a 24-square-
mile, 130-wind turbine energy facility.
I have a chart I want to use and describe.
First, let me say why the Senator from Alaska is involved in this
issue. What I am trying to say is that this is a tremendous precedent.
We have a series of areas of various States where there is a gap in
State jurisdiction and where Federal waters are adjacent to and
sometimes almost surrounding State waters. That is particularly true in
my State. With the Cook Inlet on either side of Kalgin Island, there
are gaps of Federal waters surrounded by the mainland of Alaska going
down the inlet.
The Minerals Management Service tells us there are roughly 2.5
million acres of Federal waters going down that inlet that could be
used for projects such as I am going to discuss today.
A similar situation exists with Chandeleur Island, LA; the Channel
Islands in California; the Farallon Islands in California; the Hawaiian
Islands in many instances; and in Puerto Rico.
What I am here to talk about is the precedent that would be
established by locating this facility in Nantucket

[[Page 7288]]

Sound, less than 2 miles beyond the State of Massachusetts'
jurisdiction.
If we look at this chart, you can see very clearly the area with the
darkest color on the chart, which is the proposed site of this power
facility. It is 9 miles from one part of Massachusetts, 13.8 miles from
the other side, and 6 miles from the other direction.
When you look at the situation, we realize the State has jurisdiction
over at least 3 miles in that area.
This is very close to the area of Massachusetts where people have a
right to be concerned over this project. Before the Federal Government
claimed ownership of this area, there was a judicial dispute over which
government had jurisdiction over it. I am informed that the State of
Massachusetts had established a marine park in this area. As a matter
of fact, it was listed as part of a proposed marine sanctuary, even in
the Federal listings. It is now the proposed site for the largest and
most expansive offshore wind energy project ever undertaken in the
world.
This facility would include turbines that stand 417 feet tall.
This is a chart that describes it. Those windmills would be 417 feet
tall, taller than the Statue of Liberty. The one little point at the
bottom shows a 30-foot sailboat. You can see the size of it. People
sail their boats that size on Nantucket Bay, and the Great Point
Lighthouse is supposed to keep sailors and mariners warned about the
area. It is only 73 feet tall.
When you look this area, it is 24 miles across, more than half the
size of Boston Harbor itself. It is going to be the site of this
enormous facility.
As I said, it is larger than any similar kind of wind energy project
in the world.
It is a very small area of Federal jurisdiction, completely
surrounded by the mainland and islands of Massachusetts.
Some in the media have insinuated that by including this provision in
the Coast Guard and Maritime Transportation Act, I am doing it as an
old friend to Senator Ted Kennedy. He is an old friend. It is true that
Senator Kennedy and the Governor of Massachusetts support the provision
in the Coast Guard bill, but this is my amendment. They have agreed
with me. I didn't seek their agreement. It is not an issue based on
friendship or on past favors or future favors. It is strictly a
provision based upon my long-held belief that States should have the
final say on projects which will directly impact their lands,
resources, and constituents.
Some in the press have claimed this provision is embedded in
``obscure legislation to be passed in the dead of the night.'' We hear
this all the time. But the Coast Guard authorization bill is hardly
obscure legislation, and there is nothing secretive about this bill.
The version of this bill that passed the House of Representatives
included a provision related to offshore wind farms. It was in the
House-passed bill to start with. The House and the Senate, in a
bicameral, bipartisan group of Members of a conference committee,
discussed and negotiated language to provide the State of Massachusetts
a greater voice in the siting of this windmill farm in Nantucket Sound.
This bicameral, bipartisan group also negotiated language requiring
the Coast Guard to assess the potential navigational impacts of the
proposed offshore powerplant.
This is the normal legislative process for passing legislation of
this type through the Congress.
Again, let me point out this chart. I don't live in this area, but I
have studied it very well. This is the path the ferries take coming out
of these areas and going through this sound, and it is the path which
the commercial traffic, steamships, and cargo ships use going into that
port.
As a consequence of this location, this line demonstrates the State's
jurisdiction and how close it is to the State's jurisdiction. As a
matter of fact, the area that is has been lined shows the previous plan
which would have gone partially into the State's jurisdiction. The
project was amended, so it does not touch the State waters or State
jurisdiction areas at all.
It is this area of solid brown on this chart.
By the way, this is the very shallow portion of this area. There is
no question about it. Nantucket Island is out here. But there are
equally shallow portions outside of the sound that could have been
used. But, of course, it is deeper going in there, and that access to
this interior part of this sound I think is strictly a financial
decision.
At the heart of the debate on the issue is States' rights. The fact
is this project will be located entirely in the sound--in this small
doughnut hole of the Federal water surrounded by islands and mainland
of the State of Massachusetts.
The debate over this project is similar to the fights those of us in
Alaska have been engaged in for decades. Our State lands are surrounded
by Federal lands, and we often don't have any decision regarding the
development of our resources or projects which will be located in our
State.
This is one of those situations where Congress ought to listen to the
Governor. They ought to listen to the senior Senator, in my opinion.
Those in Massachusetts have raised legitimate concerns about the
impact of this wind farm and what its impact will be on maritime
navigation, aviation, and radar installations critical to our homeland
security.
This proposed site is an area already known for its treacherous
flight conditions, and this facility could make those conditions much
worse. According to the National Air Traffic Controllers Association,
this facility will be located in the flight path of thousands of small
planes. Both the Barnstable and Nantucket Airport Commissions are
opposed to the construction of this facility, as are the major ferry
lines that operate in Nantucket Sound.
As the chart I have described shows, ferry routes pass within a mile
of the proposed location for this project on two sides. The 24-square-
mile footprint for this facility is nearly half the size of Boston
Harbor, a 471-foot wind farm.
Again, those windmills are larger than this building. Those windmills
are larger than the Capitol.
You have to get the specter of this size being built in the center of
this sound. It is a 24-square-mile footprint for this facility. As I
have said, it is half the size of Boston Harbor and has shipping and
ferry channels bordering on three sides.
There is not a single local fishing group from Massachusetts that
supports this project, I am informed. It would effectively close a 24-
mile-square-mile footprint of many kinds of fishing that has taken
place in this sound for generations. Horseshoe Shoal, where the
facility will be built, is one of the most productive fishing grounds
in the area. That means this area produces offspring. This is where the
fish spawn.
The impact of the shoal will be significant. The piling for each one
of these windmills--there are 130 of them--are 16 feet in diameter and
will be bored down into the shoal to a depth of about 80 feet. This
productive area will be littered with 130 drilled holes. Each piling
will occupy 2 acres of productive fishing ground. Navigating in and
around 130 turbines will make fishing and fishing reproduction in this
area nearly impossible.
In addition, these turbines will make Coast Guard search and rescue
missions much more difficult in this area, already known for severe
weather and sea conditions in parts of the year.
Those in Massachusetts raise another important point. Developing a
wind farm of this size and scale offshore has never been done before,
let alone in an environment as extreme as the waters of the North
Atlantic.
To put this challenge in perspective, it helps to compare the
Massachusetts project to the wind farm currently operating in Palm
Springs, CA. I know a little bit about this. I have gone into that town
several times by air. That facility stands 150 feet at the tallest
point. The blades are half the length of a football field, but they are
one-third of this size. Even on dry land and a relatively calm desert
climate, the Palm Springs wind farm has been plagued by serious
maintenance complications. Many of the turbines require constant
maintenance and repair.

[[Page 7289]]

Put that in the Massachusetts Sound. They require maintenance and
repair constantly. This Massachusetts project would require maintenance
and repair to take place in icy waters of Nantucket Sound. The size of
the windmills for this facility would dwarf the existing land-based
wind projects. The windmills in Nantucket Sound would stand nearly
three times as tall as those in Palm Springs, with wind blades over a
football field in length. Just the blade is a football field in length.
Now, given the legitimate issues raised by the people of
Massachusetts and their representative, I believe it is only fair to
allow the State to have an equal voice in the debate over the siting of
this project. Nantucket Sound, as I have said, is not the only place
where a project of this kind can be built. In Europe, deepwater wind
energy technologies are currently being developed as far out as 15
miles in 138 feet of water. Placing wind energy facilities further from
their shore reduces their impact on maritime navigation.
If this 24-square-mile wind farm is built further away from shore,
there would be a number of benefits. It would be removed from boating,
fishing, ferrying, shipping channels, reducing the risk of collision
and reducing the potential impact on the navigation which we have asked
the Coast Guard to look into.
I do support America's use of alternative energy sources, including
wind farms and wind power. I have supported wind projects in the past
during my time as chairman of the Senate Committee on Appropriations.
Our committee appropriated over $105 million for wind projects in
fiscal year 2002 to fiscal year 2006. There was even one in my State
around Kotzebue.
It is the right of a State to determine if this type of project is
consistent with its efforts to protect its resources. I believe
Congress should defer to the judgment of the Massachusetts
congressional delegation, the Governor of Massachusetts, and the people
of Massachusetts on this matter. States should have a say in the
activities taking place in the waters adjacent to their shores. This
location, in particular, deserves special consideration due to the
geographic peculiarities of the region.
California blocked oil platforms, Oregon and Washington blocked them
before they were even built.
We now have a dispute before the Congress over a potential
development of gas resources 170 miles off the State of Florida. This
is 3 miles. This is within a sound that is one of the--I have only been
there two or three times, but it is a place if you ever go to it you
would not forget. It is not a place that deserves to have this impact.
The residents of Massachusetts will have to live with the impact of
this project. They must have a greater role in determining the fate of
this treasured area.
This bill, H.R. 889, as agreed to by the conference committee,
rightly awards the State of Massachusetts this greater authority in the
decisions regarding this project. So I am here today to urge the House
and the Senate to listen to the people of Massachusetts and
particularly to listen to their senior Senator.
I am pleased to yield whatever time I have remaining. I think I have
only another 10 minutes or so. I yield to the Senator from
Massachusetts.
I think we have 30 minutes on this side and 30 minutes on that side,
is that correct?
The PRESIDING OFFICER. There is 14 minutes remaining on the majority
side.
Mr. STEVENS. Is there time on the Democratic side for the Senator
from Massachusetts?
Mr. KENNEDY. We are rotating back and forth. I am happy to work that
out.
Mr. STEVENS. We will work that out.
Mr. KENNEDY. We will stay on the subject matter.
Mr. ENZI. We had some latitude here to allow 20 minutes on this and
we were 5 minutes late from that one.
Mr. STEVENS. I talked too long.
Mr. ENZI. And Senator Thune does not have the time for his speech.
Mr. THUNE. Mr. President, I cannot yield, but if the Senator from
Massachusetts requests time and wants to use the Democratic time for
that, we have 14 minutes on the majority side I would like to use to
talk about the small business health plan. But if the Senator from
Massachusetts wants to use Democratic time, that is fine.
Mr. KENNEDY. I ask to be yielded 8 minutes on the Democratic time.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Massachusetts.
Mr. KENNEDY. Mr. President, I thank my friend and colleague, the
Senator from Alaska.
I hope to have an opportunity to get into this in greater detail than
I will for the few minutes I have this afternoon.
There are certain points I want to make. That is, the waters around
the area described by the Senator from Alaska, the Nantucket-Martha's
Vineyard-Cape Cod area, has been designated a state ocean sanctuary and
it is an unreplaceable asset to the people of Massachusetts. Up to
1986, it was generally recognized to be under the jurisdiction of the
Commonwealth. In the 1970s, Massachusetts was concerned about potential
development threats and made the entire area a protected state ocean
sanctuary--where no structures could be built on the seabed and where
no offshore electricity generation facilities could be constructed.
The legislation was passed easily through the State House. And the
specific part of Nantucket Sound that is no longer protected by the
state laws, because of a Supreme Court decision, is under consideration
for national marine sanctuary status.
My second point, Mr. President, is that I am for wind energy. We all
know we need it to meet our future needs, and we've seen the successes
that onshore wind energy farms can be. We ought to have offshore wind
energy, but we need to get it right.
The problem in Massachusetts is that we have a developer who's
basically staked a claim to 24 square miles of Nantucket Sound back
when there were no rules on offshore wind development, and then got the
project written into the new law so the new rules won't apply to this
project.
And the practical effect is that there will be no competition for the
developer and that his application is being reviewed and processed
before the Department of the Interior can even complete a national
policy.
In the Energy bill, section 388 says:

. . . the Secretary shall issue a lease, easement or
right-of-way under paragraph (1) on a competitive basis
unless the Secretary after public notice of a proposed lease,
easement or right-of-way that there is no competitive
interest.

The next provision says:

Nothing in the amendment made by subsection (a) requires
the resubmittal of any document that was previously submitted
or the reauthorization of any action that was previously
authorized with respect to a project for which, before the
date of enactment of this Act--
(1) an offshore test facility has been constructed;

Well, where in the country was there a project that had an offshore
test facility?--only in Nantucket Sound. So this was a real special
interest provision.
Because of this ``savings provision,'' the developers are pushing
Interior to complete this review before the rules of the game are even
established and before the ocean is zoned.
So while Interior is setting a uniform program--and deciding which
sites should be used--this project is on the fast track. The developer
and the developer alone picked the site.
And this is a serious problem. Look at what the EPA said about this
project's draft environmental impact statement. They called it
``inadequate.'' That's from the EPA, the agency charged with protecting
the environment.
And the EPA wasn't alone. Look at what the US Geological Survey said
about Cape Wind's draft environmental impact statement:

. . . the DEIS is at best incomplete, and too often
inaccurate and misleading.

Inadequate--Incomplete--and too often inaccurate and/or misleading.
Does this sound like project that should be on the fast track?

[[Page 7290]]

But because they've been written into the law, the interests of our
state have been basically submerged to a special interest developer.
They complain about the provision in this bill that Senator Stevens
negotiated with the House. He's right. He's trying to at least bring
this back up for review under the sunlight and ensure that the
interests of the state for safety and for environmental protection
aren't run roughshod over.
The project's developer is the one that got the special interest
legislation. This Coast Guard provision is designed to check that and
preserve the public interest.
The provision Senator Stevens crafted tries to remedy an injustice
the developer created, and at least let the people of our State be
heard.
We wish this provision wasn't necessary, and it wouldn't be if the
developer was content with following the rules that apply to everyone
else.
That would have been satisfactory, but no, we are denied that equal
treatment. We are prohibited from that. That is not right.
Our State went out and created the Cape and Islands Ocean Sanctuary
as a protected area. Then the Supreme Court cut a hole in those
protections, and now the interests of the State to preserve the
fisheries and environment of the whole region is being undermined. It
is being handed off to private interests. It's not right. We deserve to
have at least a little fairness in this.
I will not take the time to list the various national marine
sanctuaries, including the Channel Islands, all the Florida Keys, and
other national treasures, like Stellwagen Bank outside of Boston, which
I am so happy we have protected into the future.
The law says you can't build energy facilities in those sanctuaries
and we shouldn't--and Nantucket Sound is just as important as those.
For 400 years the Sound was considered Massachusetts waters, and it
was a protected by the people of our state.
In preparation for the 1986 Supreme Court decision that would specify
that this narrow area would be carved out as Federal land, we took
special care to get on the national marine sanctuary site evaluation
list. We didn't want to take any chances then, and we're still on the
list. At a minimum, no industrial project should be built there until
we can resolve that status.
And now we have a developer who wants complete control over 24 miles
in the middle of the Sound, even though no government agency has zoned
it for energy development yet.
We know that the U.S. Commission on Ocean Policy called for a
comprehensive siting policy, and that Interior is now working on it. We
endorse that approach completely, but this developer is undermining
that.
And the American people should know just what this developer is
getting for this no-bid, no-compete contract. There will be at least
$28 million a year in federal tax benefits available to the developer
that's $280 million over 10 years.
And in Massachusetts, the developer will be eligible for between $37
million and $82 million a year in price subsidies under the renewable
energy credit program. That's $370 million to $820 million in price
subsidies over 10 years.
Then there's the fact that the company will be able to write off the
$800 million cost of this project off in just 5 years.
This is a boondoggle, and it's an outrage the developer's getting a
no-bid contract to a public resource. We've seen what no-bid contracts
can do, Mr. President.
Who pays when we talk about subsidies? It comes out of the taxpayers'
pockets when we talk about subsidies.
It is a great deal for this developer. It is a great deal for his
investors. It is a great deal for the venture capitalists. They will
get so much money they will not be able to count it. But it shouldn't
be done without the voice, without the consideration, and without the
interest of the State, let alone the many groups that oppose this
project and fear that it will undermine the safety, environment, and
economic interests of the region for years to come.
I thank the Senator from Alaska for his hard work on this bill and
this provision.
Let me ask the Senator--and I know the time is up--I understand if
this proposal were for an LNG facility in Nantucket Sound, the Governor
of Massachusetts would have the same authority under the Deepwater Port
Act that we're seeking here for this project. Am I correct?
Mr. STEVENS. That is right.
Mr. KENNEDY. We need LNG and we need more energy sources, but if they
had decided here to do an LNG on this site, the Governor would have a
voice in that, am I correct?
Mr. STEVENS. I believe the Senator is correct.
Mr. KENNEDY. So this idea about having a voice on this makes a good
deal of sense.
I thank the Senator from Alaska.
I yield the floor.
The PRESIDING OFFICER (Mr. Martinez). The Senator from South Dakota.
Mr. THUNE. Mr. President, how much time is remaining on this side?
The PRESIDING OFFICER. Ten minutes remains.
Mr. THUNE. Mr. President, I ask unanimous consent, if necessary, that
I have a couple of additional minutes beyond that. I believe the other
side was granted a little bit of extra time when they were addressing
this issue as well.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered. The Senator will have an
additional 2 minutes.
Mr. THUNE. Mr. President, last week the Robert Wood Johnson
Foundation sponsored ``Cover the Uninsured'' week, a call for this
country to wake up and address a huge and growing problem in our
Nation. In 2004, approximately 19.1 percent of nonelderly Americans did
not have health insurance. That number is growing.
Why do we have this problem in one of the wealthiest nations in the
world? It is because nearly one-half of the 45 million uninsured
individuals in the United States are either employees of small firms or
family members of small business employees.
The primary reason cited by small businesses themselves for not
offering health benefits is simply the high cost of health insurance.
We can do something about that beginning today. We also have this
problem because Congress has repeatedly failed to do its job in the
past. We can also do something about that, beginning today.
Today the Senate voted on a motion to proceed to S. 1955, which is a
bipartisan bill addressing the issue of the working uninsured. This
legislation allows the creation of small business health plans to help
lower the cost of health care for small business owners and their
employees.
Our colleagues on the other side have also offered some legislation
today to address this issue. Senators Durbin and Lincoln have talked
about their particular proposal, which is a Government approach. In
fact, they say it saves money, but it shifts the costs over to the
taxpayers, to the tune of $73 billion over a 10-year period. Why would
we ask for taxpayers to foot the bill before we have allowed the small
businesses of this country to take advantage of a market-based approach
and to use the market forces that exist out there in a way that would
drive health care costs down for them and their employees? It is very
simply a difference of philosophy.
Our philosophy--the approach contemplated under S. 1955--deals with a
market-based solution to this issue. The proposal, S. 2510, by our
colleagues on the other side is a Federal Government solution to this
issue, at a great cost, I might add, to the taxpayers of $73 billion
over a 10-year period.
S. 1955, the Enzi bill, which, as I said earlier, we were able to
move to proceed to today, would lower the cost of care for employers
and employees. In addition, the Congressional Budget Office estimates
S. 1955 would reduce net Federal spending for Medicaid by about $790
million over the next 10 years. It would also save the States of this
country about $600 million in the cost of Medicaid over a 10-year
period. That is in addition, as I said, to the savings that would be
achieved for small businesses.
The Congressional Budget Office has analyzed this particular piece of
legislation and concluded it would save

[[Page 7291]]

somewhere between 2 and 3 percent for small firms in this country on
the cost of their health insurance. What is significant about this, as
well, in contrast to the proposal by our colleagues on the other side,
which would cost an additional $73 billion over the course of the next
10 years, is the Congressional Budget Office said that the Enzi bill,
S. 1955, would increase tax revenues coming into the Government by $3.3
billion over 10 years because lower spending on health insurance would
increase the share of employee compensation paid in taxable wages and
salaries versus tax-excluded health benefits. In other words, lower
spending on health insurance would translate into higher wages and
salaries and actually would also generate more revenue for the Federal
Government rather than less, which is what would happen under the
proposal by the Democrats, which would cost the taxpayers $73 billion,
according to the Congressional Budget Office, over a 10-year period.
So I believe it is important we move forward and we vote to send S.
1955 out of the Senate to conference with the House. As a Member of the
House of Representatives, I voted for the creation of small business
health plans numerous times. In fact, that particular proposal has been
voted on no fewer than eight times in the House of Representatives.
Every time I voted when I was a Member of the House, and every time
it has been passed by the House of Representatives, it has come to the
Senate and has been unable to be voted on because it has been
filibustered, obstructed by the other side. I would say, that is in
spite of the fact that if it were allowed an up-or-down vote in the
Senate, I believe there would be a decisive bipartisan majority in
favor of this legislation.
Unfortunately, due to obstructionism, the Senate, until today, has
never voted on legislation creating small business health plans. As a
Congressman and now Senator, I have listened to many accusations about
the harm that S. 1955 or similar legislation would do if it were
enacted.
What harm would be caused by decreasing the cost of health care for
small employers by 12 percent and increasing the coverage of the
working uninsured by 8 percent? Lower cost and more coverage for those
who are currently uninsured: That is not harm. That is exactly what we
ought to be accomplishing here by enacting legislation that would make
health care coverage more affordable and more available to more
Americans.
South Dakota has an estimated 72,949 small businesses as of 2004,
which is an increase of 2.4 percent from the previous year in 2003.
South Dakota also had an estimated 90,000 uninsured individuals or 12
percent of our population in the year 2004. Fifty-two percent of South
Dakotans had employer-based health insurance, 8 percent below the
national average.
Small businesses are the backbone of South Dakota's, as well as our
Nation's, economy. It is time these businesses were placed on a level
playing field and allowed to pool together to purchase health
insurance, like large employers and unions.
I have heard from many provider groups in my State of South Dakota
concerned about coverage for their specific services. S. 1955 allows
small business health plans to offer a basic benefit plan that would be
exempt from State mandates as long as the small business health plan
also offers an enhanced benefits option that includes at least those
covered benefits and providers that are covered by a State employee
health benefit plan in one of the five most populated States in this
country.
According to the Council for Affordable Health Insurance, all of
these States--all of these States--require coverage for alcoholism,
breast reconstruction, diabetes self-management, diabetic supplies,
emergency services, mammograms, mastectomy stays, maternity stays,
general mental health, chiropractors, optometrists, podiatrists,
psychologists, and social workers.
Small business owners want to give their employees the best health
coverage possible under their budgets to recruit and retrain their
workforce. Facts suggest self-insured large company health plans,
currently exempt from State mandates, generally cover services
important to their employees.
This legislation would create new options for small businesses and
the potential for a choice in health plans for their employees. Today,
only 10 percent of firms with 50 or fewer employees offer their
workforce a choice of more than one health plan. Lowering the
administrative costs of health insurance plans will give small firms
new and better coverage choices for their workers.
Additionally, the GAO found that the added cost of mandates to a
typical plan is between 5 and 22 percent. CBO estimates that every 1-
percent increase in insurance costs results in 200,000 to 300,000 more
uninsured Americans. When the cost of health insurance goes up,
coverage and access go down.
The concept behind S. 1955 is very simple: to provide health
insurance to small businesses that is both affordable and accessible.
Small businesses not only in my State of South Dakota but across the
Nation have been fighting for the creation of small business health
plans for over 10 years. It is high time that the obstruction end in
the Senate, that the Senate step aside and allow an up-and-down vote on
this very important legislation.
As I said before, it is legislation that, if you look at just the
Congressional Budget Office findings, would cover nearly a million more
people, would allow three out of every four small business employees to
pay lower premiums than they currently pay under current law, and would
see small firms' premium costs decline by 2 to 3 percent. The average
decrease per firm would likely be greater, since the CBO estimate is a
total that factors in the costs of other benefits added by firms in
response to the reduction in premiums.
It would also allow annual spending on employer-sponsored health
insurance to be reduced by about $2 billion in a 5-year period. As I
said earlier, it would increase Federal tax revenues by $3.3 billion
over 10 years because lower spending on health insurance would increase
the share of employee compensation paid in taxable wages and salaries
versus tax-excluded health benefits--more coverage; lower costs; more
revenue to the Federal Treasury, not less. The alternative offered by
our colleagues on the other side, as I said earlier, comes at a high
cost to the taxpayers: $73 billion over a 5-year period.
We can do better. We can allow the market forces of this country to
be used. We can take a market-based approach to this issue and do
something that has been done a long time ago, something that has, as I
said, been voted on repeatedly in the House of Representatives, never
to have been voted on here in the Senate, because it has been blocked.
It is high time for the small businesses of this country, for their
employees, for families who lack coverage today, to have another tool
at their disposal, a tool that takes into account and takes full
advantage of market forces, by allowing small businesses to group
together to leverage their size, to drive down the rates they pay for
health insurance and, thereby, cover more of their employees.
That, again, is in stark contrast to the model and the proposal that
is being offered by our colleagues on the other side, which consists of
a government-based solution, that comes at a very high cost to the
taxpayers, that calls for more bureaucracy and redtape, and does
nothing in the end to bring down the cost of health care for small
businesses in this country.
It is long overdue. I hope, as we have the chance to debate this now
in the Senate, once that debate is concluded, we will be able to
proceed to a vote because the one thing that has always been missed
here in the Senate, despite action on eight different occasions in the
House, is an actual up-and-down vote in the Senate that would allow the
Senate to speak on the issue of whether we want to do something
meaningful to reduce the cost of health care for small businesses in
this country, to provide more coverage for those who are currently
uninsured, and also

[[Page 7292]]

to do something that would reduce the cost to the Government, the cost
of Medicaid, as well as the other costs that are associated, as I said
earlier, by increasing the amount that would come into the Treasury.
For those reasons, Mr. President, I ask my colleagues to support this
legislation.
I yield back the remainder of my time.
The PRESIDING OFFICER. The time until 4:30 is controlled by the
minority.
The Senator from Iowa.
Mr. HARKIN. Mr. President, here we are on day 2 of Health Week, and
there are still no plans to bring up H.R. 810, the stem cell research
bill.
This bill was passed by the House of Representatives 351 days ago--
almost a year ago now--with still no action here in the Senate. Yet the
majority of Senators are for it. I do not understand how in the world
we can have a Health Week in the Senate and not vote on the American
public's No. 1 health research priority: lifting the President's
restriction on embryonic stem cell research.
That seems to be what we are doing. We are wasting our time on bills
that everyone knows are not going to pass. We are passing up a golden
opportunity to promote one of the most promising areas of research in
our lifetimes.
Most people by now have heard of the enormous potential of embryonic
stem cells. These cells have the remarkable ability to turn into every
other type of cell in the human body--brain cells that could replace
those lost in Parkinson's disease, islet cells to replace those lost in
type 1 diabetes, and on and on. Adult stem cells don't have that power,
only embryonic stem cells. That is why the world's best scientists
think embryonic stem cell research has so much promise to save lives
and ease human suffering. It is also why they are so frustrated by the
President's arbitrary restrictions on stem cell research.
Under the President's guidelines, Federal funding can be used for
research only on those stem cell lines that were created before August
9, 2001, at 9 p.m. Where did that date come from? Out of thin air? If
the stem cell lines were created at 8:30 p.m., they are fine, they are
moral, they are OK. If they were created at 9:30 p.m., all of a sudden
they missed the cutoff. It is totally arbitrary.
Shortly after the President announced his policy, he said 78 stem
cell lines were eligible under his guidelines. It turns out that only
22 are. In fact, it is even worse. Only a handful of those are even
healthy enough and readily available. More importantly, all of the 22
lines that are available have been contaminated by mouse cells. They
have been grown in a mouse feeder cell environment. It is unlikely they
will ever be used for any kind of human intervention, which is supposed
to be the whole point of the research anyway.
Dozens more stem cell lines have been created since August 9, 2001.
They are healthier. Many have never been contaminated with mouse cells.
But thanks to President Bush, they are off limits to our best
scientists.
Yet opponents of H.R. 810 sometimes argue that embryonic stem cell
research has no potential. Last week, Senator Brownback presented a
list of diseases that are being treated with adult stem cells and asked
why that hasn't happened yet with embryonic stem cells. Let me address
that directly. Scientists have been doing research on adult stem cells
for over 30 years. There are no arbitrary restrictions on research with
adult stem cells. Scientists and private companies don't have to be
skittish about doing this research. They don't have to worry that all
of a sudden the Federal Government is going to ban it or limit it.
Let's compare that situation with human embryonic stem cells.
Scientists didn't even know how to derive them until 1998. The first
Federal grant for these stem cells wasn't awarded until 2002. Even now,
only a tiny fraction of the total Federal budget for stem cell research
is used for embryonic stem cells. The vast majority goes for adult stem
cell research, and every scientist who enters this field is taking a
risk that Congress will pass a law to shut down the lab. They also risk
that they won't get any 1 of the 22 lines contaminated by mouse feeder
cells which they will then not be able to use for human therapy. So it
is no wonder that more diseases are being treated today with adult stem
cells. Adult stem cell research had a 30-year head start. Meanwhile,
scientists have been studying embryonic stem cells for just 5 years
with one arm tied behind their back.
The fact is, it doesn't matter what I think about the potential of
embryonic stem cell research. It doesn't matter what Senator Brownback
thinks either. What matters is what the scientists think. And I defy
anyone to find a single reputable biomedical scientist whose doesn't
believe we should pursue embryonic stem cell research.
I have a letter from Dr. J. Michael Bishop who won the Nobel Prize in
medicine in 1989. He writes:

The vast majority of the biomedical research community
believes that human embryonic stem cells are likely to be the
source of key discoveries related to many debilitating
diseases. . . . In fact, some of the strongest advocates for
human embryonic stem cell research are those scientists who
have devoted their careers to the study of adult stem cells.

A letter from Dr. Alfred G. Gilman, who won the Nobel Prize for
medicine in 1994:

It has become obvious, however, that the number of stem
cell lines actually available under current policy is too
small and is controlled by a limited monopoly, which has made
it significantly more difficult and expensive for research to
be conducted. These limits have hindered the important search
for new understanding and treatment of devastating diseases.

I have similar letters from Dr. Ferid Murad, who won the Nobel Prize
for medicine in 1998; Dr. Arthur Kornberg, who won the Nobel Prize in
medicine in 1959; and dozens more of our Nation's top researchers--all
of whom believe in the potential of embryonic stem cell research. I ask
my friend from Kansas, in response to his speech of late last week: Are
there any Nobel Prize winners in medicine who oppose embryonic stem
cell research? Name one.
In fact, I challenge him further: Are there any reputable biomedical
researchers at all who think we should be studying adult stem cells
only and not embryonic stem cells? Name one.
I don't think he will find one. Every scientist I have spoken to says
stem cell research should not be an either/or endeavor. We should not
be talking about stem cell research or embryonic stem cell research. We
should study both. We should open all doors in the pursuit of therapies
that can save lives and ease human suffering. The breakthroughs are
coming, but they take time. To clamp down on embryonic stem cell
research before it even has a chance to start shows a total lack of
understanding about how science works. More importantly, it denies hope
to millions of Americans who suffer from Parkinson's, ALS, juvenile
diabetes, spinal cord injuries, and dozens of other terrible diseases
and conditions.
We are rapidly approaching the 1-year anniversary of the vote in the
House on H.R. 810. It has been 351 days since the House passed it on a
strong bipartisan vote. If the Senate were allowed to vote on H.R. 810,
we would win here, too. We have the votes. We would pass this bill and
send it on to the President. Regrettably, however, the Republican
leadership has not let that happen. So here we are, we are going
through this farce--it is farcical--comedy, gimmickry of a so-called
Health Week without taking up the American public's No. 1 health
research priority.
It is Tuesday. Health Week lasts for 3 more days. We could pass H.R.
810 in a matter of hours. I urge the majority leader, take up the bill.
Let the Senate have a quantified amount of time to debate it. We will
pass it, and we will give millions of Americans who are suffering from
diseases the hope they deserve.
I yield the floor.
The PRESIDING OFFICER. The Senator from California.
Mrs. BOXER. Mr. President, before he leaves the floor, I say to my
colleague from Iowa, Senator Harkin, how much I appreciate his
leadership in the area of health care. His analysis of

[[Page 7293]]

where we stand on the stem cell issue is so appropriate, and he is so
right. Here we have a whole area of scientific research that is waiting
to take off. We have States, such as mine and others, that are taking
the lead instead of following the lead of the Federal Government.
I say to my friend, does he ever remember a time in history when this
country was plagued by disease that the Federal Government didn't step
to the plate, whether there was a Republican President or a Democratic
President? Isn't it shocking that as we face these epidemics of
Alzheimer's and Parkinson's and cancer and heart disease and all the
others my friend mentioned, isn't it amazing--I am sure it is to him as
well as to me--that we have a lack of leadership in Washington?
Mr. HARKIN. I say to the Senator from California, it is not just
amazing, it is shameful. It is shameful what is happening now with the
lack of support for biomedical research, especially embryonic stem cell
research. As I said, every Nobel Prize winner in medicine, all the
reputable scientists say we should be on it and we should be on it
strongly. Yet the President, through this arbitrary cutoff, is denying
this for scientists, denying it to people who are suffering. I say to
my friend from California, God bless California. They took the lead out
there. Her State has taken the lead. They are forging ahead. Other
States are following their lead. If only we could get the Federal
Government to follow their lead.
Mrs. BOXER. As my friend pointed out in his statement, we have the
votes for stem cell research, even with the President's opposition. If
we asked for a show of hands in any roomful of people: Have you been
touched by cancer, have you not personally or someone you know been
touched by heart disease, by stroke, by Alzheimer's, Parkinson's,
paralysis, all these things, we know how many hands would go up.
Mr. HARKIN. Juvenile diabetes.
Mrs. BOXER. That is clearly one. And I have met with juvenile
diabetics. I have met with the children, the parents and the families.
They are counting on us. Here we are in Health Week, as my friend
points out. We have the votes. Yet what do they bring up? A bill that
is actually going to take away health care from people, the Enzi bill.
Mr. HARKIN. Exactly. I appreciate my colleague from California. She
is right on target. I know my friend from California, the distinguished
Senator, has been in the forefront of fighting for the things that will
help people have better lives, especially in health care, and to ease
the pain and suffering of people, especially juvenile diabetics.
As the Senator knows, the families tell us that perhaps one of the
first therapies that could come from embryonic stem cell research would
be for these kids suffering from juvenile diabetes. What a great day
that would be.
I thank the Senator for her comments and strong leadership in all the
areas of health care, and I thank California, through her, for the
leadership they have shown.
Mrs. BOXER. I am very proud of my State.
In my State the gentleman who took the lead in putting the stem cell
research initiative on the ballot has a child with juvenile diabetes.
Watching that child suffer and struggle motivated him. He ignited this
wonderful movement in our State. Shockingly, here we are in Health Week
and this thing is nowhere to be seen. It is another example of why we
need change around this place. I thank my friend.
This Health Week Republican style is really fascinating when you look
at the bills that have come before us. The first two bills would have
hurt patients who were injured by malpractice, patients who might have
been made infertile or harmed in many ways. Those two bills took away
the rights of patients.
The PRESIDING OFFICER. The minority's time has expired.
Mrs. BOXER. I ask unanimous consent to speak another 15 minutes.
The PRESIDING OFFICER. Is there objection?
Mr. ENZI. I object.
The PRESIDING OFFICER. Objection is heard.
Mrs. BOXER. I ask unanimous consent to suggest a quorum call.
Mr. ENZI. Mr. President, under the unanimous consent agreement, we
are alternating every 30 minutes.
The PRESIDING OFFICER. Under the precedents of the Senate, the
Senator must control at least 10 minutes in order to suggest the
absence of a quorum.
Mrs. BOXER. I ask unanimous consent that at 5 o'clock I be given the
floor for 10 minutes.
The PRESIDING OFFICER. Is there objection?
Mr. ENZI. Mr. President, reserving the right to object, the Senator's
side controls the time at that time. So if they want to give the
Senator the 10 minutes, there would be no objection to that. It would
come out of the Democratic time.
Mrs. BOXER. I thank the Chair.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Wyoming.
Mr. ENZI. Mr. President, first, I apologize for the confusion over
the unanimous consent that we had. It was designed early this morning
to make sure each side had an opportunity to have an equal amount of
say on the 30 hours that we are working on in order to actually get to
amendments on this bill. Now that we have had cloture and everybody has
agreed, or almost everybody, that we needed to proceed on the bill, we
are talking about an issue that is huge to small businesses out there
and wanting to find some kind of solution. We even suggested that
perhaps they would like to reduce the number of hours of debate about
the right to proceed so that we could actually get to offering
amendments. But we have a 30-hour time requirement. That could be
reduced by unanimous consent, or even eliminated by unanimous consent.
But it has not been, so we will try to keep on a half-hour rotating
basis so that as many people as possible can have something to say on
the bill.
I am going to take a few minutes at this point to talk about this
issue. We have been talking about health care. One advantage of having
this 30 hours is to have some additional health care debate. I need to
talk a little bit about prescription drugs Part D. That is not part of
the motion to proceed, but it has been talked about a number of times
on the Senate floor today. There are some confusing things out there
for seniors that I would like to clear up.
I have been taking the last two recesses to travel across Wyoming and
hold meetings with senior citizens to explain the prescription drug
plan to get them signed up so they can get the benefit. There is some
confusion out there. When we were designing the plan, we were worried
that there would not be any plan interested in our small population in
Wyoming. We have less than 500,000 people in our State. Our biggest
city has 52,000 people. So we have a little bit of trouble finding a
big enough pool for anything and to encourage interest. So I asked that
there be kind of a Federal backup plan on it, and that was put in the
bill.
But when the time came around for companies to offer plans in
Wyoming, obviously, they were even excited about 500,000 people because
we had 41 plans respond. That is competition. That competition brought
the prices down by 25 percent before the people even applied for the
benefit. A huge decrease in cost; that is cost by competition. The
downside is that 41 plans create confusion. If you have ever tried to
buy insurance and talk to a number of different insurance salesmen,
every package is designed slightly different to make it a little bit
more confusing so that their plan looks better, but it is also harder
for you to make comparisons.
There is an easy way to make comparisons. Medicare saw that coming
and set up a computer analyzation so that all you have to know is what
your prescriptions are and what the doses are. You can put them in over
the Internet or you can talk to somebody live by an 800 number or there
are a lot of volunteers across America who are helping to get this
information out. It lets Medicare do the math. They will present you
with three or four plans that meet your prescription, your doses, and
your criteria for where you want to buy it. You can look at these

[[Page 7294]]

line by line. All the lines match up and you can compare them and find
the best one for you. It has been a tremendous help.
My mother asked me to help her on her decision. There are kids across
the United States--kids like me--who need to be helping their moms on
these kinds of decisions. I was happy to do it because it gave me an
opportunity to try out the telephone method, the Internet method, and I
talked to a number of volunteers and the local pharmacist. We owe the
local pharmacist a great deal of thanks for the way this is working and
the difficulties that they have had doing a new program. We have not
had a big change in the program in decades. When we first had Medicare,
there were problems. They got worked out. When we started this one,
there were problems, and I think they have mostly been worked out.
Occasionally, at these hearings, somebody was having a problem. A
hour and a half was the longest it took us to straighten out any
problem for anybody. I ran this process and came up with these four
best at the least cost for my mom.
One of the things that people raise in those sections is they say: I
don't need any drugs so I should not have to do this. I should not have
to pay a penalty later.
The way insurance works is that you buy into the plan usually before
you get sick. You pay a premium and when you get sick, then you have
the coverage for the things that can happen to you in the future.
Medicare prescription Part D is completely different because you can
already have a huge medical problem and a lot of prescriptions and you
can sign up for this now and have a maximum guaranteed cost. I know of
people who are actually saving thousands of dollars because they signed
up. If you don't have anything the matter with you and you don't want
to buy into a big plan, you run the evaluation and you can find a small
plan you can buy into.
One in Wyoming is $1.87 a month. What if the $1.87 a month doesn't
cover me if I have something really bad happen to me? Well, every
November 15 to December 31 you can change your mind. You can change
your company, and they cannot stop you. Tell me where else insurance
works like that. Every November 15 to December 31, you can change your
mind and sign up for a plan that has new kinds of benefits for you that
match new illnesses that you might have.
This is working for the people who have paid attention. It is easy to
have Medicare do the math. So everybody out there who hasn't signed up
needs to talk to the volunteers, probably at their senior citizen
center or call the 1-800 number or get on the Medicare Internet site
and have that plan figured out for you. It takes a few minutes and you
can be set so that you, first of all, won't have any penalties, but,
secondly, you will have some tremendous benefits as you need the
medication. It has made a huge difference.
Some people have talked about negotiating the price. When I was doing
these hearings, I had some difficulty with people who showed up and
said: You know, there are some medications I really want to have, that
I am supposed to have, and I cannot get them. Well, when I checked,
those were the veterans, and the veterans' prices are negotiated, and
when they negotiate prices, they pick a similar drug and get the best
price by kind of fixing the price on it and driving the price down
through this bidding war. But it eliminates medications. Yes, there are
medications you can take. It may not be the medication your doctor
thinks is absolutely the best. But that is what happens with negotiated
prices.
So what we relied on in the Medicare prescription Part D was
competition, and competition has happened. Prices came down 25 percent,
and then people who signed up for the program who are using medications
found out that they are also saving another 25 percent as the least
amount, or 37 percent as the average amount, and some people are
getting 83 percent--I say some people. I know some people who are
getting several thousand times more than what they are paying in
because they are into the catastrophic care. I wasn't even listing the
catastrophic care.
The important thing is that we need to tell people and help people to
sign up by May 15. It is a tremendous benefit. We have had more people
sign up than we had anticipated signing up. That means, again, a bigger
market; that means lower costs. So it works for all of us when people
sign up. Remember, there are plans out there. If they have them for
$1.87 a month in Wyoming, I bet they have that at $1.87 or less every
place in the country. Look at those if you are not using any
medication.
So that is what competition does. That is the purpose of the bill
that we are talking about and that we have actually had the motion to
proceed on, not the ones that fall under other committees'
jurisdictions, such as Medicare or stem cells or some of the other
things that have been talked about here. Those are things that
actually--this falls under the jurisdiction of the Health, Education,
Labor and Pensions Committee. We took the bill through committee that
has never been through the Senate before. The House passed a bill that
is considerably more liberal and difficult than the one that we passed.
They passed it eight times over there in a very bipartisan way. If we
have the same Democratic Senators over here vote for it that had
Democrats in the House vote for it, we will pass this bill easily. Even
if there is a filibuster, we will pass it because it is a concept that
small businesses have been asking for. This is the first opportunity we
have had to provide it for them.
We did it by being very conservative in the approach and going to a
situation where we could work across State borders, so that
associations could build a big enough pool that they could effectively
work with their insurance companies to get these multiple competition
bids. We are certain that it will work. One of the reasons we are
certain that it will work is because it has been tried within States.
But those who have tried it within States have found that it works very
well, and they know it would work even better if they could go across
State borders. So even those who are doing it are asking to do it on a
wider scale than what they have been. For a lot of the States that have
less population, yes, they want to be able to do it at all. They don't
have big enough pools within their States to do it, so they want to be
able to go across the State borders.
I want to discuss a little bit why we need to pass S. 1955 and allow
for the creation of these small business health plans. First of all,
the concept of allowing small businesses to join together to find
better prices for health insurance is not new, as I mentioned. Many
organizations have offered nationwide health plans to members in the
past. But States continued to add mandated benefits and other
regulations to their insurance markets during the 1980s and 1990s, and
the administrative hassles and costs associated with the mandates and
regulations became too much of a burden for existing plans that could
no longer offer an affordable benefit on a national basis. So they
discontinued the plans.
The Associated Builders and Contractors organization, known as ABC,
is an unfortunate example of this problem. Their insurance carrier
refused to continue doing business with the ABC insurance trust in the
late 1990s because the panoply of 50 different State regulations and
excessive benefit mandates made it impractical and unattractive for the
insurance company to continue the program. ABC was unable to find
another carrier to pick up their business.
This chart kind of shows how health care costs have gone. I don't
think there is any argument on either side of the aisle that this is
what has happened. There has been a rapid escalation, and compared to
what it used to be, there has been a rapid escalation for a long time,
oddly enough. We are up to a national average cost per employee of
about $8,000 a year. That doesn't include the part the individuals are
paying, which brings it up to about $11,000 a year. That is the amount
we

[[Page 7295]]

have been talking about on both sides of the aisle today.
What is truly unfortunate is that workers at ABC's member companies
were benefiting from this program, and the companies were saving money
on their health care expenses. The health plan sponsored by ABC for
nearly 45 years had total administrative expenses of about 13 cents for
every dollar in premium. These costs included all marketing
administration, insurance company risk, claim payment expenses, and
State premium taxes. Compare this to the small business employers who
purchase coverage directly from an insurance company. The total
expenses for most small businesses today can approach 35 cents for
every dollar of premium. So saving nearly 25 cents on a dollar is real
money, especially in today's health insurance prices.
The other benefit to ABC's member companies and employees is that any
profit generated by their health plan stays in the plan. This also
helped keep costs down. So the idea isn't new, and it has worked
before.
But Congress needs to act before small business organizations can
resurrect their defunct programs and before other organizations can
start new ones. Congress considered fixing this problem during debate
over the Health Insurance Portability and Accountability Act in 1996--
it is better known as HIPAA--but the small business affordability
provisions in the House bill were dropped during the conference between
the House and the Senate in the final bill. As a result, HIPAA only
addressed access to health insurance and not affordability. So now
everyone has access to health insurance policies, but the policies
themselves are unafford-
able to many. When I became chairman of the Committee on Health,
Education, Labor, and Pensions last year, I announced that I would
bring a health insurance affordability bill before the committee so we
could finish the job we started 10 years ago--in other words, to make
it possible for all Americans to have access to a health insurance
policy that is affordable.
Many were skeptical then, and some may still be skeptical now, but
the time for more of the same is over. America's working families want
change, and they are tired of excuses from Congress.
Small businesses and working families are demanding relief from high
health insurance costs. And it is no wonder. This year, employers are
paying twice what they were paying in the year 2000 for health
insurance. That is correct. What businesses paid for health insurance
has doubled over the past 6 years. That is a pace we can't keep up.
This cost squeeze hurts small businesses the most. The highest rates
of uninsured workers can be found in businesses with 25 or fewer
workers. Only 60 percent of the Nation's businesses are offering health
insurance these days, down from nearly 75 percent just 5 years ago.
Small businesses and working families are stuck on the escalator of
rising health insurance costs, with no end in sight. And in a tight
labor market, small business owners don't want to jump off this fast-
moving escalator because dropping health insurance puts them at a major
disadvantage in competing for the best workers. We need to give them a
safe place to get off this escalator of rising costs, somewhere where
it is more affordable for themselves and working families, and the
small business health plan will give them that option.
Mr. President, I yield the floor to the Senator from North Carolina.
The PRESIDING OFFICER. The Senator from North Carolina is recognized.
Mr. BURR. Mr. President, the chairman has brought a carefully crafted
piece of legislation to the Senate floor, one that took a tremendous
amount of skill to negotiate and one that has incredible support--more
support when the bill passed out of committee than it does today. Why?
Because people now fear it might become law. People fear this might
pass, and they never believed it would. What does it do? It brings
additional competition to the marketplace, but more importantly, it
brings health care coverage to Americans who have no coverage today.
Why are we here today, on Tuesday afternoon at almost 5 o'clock?
Because the Senate is in a 30-hour debate about whether we are going to
be willing or able to proceed. We are not even on the bill yet; we are
in a procedural mode which requires us to have a vote to proceed to
consider whether we are going to have a debate on this bill, S. 1955, a
bill that changes the choices of the uninsured population in America.
The choices they have today are nothing and nothing. Under any
scenario, you would have unanimous support to change that. But there
are actually people who are against that up here, but not across the
country. As a matter of fact, in this poll done by Public Opinion
Strategies in March of this year, over 80 percent of the people polled
overwhelmingly support small business health plans; in other words,
they support this legislation--the effort to bring new choices of
products that are affordable to small businesses, to employers, and,
more importantly, to the employees they hire.
In North Carolina, we have 671,000 small businesses. Ninety-eight
percent of firms with employees are small businesses in North Carolina.
Don't let anybody come to the floor and tell you that this bill does
not have an effect except on a select group of people. It may be a
select group of people, but it is 98 percent of the employers of North
Carolina. Women-owned small businesses have increased 24 percent in
North Carolina since 1997, Hispanic-owned small businesses have
increased 24 percent since the same date, Black-owned small businesses
have increased 31 percent since 1997, and Asian-owned small businesses
have increased 74 percent since 1997. These are companies which benefit
from this legislation. These are companies which today can't afford the
premium costs of health insurance; therefore, their employee base goes
without. They are in that category of uninsured that so many people
come and talk about on this floor, but they talk about uninsured
without the solution as to how to cover them.
This is a population which in some cases today is on Medicaid. They
work full-time. Their income level qualifies them for Medicaid. And
what would be the incentive for them to get off of Medicaid? It would
be if their employer has the option to offer them health care the way
the majority of America is now provided health care: through their
employer. But we are here in 30 hours of debate trying to decide
whether we are going to allow Members to come to the floor and debate a
bill and offer amendments which will allow us to switch from nothing
and nothing to nothing and something, which will allow us to inject
something, some ray of hope into the millions of Americans who don't
have coverage today.
Let me read a few letters. I think it is always helpful to hear from
people whom this affects, the human face behind the issues that
sometimes we lose on this floor simply because we don't want to talk
about names or pictures.
This is a woman from Sunbury, NC. She wrote me in mid-April of this
year. I am just going to read some pieces. She says:

Support SBHP legislation, S. 1955. I feel that this is very
important because I haven't had health insurance in many
years, because my employer doesn't have access to affordable
insurance to offer us.

Some suggest on this Senate floor that is not the case, that
everybody has the opportunity to have health insurance. ``I haven't had
health insurance in many years.'' Why? ``Because my employer can't
afford what is available.''
Another letter received in April of this year from a young lady in
Elizabeth City, NC:

Please support Senate bill 1955, the Health Insurance
Marketplace Modernization and Affordability Act. My employer
cannot afford health insurance for their employees. My
husband works for Ford. They are closing his plant soon. We
will have no insurance unless my employer offers it. I have
premature twins. They were born 3 months early. It costs me
$2,000 a month to feed them. That does not include any
doctor's appointments we have to go to. I feel that this is a
great bill.

What is America looking for? They are looking for hope. They are
looking

[[Page 7296]]

for us to produce a product out of this institution that actually
fulfills their needs. I don't know how it can be any clearer.

It is not offered to me today, because my employer can't
afford the options that are in our marketplace.

What do we do? We create new options that are affordable. That is, in
fact, what the chairman is trying to do with this bill.
Here is a third letter, also from Elizabeth City but a different
business. It says:

Small businesses need help with insurance--

In big bold letters--

I am now paying $986 per month for my wife and myself. This
is for only 60 percent coverage and a $2,500 deductible. I
know people with group insurance who are paying $600 a month
for 80 percent coverage and a $250 deductible. Many of those
have dental insurance as well. My policy provides none.
Please vote for this bill. Allow small businesses to have
coverage equal to employers of other companies.

That is all we are doing. We are using the scale of what people who
have a tremendous amount of employees can do, and that is they can go
to insurance carriers and they can negotiate for products based upon
the volume of their employees. But how does a small business owner do
that when he has five or six or seven employees? Well, it is real
simple. We allow them to band together. We allow them to band together
into a common association, and we allow that association to then market
their entire association based upon the volume.
Another letter that I received on April 6 says:

As a small business owner, it is important to enable some
economy of scale in allowing franchises to obtain more
affordable health care coverage.

The last one I am going to read is quite unique.

As a professional photographer, I have seen firsthand the
difficulty that my fellow professional photographers face
when attempting to purchase health insurance on their own. S.
1955 would allow photographers and other independent business
owners to band together across State lines and purchase
health insurance. Having this as an option and choice will
improve our access to quality health care and help control
costs through competition.

These letters are from people on the front lines. They are from
employees whose employers can't offer coverage today because it is not
affordable. They are from individuals who own businesses and would like
to offer coverage to their employees. They are even from photographers,
people whose lives are in their hands every day in a camera, but they
cannot afford the individual costs of health insurance in today's
marketplace.
In North Carolina, we have 1.3 million uninsured North Carolinians.
Of that 1.3 million, almost 900,000 uninsured individuals are in
families or are on their own where one person at least works full-time.
With the passage of this bill, 900,000 of the 1.3 million uninsured in
North Carolina could potentially be offered health insurance. We can
narrow it down from 1.3 million to 400,000 individuals who are
uninsured in North Carolina with the passage of one simple bill, or at
least they would have the option to be able to purchase it for once.
Ninety-one percent of workers in large firms of 1,000 employees or more
have health insurance, yet 66 percent of workers in small businesses
defined as 10 employees or fewer have health insurance. Well, if you
remember the North Carolina numbers, I said 98 percent of firms with
employees were small businesses. Think of the millions of Americans who
are going to be touched by the passage of this one piece of legislation
that provides them choice. Where today their choice is between nothing
and nothing, tomorrow their choice is between nothing and something.
Why are we here? We are here for 30 hours of debate--not debate on
the bill, not debate about the amendments, debate about whether we are
going to move forward. We do that at a time when--I just went back and
did a quick calculation on the back of my calendar--we have 76
legislative days left between now and adjournment. That is assuming we
have productive days on Fridays and Mondays, and as the chairman knows,
Fridays and Mondays are not always productive in the Halls of Congress.
People are either slow to get here or quick to leave. If you take out
Fridays and Mondays, we are down to 45 days. But we are going to spend
30 hours trying to decide whether we are going to move forward to
debate this bill, and we will spend another 30 hours after we file
cloture on the bill to get to a point where we can have an up-or-down
vote, if, in fact, we get that far.
Last night, we voted on two medical liability bills--medical
liability that covers the entire medical professional world--and last
night, we were denied the ability to proceed and to debate the
legislation, much less amend it. The second bill is legislation in
which--and I think the American people would be shocked at this--we
were denied the ability to move forward to debate or amend legislation
that limited the liability to OB/GYNs in America, a specialty we are
losing specialists out of every day, where every year people aren't
continuing to practice. But we will spend 30 hours debating whether we
proceed to debate not necessarily the merits of the bill--and my hope
is that the chairman will be successful, and I will be beside him
arguing every step of the way, because without this, these Americans
don't have hope of a choice of anything other than nothing and nothing.
Mr. President, I yield the floor.
The PRESIDING OFFICER (Mr. Isakson). Under the previous order, the
Senator from California is recognized.
Mrs. BOXER. Mr. President, my understanding is that Senator Dorgan
had time at 5 o'clock set aside, so if he wishes to take it now, then I
will wait until his conclusion.
I ask unanimous consent that at the conclusion of Senator Dorgan's
remarks I be permitted to speak at that time. Since it is controlled by
the Democrats, I can make that request by myself.
The PRESIDING OFFICER. The Senator from North Dakota will be
recognized, and at such time as he completes his statement, the Senator
from California will be recognized.
Mr. ENZI. That is assuming it comes within the 30-minute parameters?
The PRESIDING OFFICER. The Senator is correct.
Mr. DORGAN. Mr. President, I have listened to some of the debate
today. It has been very interesting. The last speaker spoke about
choice and choices. I want to talk about choices in health care a bit.
This is Health Week, we are told. It is an opportunity, for a change,
at long last to talk about some health care issues on the floor of the
Senate.
The intent, I believe, of the chairman who brings this bill to the
floor is that we should speak only about and address only the issues
dealing with small business health plans. However, he knows and I know
there are many other health issues that have been long delayed by this
Chamber and that need to be debated. I intend to offer a number of
amendments. They are in order under the rules of the Senate. They are
amendments that deal explicitly with health care issues.
The issue before the Senate is not unimportant. The question of
rising health care costs is very significant to everybody--individuals,
businesses, governments. Everyone who is a consumer has to deal with
increased costs of health care and we should, indeed, address the issue
of health care costs for business associations and for small
businesses. There is no question about that. I wish to be a part of the
group that works on that in a bipartisan way, in a way that expands
opportunity, not narrows opportunity; in a way that expands coverage,
not narrows coverage; in a way that covers everyone, not just a few. I
do not agree that we should make health care unaffordable for the older
and sicker and then make profit out of insuring people who are younger
and healthier. That is not the right way to do this.
But having said all of that, let me describe some other things that
have been long delayed on the floor of the Senate that need to be
addressed. Let me talk about the first one. It is the issue of
reimportation of prescription drugs. A bipartisan piece of legislation

[[Page 7297]]

has been long ago introduced and discussed here on the floor of the
Senate, and we have not had the opportunity to vote on it.
The reimportation of prescription drugs, why is that important?
Because the American people are charged the highest prices in the world
for prescription drugs; it is not even close--the highest prices in the
world. Consumers in every other country are paying lower prices. Try to
buy Lipitor and if you buy it in the United States you pay a higher
price than in any country in the world--France, Germany, England, you
name it. You pay the highest prices in the United States. Why should
U.S. consumers be charged the highest prices?
With consent, I want to show a couple of things on the floor of the
Senate. Let me show, if I might, two bottles of Lipitor. I ask consent
to show these on the floor of the Senate.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DORGAN. As you can see, they look identical: identical labels,
identical pills in the same bottle made by the same company--shipped to
two different places. One is shipped to Canada and one is shipped to
the United States. The difference? One is half the price of the other.
Guess which. It is the Canadian consumer who gets the benefit of paying
half the price for the identical prescription drug.
Let me also show a couple of containers of Prevacid. This is a drug
that is widely used for ulcers. Once again, as you can see, it is
essentially the same bottle, same pill, made by the same company, made
in an FDA-approved plant and shipped to two different locations, one to
Canada and one to the United States. The difference? This one costs
twice as much. Who buys this one? The U.S. consumer; twice as much for
the same pill.
An old fellow sitting on a hay bale in North Dakota at a farm meeting
said, my wife has been fighting breast cancer for 3 years. She took
Tamoxifen for breast cancer. Every 3 months we drove to Canada to get
Tamoxifen because it was the only way we could afford it, and we paid
about 80 percent less than it would have cost us to buy that
prescription drug to treat her breast cancer. We paid 80 percent less
by driving to Canada to get it.
The fact is, they allow a small amount of drugs to come across the
border for personal use. But other than that, a U.S. consumer cannot
access an FDA-approved prescription drug nor can a U.S. pharmacist
access that same FDA-approved prescription drug. That is unbelievable.
We have a bipartisan group of Members of the Senate who say consumers
ought to be able to purchase FDA prescription drugs by reimporting them
from other countries. That would put downward pressure on prescription
drug prices in this country. A bipartisan group of Senators wants to do
that, but we are prevented from doing it by current law. We want to
change the law.
Yet we are prevented from changing the law because the majority
leader won't bring this legislation to the floor of the Senate. This is
something we can offer as an amendment to the bill on the floor. It is
well within the rules of the Senate, it deals with health care, and I
am serving notice now that this is an amendment we will offer and vote
on during the conduct of this discussion, providing we are allowed to
offer amendments. I am hearing rumors that perhaps the majority leader
will decide to fill the tree legislatively and allow no amendments. If
that is the case, it will be a long week, but my hope is he will not do
that. If amendments are allowed, I will offer this amendment and will
get a vote.
Let me go back to about midnight on the night of March 11, 2004. That
is a little over 2 years ago--midnight. The reason I remember it was
midnight, I was sitting right back here and I reached an agreement with
the majority leader, Senator Frist. Here is what Senator Frist
announced that evening after our negotiations, and after which I agreed
to release the name of Dr. Mark McClellan to be promoted from the head
of FDA to the Centers for Medicare and Medicaid Services. As a result
of that, Senator Frist came to the floor and put this in the Record.

I announce for the information of my colleagues that, with
consultation with the chairman of the Senate Committee on
Health, Education, Labor, Pensions, Senator Dorgan, Senator
Stabenow, Senator McCain, Senator Cochran, and other
interested Senators, the Senate will begin a process for
developing proposals that would allow for the safe
reimportation of FDA-approved prescription drugs.

Two years later, nothing: No vote on the floor of the Senate,
nothing. My colleague, Senator Vitter, sent a letter around a year ago.
It says:

. . . in the context of the Lester Crawford FDA
nomination, I obtained an agreement with Majority Leader
Frist regarding drug importation legislation. . . .The Senate
will probably hold some floor vote on a reimportation
amendment soon, probably on the Agriculture Appropriations
bill. Should that vote demonstrate that reimportation has 60-
vote support on the floor, then Leader Frist will be open to
and work in good faith toward a floor debate and vote on a
reimportation bill. . . .

What happened as a result of that? Nothing. No action, no votes,
nothing.
This bill on the floor of the Senate is amendable. This bipartisan
amendment deals with health care. It has been long delayed--and no
more. I intend to offer this amendment this week.
Finally, at long last, perhaps the American consumers will no longer
be charged the highest prices in the world for prescription drugs
because they will be able to access FDA-approved drugs by reimporting
them from virtually any other country in which the consumers are paying
a lesser price for the identical prescription drug. That is unfair to
the American people. The only reason we have not changed it yet is
there are, regrettably, a few people in this Chamber who have blocked
that opportunity, I assume on behalf of the pharmaceutical industry.
But that blocking is about done. This week this bill is open for
amendment. I intend to come and offer this as an amendment.
That is one.
Let me talk for a moment about another issue, once again long
promised here to the Senate. We are told we are going to have an
opportunity to do this--again and again and again--and we are not. We
don't get the opportunity. It is called stem cell research. It is
controversial; there is no question about that. I understand the
controversy. But is it important? Yes, it is. We have all these people
who talk about life. This is about life. This is about life-giving
medical research, to find ways to unlock the mysteries and to cure some
of the worst diseases known to people: Alzheimer's, diabetes, cancer,
heart disease, Parkinson's. There is an unbelievable opportunity for
medical research to unlock the cures for some of these diseases. But we
need to proceed with stem cell research.
We have been long promised the opportunity to have a vote on stem
cell research on the floor of the Senate, and guess what. No such vote.
On May 24, almost 1 year ago, the House of Representatives passed a
bill on stem cell research. We are still waiting to have a vote on that
here on the floor of the Senate--once again, a bill with bipartisan
support.
Let me describe, if I might, the importance of this in the eyes of a
young woman. I met with this young girl about 2 weeks ago. It is not
the first time I met her. She is a young lady, Camille Johnson, 13
years old, diagnosed with type 1 diabetes at age 4. She is the one in
the middle, playing the clarinet. She has had some very serious health
problems, some very serious problems in her young life. She would like
very much to live her life without diabetes. She would like diabetes to
be cured for her and millions of others.
In 2002, scientists at Stanford University used special chemicals to
what is called transform undifferentiated embryonic stem cells of mice
into cell masses that resemble islets found in the mouse pancreas. When
this tissue is transplanted into the diabetic mice, it produces insulin
in response to high glucose levels in animals. Wouldn't it be wonderful
if, through this stem cell research, we cure diabetes; if we could tell
this young woman your life is not going to be a life of diabetes. We
can cure that disease.
I have been involved in political campaigns recently and have been
told by

[[Page 7298]]

opponents that my proposal and my position on stem cell research is one
that murders embryos. Nothing could be further from the truth, nothing
at all. Do you know there are 1 million people living among us,
walking, breathing, talking--1 million people who were conceived
through in vitro fertilization? One million people. When that in vitro
fertilization takes place, the uniting of a sperm and an egg in a petri
dish, more than a single embryo is created. A number of embryos are
created in that process. Some are implanted into the uterus of a woman
and some become a human being. Some are cryogenically frozen and stored
in the event they should be used again if this did not result in a
pregnancy.
There are some 400,000 of those embryos frozen at in vitro clinics
right now, 400,000 of them, and 8,000 to 11,000 are discarded, thrown
away, every year. They become hospital waste.
Should some perhaps be used for stem cell research with the hope of
saving lives? The answer clearly is yes. This is not about murdering an
embryo. If in fact this is the murder of an embryo, then the discarding
of the embryos at the in vitro fertilization clinic, 8,000 to 11,000 a
year, is also murder.
We had one person testify at the Commerce Committee a couple of years
ago who said those 1 million people who are here as a result of in
vitro fertilization should not be here; it was wrong to create these
people. Tell that to the parents who had those children; the childless
parents who, through in vitro fertilization, discovered the miracle of
having a child.
The question of stem cell research is not about murdering an embryo,
it is about an opportunity to cure some of the dreaded diseases.
The other issue--and the reason I am talking about this is this is a
big issue that we are not allowed to vote on in the Senate. This, too,
should be an amendment on this bill. This, too, during Health Week is a
very important issue dealing with health.
The other side of this research is something called somatic cell
nuclear transfer. Simply it is this: Let us assume a patient takes a
skin cell from their own earlobe and that skin cell from their earlobe
is then put in an evacuated egg and stimulated to become a blastocyst
of a couple of hundred cells.
That blastocyst now has predictor cells. They use the predictor cells
for heart muscle, to inject back into the heart muscle to grow a
stronger heart, to repair a heart attack.
Some would say you have destroyed or murdered an embryo. There is no
fertilized egg. There is only the skin cell from the person who had the
heart attack whose cell is now being used, through somatic cell nuclear
transfer, to save that person's life. This is about lifesaving. Yet we
have so many here who said: Let's not worry about these diseases. Let's
shut off this research because we think it is about murdering embryos.
That is not what this is about. It is about this young girl and
whether we decide we want this young girl to live her life as a
diabetic, a life filled with hope at this point that Congress will
finally do the right thing.
The House of Representatives did it. The Senate needs to vote on it.
Perhaps this week is as good a week as any. We have been promised. A
year ago we were promised, just like drug reimportation. This Chamber
is full of promises, but we never quite get to vote on important
issues.
I am not suggesting that when I talk about stem cell research that
there are not ethical considerations, without serious concerns and
serious issues to which we should be attentive. We should. I don't
dismiss all the other concerns. But I do say this: If you have lost a
child, if you have lost a loved one, and you have watched someone die
from Parkinson's or cancer or heart disease, if you have been through
that and then say to yourself: But I want to shut down promising
research that could potentially cure diseases, then you have not been
through it the way a number of people in this Chamber have been through
it. I think it is so important for us to do the right thing and to
continue this breathtaking research that can save lives.
There are so many other issues. There are just a couple of minutes
remaining. Then I will yield the time to my colleague from California.
We passed recently in the Senate a piece of legislation that provides
prescription drug benefits to senior citizens. But we did nothing to
put downward pressure on drug prices. There is a special provision in
the bill which my colleagues, Senators Wyden and Snowe, were talking
about earlier today, that actually prevents the Federal Government from
negotiating for lower prices with the pharmaceutical industry. That is
unbelievably ignorant. A provision like that is unbelievably ignorant,
and it ought to be repealed.
All we need is a vote on that on the Senate floor. That, too, is a
health issue. There is no excuse for this Congress to say: By the way,
the Federal Government cannot negotiate for a lower price. We already
do it in the VA. We end up with far lower prices as a result of the
negotiations.
In this case, with this bill, there is a provision that says: Don't
you dare negotiate. It would be against the law for you to try to get
lower prices and reduce Government spending. That, too, is a health
issue. That, too, will be in order this week.
I hope very much that we will have a vote on that. Yes, the
underlying bill is important. We ought to find a bipartisan way to fix
it. No, it doesn't work the way it is. It will restrict choice, in my
judgement, increase prices for some, and make others completely
uninsurable. We ought to fix it in a bipartisan way.
But on the other three issues--reimportation of prescription drugs,
stem cell research, repeal the law that prevents negotiation of lower
prices with the pharmaceutical industry to save taxpayers money--
shouldn't we do all three of those? We ought to do all three of those
this afternoon, right now. We have been blocked for far too long.
If there is, in fact, an amendable vehicle--and I hope it will be; we
will know that tomorrow morning--then I have just described three
amendments that I believe should be offered, and when offered I believe
will be approved in the coming days. If not, if this is a charade, and
tomorrow we discover there is a legislative approach called ``filling
the tree,'' which is simply setting up a little blocking device to say
we are not going to allow anybody to offer anything, then I think the
Senate will have sent a very strong message that this isn't Health
Week. This is a week in which you want to trot out a little proposal of
your own and avoid votes on serious issues that we should be taking in
the Senate.
I yield the floor.
The PRESIDING OFFICER. The Senator from California.
Mrs. BOXER. Mr. President, I appreciate Senator Dorgan's remarks. I
have been on the floor of the Senate a lot today waiting to get the
time, and I have been fortunate to hear many colleagues. I thank him
for very succinctly pointing out that in a real health care week you
wouldn't close your eyes to hope--hope that we are going to find cures
for the terrible diseases that plague our families--Parkinson's,
Alzheimer's, diabetes, spinal cord injuries, stroke, heart attack, you
just name them. The fact is, we know stem cell research is promising.
We know a lot of States have gotten out ahead of the Federal Government
because this President and this Congress have restricted the number of
stem cell lines we can fund research on. And many of those stem cell
lines are, frankly, no good at all because they have been impacted by
mice cells. And they lack the diversity needed for robust research.
I have talked to leaders in this field. I am not a scientist. I was
educated in economics. But I have spoken to leading scientists, among
whom is a gentleman named Dr. Peterson who worked at USFC in San
Francisco. He is one of the leading pioneers in stem cell research who
left to go to England because this President and this Congress put up a
big stop sign in front of stem cell research. It is tragic.
Our families need the hope of a cure. How many of us have met with
these

[[Page 7299]]

youngsters who have juvenile diabetes, and we have seen how difficult
their lives are and how they suffer, even with the strides that have
been made in this area. They are still in great danger.
Health Week is here. We have a vehicle, as Senator Dorgan calls it,
the Enzi bill, which tries to deal with the health insurance problems
that small businesses face. I am going to talk about a better
alternative to the Enzi bill that will really do something. But we also
have a chance to raise these issues during the debate on the Enzi bill.
We have bipartisan support for drug importation from countries such
as Canada, where drugs are sold at half the price of what drug
companies charge in the U.S. We have bipartisan support for stem cell
research, fixing the Medicare prescription drug issue so we could
actually say to Medicare: You have the ability and the right just as
the VA has to negotiate with the pharmaceutical companies for lower
prices. But I have to say Health Care Week Republican style is really
Insurance Company Week.
If you look at the bills that have been brought before us, they all
help the insurance companies. They don't help average Americans. They
do not help us.
The first two bills said we are going to restrict the right of
patients--whether they are very wealthy, whether they are middle
income, whether they are poor--we are going to stop them from
recovering damages if they are harmed by medical malpractice.
I was very pleased that the Senate chose not to limit debate on those
two bills which would have taken away the rights of patients while
giving a gift to the insurance companies. And hopefully we can change
the Enzi bill.
I don't like bills that take away benefits from my people in
California. I don't like bills that take away benefits from all
Americans. That is why the Enzi bill is a bad bill. It does just that.
I will go through with you the list of benefits that are taken away.
Mr. President, the Republicans bring us Health Care Week. They bring
us the Enzi bill. What they do not tell us and you don't find out until
you look is that all the States' protections that have been put into
place will be wiped out upon passage of the Enzi bill.
Those are harsh words. What do I mean? What benefits will be taken
away from my people in California? According to the report put together
by Families U.S.A, ``The Enzi Bill, Bad Medicine for America,'' those
benefits include AIDS vaccines, alcoholism treatment, blood lead
screening. You know that is important because if you don't screen kids
for lead in their blood they could have learning disabilities--bone
density screening. We know about osteoporosis. In California we
guarantee that your insurance will pay for that; no guarantee in the
Enzi bill whatsoever. As a matter of fact, the Enzi bill overrides all
of this--cervical cancer screening, clinical trials, colorectal
screening, contraceptives, diabetic supplies and education.
We just talked about how it is so important for diabetics to have
their meds--drug abuse treatment, emergency services, home health care,
hospice care, infertility treatment, mammography screening, maternity
care, mental health parity.
In my State, if you have a mental health problem and you need help,
your insurance coverage will cover your treatment, just the same as if
you had a physical problem. We know it works. The list goes on--
metabolic disorders, minimal mastectomy, off-label drug use. In
California, we have a law that says you can't kick a woman out of a
hospital the same day she has a mastectomy. What, you may say? This
happens? It does--off-label drug use, orthotics, prosthetics, prostate
cancer screening. We know that prostate cancer is a scourge--
reconstructive surgery, second medical surgery opinion.
If somebody tells you you need serious surgery, you can get a second
opinion in California. That is covered--special footwear, telemedicine,
well child care, so that we prevent diseases. That is my State.
Every single State in the Union gets overridden, whether it is
Alabama, Colorado, Georgia, Idaho.
I know my friend from Georgia would be interested because he is
sitting in the Chair. These are the things that your State offers. It
protects your consumers. It is as long a list as California, I am proud
to say--alcoholism treatment, ambulatory surgery, bone density
screening, bone marrow transplants are covered in the State of Georgia.
Cervical cancer screening, contraceptives, dental anesthesia, diabetic
supplies, drug abuse treatment, emergency services, heart transplants
are covered in Georgia. Infertility treatment, mammography screening,
mental health parity, minimal mastectomy stay, morbid obesity care--
which is very important now with the obesity epidemic--off-label drug
use, ovarian cancer screening, telemedicine, and well child care.
Georgia has a very inclusive and wonderful list of guaranteed
protections for people.
In the State of Georgia there are 2.347 million people affected by
this who would not have those guarantees under the Enzi plan. The Enzi
plan essentially says to insurance companies: You can choose. You have
to offer one plan. What do they call that plan? One premium plan. You
have to offer one premium plan based on a state plan of their choosing,
but there is no guarantee at all that what is in that premium plan is
what is in the Georgia plan or the California plan or the North Dakota
plan.
The fact is, all of the work that has been done in our States--and I
find it somewhat amusing given this is a Republican debate, that the
Republican bill preempts the States. What is wrong with this picture? I
thought our Republican friends loved decisionmaking at the State level.
No, not here in the Senate. They would prefer the insurance companies
decide it rather than the States.
This is why I call my colleagues' attention to a study done on the
impact on all the States, with letters compiled from attorneys general
from many of the States and Governors.
From Oregon, they register their opposition, first their benefits are
not guaranteed any longer. In addition, they are very worried about
what happens to premiums. The Enzi bill disadvantages older people. As
far as the research I have done, it disadvantages women. It certainly
disadvantages people who come in with a preexisting condition such as
high blood pressure. That includes a lot of Americans.
The bottom line is, the Enzi bill, the star rollout production of the
Republican Health Care Week, will make null and void all protections
that our States have given their citizens and replace them with some
kind of riverboat gamble where insurers will choose some plan, from
some State, and apply it to my State. I don't want a so-called premium
plan from another State.
Here is a good example. In Connecticut, there is a terrible epidemic
of Lyme disease. A tick bites your body and it can make a person very
ill. We have some of that in California, but we do not have as much per
capita as Connecticut. In Connecticut, the State legislature and the
Governor say insurers have to cover Lyme disease because it is an
epidemic in the State. In other States, it may not be necessary.
However, we will wipe that Connecticut requirement off the books, and
we will say, through the Enzi bill, insurance companies are going to
decide.
Something is wrong. This is not Health Care Week, this is ``insurance
company week.'' That is not good for consumers.
My own State has built a comprehensive State health insurance system
that encourages affordable and equitable coverage for all, while
ensuring consumers are protected and guaranteed benefits. The Enzi bill
takes away a State's power to regulate health insurance. It is a gift
to the insurers, as I said. It preempts benefits, as I said. It also is
going to lead to way higher premiums for all in America who are covered
by health insurance.
Insurance companies, not the States, will now decide what benefits
the consumers. That is why we have letter after letter after letter
from Governors, from attorneys general, warning us not to pass the Enzi
bill.
There appears to be no limits on the cost shares an insurer can
charge nor

[[Page 7300]]

are there requirements that plans treat consumers equitably or offer
comprehensive coverage.
As I said, if you are a little older--maybe you have high blood
pressure, maybe you have some other health problems--you are in
trouble. You are not going to have an affordable plan and you will lose
the benefits you have. You may be priced out of the market. It will be
catastrophic.
We have serious problems with the Enzi bill. Here is the great news.
There is a wonderful alternative out there, the Durbin-Lincoln bill, of
which I am a cosponsor. I thank my friends for working so hard on this.
As I go around my State, people nod in agreement with the Durbin-
Lincoln bill's premise. Senators have very good health insurance. We
pay half of the premium and the Government matches the other half.
There is a Federal Employee Health Benefits Program. There are basic
benefits required and private companies come in and offer various
plans. People such as me and my employees can choose from a broad array
of plans. It works beautifully.
I ask unanimous consent, at 5:45, the Senator from Oregon, Senator
Murray, be recognized for 15 minutes, until 6 o'clock.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mrs. BOXER. Senators Durbin and Lincoln take this Federal plan and
open it up to small businesses with 100 employees down to a single
self-employed person.
This plan will work because there will be a huge pool set up.
Everyone can buy into it from any business in this country with less
than 100 employees. It would be a very diverse pool of people. They
will be insured. The pricing is going to be very fair and reasonable.
The plan will be administered in the same way our Federal benefits are
administered.
I heard Senator Thune say: That is a government plan. No, it isn't.
It is a plan that is administered by the Federal Employees Health
Benefit Plan, but it is coverage provided by private insurers. Because
the administrative costs are kept so low, this is going to be very
affordable and will solve the problem.
And guess what. This alternative, the Durbin-Lincoln alternative,
does not take away the protections States have given all who live in
those States. If you are in California, you still get the benefits. By
law, you are protected. If you live in Washington State, you will get
those benefits. The alternative that the Democrats are behind will cost
less. It will protect benefits. It will work beautifully.
I say to my colleagues, if it is good enough for you, it ought to be
good enough for small businesses and their employees. This bill is a
wonderful and practical alternative.
In my concluding 6 or 7 minutes, I will say that this so-called
Health Care Week is a major disappointment, unless we find out tomorrow
we can amend the Enzi bill. If we can amend Enzi and pass stem cell
research and prescription drug reimportation, if we can make sure there
is hope for patients with Alzheimer's, diabetes, heart condition,
stroke, cancer because we move ahead with science, then Health Care
Week will have mattered. If we can offer the Durbin-Lincoln substitute,
it will not preempt the protections of State law as the Enzi bill does.
The Enzi bill has more opposition than any bill I remember. AARP is
against it. The Cancer Foundation is against it. There are 224
organizations against it.
I ask unanimous consent to have printed in the Record those
organizations opposed to the Enzi bill.
There being no objection, the material was ordered to be printed in
the Record, as follows:

National Partnership for Women & Families, 9 to 5,
Association for Working Women, Action Alliance of Senior
Citizens of Greater Philadelphia, Alabama Psychological
Association, Alliance for Advancing Nonprofit Health Care,
Alliance for Justice, Alliance for the Status of Missouri
Women, American Academy of Child & Adolescent Psychiatry,
American Academy of HIV Medicine, American Academy of
Pediatrics.
American Academy of Pediatrics--Nebraska Chapter, American
Academy of Physician Assistants, American Association for
Geriatric Psychiatry, American Association for Marriage and
Family Therapy, American Association of People with
Disabilities, American Association on Mental Retardation,
American Chiropractic Association, American College of Nurse-
Midwives, American Counseling Association, American Diabetes
Association.
American Federation of State, County and Municipal
Employees, American Federation of Teachers, American
Foundation for the Blind, American Nurses Association,
American Occupational Therapy Association, American
Optometric Association, American Pediatric Society, American
Podiatric Medical Association, American Psychiatric
Association, American Psychological Association.
American Speech-Language-Hearing Association, Arizona
Action Network, Arizona Business and Professional Women,
Arizona Psychological Association, Asociacion de Psicologia
de Puerto Rico, Assistive Technology Law Center, Association
of Medical School Pediatric Department Chairs, Association of
University Centers on Disabilities, Association of Women's
Health, Obstetric and Neonatal Nurses, B'nai B'rith
International.
Bazelon Center for Mental Health Law, C3: Colorectal Cancer
Coalition, California Coalition for PKU and Allied Disorders,
California Black Health Network, California Psychological
Association, Campaign for Better Health Care--Illinois,
Capital District Physician's Health Plan, Inc., Catholics for
a Free Choice, Center for Civil Justice, Center for Justice
and Democracy.
Center for Women Policy Studies, Children's Alliance,
Citizen Action/Illinois, Citizen Action of New York, Clinical
Social Work Guild 49, OPEIU, Coalition on Human Needs,
Colorado Center on Law and Policy, Colorado Children's
Campaign, Colorado Progressive Action, Colorado Psychological
Association.
Committee of Ten Thousand, Communications Workers of
America, Connecticut Citizen Action Group, Consumers for
Affordable Health Care, Delaware Alliance for Health Care,
Delaware Psychological Association, Department for
Professional Employees, AFL-CIO, Disability Rights Wisconsin,
District of Columbia Psychological Association, Easter Seals.
Empire Justice Center, Epilepsy Foundation, Excellus Blue
Cross Blue Shield, Families USA, Families with PKU, Family
Planning Advocates of New York State, Florida Consumer Action
Network, Georgia Rural Urban Summit, Guttmacher Institute,
HIP Health Plan of New York.
Hawaii Psychological Association, Health and Disability
Advocates, Hemophilia Federation of America, Idaho
Psychological Association, Illinois Alliance for Retired
Americans, Illinois Psychological Association, Indiana
Psychological Association, Institute for Reproductive Health
Access, International Association of Machinists & Aerospace
Workers, International Brotherhood of Electrical Workers.
International Longshore & Warehouse Union, Iowa Citizen
Action Network, Iowa Psychological Association, Kansas
Psychological Association, Kentucky Task Force on Hunger,
League of Women Voters, Maine Children's Alliance, Maine
Dirigo Alliance, Maine People's Alliance, Maine Psychological
Association.
Maine Women's Lobby, Massachusetts Psychological
Association, Maternal and Child Health Access, Mental Health
Association in Michigan, Mental Health Legal Advisors
Committee (Commonwealth of Massachusetts), Michigan
Association for Children with Emotional Disorders, Michigan
Campaign for Quality Care, Michigan Citizen Action, Minnesota
COACT, Minnesota Psychological Association.
Missouri Association of Social Welfare, Missouri
Progressive Vote Coalition, Montana Psychological
Association, Montana Senior Citizens Association, Inc.,
NAADAC--The Association for Addiction Professionals, NETWORK,
a National Catholic Social Justice Lobby, National Alliance
on Mental Illness, National Association for Children's
Behavioral Health, National Association of Anorexia Nervosa
and Associated Disorders, National Association of Social
Workers.
National Association of Social Workers, Arizona Chapter,
National Association of County Behavioral Health and
Developmental Disability Directors, National Coalition for
Cancer Survivorship, National Consumers League, National
Council for Community Behavioral Health Care, National
Council of Jewish Women, National Council on Independent
Living, National Disability Rights Network, National Family
Planning and Reproductive Health Association, National Health
Care for the Homeless Council.
National Health Law Program, National Hemophilia
Foundation, National Mental Health Association, National
Multiple Sclerosis Society, National Organization for Women,
National Rehabilitation Association, National Research Center
for Women & Families, National Urea Cycle Disorders
Foundation, National Women's Health Network, National Women's
Law Center.
Nebraska Psychological Association, Nevada State
Psychological Association, New Hampshire Citizens Alliance,
New Jersey Citizen Action. New Jersey Psychological

[[Page 7301]]

Association, New Mexico PACE, New Mexico Psychological
Association, New York Civil Liberties Union Reproductive
Rights Project, New York State Health Care Campaign, New York
State Psychological Association.
North Carolina Justice Center's Health Access Coalition,
North Carolina Psychological Association, North Dakota PKU
Organization, North Dakota Progressive Coalition, North
Dakota Psychological Association, Northwest Health Law
Advocates, Northwest Women's Law Center, Ohio Psychological
Association, Oklahoma Psychological Association, Oregon
Action.
Oregon Advocacy Center, Oregon Psychological Association,
Organic Acidemia Association, Patient Services, Inc.,
Pediatrix Medical Group, Pennsylvania Council of Churches,
Pennsylvania Psychological Association, Philadelphia Citizens
for Children and Youth, Philadelphia Coalition of Labor Union
Women, Planned Parenthood Federation of America.
Planned Parenthood of New York City, Population Connection,
Progressive Maryland, Public Citizen, RESULTS, Religious
Coalition for Reproductive Choice, Reproductive Health
Technologies Project, Rhode Island Ocean State Action, Rhode
Island Psychological Association.
Sargent Shriver National Center on Poverty Law, Save Babies
Through Screening Foundation, Senior Citizens' Law Office,
Small Business Majority, Society for Pediatric Research,
South Dakota Psychological Association, Suicide Prevention
Action Network USA, Summit Health Institute for Research and
Education, Inc., Tennessee Citizen Action, Tennessee
Psychological Association.
Texas Psychological Association, The Arc of the United
States, The Black Children's Institute of Tennessee, The
Disability Coalition of New Mexico, The Institute for
Reproductive Health Access, The Senior Citizens' Law Office,
The Virginia Academy of Clinical Psychologists, Triumph
Treatment Services, US Action, US Action Education Fund.
U.S. PIRG (Public Interest Research Group), Union for
Reform Judaism, United Association of Journeymen and
Apprentices in the Plumbing and Pipe Fitting Industry, United
Cerebral Palsy, United Food and Commercial Workers, United
Senior Action of Indiana, United Steelworkers International
Union, United Vision for Idaho, Univera Healthcare, Universal
Health Care Action Network.
Utah Health Policy Project, Vermont Coalition for
Disability Rights, Vermont Office of Health Care Ombudsman,
Voices for America's Children, Voices for Virginia's
Children, Washington Citizen Action, Washington State
Coalition on Women's Substance Abuse Issues, Washington State
Psychological Association, West Virginia Citizen Action
Group, West Virginia Psychological Association.
Wisconsin Citizen Action, Wisconsin Psychological
Association, Women of Reform Judaism, WorId Institute on
Disability, Wyoming Psychological Association.

Mrs. BOXER. Mr. President, this bill is going to hurt American health
care by cancelling out all the hard-won State protections and by
raising premiums so high they will price consumers out of the market.
That is why across the board there is opposition. I have not seen this
many organizations come out against a bill.
By the way, this bill, when it was first presented, sounded
reasonable. It was only when we looked at the small print that we
realized how dangerous it is.
Instead of working on this misguided bill, we could have done the
alternative, we could have done the stem cell, we could have fixed the
Medicare prescription drugs, we could have allowed drug importation.
If we didn't want to do real health care reform, there are a lot of
other things we could have done, such as raise the minimum wage. We
could have finished the job on immigration reform, strengthening the
enforcement at the border and stopping illegal immigration, but getting
people on a path and out of the shadows.
What about Superfund sites? We have some of the most polluted sites
in the country still awaiting cleanup. We have one in four people in
America, including 10 million children, living within 4 miles of a
Superfund site.
What about debating the war Iraq? That is on everyone's mind. There
is still no exit strategy. There is still no plan. We see suffering on
the ground there every single day.
We have issues with a potential nuclear Iran. We should debate that.
In Afghanistan, the situation is deteriorating and we have all but
forgotten about it. We have not followed the recommendations of the 9/
11 Commission to this date. We have failed fiscal policies. We have
debt as far as the eye can see. We ought to debate pay-as-you-go. If
Members want to spend money, they should show how they going to pay for
it instead of putting the burden on the backs of America's children.
There are many other things we could do, but since we are on Health
Care Week, let's fix our health care system. Let's not pass a bill that
will not help people with serious diseases or fix the problems with the
Medicare prescription drug program.
We have so much work to do and this Enzi bill is masquerading as a
bill that will help our citizens. When we read the fine print, we find
out it is only going to make matters worse.
I am proud to yield the floor to my friend from Washington.
The PRESIDING OFFICER. The Senator from Washington is recognized for
15 minutes.
Mrs. MURRAY. Mr. President, I ask unanimous consent the next
Democratic speakers in order be Senator Dayton, Senator Durbin, and
Senator Akaka.
The PRESIDING OFFICER (Mr. Chambliss). Without objection, it is so
ordered.
Mrs. MURRAY. Mr. President, at this hour, families are struggling
with health care. Seniors are facing a critical deadline for drug
coverage. Businesses are grappling with the high cost of insurance. And
patients are being denied the cutting-edge research that could save
their lives. Those are critical issues. And what is the Senate doing?
We are dealing with a distraction instead of real solutions to make
health care affordable, more accessible, and more innovative.
I am on the Senate floor this evening to talk about what we should be
doing to help families and businesses and communities meet their health
care needs. I also want to talk this evening about why the Republican
proposal, S. 1955, could do more harm than good.
This is a bill which takes a good idea--pooling the risk in health
insurance--and distorts it with a plan that will raise the cost of
health care, strip away patient protections, and hurt many of our small
businesses. But do not take my word for it. Attorneys general from 41
States, including my own, have written to outline the serious problems
with the Republican bill. I have heard from doctors with the Washington
State Medical Association and from my own Governor about the damage
this bill will inflict on patients and on our economy.
Simply put, this proposal is a distraction. Instead of dealing with
real solutions to real problems, the Republican leadership is wasting
time on one narrow proposal that is only going to make things worse. We
can do better. The truth is that patients and seniors, doctors and
nurses, and all of our communities deserve better.
If we were serious about reducing the cost of health care, helping to
improve access, and driving innovation, we would be talking about the
critical issues that the Republican leadership is trying to avoid. We
should be focusing on everything from the Medicare drug program, to
stem cell research, to community health care. Frankly, we do not have a
day to waste.
On Monday, millions of seniors and disabled will be hit with a
deadline that means higher premiums for their prescription drugs. That
May 15 deadline is just 6 days away. I am hearing from seniors that
they are very worried about this deadline. They are worried they are
going to pick the wrong plan, and they do not think it is fair to be
punished if they need more time so they can make an informed choice.
I have been traveling throughout my home State of Washington, meeting
with seniors and holding roundtables with patients, with pharmacists,
with advocates.
Three weeks ago, I was in Chehalis, at the Twin Cities Senior Center.
I can tell you, seniors are worried. They are angry. They are
frustrated. They are frightened about this May 15 deadline, and that
deadline is just one of the problems this flawed drug program is
presenting.
The week before that, I was in Silverdale, and I have held Medicare
roundtables in Kent, Vancouver,

[[Page 7302]]

Ballard, Shelton, Spokane, Anacortes, Bellevue, Aberdeen, Olympia,
Lakewood, Seattle, and Everett. Everywhere, I have heard from seniors
about just how bad the Medicare Part D Program is. I have heard their
frustration about dealing with such a confusing system. I have heard
their anger that this program does not meet their needs. And I have
heard from many who just want to throw their hands up in the air and
ignore the whole program.
If we were serious about improving health care, we would be fixing
the problems they have outlined. Instead, we are going to let an unfair
deadline hurt our seniors even further. In just 6 days--in just 6
days--they are going to have to pick a plan or face high penalties
whenever they do enroll, and the penalties grow larger the longer they
wait. To me, that is just not fair.
Right now, this Senate could be extending the deadline so our seniors
are not pressured into making the wrong choice in such a complicated
system. Right now, we could be lifting the penalty so that seniors are
not punished if they need more time to make the right choice. Right
now, we could be providing help to millions of vulnerable Americans who
have been mistreated by this flawed Republican plan. But, instead, this
Congress is leaving seniors to fend for themselves. The Secretary of
Health and Human Services has said he opposes extending the deadline or
lifting the penalties, and this Republican Congress seems to agree with
him by a shameful lack of action.
Seniors deserve better. The disabled deserve better. Our most
vulnerable neighbors deserve better. If we really wanted to make health
care more affordable and more accessible and more innovative, we would
be on this floor fixing the Medicare drug program and helping seniors
who are facing that unfair deadline.
Now, that is just one example of what a real focus on health care on
this floor would include.
If we were serious about helping patients, we would be expanding
lifesaving research. For patients who are living with diseases such as
Parkinson's or multiple sclerosis or Alzheimer's or diabetes, stem cell
research holds the potential to help us understand and to treat and
someday perhaps cure those devastating diseases.
Nearly a year ago, the House of Representatives passed legislation to
lift the restrictions that hold back this promising research. The House
of Representatives has acted, but for an entire year the Senate has
not. My colleagues, Senator Specter and Senator Harkin, are well known
for their leadership on this fight. They were promised a vote on stem
cell research, and that vote has still not taken place. Every delay
means missed opportunities for patients with devastating diseases.
If this Senate is serious about health care and saving lives, we
should be voting on stem cell legislation today. That is why, last
week, I joined with 39 other Senators in writing to the majority leader
urging him to bring up H.R. 810, the Stem Cell Research Enhancement
Act. But instead of real solutions, the Senate is focusing on a
distraction. Patients with life-threatening diseases deserve a lot
better.
If we were serious about improving health care, we would be investing
in local efforts that boost access to health care.
Two weeks ago, through the Johnson & Johnson Community Health Care
Awards, I had a chance to honor leaders from across the country who are
doing innovative work to break down the barriers to care. If we were
serious about improving health care, we would be building more Federal
support for their work. Instead, we are moving in the opposite
direction.
Perhaps the best example is the Bush administration's 5-year effort
to kill the Healthy Communities Access Program, which is known as HCAP.
This is a program which helps our local organizations coordinate care
for the uninsured. I have seen it make a tremendous difference in my
home State. Well, every year since taking office, this Bush
administration has tried to kill that successful program. I have been
out here on the floor leading the fight for our local communities every
year, and most years we have won. But this past year, the White House
and the Republican Congress ended the support for Healthy Communities
and thus made health care less accessible for families from coast to
coast.
If we were serious about improving health care, we would be investing
in local programs that make a difference. But, instead, the Republican
leadership is focused on distractions. We can do better than that.
So let me take a few minutes to turn to the specific problems with
the bill that is before us, S. 1955, and explain why so many experts
across this country are warning us that this bill will eliminate
critical patient protections, it will lead to unfair premiums and
insurance practices, and it will raise the cost of health care.
First of all, this bill will eliminate many of the important
protections that keep patients healthy and lower the cost of health
care.
In my home State of Washington, we have enacted a number of State
patient protections that require health plans to cover services such as
diabetic care, mental health services, breast and cervical cancer
screening, emergency medical services, and dental procedures. But under
this bill, small business health plans or association health plans
would not be required to cover those important benefits. Allowing
insurers to abandon mandated benefits, many of which are preventive and
are diagnostic, will result in a sicker population and higher health
costs for everyone.
When this legislation was debated in the HELP Committee, I offered a
number of amendments to provide for coverage of several important
women's health benefits. Unfortunately, every one of those amendments
was defeated. So now, here we are, and we have a bill on this floor
that will strip away the protections on which our patients across this
country rely.
A new report by Families USA shows just how many families in my home
State will be hurt by this bill. That report found that 1,861,000
residents of Washington State may lose protections if this bill is
passed. And what could they lose? Emergency services, home health care,
drug and alcohol treatment, contraceptives, diabetic supplies and
education, hospice care, mammography screening, maternity services,
mental health care--the list goes on. I am not going to tell nearly 2
million people in my home State whom I represent that we are going to
take a gamble and risk losing those hard-won protections for a plan
that will likely raise the cost of health care for many of our families
and small businesses.
Secondly, this bill will encourage insurance companies to charge
higher premiums for less healthy consumers. This bill will preempt
strong laws and protections in our State that limit the ability of
insurers to vary premiums based on health status, age, gender, or
geography. I am very concerned this will result in adverse selection or
what we call cherry-picking, leading to higher premiums for less
healthy consumers. In fact, rates will likely become unaffordable for
those who need it the most, potentially increasing the number of
uninsured Americans.
Now, Mr. President, I would like to share some letters I have
received from leaders in my home State who all speak against this
flawed proposal. I ask unanimous consent that these two letters be
printed in the Record following my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mrs. MURRAY. Mr. President, recently I received a letter from the
Governor, Governor Christine Gregoire of my home State of Washington,
in which she expressed many of her concerns regarding this legislation
and its impact on the people who live in my home State.
This chart behind me contains the full text of the Governor's letter.
As you can see, she has many serious concerns. I wish to highlight for
the Senate some of the main points our Governor has raised with me.
Governor Gregoire alludes to the harmful aspects of this bill, and
she says:

[[Page 7303]]

[S. 1955] stands to harm our small group insurance market,
which is a critical component of [Washington State's] current
health care system. . . .
Instead of promoting more affordable health care, this
legislation would cause a serious increase in rates for
consumers--possibly two or three times over what they now
pay.

Governor Gregoire also warns in her letter to me that:

[this] bill threatens consumer protections that the state
of Washington strives to guarantee to [all of] our residents.

The Governor also warns that this bill:

would foster a proliferation of health plans that do not
cover preventive services that are absolutely vital to the
health and well-being of Washington residents. . . .

Mr. President, I would also like to share a letter that I have
received from the 9,000-member Washington State Medical Association
that wrote to me in strong opposition to S. 1955.
Now, this chart shows the full letter, and I want to read just a
portion of it:

This legislation will have a severe impact on all the
consumer health gains that have been made in Washington State
over the past decade.
S. 1955 will:
Undermine Washington State's many gains in advancing health
care quality;
Pull people from existing insurance coverage rather than
attract the uninsured;
Lead to higher costs for consumers;
Strike down Washington's Mental Health Parity law, which
took eight years of work to be enacted;
Eliminate other mandated benefits that help consumers such
as mammography services; and,
Leave Washington's citizens at risk for unpaid medical
bills in the event of an AHP insolvency.

That is from the head of the Washington State Medical Association,
which has 9,000 members in my home State. I think their words should be
heeded by the Members of this Senate.
Third, this proposal does nothing to address increasing health care
costs.
In fact, it builds on the sorry record of this administration and
this Congress in not addressing the rising costs that Americans face.
Because of the flaws I mentioned, this bill does nothing to contain
those costs. In fact, it could dramatically increase costs for many
businesses and families in Washington State. It could well mean that
people in the State of Washington who have affordable coverage today
could end up worse off than they are right now.
I know my State has been a leader in working to expand access to
affordable health insurance for working families and small businesses.
Many of the reforms that worked to control costs in my State would be
jeopardized if this legislation is enacted. Washington State has a
proud tradition of strong consumer protections and integrated managed
care that has improved health outcomes and controlled cost increases.
We should not jeopardize what my State has fought hard for by dangerous
Federal legislation.
I do support the concept of pooling. I believe we can implement
policies that provide stability in health insurance premiums. In fact,
I am currently working with a number of my colleagues on legislation to
create Federal and State catastrophic cost pools to spread out the
risks and address what is driving health care costs. We can help spread
the risk in ways that will lower costs and still protect patients. The
legislation before us could raise costs for consumers and small
businesses. We can do better than that.
There are serious challenges facing our country when it comes to
health care. This Senate needs to get serious. Instead of focusing on a
distraction, we should be helping seniors with prescription drugs. We
should be expanding lifesaving research, and we should be supporting
community health care. Those are some of the things we should be
working on to reduce the cost of health care and to improve access and
to accelerate innovation. We can do all of those things, but we need
the Republican leadership to get serious if we are going to provide
serious solutions. We don't have a day to waste. I hope we can get to
work on the real solutions that our American families deserve.

Exhibit 1

Christine O. Gregoire,

Office of the Governor,

Olympia, WA, April 27, 2006.
Hon. Patty Murray,
U.S. Senate, Washington, DC.
Dear Senator Murray: I am writing with great concern about
S. 1955, the Health Insurance Marketplace Modernization and
Affordability Act, and its potential to further erode our
ability to provide sound health coverage to citizens in
Washington State. This bill stands to harm our small group
insurance market, which is a critical component of our
current health care system. Furthermore, the bill threatens
consumer protections that the State of Washington strives to
guarantee to our residents. For these reasons, I ask that you
oppose the bill in its current form.
When it comes to providing health care, the federal
government has been putting an ever-Increasing burden on the
states. The Deficit Reduction Act, alone, paves the way to
eliminate nearly $50 billion over the next five years for the
Medicaid program. Fresh on the heals of signing the Deficit
Reduction Act, the President unveiled his Fiscal Year 2007
budget proposal, which proposes eliminating $36 billion from
the Medicare program over the next five years. Additionally,
the implementation of the Medicare Part D prescription drug
program has had enormous impacts on the states. Nearly every
state in the Nation--Washington included--felt compelled to
step in to ensure that our most needy citizens, our dual
eligible population, continue to receive their medications
due to fundamental flaws in the Medicare Modernization Act.
Against this backdrop now comes S. 1955.
If passed, S. 1955 would establish a small group rating
mechanism that would further erode the possibility of
pursuing reasonable health care costs in the states. Instead
of promoting more affordable health care, this legislation
would cause a serious increase in rates for consumers--
possibly two or three times over what they now pay. At its
worst, the bill could result in the total collapse of our
small group insurance market, something we must fight to
prevent.
Additionally, I am concerned that S. 1955 would foster a
proliferation of health plans that do not cover preventative
services that are absolutely vital to the health and well-
being of Washington residents, such as mammography,
colonoscopies, diabetic care services, and newborn coverage.
In 2005, the Washington State Legislature passed, and I
signed, legislation providing mental health parity. If
Congress passes S. 1955, the bill could also fully abrogate
this effort to ensure mental health coverage in Washington
State.
It is surprising to me that S. 1955 is moving forward,
given that it is patterned, in part, on a flawed National
Association of Insurance Commissioner's 1993 Model Rating
Law, actually adopted by the state of New Hampshire in 2003.
This proved to be an unfortunate experiment for the people of
New Hampshire. Just this year, that state's Legislature
repealed provisions of its 2003 law due to the astronomical
jump in rates that occurred in only a two-year period after
it was implemented. Given this history that he knows only too
well, my colleague, Governor John Lynch of New Hampshire,
recently registered his opposition to S. 1955 in a letter to
his federal delegation, dated March 28, 2006. New Hampshire's
experience is illustrative and a harbinger of what could come
to all states, should Congress adopt S. 1955.
As Washington State's Attorney General from 1993-2005, I,
along with the majority of my colleagues within the National
Association of Attorneys General (NAAG), opposed several
precursor bills to S. 1955. Introduced in each of the last
several Congresses, these bills allow for the federal
regulation of association health plans (AHPs), and have
passed out of the U.S. House more than once. I appreciate
that S. 1955, in its current form, does away with one fatal
flaw of the earlier AHP bills--that being the wholesale
obliteration of state regulation over national AHPs. But, as
I have articulated, S. 1955 still goes too far in preempting
other basic consumer protections. It is heartening to see
that a majority of current members of NAAG, including
Washington State Attorney General Rob McKenna, have now
weighed in with their concerns and opposition to S. 1955.
As a nation, we need innovative solutions that provide high
quality, sustainable and affordable health care access to our
un- and under-insured populations. With the help of the
Washington State Legislature, I have embarked on a five-point
strategy to promote evidence-based medicine; better manage
chronic diseases; increase prevention and wellness
initiatives; require data transparency; and expand the reach
of health information technology. These strategies invite
strong partnerships between states and the federal government
that I remain committed to pursuing with you. Unfortunately,
proposals like S. 1955, are counterintuitive to the notion of
forging such partnerships and I ask that you reject the bill.
Sincerely,
Christine O. Gregoire,
Governor.

[[Page 7304]]

____
Washington State

Medical Association,

April 25, 2006.
Hon. Patty Murray,
U.S. Senate, Washington, DC.
Dear Senator Murray: On behalf of the 9,000 members of the
Washington State Medical Association, WSMA, I am writing to
ask that you vote no on S. 1955--Association Health Plans,
AHPs, when the bill comes to a vote in the U.S. Senate.
The WSMA is very concerned about the negative effect of
this legislation on our State's citizens, purchasers,
providers and health plans.
This legislation will have a severe impact on all the
consumer health gains that have been made in Washington State
over the past decade.
S. 1955 will:
Undermine Washington State's many gains in advancing health
care quality;
Pull people from existing insurance coverage rather than
attract the uninsured;
Lead to higher costs for consumers;
Strike down Washington's Mental Health Parity law, which
took eight years of work to be enacted;
Eliminate other mandated benefits that help consumers such
as mammography services; and,
Leave Washington's citizens at risk for unpaid medical
bills in the event of an AHP insolvency
The Washington State Medical Association works hard every
day to insure that Washington's citizens have access to the
finest medical care in the country. This legislation will
test our ability to continue in this endeavor.
For more information, please do not hesitate to contact Len
Eddinger in our Olympia office.
Very Truly yours,
Peter J. Dunbar, MD,
President.

The PRESIDING OFFICER (Mr. Smith). The Senator from Kansas.
Mr. BROWNBACK. Mr. President, I rise to address some issues my
colleagues have raised. I am appreciative of the debate and the chance
to talk about health care. It is a critically important topic. It is
one that we have to talk a lot more about, how we can provide as much
health care as possible to everybody at the lowest price that we can
get it and get more people insured. That is at the root of what we are
trying to get done with the proposal of Senator Enzi and others to get
more health insurance, better coverage to more people across the United
States. That is a worthy goal, something we need to do. We have far too
many people uninsured. We need more people insured. That is central to
us. It is central to the hospital and the provider community that we
have people who are insured. Because of those who are not insured and
then can't pay the price of their health care, that is spread across to
other people, which is what we do today. That is what we need to do,
but it would be better if we could get more people insured and have a
direct system of payment.
Others have said that what we need to be talking about is different
than this, rather than expanding health insurance coverage. I respect
that. Some of my colleagues have raised the stem cell issue. I want to
address the concerns my colleagues have raised on stem cells. I want to
report to my colleagues what a tremendous positive story we have to
tell about stem cells, an exciting story of people receiving
treatments, living longer and healthier lives because of stem cell
treatments. These are not the controversial ones. This does not involve
the destruction of a young human in the embryonic stage. This involves
the use of adult stem cells, which the Presiding Officer and others,
everybody in this room has in their body, adult stem cells. It also
involves cord blood stem cells. These are the stem cells that are in
the umbilical cord between the mother and child, while the mother is
carrying the child.
I want to show two charts to start off. I think it is best if we make
this a personal debate. I challenge my colleagues who have challenged
me about this topic to come forward with pictures of individuals who
are being treated with embryonic stem cells. I would like to see the
people who are being treated with embryonic stem cells. We have put
nearly half a billion dollars of research money into embryonic stem
cell research. We have known about embryonic stem cells for 20 years. I
don't know of the people being treated by embryonic stem cells.
I can show people who are being treated with adult stem cells or cord
blood. This is Erik Haines. He is 13 years old. He was diagnosed with
Krabbes disease, the first patient to receive cord blood for this rare,
inherited metabolic disease. The date of transplant was 1994. He is
alive today. He would be dead without this having taken place.
Let me show you a picture of Keone Penn. I had him in to testify
before a Commerce Committee hearing a couple years ago. He has sickle
cell anemia. The date of transplant was December 11, 1998. He had been
very sick. He wasn't expected to live. As a matter of fact, it says in
a statement that he made: If it wasn't for cord blood, I would probably
be dead by now. It is a good thing I found a match. It saved my life.
We have now many more people being treated for sickle cell, a whole
host of diseases. As a matter of fact, I want to read off a few of
these. These are human clinical trials, real people getting real
treatments, living longer lives, if not being cured, by the use of
adult stem cells and cord blood stem cells in 69 different disease
areas.
My colleagues have heard this debate for a period of years. We have
been debating stem cells for a number of years. We have been debating
the controversial area of embryonic stem cells, which the Federal
Government funds, which State governments fund, which private industry
and the private sector is fully free to fund completely, every bit of
the way that they want to do that. They can. They have been. And we
have no human treatments from embryonic stem cells to date. We don't
have any. They are funded globally. There is no prohibition against
embryonic stem cell research in the United States.
My colleagues seek more than the nearly $500 billion that we have put
into embryonic stem cell research, an area that has not produced any
human treatments to date. I want to be clear that that is what we are
talking about. When we started this debate, my colleagues pushing
embryonic stem cells, who in their hearts absolutely believe they are
doing the right thing and this will lead to cures, listed cancer,
sickle cell anemia, Lou Gehrig's disease. We are going to deal with all
of these things. With the promise of embryonic stem cells, we will cure
these things. That is what they said on their side when we started this
debate 6 years ago. Six years later--I could be off a year or 2--where
are the cures? I say we have them. They are in adult and cord blood
stem cells.
I ask unanimous consent to print in the Record at the end of my
statement a sheet of human clinical applications using adult stem
cells.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. BROWNBACK. I want to read a few of the 69 from this document:
Sickle cell anemia, aplastic anemia, chronic Epstein-Barr infection,
lupus, Crohn's disease, rheumatoid arthritis, juvenile arthritis,
multiple sclerosis, brain tumors, different cancers, lymphoma, non-
Hodgkins lymphoma, a number of solid tumors, cardiovascular. This is an
exciting area that is taking place where we now have people with acute
heart damage, chronic coronary artery disease being treated with adult
stem cells. Primarily, this has been an adult stem cell treatment where
they harvest stem cells out of their own body and inject them right
back into the damaged heart tissue.
Now we are seeing people who couldn't walk up a flight of steps going
up eight flights, having hard tissue being regenerated with the use of
their own adult stem cells. There is no rejection problem. This is
their own cells. They take these adult stem cells from your body, which
are repair cells, grow them outside of the body, put them back into the
damaged heart tissue area, and now instead of congestive heart failure,
without any ability to get enough blood throughout the body, the heart
is pumping harder and better. It is actually working. They are
regenerating the heart in these people. This is actually taking place
in human clinical trials today. It is a beautiful issue.
The list goes on: chronic liver failure, Parkinson's disease. I had a
gentleman

[[Page 7305]]

in to testify who had taken stem cells out of a part of his body, grew
them, put them in the left part of the brain. The right side of the
body started functioning without Parkinson's disease. Later it came
back, after several years, but he had several years free and was
starting to learn how better this can work with Parkinson's disease.
Again, continuing from the list: spinal cord injury, stroke damage,
limb gangrene, skull bone repair. We have recently had advances. For
example, they took the stem cells out of a person's body. They had a
form around which the bladder could be grown, outside a new bladder
could be grown. They took the stem cells, put them around this form,
and actually grew a bladder out of a person's own stem cells. These are
marvelous, miraculous things that are taking place in 69 different
areas of human clinical trials, adult and cord blood. I ask my
colleagues from the other side, the ones who promised all of the cures
from embryonic stem cells, as this debate moves forward, we will bring
out statements that people made 5, 6 years ago about the cures that
would come from embryonic stem cells. The cures have come from these
noncontroversial areas. This is where we ought to be funding. This is
what we ought to be doing. This is where we are getting treatments.
I ask my colleagues from the other side, where are the treatments
with embryonic stem cells? Colleagues on the other side, for whom I
have great respect and I know in their hearts are doing what they
believe is the right thing to do, asked about reputable scientists
opposed to embryonic stem cells. I ask unanimous consent to print in
the Record this letter at the conclusion of my statement.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 2.)
Mr. BROWNBACK. It is dated October 27, 2004. It is to Senator John F.
Kerry, running for President at the time, signed by 57 scientists who
have a real problem with embryonic stem cell research.
They say in this letter:

As professionals trained in the life sciences we are
alarmed at these statements.

They are referring to what Senator Kerry was saying, that this would
be a centerpiece issue for him in moving forward with science. This is
in 2004.

First, your statement misrepresents science. In itself,
science is not a policy or a political program.
Second, it is no mere ``ideology'' to be concerned about
the possible misuse of humans in scientific research.

Here we come to the real rub of the issue on embryonic stem cell
research. Is the embryo human life or isn't it? It is one or the other.
It is either a human life or it isn't. It is alive. It is human in its
genetic form. Is it a human life or not? If it is not a human life, do
with it as you choose. If it is a human life, it deserves protection
and respect. We do it for everybody in this room, no matter what your
State is, your physical condition. Why wouldn't we do it while you are
in the womb?
I have a letter signed by 57 scientists with a real problem with
embryonic stem cell research. My colleague asked me to produce
scientists who are opposed to embryonic stem cell research. Here they
are.
I finally say to my colleagues on this topic, the promises they have
made about embryonic stem cell research have not been realized to date,
and reputable scientists question whether they will ever be realized.
We are half a billion dollars later after investment from the Federal
Government on embryonic stem cell research, animal and human. Now you
are seeing--this is just the Federal Government, not about the private
sector or other governments around the world. I will read to you what
other scientists who support embryonic stem cell research are saying
about the prospects of embryonic stem cell research. A British stem
cell research expert, named Winston, warned colleagues that the
political hype in support of human embryonic stem cells needs to be
reined in. This is dated June 20, 2005, where he says this:

One of the problems is that in order to persuade the public
that we must do this work, we often go rather too far in
promising what we might achieve. This is a real issue for the
scientists. I am not entirely convinced that embryonic stem
cells will, in my lifetime, and possibly anybody's lifetime,
for that matter, be holding quite the promise that we
desperately hope they will.

Let's look at another researcher talking in this field. I want to get
testimony in here from Jamie Thompson, the first scientist to grow
human embryonic stem cells. This is the question posed to him:

People who use nuclear transfer generally say that the
technique is optimized for producing stem cells rather than
making babies. They would not want to equate this with the
process that produces embryos that were fit for implantation,
and they argue that they are used in the reproductive process
differently.

I am talking about the use of embryonic stem cell research in a
cloning procedure, where you create a clone, take the embryonic stem
cells from the clone.
This is what Professor Thompson says:

So you are trying to define it away and it doesn't work. If
you create an embryo by nuclear transfer and you give it to
somebody, you didn't know where it came from, there would be
no test you could do on that embryo to say where it came
from. It is what it is. It is an embryo. It is a young human
life. It's true that they have much lower probability of
giving rise to a child, but by any reasonable definition, at
least at some frequency, you are creating an embryo. If you
are trying to define it away, you are being disingenuous.

My colleagues started to raise the issue that if you create an embryo
by process of cloning, it is not really a young human life. But if you
create an embryo that is a sheep, like Dolly, and grow it up to be
Dolly the sheep, is Dolly not a sheep? Would that be the contention?
That is simply not the case when they are creating a cloned individual
or cloned human being, and that goes into the next step in this debate,
to discuss human cloning. The other side calls it somatic nuclear cell
transfer--the same process that created Dolly.
My point is that that is the next step on this continuum. We are
talking about embryonic stem cell research funding and the lack of
production taking place there for human treatment. The next step is
that we need to clone and then we need to clone the individual and not
harvest it in a day or two, but we need to grow the fetus out several
weeks so we have sort of fetal farming, which is a ghastly thing to
even consider. Yet it is being talked about in some research circles.
I conclude with the statement that if we want to be successful in
this area and treat people, which I believe is the measure that we
should go by--the treatment of individuals--our best bet, if my
colleagues want human treatments to take place, they want to cure
people, if that is what their effort is, let's fund what is working,
which is adult cord blood. Let's move off of this politicized debate
which is about the definition of young human life. Let's move off this
debate and do something that is curing people. And we can.
That is the way we ought to go in this debate. We ought to also pass
the Enzi proposal that gets more people health insurance, which is
where we should focus this debate now because that is what we are
talking about, rather than a politicized issue of embryonic stem cell
research, which has not worked and is not working.
I yield the floor.

Exhibit 1

Adult & Non-Embryonic Stem Cell Research

Advances & Updates for April 2006

HIGHLIGHT OF THE MONTH--STEM CELL HOPE FOR LIVER PATIENTS

British doctors reported treatment of 5 patients with liver
failure with the patients' own adult stem cells. Four of the
5 patients showed improvement, and 2 patients regained near
normal liver function. The authors noted: ``Liver
transplantation is the only current therapeutic modality for
liver failure but it is available to only a small proportion
of patients due to the shortage of organ donors. Adult stem
cell therapy could solve the problem of degenerative
disorders, including liver disease, in which organ
transplantation is inappropriate or there is a shortage of
organ donors.''--Stem Cells Express, Mar. 30, 2006

[[Page 7306]]

ADVANCES IN HUMAN TREATMENTS USING ADULT STEM CELLS--

Buerger's Disease: Scientists in Korea using adult stem
cell treatments showed significant improvement in the limbs
of patients with Buergers disease, where blood vessels are
blocked and inflamed, eventually leading to tissue
destruction and gangrene in the limb. Out of 27 patients
there was a 79% positive response rate and improvement in the
limbs, including the healing of previously non-healing
ulcers.--Stem Cells Express, Jan. 26, 2006
Bladder Disease: Doctors at Wake Forest constructed new
bladders for 7 patients with bladder disease, using the
patients' own progenitor cells grown on an artificial
framework in the laboratory. When implanted back into the
patients, the tissue-engineered bladders appeared to function
normally and improved the patients' conditions. ``This
suggests that tissue engineering may one day be a solution to
the shortage of donor organs in this country for those
needing transplants,'' said Dr. Anthony Atala, the lead
researcher.--The Lancet, Apr. 4, 2006; reported by the AP,
Apr. 4, 2006
Lupus: Adult Stem Cell Transplant Offers Promise for Severe
Lupus--Dr. Richard Burt of Northwestern Memorial Hospital is
pioneering new research that uses a patient's own adult stem
cells to treat extremely severe cases of lupus and other
autoimmune diseases such as multiple sclerosis and rheumatoid
arthritis. In a recent study of 50 patients with lupus, the
treatment with the patients' adult stem cells resulted in
stabilization of the disease or even improvement of previous
organ damage, and greatly increased survival of patients.
``We bring the patient in, and we give them chemo to destroy
their immune system,'' Dr. Burt said. ``And then right after
the chemotherapy, we infuse the stems cells to make a brand-
new immune system.''--ABC News, Apr. 11, 2006; Journal of the
American Medical Assn, Feb. 1, 2006
Cancer: Bush policy may help cure cancer--``Unlike
embryonic stem cells . . . cancer stem cells are mutated
forms of adult stem cells. . . . Interest in the [adult stem
cell] field is growing rapidly, thanks in part,
paradoxically, to President George W. Bush's restrictions on
embryonic-stem-cell research. Some of the federal funds that
might otherwise have gone to embryonic stem cells could be
finding their way into cancer [adult]-stem-cell studies.''--
Time: Stem Cells that Kill, Apr. 17, 2006
Heart: Adult stem cells may inhibit remodeling and make the
heart pump better and more efficiently.--Researchers in
Pittsburgh have shown that adding a patient's adult stem
cells along with bypass surgery can give significant
improvement for those with chronic heart failure. Ten
patients treated with their own bone marrow adult stem cells
improved well beyond patients who had only standard bypass
surgery. In addition, scientists in Arkansas and Boston
administered the protein G-CSF to advanced heart failure
patients, to activate the patients' bone marrow adult stem
cells, and found significant heart improvement 9 months after
the treatment.--Journal of Thoracic and Cardiovascular
Surgery, Dec., 2005; American Journal of Cardiology, Mar.,
2006
Stroke: Mobilizing adult stem cells helps stroke patients--
Researchers in Taiwan have shown that mobilizing a stroke
patient's bone marrow adult stem cells can improve recovery.
Seven stroke patients were given injections of a protein--G-
CSF--that encourages bone marrow stem cells to leave the
marrow and enter the bloodstream. From there, they home in on
damaged brain tissue and stimulate repair. The 7 patients
showed significantly greater improvement after stroke than
patients receiving standard care.--Canadian Medical
Association Journal Mar. 3, 2006

69 Current Human Clinical Applications Using Adult Stem Cells

Anemias & Other Blood Conditions

Sickle cell anemia, Sideroblastic anemia, Aplastic anemia,
Red cell aplasia (failure of red blood cell development),
Amegakaryocytic thrombocytopenia, Thalassemia (genetic
[inherited] disorders all of which involve underproduction of
hemoglobin), Primary amyloidosis (A disorder of plasma
cells), Diamond blackfan anemia, Fanconi's anemia, Chronic
Epstein-Barr infection (similar to Mono).

Auto-Immune Diseases

Systemic lupus (auto-immune condition that can affect skin,
heart, lungs, kidneys, joints, and nervous system), Sjogren's
syndrome (autoimmune disease w/symptoms similar to
arthritis), Myasthenia (An autoimmune neuromuscular
disorder), Autoimmune cytopenia, Scleromyxedema (skin
condition), Scleroderma (skin disorder), Crohn's disease
(chronic inflammatory disease of the intestines), Behcet's
disease, Rheumatoid arthritis, Juvenile arthritis, Multiple
sclerosis, Polychondritis (chronic disorder of the cartilage)
Systemic vasculitis (inflammation of the blood vessels),
Alopecia universalis, Buerger's disease (limb vessel
constriction, inflammation).

Cancer

Brain tumors--medulloblastoma and glioma, Retinoblastoma
(cancer), Ovarian cancer, Skin cancer: Merkel cell carcinoma,
Testicular cancer, Lymphoma, Non-Hodgkin's lymphoma,
Hodgkin's lymphoma, Acute lymphoblastic leukemia, Acute
myelogenous leukemia, Chronic myelogenous leukemia, Juvenile
myelomonocytic leukemia, Cancer of the lymph nodes:
Angioimmunoblastic lymphadenopathy, Multiple myeloma (cancer
affecting white blood cells of the immune system),
Myelodysplasia (bone marrow disorder), Breast cancer,
Neuroblastoma (childhood cancer of the nervous system), Renal
cell carcinoma (cancer of the kidney), Soft tissue sarcoma
(malignant tumor that begins in the muscle, fat, fibrous
tissue, blood vessels), Various solid tumors, Waldenstrom's
macroglobulinemia (type of lymphoma), Hemophagocytic
lymphohistiocyctosis, POEMS syndrome (osteosclerotic
myeloma), Myelofibrosis.

Cardiovascular

Acute Heart damage, Chronic coronary artery disease.

Immunodeficiencies

Severe combined immunodeficiency syndrome, X-linked
lymphoproliferative syndrome, X-linked hyper immunoglobulin M
syndrome.

Liver Disease

Chronic liver failure.

Neural Degenerative Diseases & Injuries

Parkinson's disease, Spinal cord injury, Stroke damage.

Ocular

Corneal regeneration.

Wounds & Injuries

Limb gangrene, Surface wound healing, Jawbone replacement,
Skull bone repair.

Other Metabolic Disorders

Sandhoff disease (hereditary genetic disorder), Hurler's
syndrome (hereditary genetic disorder), Osteogenesis
imperfecta (bone/cartilage disorder), Krabbe Leukodystrophy
(hereditary genetic disorder), Osteopetrosis (genetic bone
disorder), Cerebral X-linked adrenoleukodystrophy.

Exhibit 2

October 27, 2004.
Senator John F. Kerry,
John Kerry for President,
Washington, DC.
Dear Senator Kerry: Recently you have made the promotion of
embryonic stem cell research, including the cloning of human
embryos for research purposes, into a centerpiece of your
campaign. You have said you will make such research a ``top
priority'' for government, academia and medicine (Los Angeles
Times, 10/17/04). You have even equated support for this
research with respect for ``science,'' and said that science
must be freed from ``ideology'' to produce miracle cures for
numerous diseases.
As professionals trained in the life sciences we are
alarmed at these statements.
First, your statements misrepresent science. In itself,
science is not a policy or a political program. Science is a
systematic method for developing and testing hypotheses about
the physical world. It does not ``promise'' miracle cures
based on scanty evidence. When scientists make such
assertions, they are acting as individuals, out of their own
personal faith and hopes, not as the voice of ``science''. If
such scientists allow their individual faith in the future of
embryonic stem cell research to be interpreted as a reliable
prediction of the outcome of this research, they are acting
irresponsibly.
Second, it is no mere ``ideology'' to be concerned about
the possible misuse of humans in scientific research. Federal
bioethics advisory groups, serving under both Democratic and
Republican presidents, have affirmed that the human embryo is
a developing form of human life that deserves respect. Indeed
you have said that human life begins at conception, that
fertilization produces a ``human being.'' To equate concern
for these beings with mere ``ideology'' is to dismiss the
entire history of efforts to protect human subjects from
research abuse.
Third, the statements you have made regarding the purported
medical applications of embryonic stem cells reach far beyond
any credible evidence, ignoring the limited state of our
knowledge about embryonic stem cells and the advances in
other areas of research that may render use of these cells
unnecessary for many applications. To make such exaggerated
claims, at this stage of our knowledge, is not only
scientifically irresponsible--it is deceptive and cruel to
millions of patients and their families who hope desperately
for cures and have come to rely on the scientific community
for accurate information.
What does science tell us about embryonic stem cells? The
facts can be summed up as follows:
At present these cells can be obtained only by destroying
live human embryos at the blastocyst (4-7 days old) stage.
They proliferate rapidly and are extremely versatile,
ultimately capable (in an embryonic environment) of forming
any kind of cell found in the developed human body. Yet there
is scant scientific evidence that embryonic stem cells will
form normal tissues in a culture dish, and the very
versatility of these cells is now known to be a disadvantage
as well--embryonic stem cells are difficult to develop into a
stable cell line, spontaneously accumulate genetic
abnormalities in culture,

[[Page 7307]]

and are prone to uncontrollable growth and tumor formation
when placed in animals.
Almost 25 years of research using mouse embryonic stem
cells have produced limited indications of clinical benefit
in some animals, as well as indications of serious and
potentially lethal side-effects. Based on this evidence,
claims of a safe and reliable treatment for any disease in
humans are premature at best.
Embryonic stem cells obtained by destroying cloned human
embryos pose an additional ethical issue--that of creating
human lives solely to destroy them for research--and may pose
added practical problems as well. The cloning process is now
known to produce many problems of chaotic gene expression,
and this may affect the usefulness and safety of these cells.
Nor is it proven that cloning will prevent all rejection of
embryonic stem cells, as even genetically matched stem cells
from cloning are sometimes rejected by animal hosts. Some
animal trials in research cloning have required placing
cloned embryos in a womb and developing them to the fetal
stage, then destroying them for their more developed tissues,
to provide clinical benefit--surely an approach that poses
horrific ethical issues if applied to humans.
Non-embryonic stem cells have also received increasing
scientific attention. Here the trajectory has been very
different from that of embryonic stem cells: Instead of
developing these cells and deducing that they may someday
have a clinical use, researchers have discovered them
producing undoubted clinical benefits and then sought to
better understand how and why they work so they can be put to
more uses. Bone marrow transplants were benefiting patients
with various forms of cancer for many years before it was
understood that the active ingredients in these transplants
are stem cells. Non-embryonic stem cells have been discovered
in many unexpected tissues--in blood, nerve, fat, skin,
muscle, umbilical cord blood, placenta, even dental pulp--and
dozens of studies indicate that they are far more versatile
than once thought. Use of these cells poses no serious
ethical problem, and may avoid all problems of tissue
rejection if stem cells can be obtained from a patient for
use in that same patient. Clinical use of non-embryonic stem
cells has grown greatly in recent years. In contrast to
embryonic stem cells, adult stem cells are in established or
experimental use to treat human patients with several dozen
conditions, according to the National Institutes of Health
and the National Marrow Donor Program (Cong. Record,
September 9, 2004, pages H6956-7). They have been or are
being assessed in human trials for treatment of spinal cord
injury, Parkinson's disease, stroke, cardiac damage, multiple
sclerosis, and so on. The results of these experimental
trials will help us better assess the medical prospects for
stem cell therapies.
In the case of many conditions, advances are likely to come
from sources other than any kind of stem cell. For example,
there is a strong scientific consensus that complex diseases
such as Alzheimer's are unlikely to be treated by any stem
cell therapy. When asked recently why so many people
nonetheless believe that embryonic stem cells will provide a
cure for Alzheimer's disease, NIH stem cell expert Ron McKay
commented that ``people need a fairy tale'' (Washington Post,
June 10, 2004, page A3). Similarly, autoimmune diseases like
juvenile diabetes, lupus and MS are unlikely to benefit from
simple addition of new cells unless the underlying problem--a
faulty immune system that attacks the body's own cells as
though they were foreign invaders--is corrected.
In short, embryonic stem cells pose one especially
controversial avenue toward understanding and (perhaps)
someday treating various degenerative diseases. Based on the
available evidence, no one can predict with certainty whether
they will ever produce clinical benefits--much less whether
they will produce benefits unobtainable by other, less
ethically problematic means.
Therefore, to turn this one approach into a political
campaign--even more, to declare that it will be a ``top
priority'' or receive any particular amount of federal
funding, regardless of future evidence or the usual
scientific peer review process--is, in our view,
irresponsible. It is, in fact, a subordination of science to
ideology.
Because politicians, biotechnology interests and even some
scientists have publicly exaggerated the ``promise'' of
embryonic stem cells, public perceptions of this avenue have
become skewed and unrealistic. Politicians may hope to
benefit from these false hopes to win elections, knowing that
the collision of these hopes with reality will come only
after they win their races. The scientific and medical
professions have no such luxury. When desperate patients
discover that they have been subjected to a salesman's pitch
rather than an objective and candid assessment of
possibilities, we have reason to fear a public backlash
against the credibility of our professions. We urge you not
to exacerbate this problem now by repeating false promises
that exploit patients' hopes for political gain.
Signed by 57 doctors.

The PRESIDING OFFICER (Mr. Cornyn). The Senator from Minnesota is
recognized.
Mr. DAYTON. Mr. President, I ask unanimous consent to speak for 15
minutes as in morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.

Report on Hurricane Katrina

Mr. DAYTON. Mr. President, last week the Senate Committee on Homeland
Security and Governmental Affairs, of which I am a member, approved its
report titled ``Hurricane Katrina, A Nation Still Unprepared.'' The
committee's distinguished chairman set today as the deadline for
additional views.
I reluctantly voted not to approve that draft of the report last week
because it is seriously incomplete. While it is still lacking all of
the information, documents, and testimony which President Bush and his
subordinates denied the committee, last March 15 the ranking member
asked the chairman to subpoena witnesses and documents that have been
withheld by the White House. Regrettably, she declined to do so.
Earlier this year, on January 12, the chairman and ranking member
wrote the White House Chief of Staff, Mr. Andrew Card, regarding the
information they had previously requested. Their letter stated, in
part:

This practice (of withholding information) must cease.

It continued:

We are willing to discuss claims of executive privilege
asserted by the White House, either directly or through a
Federal agency. But we will not stand for blanket
instructions to refuse answering any questions concerning any
communications with the EOP [Executive Office of the
President].

Their insistence that either administration officials comply with
this oversight committee's rightful demands or the President invoke his
executive privilege not to do so was entirely appropriate.
Unfortunately, when Mr. Card and his subordinates still refused to
comply, the chairman denied the ranking member's request to issue
subpoenas.
Regrettably, at its markup of the draft report, the Senate committee
failed to support my motion to subpoena those documents and witnesses,
which were being withheld by the White House without claim to executive
privilege, and which were being wrongfully denied by executive
agencies.
The administration's refusal to comply and cooperate with this
investigation is deplorable, as is the Homeland Security Committee's
failure to back the chairman and ranking member's proper insistence
that the White House do so. That committee is charged by the full
Senate with the responsibility to oversee the agencies, programs, and
activities that are related to homeland security. The committee was
expressly directed by the Senate majority leader to examine the Bush
administration's failure to respond quickly or effectively to the
disasters caused by Hurricane Katrina. This investigation is not
complete without all of the information requested from the
administration. Furthermore, the report's findings and conclusions can
hardly be considered reliable if the White House has decided what
information to provide and what information to withhold from the
committee.
This unfortunate acquiescence confirms the judgment of the Senate
Democratic leader that an independent bipartisan commission was
necessary to ensure complete and unbiased investigation into the failed
Federal, State, and local responses to Hurricane Katrina. His request
has been repeatedly denied by the majority, with the assurance that the
Senate committee would fulfill those responsibilities. Tragically and
reprehensibly, it has failed to do so. Thus, the committee failed the
Senate's constitutional obligations to be an independent, coequal
branch of Government from the executive. It also failed the long-
suffering victims of Hurricane Katrina, who deserve to know why their
governments failed them, and all of the American people, who depend
upon their elected representatives to protect their lives and their
interests, without regard to partisan political considerations. That
partisanship includes unjustified protection of an administration of
the

[[Page 7308]]

same political party, as much as undue criticism of one from another
party.
That partisan protectionism is especially unwarranted given
widespread agreement about the urgent need to understand the failures
during and after Hurricane Katrina and to remedy them before another
large-scale disaster, God forbid, should occur.
Now, 8 months after the hurricane, the lack of progress in cleanup,
repair, and reconstruction in devastated areas provides further
evidence of the Federal Government's continuing failure to respond
efficiently or effectively. There is no time in which the helping hand
of Government is more urgently needed and more surely deserved than
during and after a disaster. Victims are damaged or devastated
physically, emotionally, and financially.
Local officials and their public services are overwhelmed, if not
destroyed. They need a Federal emergency response organization
comprised of experienced, dedicated professionals, who have the
resources necessary to alleviate short-term suffering and commence
long-term recovery, and also have the authority to expeditiously commit
those resources.
What the failed Federal response to Hurricane Katrina showed is the
utter ineptitude of the Federal Emergency Management Agency, known as
FEMA. Even worse, FEMA's indifference and incompetence in the aftermath
of Katrina was not an isolated instance. In my direct experience with
FEMA's disaster relief responses in Minnesota, the agency is too often
a major obstruction to recovery projects rather than a principal ally.
Thus, I agree with the report's recommendation to create a new,
comprehensive emergency management organization, to prepare for and
respond to all disasters and catastrophes. I remain openminded about
whether this new entity should remain within the Department of Homeland
Security, as this recommendation intends, or be established as a
separate Federal agency. The challenge for the committee, for all of
Congress, and for the administration will be to actually recreate an
existing Federal agency which has become dysfunctional and
nonfunctional. Merely ``reforming'' FEMA by rearranging some boxes and
lines in its organizational chart, revising it, and giving its head a
new title, will be woefully inadequate. The new organization must be
more streamlined, centralized, and compact than its predecessor. It
must be less bureaucratic, less consumed with regulatory minutiae, and
less resistant to local recovery initiatives. It must spend less time
creating complex plans and cumbersome procedures, and more time in
training and perfecting action responses to emergency situations.
History shows that ``if a student does not learn the lesson, the
teacher reappears.'' This report describes some of the most important
lessons from the failed response to Hurricane Katrina. The committee's
and this Congress's subsequent actions to correct these serious
deficiencies before the next catastrophe will indicate whether those
lessons will be learned.
I yield the floor and suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. AKAKA. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. AKAKA. Mr. President, I ask unanimous consent that I be allowed
to speak for 10 minutes as in morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.

Native Hawaiian Government Reorganization Act of 2005

Mr. AKAKA. Mr. President, I rise today to talk about bipartisan
legislation that is of critical importance to the people of Hawaii. S.
147, the Native Hawaiian Government Reorganization Act of 2005, would
extend the Federal policy of self-governance and self-determination to
Hawaii's indigenous peoples, Native Hawaiians, by authorizing a process
for the reorganization of a Native Hawaiian governing entity for the
purposes of a government-to-government relationship with the United
States.
Together with my senior Senator and the rest of Hawaii's
congressional delegation, I first introduced this bill in 1999. The
bill passed the House in 2000, but, unfortunately, the Senate adjourned
before we could complete consideration of that bill.
Since then, I have introduced a bill every Congress. In every
Congress, the committees of jurisdiction--the Senate Committee on
Indian Affairs and the House Committee on Resources--have favorably
reported the bill and its companion measure.
I thank the majority leader, the senior Senator from Tennessee, who
is working to uphold his commitment to bring this bill to the Senate
floor for a debate and rollcall vote. I must tell my colleagues that he
did try to meet his commitment in September 2005 and did schedule it
for the floor. But at that time, Katrina happened, and we took it off
the calendar.
I also appreciate the efforts of my colleague from Arizona who
opposes the bill on substance, but has worked with me to uphold his
promise to allow the bill to come to the floor for debate and rollcall
vote.
S. 147 does three things. First, it authorizes the Office of Native
Hawaiian Relations in the Department of the Interior. The office is
intended to serve as a liaison between Native Hawaiians and the United
States. It is not intended to become another Bureau of Indian Affairs,
as the current program for Native Hawaiians will remain with the
agencies that currently administer those programs.
Second, the bill establishes the Native Hawaiian interagency
coordinating group. This is a Federal working group to be composed of
representatives from Federal agencies who administer programs and
services for Native Hawaiians. There is no statutory requirement for
these agencies to work together. This working group can coordinate
policies to ensure consistency and prevent unnecessary duplication in
Federal policies impacting Native Hawaiians.
Finally, the bill authorizes a process for the reorganization of the
Native Hawaiian governing entity. And we ask: Why do we need to
organize the entity? It is because the Native Hawaiian Government was
overthrown with the assistance of U.S. agents in 1893. Rather than shed
the blood of the people, our beloved queen, Queen Lili`uokalani,
abdicated her throne after being arrested and imprisoned in her own
home.
Following the overthrow, a republic was formed. Any reformation of a
native governing entity has been discouraged. Despite this fact, Native
Hawaiians have established distinct communities and retained their
language, culture, and traditions. They have done so in a way that also
allows other cultures to flourish in Hawaii. Now their generosity is
being used against them by opponents of this bill who claim that
because Native Hawaiians do not have a governing entity, they cannot
partake in the Federal policy of self-governance and self-determination
that is offered to their native brethren in the United States.
My bill authorizes a process for the reorganization of the Native
Hawaiian governing entity for the purposes of a federally recognized
government-to-government relationship. There are many checks and
balances in this process which has the structure necessary to comply--
to comply--with Federal law and still maintains the flexibility for
Native Hawaiians to determine the outcome of this process.
Further, my bill includes a negotiations process between the Native
Hawaiian governing entity, the State of Hawaii, and the United States
to address issues such as lands, natural resources, assets, criminal
and civil jurisdiction, and historical grievances. Nothing that is
currently within the jurisdiction of another level of government can be
conveyed to the Native Hawaiian Government without going through this
negotiations process.
I am proud of the fact that this bill respects the rights of Hawaii's
indigenous peoples through a process that is

[[Page 7309]]

consistent with Federal law and it provides the structured process for
the people of Hawaii to address the longstanding issues which have
plagued both Native Hawaiians and non-Native Hawaiians since the
overthrow of the Kingdom of Hawaii.
I want to reiterate to my colleagues that this bill is not race
based. This bill is based on the Federal policies toward indigenous
peoples. Those who characterize this bill as race based fail to
understand the Federal policies toward indigenous peoples. Those who
characterize this bill as race based fail to understand the legal and
political relationship the United States had with the indigenous
peoples and their governments preexisting the United States.
Finally, those who characterize this bill as race based are saying
that Native Hawaiians are not native enough. I find this offensive. And
I ask that my colleagues join me in my efforts to bring parity to
Native Hawaiians by enacting my bill.
This effort will continue from day-to-day here. We will continue to
bring forward the history of Hawaii and the reasons why we are trying
to enact this bill, not only for the benefit of the indigenous people
of Hawaii but for the benefit of the United States as well.
Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. VOINOVICH. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Thune). Without objection, it is so
ordered.

____________________

MORNING BUSINESS

Mr. VOINOVICH. Mr. President, I ask unanimous consent that there now
be a period of morning business with Senators permitted to speak for up
to 10 minutes each.
The PRESIDING OFFICER. Without objection, it is so ordered.

____________________

VOTE EXPLANATION

Mr. DURBIN. Mr. President, yesterday, the Senate voted on two motions
to invoke cloture to proceed to legislation regarding medical
malpractice. Due to a mechanical problem with the plane on my flight
from Chicago, I was necessarily absent for this debate and the first
vote. Had I been present for that vote, I would have voted against the
motion to invoke cloture, and I did vote against the second motion.
Since 2003, the last time Congress considered this issue, 34 States
have passed malpractice legislation. Four additional States have
pending legislation in this year.
AMA counts 21 States as ``crisis'' States. Of those 21 States, 16
States passed legislation in the past 2 years, and two are currently
considering bills.
Instead of considering ways to cap pain and suffering damages for
injured patients, Congress should be working on other health care
priorities.
Neither S. 22 nor S. 23 do anything to address medical errors, the
underlying reason for medical malpractice lawsuits.
According to the Institute of Medicine, medical errors have caused
more American deaths per year than breast cancer, AIDS and car
accidents combined. It is equivalent to a jumbo jet liner crashing
every 24 hours for 1 year.
When I sat on the Government Affairs Committee, Dr. Carolyn Clancy,
Director of the Agency for Healthcare Research and Quality, testified
about patient safety.
She called medical errors ``a national problem of epidemic
proportions.'' She went on to say that Congress and HHS need to make
sure that health care professionals work in systems that are designed
to prevent mistakes and catch problems before they cause harm.
These bills will do nothing to reach that goal.
The most far-reaching study of the extent and cost of medical errors
in our hospitals was published in the Journal of the American Medical
Association, the authors of the study analyzed 7.45 million records
from 994 hospitals in 28 States, a sample representative of about 20
percent of U.S. hospitals.
They concluded that medical injuries in hospitals ``pose a
significant threat to patients and incur substantial costs to society''
and ``are a serious epidemic confronting our health care system.''
The study found that injuries in U.S. hospitals in 2000, just 1 year,
led to approximately 32,600 deaths, at least 2.4 million extra days of
patient hospitalization and additional costs of up to $9.3 billion.
These injuries did not include adverse drug reactions or malfunctioning
medical devices.
What do these bills do about these medical errors? Nothing.
Instead, these bills place an arbitrary, one-size-fits-all cap on
noneconomic damages, forfeiting the right of a jury to decide the
appropriate level of compensation for an injured person.
The answer to this problem is not to have Congress deciding what
injured patients should receive. America has judges and juries who make
those decisions. One hundred Senators do not have all the facts and
should not place a blanket cap on all cases.
Proponents of this bill are saying it is a ``new'' medical
malpractice proposal because a patient could receive up to $750,000 in
pain and suffering as opposed to the $250,000 cap we considered in
2003.
However, the cap is still $250,000 for a doctor, a hospital or other
provider. If a patient is injured at three hospitals or by three
doctors, he or she could receive a total $750,000, but the cap is still
$250,000 per provider.
Ten years ago, Donna Harnett arrived at a hospital in Chicago, IL, in
labor with her first child. She waited nearly 5 hours before being
admitted. Following an initial examination, her doctor decided that her
labor was not progressing quickly enough and prescribed a drug to help
induce more contractions.
Later, when Donna's labor still was not progressing, her doctor broke
her water and found that it was abnormal. Rather than consider a C-
section, Donna's doctor decided to continue administering the drug, in
hopes that the labor would progress.
Six hours later, Donna still hadn't delivered, but her son's fetal
monitoring system began alarming, indicating that the baby was in
serious respiratory distress. The doctor finally decided that it was
time to perform an emergency C-section, but it was another hour before
Donna was taken into the operating room.
During that time, the doctor failed to administer oxygen or an IV to
help the baby breathe. After Martin was born, he remained in the
intensive care unit for 3 weeks. Examinations have since revealed that
Martin has substantial brain damage and cerebral palsy--a direct result
of the doctor's failure to respond to indications of serious oxygen
deprivation and deliver in a timely manner.
Donna's doctor told her never to have more children because there was
a serious problem with her DNA, which could result in similar mental
and physical disabilities in any of her future children.
Donna has since given birth to three perfectly healthy sons. Donna
sued the doctor responsible for Martin's delivery and received a
settlement, but this doctor is still licensed and practicing medicine
in Illinois--despite several other cases that have been filed against
him.
Donna is thankful that she has money from a malpractice settlement to
help cover the costs associated with Martin's care that are not covered
by health insurance--such as the used, wheelchair-accessible van that
she purchased for $50,000, and the $100,000 for renovating the new home
she purchased to make it accessible for Martin.
If the law we are debating today had been in place when Donna filed
her malpractice suit against the doctor who delivered Martin, she
doubts that she would have been able to keep him out of an institution,
because as someone who sustained permanent injuries as a newborn,
Martin would not have been eligible for an economic damage award.
The problem with malpractice premiums is a cyclical insurance
problem.

[[Page 7310]]

We had a crisis during the 1970s and again in the 1980s. Dozens of
States have passed tort reform. Yet we find ourselves faced with the
same problems. That is because we haven't looked closely at insurance
companies.
Property casualty insurers had a record year in 2005.
The property casualty insurance industry made $43 billion in profit
last year.
The difference between the cost of the policies offered to doctors
and hospitals, and the payouts from lawsuits is enormous. Payouts have
remained steady while premiums have skyrocketed.
Wonder where that money is going?
Jeffry Immelt, the CEO of GE, made $19.23 million last year.
Martin Sullivan, CEO of American International Group, made $11
million.
Stephen Lilienthal, CEO of CNA Financial Corporation, made $3.2
million.
A. Derrill Crowe, CEO of ProAssurance, made $1.5 million.
This bill completely ignores the role of insurers in this problem.
Between 1993 and 2003, the annual premiums Americans paid for their
health insurance increased by 79 percent and employer contributions to
their employee insurance increased by 90 percent.
We need to be looking at the underlying reasons for rising health
costs, and these bills do nothing to achieve that goal.
In fact, a new CBO report, published last Friday concluded that ``the
estimated effect of implementing a package of previously proposed tort
limits is near zero.''
In other words, capping pain and suffering for patients will not
bring down health insurance costs.
Proponents of limiting pain and suffering claim frivolous lawsuits
are at the root of the problem, but these bills do nothing to cut down
on the number of lawsuits. They only punish those who have legitimate
cases.
The people whose cases make it to jury verdicts have surmounted many
hurdles. Cases without merit are thrown out before they ever reach the
jury. Why would we want to limit pain and suffering for those whose
cases make it through the system?
Medical malpractice is a complicated and multifaceted problem that
requires a variety of solutions.
First, we must improve patient safety. Medicare is starting to
embrace something called Pay for Performance that will go a long way
toward improving quality.
The idea of Pay for Performance is to pay doctors based on whether
they fulfill certain quality standards and use the best treatment
methods, rather than simply reimbursing for all services performed.
Under a Medicare pilot program, doctors can qualify for bonuses if
they provide services like vaccines and cancer screening, and eliminate
unnecessary procedures.
Here is an example of how it can improve quality.
Hackensack University Medical Center in New Jersey signed up for the
program. It agreed to report its performance on a variety of measures.
Right away, the hospitals noticed some problem areas. Under clinical
guidelines, a patient who has had orthopedic surgery should be taken
off IV antibiotics after 24 hours. Longer use of the drugs don't
prevent infection, they cost money, and they can lead to greater
antibiotic resistance.
Hackensack hospital found that 25 percent of their surgery patients
were being kept on IV antibiotics longer than 24 hours. Within one week
of the launch of the Pay for Performance program, 94 percent of
patients were taken off the drugs on time.
Second, we must improve oversight. We have something called the
National Practitioner Data Bank, which was set up to allow licensing
boards and employers to check on doctors' records before they are hired
so problem doctors could not move from state to state.
This data bank is not working. According to the federal Department of
Health and Human Services, nearly 54 percent of all hospitals have
never reported a disciplinary action to the data bank.
Federal law requires that hospitals and medical boards be penalized
if they don't report to the data bank. But no fine or penalty has ever
been levied.
Further, hospitals sometimes agree not to report doctors they are
forcing from their staffs to smooth their departure. Also, physicians'
names are removed from malpractice settlements to keep them out of the
data bank.
The failings of the data bank create problems like the one faced by
Gwyneth Vives. Three hours after giving birth to a healthy boy in 2001,
Vives, a scientist at Los Alamos National Laboratory in New Mexico,
suffered a complication and bled to death.
The OB/GYN who tended to Ms. Vives had a troubled history. She had
previously been forced to leave a job at Duke University Medical Center
in North Carolina when questions arose about her surgical skills and
her complication rate.
According to the New Mexico Medical Board, she lied to get her New
Mexico license, saying she had never lost hospital privileges.
After Ms. Vives died, the OB/GYN went to Michigan and got a license.
We must improve the national practitioner database system so the few
doctors who are causing medical injuries cannot simply move to another
State.
Contrary to popular belief about frivolous lawsuits, 95 percent of
people who are injured by a doctor do not sue.
Studies have shown that the most significant reason people sue is
because they feel their doctor or hospital did not acknowledge the
problem, or apologize. In other words, they are angry.
Based on this data, a program called ``Sorry Works'' has been
launched. Under the program, doctors and hospital staff conduct
analyses after every patient injury, and if a medical error caused the
problem, the doctors and hospital staff apologize, provide solutions to
fix the problem, and offer upfront compensation to the patient, family,
and their attorney.
This approach helps alleviate anger and actually reduces the chances
of litigation and costly defense litigation bills. The program has
worked successfully at hospitals such as the University of Michigan
Hospital system, Stanford Medical Center, Children's Hospitals and
Clinics of Minnesota, and the VA Hospital in Lexington, Kentucky.
I am proud to say that Illinois is the first State to enact a Sorry
Works pilot program statewide.
My colleague from Illinois, Barack Obama, has introduced a bill in
the U.S. Senate to facilitate federal funding for apology programs.
The insurance industry has a blanket exemption from Federal antitrust
laws. Using their exemption, insurers can collude to set rates,
resulting in higher premiums than true competition would achieve--and
because of this exemption, enforcement officials cannot investigate any
such collusion.
There was an article in the Washington Post last Friday about Hank
Greenberg, the former chairman of one of the largest malpractice
insurers in the country, American Continental Group.
Mr. Greenberg has been sued by New York Attorney General Eliot
Spitzer for fraudulent transactions aimed at manipulating the insurer's
financial statements and deceiving regulators and investors.
If Congress is serious about controlling rising medical malpractice
premiums, we must revoke this blanket exemption created in the
McCarran-Ferguson act.
I am a cosponsor of a bill introduced by Senator Leahy called the
Medical Malpractice Insurance Antitrust Act. Our bill modifies the
McCarran-Ferguson Act for the most pernicious antitrust offenses: price
fixing, bid rigging, and market allocations.
Who could object to a prohibition on insurance carriers' fixing
prices or dividing territories for anticompetitive purposes. After all,
the rest of our Nation's industries manage either to abide by these
laws or pay the consequences.
We need to stop insurers from gouging doctors and hospitals and this
bill is a step in the right direction.

[[Page 7311]]

____________________

LOCAL LAW ENFORCEMENT ENHANCEMENT ACT OF 2005

Mr. SMITH. Mr. President, I rise today to speak about the need for
hate crimes legislation. Each Congress, Senator Kennedy and I introduce
hate crimes legislation that would add new categories to current hate
crimes law, sending a signal that violence of any kind is unacceptable
in our society. Likewise, each Congress I have come to the floor to
highlight a separate hate crime that has occurred in our country.
On March 7, 2006, in New York, NY, Victor Lopez and David Andrade
were sentenced separately to 8 years in prison for their involvement in
a series of beatings that targeted gay men. Lopez and Andrade would
pick up gay men, then beat and rob them. According to police, these
attacks were motivated by the victims sexual orientation.
I believe that the Government's first duty is to defend its citizens,
to defend them against the harms that come out of hate. The Local Law
Enforcement Enhancement Act is a symbol that can become substance. I
believe that by passing this legislation and changing current law, we
can change hearts and minds as well.

____________________

HONORING OUR ARMED FORCES

Staff Sergeant Joseph E. Proctor

Mr. BAYH. Mr. President, I rise today with a heavy heart and deep
sense of gratitude to honor the life of a brave man from Indianapolis.
Joseph E. Proctor, 38 years old, was killed on May 2 in a suicide
bombing near his observation post in Iraq. Leaving his life and family
behind him, Joseph risked everything to fight for the values Americans
hold close to our hearts, in a land halfway around the world.
After September 11, many Americans, including Joseph, felt a deep
calling to help their country in its time of need. In the wake of the
attacks, despite his family's concerns over his safety, Joseph signed
up for the Indiana National Guard, where he had served 20 years ago as
a young man. After his Guard service in the mid-1980s, he went into the
Army on active duty and served in Desert Storm. Joseph re-enlisted in
the Guard in 2002, and began work as a refueler in Iraq. His brother
Eddie told a local news outlet that Joseph had seen his military
service as a way to help out fellow soldiers. He recounted Joseph's
selflessness, saying that one of the reasons Joseph went to Iraq was to
give other soldiers a break to come home and see their families. At the
time of his death, he was supposed to return home in just 2 weeks.
Joseph was killed while serving his country in Operation Iraqi
Freedom. He was assigned to the 638th Aviation Support Battalion in
Noblesville. This brave soldier leaves behind his wife, Beth, and three
children, Joe, 20, Cassandra, 17, and Adam, 11, years old.
Today, I join Joseph's family and friends in mourning his death.
While we struggle to bear our sorrow over this loss, we can also take
pride in the example he set, bravely fighting to make the world a safer
place. It is his courage and strength of character that people will
remember when they think of Joseph, a memory that will burn brightly
during these continuing days of conflict and grief.
Joseph was known for his dedication to his family and his love of
country. Today and always, Joseph will be remembered by family members,
friends and fellow Hoosiers as a true American hero and we honor the
sacrifice he made while dutifully serving his country.
As I search for words to do justice in honoring Joseph's sacrifice, I
am reminded of President Lincoln's remarks as he addressed the families
of the fallen soldiers in Gettysburg: ``We cannot dedicate, we cannot
consecrate, we cannot hallow this ground. The brave men, living and
dead, who struggled here, have consecrated it, far above our poor power
to add or detract. The world will little note nor long remember what we
say here, but it can never forget what they did here.'' This statement
is just as true today as it was nearly 150 years ago, as I am certain
that the impact of Joseph's actions will live on far longer that any
record of these words.
It is my sad duty to enter the name of Joseph Proctor in the official
record of the U.S. Senate for his service to this country and for his
profound commitment to freedom, democracy and peace. When I think about
this just cause in which we are engaged, and the unfortunate pain that
comes with the loss of our heroes, I hope that families like Joseph's
can find comfort in the words of the prophet Isaiah who said, ``He will
swallow up death in victory; and the Lord God will wipe away tears from
off all faces.''
May God grant strength and peace to those who mourn, and may God be
with all of you, as I know He is with Joseph.

Honoring Corporal Eric Lueken

Mr. President, I rise today with a heavy heart and deep sense of
gratitude to honor the life of a brave young Marine from Southern
Indiana. Eric Lueken, 23 years old, died on April 22 in combat
operations in the Anbar province of Iraq. With his entire life before
him, Eric risked everything to fight for the values Americans hold
close to our hearts, in a land halfway around the world.
A 2001 graduate of Northeast Dubois High School, Eric joined the
Marine Corps in October 2003 to challenge himself and see the world. He
previously served in Afghanistan for 8 months, before heading out to
Iraq in March. He was a decorated war hero, who was awarded with a
Purple Heart, two Combat Action Ribbons, a National Defense Service
Medal, a Sea Service Deployment Ribbon, Iraq and Afghanistan Service
Medals and the Global War on Terror Service Medal. A Marine who took
his work seriously, Eric had planned to marry his girlfriend Ericka
Merkel upon his return from Iraq. She told a local paper, ``He always
put other people before him.'' I stand here today to express my
gratitude for Eric's sacrifice and that of his family and loved ones.
Eric was killed while serving his country in Operation Iraqi Freedom.
He was assigned to the 3rd Battalion, 3rd Marine Regiment, 3rd Marine
Division, III Marine Expeditionary Force based at Kaneohe Bay, Hawaii.
This brave young soldier leaves behind his parents Glenn ``Jake'' and
Melinda Lueken, and his brother Brent.
Today, I join Eric's family and friends in mourning his death. While
we struggle to bear our sorrow over this loss, we can also take pride
in the example he set, bravely fighting to make the world a safer
place. It is his courage and strength of character that people will
remember when they think of Eric, a memory that will burn brightly
during these continuing days of conflict and grief.
Eric was known for his dedication to his family and his love of
country. Today and always, Eric will be remembered by family members,
friends and fellow Hoosiers as a true American hero and we honor the
sacrifice he made while dutifully serving his country.
As I search for words to do justice in honoring Eric's sacrifice, I
am reminded of President Lincoln's remarks as he addressed the families
of the fallen soldiers in Gettysburg: ``We cannot dedicate, we cannot
consecrate, we cannot hallow this ground. The brave men, living and
dead, who struggled here, have consecrated it, far above our poor power
to add or detract. The world will little note nor long remember what we
say here, but it can never forget what they did here.'' This statement
is just as true today as it was nearly 150 years ago, as I am certain
that the impact of Eric's actions will live on far longer that any
record of these words.
It is my sad duty to enter the name of Eric Lueken in the official
record of the U.S. Senate for his service to this country and for his
profound commitment to freedom, democracy and peace. When I think about
this just cause in which we are engaged, and the unfortunate pain that
comes with the loss of our heroes, I hope that families like Eric's can
find comfort in the words of the prophet Isaiah who said, ``He will
swallow up death in victory; and the Lord God will wipe away tears from
off all faces.''

[[Page 7312]]

May God grant strength and peace to those who mourn, and may God be
with all of you, as I know He is with Eric.

Honoring Staff Sergeant Eric A. McIntosh

Mr. President, I rise today with a heavy heart and deep sense of
gratitude to honor the life of a brave young man from Indianapolis.
Eric McIntosh, 29 years old, was one of three Marines killed on April 2
during combat operations in the Anbar province of Iraq. With his entire
life before him, Eric risked everything to fight for the values
Americans hold close to our hearts, in a land halfway around the world.
A former Roncalli High School student, Eric had been in the Marines
for 10 years and was on his second tour in Iraq when he was killed.
Although he graduated high school unsure of what he wanted to do with
his life, he found purpose during his time as a Marine. After
completing his second tour, he hoped to become a recruiter for the
military. Despite having battled asthma as a child, Eric was an avid
athlete and an enthusiastic surfer. His brother Richard, who served in
the Army during the Gulf War, recalled his pride in Eric and Eric's
passion for his job. ``He loved the Marines. He loved his job,'' said
Richard. ``He was a way better soldier than I was.''
Eric was killed while serving his country in Operation Iraqi Freedom.
He was a member of the 3rd Battalion, 8th Marine Regiment, 2nd Marine
Division, II Marine Expeditionary Force. This brave young soldier
leaves behind his mother Betty, his brother Richard, his sister Lisa
Schoenly; and his wife Cynthia.
Today, I join Eric's family and friends in mourning his death. While
we struggle to bear our sorrow over this loss, we can also take pride
in the example he set, bravely fighting to make the world a safer
place. It is his courage and strength of character that people will
remember when they think of Eric, a memory that will burn brightly
during these continuing days of conflict and grief.
Eric was known for his dedication to his family and his love of
country. Today and always, Eric will be remembered by family members,
friends and fellow Hoosiers as a true American hero and we honor the
sacrifice he made while dutifully serving his country.
As I search for words to do justice in honoring Eric's sacrifice, I
am reminded of President Lincoln's remarks as he addressed the families
of the fallen soldiers in Gettysburg: ``We cannot dedicate, we cannot
consecrate, we cannot hallow this ground. The brave men, living and
dead, who struggled here, have consecrated it, far above our poor power
to add or detract. The world will little note nor long remember what we
say here, but it can never forget what they did here.'' This statement
is just as true today as it was nearly 150 years ago, as I am certain
that the impact of Eric's actions will live on far longer that any
record of these words.
It is my sad duty to enter the name of Eric McIntosh in the official
record of the U.S. Senate for his service to this country and for his
profound commitment to freedom, democracy and peace. When I think about
this just cause in which we are engaged, and the unfortunate pain that
comes with the loss of our heroes, I hope that families like Eric's can
find comfort in the words of the prophet Isaiah who said, ``He will
swallow up death in victory; and the Lord God will wipe away tears from
off all faces.''
May God grant strength and peace to those who mourn, and may God be
with all of you, as I know He is with Eric.

____________________

COSPONSORSHIP OF S. 722

Mr. BURNS. Mr. President, I rise today to express my support for
legislation introduced in the Senate which has a significant impact on
more than 800 small businesses in Montana and hundreds of thousands
more around the country. S. 722 would reduce the tax burden on every
barrel of beer, which currently stands at $18. Prior to 1991, this tax
was only half of the cost today.
This tax was originally enacted as a means to pay for the U.S. Civil
War. The lesson is that there is no such thing as a short-term tax. The
tax on beer, which accounts for 44 percent of a bottle of beer and a
whopping 80 percent cost of a six-pack, has been steadily increasing
since 1991.
The taxation of beer falls unfairly on Montanans who can least afford
to pay it. A report by Citizens for Tax Justice indicates that people
whose family's income is in the top 20 percent pay five times less in
excise beer tax than those whose family is in the bottom 20 percent.
The Tax Code was intended to raise revenue for the Federal
Government. It should not be used to influence behavior or personal
choice. This excessive tax on beer is not efficient at raising revenue,
and the cost of each dollar imposed is much greater in terms of jobs
lost and economic drag.
There are, of course, concerns about the social costs of alcohol
consumption. I am very sensitive to those concerns and am encouraged by
the reductions in drunk driving and alcohol abuse. But the fact is,
this tax punishes all beer consumers instead of the minority who act
dangerously. In any case, these problems must be addressed directly
through specific legislation rather than indirectly through the Tax
Code, which is already complicated enough.
Mr. President, because this tax has grown so much since 1991 and
because it not only affects beer wholesalers and resellers but hard-
working Montanans who enjoy these products responsibly, I am pleased to
cosponsor this legislation in the Senate.

____________________

PASSING THE MINIMUM WAGE

Mr. BIDEN. Mr. President, every day we see more evidence that this
economy is not working for millions of Americans. One troubling trend
is the growing divide between rich and poor the widening gap in income
inequality and the distribution of wealth in our country.
Over the past 24 years, the most fortunate Americans, in the top 1
percent, saw their incomes more than double from an average of $306,000
to over $700,000. During that same period, the incomes of average
Americans grew just 15 percent.
But the poorest fifth of our citizens saw their already inadequate
incomes grow just $600--over 24 years.
As a result, the top 1 percent of Americans now get over 12 percent
of all the income, up over 50 percent 24 years ago. And the share of
the average family actually dropped. The share going to the bottom
fifth dropped even more.
We are moving apart, not coming together, as a nation. Last year, the
Chair of the Federal Reserve called growing concentration of income in
the hands of a tiny minority ``a really serious problem.''
There are many things we need to do to get our economy working for
working families. One place to start is at the bottom among those
Americans who work at full-time jobs and remain below the poverty line.
We should not permit that to happen. If we honor work, we have to
reward it. We should not stand for any American to work a full-time job
and come home too poor to meet the basic needs.
The minimum wage has not increased since 1996--and all of that
increase has been wiped out by the cost of living. The minimum wage
today, at $5.15 an hour, is even worth less in today's dollars than the
$4.25 rate it replaced.
Today, the minimum wage is worth only a third of the average hourly
wage of American workers, the lowest level in more than half a century.
The bottom rung of the ladder of opportunity is broken. It is time to
fix it.
That is why I am a cosponsor of S. 1062, which will raise the minimum
wage in three stages, over the next 3 years, to $7.25 an hour.
That means a pay raise for over 7 million workers and lifting the
floor under everybody's wages.
It has been 10 years since we last raised the minimum wage. Over the
past few years, we have passed tax cuts that last year alone gave over
$100,000 to the wealthiest among us. The gap between rich and poor is
now as big as it was during the Great Depression.

[[Page 7313]]

Raising the minimum wage is only the first step in restoring balance
and fairness to our economy. But it is past time for us to take that
step. We must not wait any longer.

____________________

BE KIND TO ANIMALS WEEK

Mr. ALLARD. Mr. President, I am pleased to announce that this week,
May 7 to 13, 2006, has been designated by the American Humane
Association as the 92nd Be Kind to Animals Week. The American Humane
Association, which is headquartered in Englewood, CO, was founded in
1877 and is the oldest national organization dedicated to the mission
of preventing cruelty to animals, as well as to children. Through this
work, American Humane has helped America shed light on the nature and
origins of cruelty and through this annual observance reminds us that
the practice of kindness can both heal hurt and yield constructive
reform.
When, in 1915, American Humane launched the Nation's first national
week for animals, its purpose was simple: ``to direct the attention of
the public to the importance of giving proper care and attention to
animals.'' This message resonated powerfully with Americans and quickly
evolved into a national public education campaign with a broader
mission: promoting the teaching of humane education in our schools;
promoting the good works of animal shelters; and helping Americans
understand the unique bond between humans and animals.
Be Kind to Animals Week is the oldest event of its kind. Each year it
reminds us how animals enrich our lives through their companionship,
friendship and love. Over the last 91 years, a central theme of this
annual event has been the importance of teaching the principles of
kindness and compassion to children. Humane groups spend much of their
time reacting to mistreatment of animals as it occurs. American Humane
believes that, if we share our humane values with our children, these
problems can be prevented and our society made safer and kinder.
American Humane's Be Kind to Animals Week is as much a lifelong
attitude as it is a weeklong event. It is about animal shelters,
veterinarians, humane educators, animal control professionals, and the
faith community promoting discussion and reflection about kindness to
animals, to individuals, within families and perhaps most important,
within communities. But Be Kind to Animals Week isn't just about
animals. It is also about children and those who care for and about
them.
As a veterinarian, I have seen firsthand how important animals are to
people. When a family adopts a pet, it becomes one of them. Usually,
when people bring an animal to a veterinarian, it is because there is
something wrong with the animal. It was always obvious to me the love
that people had for their animals. The illness of a pet can cause great
sorrow, but the healing of a pet brings great joy. Many studies have
shown the increased happiness and healing powers of spending time with
a pet.
During Be Kind to Animals Week, we should all keep in mind a simple
but powerful message. The week should serve as a reminder that as
humans, we need to be ever more compassionate about the animals in our
world, whether they are companion pets, service animals such as seeing-
eye dogs, zoo critters, livestock, or nature's wildlife. It is a
reminder that the bond between humans and animals is a vital one and is
capable of bringing joy and healing to people of all ages. It is also a
reminder to be more kind and compassionate to our fellow man. We co-
exist in this world--human to human and human to animal--and those
bonds must be maintained, they must be kept strong.

____________________

ADDITIONAL STATEMENTS

______

HONORING SIGNATURE SCHOOL

Mr. BAYH. Mr. President, I rise today to pay tribute to
Evanville's Signature School, which was recently ranked by Newsweek
Magazine as one of the top one hundred high schools in the Nation. This
ranking is a remarkable honor to the school, and it demonstrates the
hard work and dedication to educational excellence of the students and
teachers at Signature.
I am honored to have the opportunity to commend the achievements of
Signature's students and the commitment of Signature's families and
teachers, which made this prestigious recognition possible. Now more
than ever, education is the key to greater personal opportunity. Here
in Washington, I have fought to ensure that education is available and
accessible to all our Nation's students. However, the real, heroic work
is done on the ground, in our schools. The Signature School is a
perfect example of what can happen when teachers and students unite
around the goal of achieving academic excellence.
Signature was the first charter school in Indiana, created to offer a
challenging curriculum and nurturing educational environment to its
students. Signature was a half-day program offering accelerated courses
for a decade, before the passage of Indiana's charter school law,
allowing Signature to become a full-day, independent charter school in
2002. Since then, Signature has been able to focus full-time on
offering Evansville students the opportunity to compete at a national
level. As Newsweek's rankings demonstrate, the school has certainly
succeeded in accomplishing its mission.
I wish to take a moment to pay special tribute to Signature's
teachers and principal, Vicki Schneider. With their focus on quality
education and dedication to their students, every teacher and staff
person at Signature has helped ensure that their graduates have the
necessary tools to excel in today's increasingly competitive world.
This summer, as Signature's graduates take the next step in their
lives, they do so well-prepared to assume the mantle of leadership for
their generation. I look forward to following their future successes,
and I hope they will remember their extraordinary education and someday
return the favor and give back to the youth of our country so that they
can enjoy similar opportunities.

____________________

IN RECOGNITION OF DELTA TAU DELTA'S BETA PHI CHAPTER

Mr. CARPER. Mr. President. I rise today to recognize the Beta
Phi Chapter of Delta Tau Delta for their reinstatement to the Ohio
State University's fraternity system and for the chapter's commitment
to living lives of excellence that can serve as an example for us all.
Founded at Bethany College in 1858, Delta Tau Delta began as a
response by the eight founding members to suspicions that the student-
run Neotrophian Literary Society had been compromised and that the
results of a student oratory contest had been manipulated. This
injustice was not to be tolerated by the young founding members, as
they were devoted to the idea of truth in all matters. Their response
was to found the fraternal society of Delta Tau Delta, which continues
to thrive on college campuses across America.
This devotion to the truth is only one of the hallmarks of Delta Tau
Delta. The ideals of courage, faith and power complete the quartet of
founding principles. These guiding lights have illuminated the lives of
many extraordinary young men who have undertaken the commitment that is
required to become an active member of this outstanding organization.
Those men have gone on to serve in positions of trust and great
responsibility today as CEOs of companies like GM and General Mills, as
Governor of New Mexico, as U.S. Representatives, and as U.S. Senators
of South Dakota and Delaware.
The Beta Phi chapter at the Ohio State University was founded on
November 19, 1894. More than 2,000 young men have forged their college
memories there through their participation in this chapter. Located
less than 200 yards from campus, the Delta Tau Delta house stood for
much of the past century as a testament to character, honesty, and
integrity. The reinstatement of the Beta Phi chapter represents a
return to those values.

[[Page 7314]]

These bonds of brotherhood do not dissolve at graduation. They
continue through time because the brothers of Delta Tau Delta commit
themselves to a cause that is larger than a single individual or
graduating class.
With chapters on more than 200 college campuses across America and
approximately 6,000 active members and more than 145,000 alumni, Delta
Tau Delta has had an immeasurable impact on the communities in which
its members--past and present--live and serve. Volunteer service is
vital to the improvement of any community. It is one of the primary
requirements for becoming an active member of Delta Tau Delta. By
partnering with the Adopt-A-School volunteer service organization, the
men of the Beta Phi Chapter have lent their time and energy at every
turn to mentor and tutor thousands of schoolchildren less fortunate
than they.
The Delta Tau Delta experience also allows young men to gain
experience that the average college student does not receive by
providing members with opportunities for responsibility and leadership
that are not easily found in the many traditional college settings.
Whether mentoring school children or organizing a community blood
drive, the men of Delta Tau Delta accept responsibility for more than
themselves. They learn to give back to their communities and strive for
excellence at every opportunity.
With this proud tradition in mind, the men of Delta Tau Delta's Beta
Phi chapter are to be commended and applauded for their reinstatement
to the Ohio State University community and for this chapter's return to
the principles on which it was founded more than a century ago.

____________________

IN RECOGNITION OF RETHA FISHER'S RETIREMENT

Mr. CARPER. Mr. President. I rise to today in recognition of
Retha Fisher upon her retirement. Retha has served as Westminster
Presbyterian Church's director of social services for 29 years, and her
leadership over that span of time has won her the respect and gratitude
of our entire State. She has been, and remains, a trusted friend to
many members of our congregation and of the community that we serve.
Retha was born in Fayetteville, NC, on April 18, 1936. She was the
only child of Clara and Lester McLerin. Her early childhood ambition
was to become a nurse, but she decided against it because she disliked
the sight of blood. After many years of piano and voice lessons, she
began her college career in Washington, DC, at Howard University where
she majored in music. She later decided to follow her childhood desire
to help her fellow man and changed her major to psychology and
sociology with a minor in English. It was during this time that she
made the decision to become a social worker.
After graduation and while looking for employment, Retha applied to
what was then known as the State Department of Welfare, Child Welfare
Division in Dover. During the interview process, she was asked if she
would like to take advantage of a stipend to attend graduate school.
While living in Wilmington, she attended the University of
Pennsylvania's School of Social Work and was placed in a position in
Dover. Her placement was with Child Welfare Services, and she soon
discovered that working with children was her true calling. Twelve
years later, Retha accepted a position with the Wilmington Housing
Authority as their coordinator of social services.
Throughout these many years doing her fine work, Retha maintained and
nourished some other ``loves of her life.'' She met and married Arland
Roland Fisher, whom everyone called Roland. Together they had one
daughter, Whitney Gayle Fisher, who now practices personal injury and
criminal law in Newark, NJ. After her daughter's birth, Retha left her
position to with the Wilmington Housing Authority to devote her time as
a full-time wife and mother.
In 1977, though, Retha was asked by Westminster Presbyterian Church
if she would be interested in interviewing for a job there. It was with
this wonderful opportunity that Retha found her true calling. She
became the church's director of social services, and the people of
Westminster and of Delaware have been truly blessed by this decision
for almost three decades.
Retha's service has extended far beyond the church walls and well
into the community. In 1993, she founded the Food Bank of Delaware, a
nonprofit agency that helps feed hungry people throughout our State.
The Food Bank of Delaware is the only facility in Delaware with the
equipment, warehouse, and staff to collect donations for all sectors of
the food industry and to safely and efficiently redistribute it to the
people who need it most. Through 235 member agencies, the Food Bank of
Delaware distributes over 10 million pounds of food annually.
In addition to the Food Bank of Delaware, Retha has also helped
countless low-income individuals with financial assistance. She founded
F.A.I.T.H. Center, which provides financial assistance to the poor. In
1992, she also chaired the Conectiv--now Delmarva Power--Consumer
Council, which continues to meet with representatives of the utility
and the State of Delaware to bring financial support to those who
cannot afford to pay their utility bills.
In 1989, Retha met with 10 Westminster couples to explore the
possibility of how they might help homeless families get off the street
and into adequate housing. To that end, Retha founded the Samaritans.
From case management to furniture to mentoring, the Samaritans stand
ready to provide support for the year or so that a homeless family
needs to become stabilized.
At Christmastime, Retha embodies the true spirit of the holidays.
Each year, Retha organizes and oversees Westminster's yearly program to
distribute Christmas food and gift baskets to nearly 200 clients of the
social services agencies of greater Wilmington.
Retha has not only brought financial assistance through her work in
these various programs, but she has served as a spiritual leader as
well. She has been an ear to the lonely and a person to pray with
through the hard times. She has given each of these people who have
come to her dignity and hope.
Through Retha's tireless efforts, she has made a profound difference
in the lives of thousands of Delawareans. Upon her retirement, she
leaves behind a legacy of commitment to public service for future
generations to follow. I thank her for the friendship that many of us
are privileged to share with Retha and for the inspiration that she
provides through a lifetime of caring. On behalf of all Delawareans, I
congratulate her on a truly remarkable and distinguished career and
extend to her my very best wishes for every success in the future. I
wish her and her family only the very best in all that lies
ahead.

____________________

MESSAGES FROM THE PRESIDENT

Messages from the President of the United States were communicated to
the Senate by Ms. Evans, one of his secretaries.

____________________

EXECUTIVE MESSAGES REFERRED

As in executive session the Presiding Officer laid before the Senate
messages from the President of the United States submitting sundry
nominations which were referred to the appropriate committees.
(The nominations received today are printed at the end of the Senate
proceedings.)

____________________

REPORTS OF COMMITTEES

The following reports of committees were submitted:

By Mr. STEVENS, from the Committee on Commerce, Science,
and Transportation, with an amendment in the nature of a
substitute:
S. 2389. A bill to amend the Communications Act of 1934 to
prohibit the unlawful acquisition and use of confidential
customer proprietary network information, and for other
purposes (Rept. No. 109-253).
By Mr. WARNER, from the Committee on Armed Services,
without amendment:
S. 2766. An original bill to authorize appropriations for
fiscal year 2007 for military activities of the Department of
Defense, for

[[Page 7315]]

military construction, and for defense activities of the
Department of Energy, to prescribe personnel strengths for
such fiscal year for the Armed Forces, and for other purposes
(Rept. No. 109-254).
S. 2767. An original bill to authorize appropriations for
fiscal year 2007 for military activities of the Department of
Defense, to prescribe personnel strengths for such fiscal
year for the Armed Forces, and for other purposes.
S. 2768. An original bill to authorize appropriations for
fiscal year 2007 for military construction, and for other
purposes.
S. 2769. An original bill to authorize appropriations for
fiscal year 2007 for defense activities of the Department of
Energy, and for other purposes.

____________________

INTRODUCTION OF BILLS AND JOINT RESOLUTIONS

The following bills and joint resolutions were introduced, read the
first and second times by unanimous consent, and referred as indicated:

By Mr. DODD (for himself and Mr. Smith):
S. 2765. A bill to provide assistance to improve the health
of newborns, children, and mothers in developing countries,
and for other purposes; to the Committee on Foreign
Relations.
By Mr. WARNER:
S. 2766. An original bill to authorize appropriations for
fiscal year 2007 for military activities of the Department of
Defense, for military construction, and for defense
activities of the Department of Energy, to prescribe
personnel strengths for such fiscal year for the Armed
Forces, and for other purposes; from the Committee on Armed
Services; placed on the calendar.
By Mr. WARNER:
S. 2767. An original bill to authorize appropriations for
fiscal year 2007 for military activities of the Department of
Defense, to prescribe personnel strengths for such fiscal
year for the Armed Forces, and for other purposes; from the
Committee on Armed Services; placed on the calendar.
By Mr. WARNER:
S. 2768. An original bill to authorize appropriations for
fiscal year 2007 for military construction, and for other
purposes; from the Committee on Armed Services; placed on the
calendar.
By Mr. WARNER:
S. 2769. An original bill to authorize appropriations for
fiscal year 2007 for defense activities of the Department of
Energy, and for other purposes; from the Committee on Armed
Services; placed on the calendar.
By Mr. McCAIN (for himself, Mr. Biden, Mr. Lieberman,
and Mr. Leahy):
S. 2770. A bill to impose sanctions on certain officials of
Uzbekistan responsible for the Andijan massacre; to the
Committee on Foreign Relations.
By Mr. VITTER:
S. 2771. A bill to increase the types of Federal housing
assistance available to individuals and households in
response to a major disaster, and for other purposes; to the
Committee on Homeland Security and Governmental Affairs.
By Mr. VOINOVICH (for himself, Mr. Bingaman, Mr.
DeWine, and Mr. Akaka):
S. 2772. A bill to provide for innovation in health care
through State initiatives that expand coverage and access and
improve quality and efficiency in the health care system; to
the Committee on Health, Education, Labor, and Pensions.
By Mrs. BOXER:
S. 2773. A bill to require the Federal Government to
purchase fuel efficient automobiles, and for other purposes;
to the Committee on Homeland Security and Governmental
Affairs.

____________________

SUBMISSION OF CONCURRENT AND SENATE RESOLUTIONS

The following concurrent resolutions and Senate resolutions were
read, and referred (or acted upon), as indicated:

By Mr. COLEMAN (for himself, Ms. Landrieu, and Mr.
Craig):
S. Res. 471. A resolution recognizing that, during National
Foster Care Month, the leaders of the Federal, State, and
local governments should provide leadership to improve the
care given to children in foster care programs; considered
and agreed to.

____________________

ADDITIONAL COSPONSORS

S. 185

At the request of Mr. Nelson of Florida, the name of the Senator from
Ohio (Mr. DeWine) was added as a cosponsor of S. 185, a bill to amend
title 10, United States Code, to repeal the requirement for the
reduction of certain Survivor Benefit Plan annuities by the amount of
dependency and indemnity compensation and to modify the effective date
for paid-up coverage under the Survivor Benefit Plan.

S. 401

At the request of Mr. Harkin, the names of the Senator from Hawaii
(Mr. Inouye) and the Senator from South Dakota (Mr. Johnson) were added
as cosponsors of S. 401, a bill to amend title XIX of the Social
Security Act to provide individuals with disabilities and older
Americans with equal access to community-based attendant services and
supports, and for other purposes.

S. 713

At the request of Mr. Roberts, the name of the Senator from Idaho
(Mr. Craig) was added as a cosponsor of S. 713, a bill to amend the
Internal Revenue Code of 1986 to provide for collegiate housing and
infrastructure grants.

S. 722

At the request of Mr. Santorum, the name of the Senator from Montana
(Mr. Burns) was added as a cosponsor of S. 722, a bill to amend the
Internal Revenue Code of 1986 to reduce the tax on beer to its pre-1991
level.

S. 1278

At the request of Mr. Leahy, the name of the Senator from Hawaii (Mr.
Akaka) was added as a cosponsor of S. 1278, a bill to amend the
Immigration and Nationality Act to provide a mechanism for United
States citizens and lawful permanent residents to sponsor their
permanent partners for residence in the United States, and for other
purposes.

S. 1537

At the request of Mr. Akaka, the names of the Senator from Illinois
(Mr. Obama) and the Senator from Washington (Mrs. Murray) were added as
cosponsors of S. 1537, a bill to amend title 38, United States Code, to
provide for the establishment of Parkinson's Disease Research Education
and Clinical Centers in the Veterans Health Administration of the
Department of Veterans Affairs and Multiple Sclerosis Centers of
Excellence.

S. 1698

At the request of Mr. Kerry, the name of the Senator from Washington
(Mrs. Murray) was added as a cosponsor of S. 1698, a bill to accelerate
efforts to develop vaccines for diseases primarily affecting developing
countries and for other purposes.

S. 1774

At the request of Mr. Cornyn, the name of the Senator from New York
(Mr. Schumer) was added as a cosponsor of S. 1774, a bill to amend the
Public Health Service Act to provide for the expansion,
intensification, and coordination of the activities of the National
Heart, Lung, and Blood Institute with respect to research on pulmonary
hypertension.

S. 1934

At the request of Mr. Specter, the name of the Senator from Maryland
(Ms. Mikulski) was added as a cosponsor of S. 1934, a bill to
reauthorize the grant program of the Department of Justice for reentry
of offenders into the community, to establish a task force on Federal
programs and activities relating to the reentry of offenders into the
community, and for other purposes.

S. 2039

At the request of Mr. Durbin, the name of the Senator from New York
(Mrs. Clinton) was added as a cosponsor of S. 2039, a bill to provide
for loan repayment for prosecutors and public defenders.

S. 2306

At the request of Mr. Levin, the name of the Senator from Illinois
(Mr. Durbin) was added as a cosponsor of S. 2306, a bill to amend the
National Organ Transplant Act to clarify that kidney paired donation
and kidney list donation do not involve the transfer of a human organ
for valuable consideration.

S. 2321

At the request of Mr. Santorum, the names of the Senator from North
Dakota (Mr. Dorgan), the Senator from North Carolina (Mrs. Dole) and
the Senator from Wyoming (Mr. Thomas) were added as cosponsors of S.
2321, a bill to require the Secretary of the Treasury to mint coins in
commemoration of Louis Braille.

S. 2452

At the request of Mr. Bayh, the name of the Senator from Nebraska
(Mr.

[[Page 7316]]

Hagel) was added as a cosponsor of S. 2452, a bill to prohibit
picketing at the funerals of members and former members of the armed
forces.

S. 2491

At the request of Mr. Cornyn, the name of the Senator from Idaho (Mr.
Craig) was added as a cosponsor of S. 2491, a bill to award a
Congressional gold medal to Byron Nelson in recognition of his
significant contributions to the game of golf as a player, a teacher,
and a commentator.

S. 2510

At the request of Mr. Durbin, the name of the Senator from Michigan
(Ms. Stabenow) was added as a cosponsor of S. 2510, a bill to establish
a national health program administered by the Office of Personnel
Management to offer health benefits plans to individuals who are not
Federal employees, and for other purposes.

S. 2554

At the request of Mr. Ensign, the name of the Senator from South
Carolina (Mr. Graham) was added as a cosponsor of S. 2554, a bill to
amend the Internal Revenue Code of 1986 to expand the permissible use
of health savings accounts to include premiums for non-group high
deductible health plan coverage.

S. 2562

At the request of Mr. Craig, the name of the Senator from Maine (Ms.
Snowe) was added as a cosponsor of S. 2562, a bill to increase,
effective as of December 1, 2006, the rates of compensation for
veterans with service-connected disabilities and the rates of
dependency and indemnity compensation for the survivors of certain
disabled veterans.

S. 2644

At the request of Mrs. Feinstein, the name of the Senator from
Delaware (Mr. Biden) was added as a cosponsor of S. 2644, a bill to
harmonize rate setting standards for copyright licenses under sections
112 and 114 of title 17, United States Code, and for other purposes.

S. 2652

At the request of Mrs. Feinstein, the name of the Senator from
Colorado (Mr. Allard) was added as a cosponsor of S. 2652, a bill to
amend chapter 27 of title 18, United States code, to prohibit the
unauthorized construction, financing, or, with reckless disregard,
permitting the construction or use on one's land, of a tunnel or
subterranean passageway between the United States and another country.

S. 2658

At the request of Mr. Bond, the name of the Senator from Ohio (Mr.
DeWine) was added as a cosponsor of S. 2658, a bill to amend title 10,
United States Code, to enhance the national defense through empowerment
of the Chief of the National Guard Bureau and the enhancement of the
functions of the National Guard Bureau, and for other purposes.
At the request of Mr. Leahy, the names of the Senator from Nevada
(Mr. Reid) and the Senator from Louisiana (Ms. Landrieu) were added as
cosponsors of S. 2658, supra.

S. 2674

At the request of Mr. Akaka, the name of the Senator from North
Dakota (Mr. Dorgan) was added as a cosponsor of S. 2674, a bill to
amend the Native American Languages Act to provide for the support of
Native American language survival schools, and for other purposes.

S. 2692

At the request of Mr. Levin, the name of the Senator from Michigan
(Ms. Stabenow) was added as a cosponsor of S. 2692, a bill to suspend
temporarily the duty on certain microphones used in automotive
interiors.

S. 2694

At the request of Mr. Craig, the name of the Senator from Texas (Mrs.
Hutchison) was added as a cosponsor of S. 2694, a bill to amend title
38, United States Code, to remove certain limitations on attorney
representation of claimants for veterans benefits in administrative
proceedings before the Department of Veterans Affairs, and for other
purposes.

S. 2697

At the request of Mr. Lugar, the name of the Senator from Missouri
(Mr. Bond) was added as a cosponsor of S. 2697, a bill to establish the
position of the United States Ambassador for ASEAN.

S. 2703

At the request of Mr. Leahy, the names of the Senator from Wisconsin
(Mr. Feingold), the Senator from Indiana (Mr. Bayh) and the Senator
from Connecticut (Mr. Lieberman) were added as cosponsors of S. 2703, a
bill to amend the Voting Rights Act of 1965.

S. 2704

At the request of Mr. DeWine, the name of the Senator from New York
(Mrs. Clinton) was added as a cosponsor of S. 2704, a bill to revise
and extend the National Police Athletic League Youth Enrichment Act of
2000.

S. 2723

At the request of Mr. Lautenberg, the name of the Senator from
Colorado (Mr. Salazar) was added as a cosponsor of S. 2723, a bill to
amend title XVIII of the Social Security Act to require the sponsor of
a prescription drug plan or an organization offering an MA-PD plan to
promptly pay claims submitted under part D, and for other purposes.

S. 2725

At the request of Mrs. Clinton, the names of the Senator from Indiana
(Mr. Bayh) and the Senator from Massachusetts (Mr. Kerry) were added as
cosponsors of S. 2725, a bill to amend the Fair Labor Standards Act of
1938 to provide for an increase in the Federal Minimum wage and to
ensure that increases in the Federal minimum wage keep pace with any
pay adjustments for Members of Congress.

S. 2754

At the request of Mr. Santorum, the name of the Senator from Oklahoma
(Mr. Inhofe) was added as a cosponsor of S. 2754, a bill to derive
human pluripotent stem cell lines using techniques that do not
knowingly harm embryos.

S. 2759

At the request of Mr. Smith, the name of the Senator from Ohio (Mr.
DeWine) was added as a cosponsor of S. 2759, a bill to provide for
additional outreach and education related to the Medicare program and
to amend title XVIII of the Social Security Act to provide a special
enrollment period for individuals who qualify for an income-related
subsidy under the Medicare prescription drug program.

S. RES. 320

At the request of Mr. Ensign, the names of the Senator from New York
(Mrs. Clinton) and the Senator from New York (Mr. Schumer) were added
as cosponsors of S. Res. 320, a resolution calling the President to
ensure that the foreign policy of the United States reflects
appropriate understanding and sensitivity concerning issues related to
human rights, ethnic cleansing, and genocide documented in the United
States record relating to the Armenian Genocide.

S. RES. 436

At the request of Mr. McCain, the name of the Senator from Oregon
(Mr. Smith) was added as a cosponsor of S. Res. 436, a resolution
urging the Federation Internationale de Football Association to prevent
persons or groups representing the Islamic Republic of Iran from
participating in sanctioned soccer matches.

S. RES. 469

At the request of Mr. Lieberman, the name of the Senator from
Connecticut (Mr. Dodd) was added as a cosponsor of S. Res. 469, a
resolution condemning the April 25, 2006, beating and intimidation of
Cuban dissident Martha Beatriz Roque.

____________________

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

Mr. DODD (for himself and Mr. Smith):
S. 2765. A bill to provide assistance to improve the health of
newborns, children, and mothers in developing countries, and for other
purposes; to the Committee on Foreign Relations.
Mr. President, I rise today to introduce, on behalf of myself and my
friend, Senator Gordon Smith of Oregon, the Child Health Investment for
Long-term Development (CHILD and Newborn) Act of 2006. This legislation
would perform four simple, yet critically important functions.

[[Page 7317]]

First, it would require the Administration to develop and implement a
strategy to improve the health of, and reduce mortality rates among,
newborns, children, and mothers in developing countries.
Second, it would mandate the establishment of a U.S. Government task
force to assess, monitor, and evaluate the progress of U.S. efforts to
meet the United Nations Millennium Development Goals by 2015--
specifically as those goals relate to reducing mortality rates for
mothers and for children less than 5 years of age in developing
countries.
Third, it would authorize the President to furnish assistance for
programs whose goal is to improve the health of newborns, children, and
mothers in developing countries.
And fourth, this legislation would authorize appropriations to carry
out its provisions--$660 million for fiscal year 2007, and $1.2 billion
for each of fiscal years 2008-2011.
I know that some of my colleagues will look at this bill and ask why
the U.S. should devote such large amounts of resources to combating
child and maternal mortality in the developing world. Certainly, nobody
would deny that it's an important cause, but should it really be this
much of a priority?
I would argue that the answer to this is yes. Why? Because with U.S.
leadership, the current reality for mothers and their young children in
the developing world can be changed dramatically.
What is that reality?
Almost 11 million children under the age of 5 die every year in the
developing world--that's approximately 30,000 each day. About four
million of those children die in their first four weeks of life. In
many cases, they aren't even provided with a fighting chance. Indeed,
for children under the age of five in the developing world, preventable
or treatable diseases such as measles, tetanus, diarrhea, pneumonia,
and malaria are the most common causes of death.
Each year, more than 525,000 women die from causes related to
pregnancy and childbirth--more than 1,400 each day. Ninety-nine percent
of these deaths occur in the developing world. And the lifetime risk of
an African woman dying from a pregnancy or childbirth-related
complication is I in 16, a high level of risk that is all the more
striking when compared to the same risk for women in more developed
regions--1 in 2,800. Some of the most common risk factors for maternal
death in developing countries include early pregnancy and childbirth,
closely spaced births, infectious diseases, malnutrition, and
complications during childbirth.
Mr. President, the deaths of these nearly 12 million mothers and
children are from largely preventable causes. This is a tragic
situation, and it shouldn't be the case.
Luckily, we can combat these high levels of mortality--and it won't
require lots of sophisticated technology. Instead, it will require
simple measures that we take for granted here in the developed world.
For instance, it is estimated that two-thirds of deaths among
children under 5 years of age--that's 7.1 million children, including 3
million new-
borns--could be prevented by low-cost, low-tech health and nutritional
interventions. These interventions include encouraging breastfeeding;
providing vitamin supplements, immunizations, and antibiotics; offering
oral rehydration therapy with clean water; and expansion of basic
clinical care.
For expecting mothers, simple steps such as birth spacing, access to
preventive care, skilled birth attendants, and emergency obstetric care
can help reduce maternal morality rates. And keeping mothers healthy is
critical because the welfare of newborns and infants is inextricably
tied to the health of the mother.
Mr. President, the U.S. isn't new at this battle. Over the past 30
years, our work in promoting child survival and maternal health
globally has resulted in millions of lives being saved.
And in 2000, the U.S. joined 188 other countries in supporting eight
Millennium Development Goals laid out by the United Nations. Two of
these goals are related to child and maternal health--one calls for a
reduction by two-thirds in the mortality rate of children under 5, and
the other calls for a reduction in maternal deaths by three-quarters.
Both of these goals are targeted to be met by 2015.
But with current structures and at current funding levels, the world
is unlikely to meet these laudable goals. Certainly, the U.S. can't
meet these global needs alone. Addressing this critical issue can't be
a unilateral effort--countries around the world must also do their part
and come forward with much-needed funding.
But passing the CHILD and Newborn Act of 2006 would send a strong
message to the international community that this is a priority issue,
and it would encourage them to step up to the plate. Millions of lives
could be saved in the process.
On September 14, 2005, President Bush stated that the U.S. is
``committed to the Millennium Development Goals.'' I commend the
President for his words. But now, it is time for Congress to stand up
and make sure that the U.S. fulfills this commitment to protect
millions of innocent women and their children around the globe. I urge
my colleagues to support this bill.
I ask unanimous consent that the text of the bill be printed in the
Record.
There being no objection, the text of the bill was ordered to be
printed in the Record, as follows:

S. 2765

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

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Child Health Investment for
Long-term Development (CHILD and Newborn) Act of 2006''.

SEC. 2. FINDINGS AND PURPOSES.

(a) Findings.--Congress finds the following:
(1) Around the world, approximately 10.8 million children
under the age of five die each year, more than 30,000 per
day, almost all in the developing world.
(2) Each year in the developing world, four million
newborns die in their first four weeks of life.
(3) Sub-Saharan Africa, with only 10 percent of the world's
population, accounts for 43 percent of all deaths among
children under the age of five.
(4) Countries such as Afghanistan, Angola and Niger
experience extreme levels of child mortality, with 25 percent
of children dying before their fifth birthday.
(5) For children under the age of five in the developing
world, preventable or treatable diseases, such as measles,
tetanus, diarrhea, pneumonia, and malaria, are the most
common causes of death.
(6) Throughout the developing world, the lack of basic
health services, clean water, adequate sanitation, and proper
nutrition contribute significantly to child mortality.
(7) Hunger and malnutrition contribute to over five million
child deaths annually.
(8) The lack of low-cost antibiotics and anti-malarial
drugs contribute to three million child deaths each year.
(9) Lack of access to health services results in 30 million
children under the age of one year going without necessary
immunizations.
(10) Every year an estimated 250,000 to 500,000 vitamin A-
deficient children become blind, with one-half of such
children dying within 12 months of losing their sight.
(11) Iron deficiency, affecting over 30 percent of the
world's population, causes premature birth, low birth weight,
and infections, elevating the risk of death in children.
(12) Two-thirds of deaths of children under five years of
age, or 7.1 million children, including three million newborn
deaths, could be prevented by low-cost, low-tech health and
nutritional interventions.
(13) Exclusive breastfeeding--giving only breast milk for
the first six months of life--could prevent an estimated 1.3
million newborn and infant deaths each year, primarily by
protecting against diarrhea and pneumonia.
(14) An additional two million lives could be saved
annually by providing oral-rehydration therapy prepared with
clean water.
(15) During the 1990s, successful immunization programs
reduced polio by 99 percent, tetanus deaths by 50 percent,
and measles cases by 40 percent.
(16) Between 1998 and 2000, distribution of low-cost
vitamin A supplements saved an estimated one million lives.
(17) Expansion of clinical care of newborns and mothers,
such as clean delivery by skilled attendants, emergency
obstetric care, and neonatal resuscitation, can avert 50
percent of newborn deaths.
(18) Keeping mothers healthy is essential for child
survival because illness, complications, or maternal death
during or following

[[Page 7318]]

pregnancy increases the risk for death in newborns and
infants.
(19) Each year more than 525,000 women die from causes
related to pregnancy and childbirth, with 99 percent of these
deaths occurring in developing countries.
(20) The lifetime risk of an African woman dying from a
complication related to pregnancy or childbirth is 1 in 16,
while the same risk for a woman in a developed country is 1
in 2,800.
(21) Risk factors for maternal death in developing
countries include early pregnancy and childbirth, closely
spaced births, infectious diseases, malnutrition, and
complications during childbirth.
(22) Birth spacing, access to preventive care, skilled
birth attendants, and emergency obstetric care can help
reduce maternal mortality.
(23) The role of the United States in promoting child
survival and maternal health over the past three decades has
resulted in millions of lives being saved around the world.
(24) In 2000, the United States joined 188 other countries
in supporting eight Millennium Development Goals designed to
achieve ``a more peaceful, prosperous and just world''.
(25) Two of the Millennium Development Goals call for a
reduction in the mortality rate of children under the age of
five by two-thirds and a reduction in maternal deaths by
three-quarters by 2015.
(26) On September 14, 2005, President George W. Bush stated
before the leaders of the world: ``To spread a vision of
hope, the United States is determined to help nations that
are struggling with poverty. We are committed to the
Millennium Development Goals.''.
(b) Purposes.--The purposes of this Act are to--
(1) authorize assistance to improve the health of newborns,
children, and mothers in developing countries, including by
strengthening the capacity of health systems and health
workers;
(2) develop and implement a strategy to improve the health
of newborns, children, and mothers, including reducing child
and maternal mortality, in developing countries;
(3) to establish a task force to assess, monitor, and
evaluate the progress and contributions of relevant
departments and agencies of the Government of the United
States in achieving the United Nations Millennium Development
Goals by 2015 for reducing the mortality of children under
the age of five by two-thirds and reducing maternal mortality
by three-quarters in developing countries.

SEC. 3. ASSISTANCE TO IMPROVE THE HEALTH OF NEWBORNS,
CHILDREN, AND MOTHERS IN DEVELOPING COUNTRIES.

(a) In General.--Chapter 1 of part I of the Foreign
Assistance Act of 1961 (22 U.S.C. 2151 et seq.) is amended--
(1) in section 104(c)--
(A) by striking paragraphs (2) and (3); and
(B) by redesignating paragraph (4) as paragraph (2);
(2) by redesignating sections 104A, 104B, and 104C as
sections 104B, 104C, and 104D, respectively; and
(3) by inserting after section 104 the following new
section:

``SEC. 104A. ASSISTANCE TO IMPROVE THE HEALTH OF NEWBORNS,
CHILDREN, AND MOTHERS.

``(a) Authorization.--Consistent with section 104(c), the
President is authorized to furnish assistance, on such terms
and conditions as the President may determine, to improve the
health of newborns, children, and mothers in developing
countries.
``(b) Activities Supported.--Assistance provided under
subsection (b) shall, to the maximum extent practicable, be
used to carry out the following activities:
``(1) Activities to strengthen the capacity of health
systems in developing countries, including training for
clinicians, nurses, technicians, sanitation and public health
workers, community-based health workers, midwives and birth
attendants, peer educators, and private sector enterprises.
``(2) Activities to provide health care access to
underserved and marginalized populations.
``(3) Activities to ensure the supply, logistical support,
and distribution of essential drugs, vaccines, commodities,
and equipment to regional, district, and local levels.
``(4) Activities to educate underserved and marginalized
populations to seek health care when appropriate, including
clinical and community-based activities.
``(5) Activities to integrate and coordinate assistance
provided under this section with existing health programs
for--
``(A) the prevention of the transmission of HIV from
mother-to-child and other HIV/AIDS counseling, care, and
treatment activities;
``(B) malaria;
``(C) tuberculosis; and
``(D) child spacing.
``(6) Activities to expand access to safe water and
sanitation.
``(7) Activities to expand the use of and technical support
for appropriate technology to reduce acute respiratory
infection from firewood smoke inhalation.
``(c) Guidelines.--To the maximum extent practicable,
programs, projects, and activities carried out using
assistance provided under this section shall be--
``(1) carried out through private and voluntary
organizations, as well as faith-based organizations, giving
priority to organizations that demonstrate effectiveness and
commitment to improving the health of newborns, children, and
mothers;
``(2) carried out with input by host countries, including
civil society and local communities, as well as other donors
and multilateral organizations;
``(3) carried out with input by beneficiaries and other
directly affected populations, especially women and
marginalized communities; and
``(4) designed to build the capacity of host country
governments and civil society organizations.
``(d) Annual Report.--Not later than January 31 of each
year, the President shall transmit to Congress a report on
the implementation of this section for the prior fiscal year.
``(e) Definitions.--In this section:
``(1) AIDS.--The term `AIDS' has the meaning given the term
in section 104B(g)(1) of this Act.
``(2) HIV.--The term `HIV' has the meaning given the term
in section 104B(g)(2) of this Act.
``(3) HIV/AIDS.--The term `HIV/AIDS' has the meaning given
the term in section 104B(g)(3) of this Act.''.
(b) Conforming Amendments.--The Foreign Assistance Act of
1961 (22 U.S.C. 2151 et seq.) is amended--
(1) in section 104(c)(2) (as redesignated by subsection
(a)(1)(B) of this section), by striking ``and 104C'' and
inserting ``104C, and 104D'';
(2) in section 104B (as redesignated by subsection (a)(2)
of this section)--
(A) in subsection (c)(1), by inserting ``and section 104A''
after ``section 104(c)'';
(B) in subsection (e)(2), by striking ``section 104B, and
section 104C'' and inserting ``section 104C, and section
104D''; and
(C) in subsection (f), by striking ``section 104(c), this
section, section 104B, and section 104C'' and inserting
``section 104(c), section 104A, this section, section 104C,
and section 104D'';
(3) in subsection (c) of section 104C (as redesignated by
subsection (a)(2) of this section), by inserting ``and
section 104A'' after ``section 104(c)'';
(4) in subsection (c) of section 104D (as redesignated by
subsection (a)(2) of this section), by inserting ``and
section 104A'' after ``section 104(c)''; and
(5) in the first sentence of section 119(c), by striking
``section 104(c)(2), relating to Child Survival Fund'' and
inserting ``section 104A''.

SEC. 4. DEVELOPMENT OF STRATEGY TO IMPROVE THE HEALTH OF
NEWBORNS, CHILDREN, AND MOTHERS IN DEVELOPING
COUNTRIES.

(a) Development of Strategy.--The President shall develop a
comprehensive strategy to improve the health of newborns,
children, and mothers, including reducing newborn, child, and
maternal mortality, in developing countries.
(b) Components.--The strategy developed pursuant to
subsection (a) shall include the following:
(1) Programmatic areas and interventions providing maximum
health benefits to populations at risk as well as maximum
reduction in mortality, including--
(A) costs and benefits of programs and interventions; and
(B) investments needed in identified programs and
interventions to achieve the greatest results.
(2) An identification of countries with priority needs for
the five-year period beginning on the date of the enactment
of this Act based on--
(A) the neonatal mortality rate;
(B) the mortality rate of children under the age of five;
(C) the maternal mortality rate;
(D) the percentage of women and children with limited or no
access to basic health care; and
(E) additional criteria for evaluation such as--
(i) the percentage of one-year old children who are fully
immunized;
(ii) the percentage of children under the age of five who
sleep under insecticide-treated bed nets;
(iii) the percentage of children under the age of five with
fever treated with anti-malarial drugs;
(iv) the percentage of children under the age of five who
are covered by vitamin A supplementation;
(v) the percentage of children under the age of five with
diarrhea who are receiving oral-rehydration therapy and
continued feeding;
(vi) the percentage of children under the age of five with
pneumonia who are receiving appropriate care;
(vii) the percentage of the population with access to
improved sanitation facilities;
(viii) the percentage of the population with access to safe
drinking water;
(ix) the percentage of children under the age of five who
are underweight for their age;
(x) the percentage of births attended by skilled health
care personnel;

[[Page 7319]]

(xi) the percentage of women with access to emergency
obstetric care;
(xii) the potential for implementing newborn, child, and
maternal health interventions at scale; and
(xiii) the demonstrated commitment of countries to newborn,
child, and maternal health.
(3) A description of how United States assistance
complements and leverages efforts by other donors, as well as
builds capacity and self-sufficiency among recipient
countries.
(4) An expansion of the Child Survival and Health Grants
Program of the United States Agency for International
Development to provide additional support programs and
interventions determined to be efficacious and cost-effective
in improving health and reducing mortality.
(5) Enhanced coordination among relevant departments and
agencies of the Government of the United States engaged in
activities to improve the health of newborns, children, and
mothers in developing countries.
(c) Report.--Not later than 180 days after the date of the
enactment of this Act, the President shall transmit to
Congress a report that contains the strategy described in
this section.

SEC. 5. INTERAGENCY TASK FORCE ON CHILD SURVIVAL AND MATERNAL
HEALTH IN DEVELOPING COUNTRIES.

(a) Establishment.--There is established a task force to be
known as the Interagency Task Force on Child Survival and
Maternal Health in Developing Countries (in this section
referred to as the ``Task Force'').
(b) Duties.--
(1) In general.--The Task Force shall assess, monitor, and
evaluate the progress and contributions of relevant
departments and agencies of the Government of the United
States in achieving the Millennium Development Goals by 2015
for reducing the mortality of children under the age of five
by two-thirds and reducing maternal mortality by three-
quarters in developing countries, including by--
(A) identifying and evaluating programs and interventions
that directly or indirectly contribute to the reduction of
child and maternal mortality rates;
(B) assessing effectiveness of programs, interventions, and
strategies toward achieving the maximum reduction of child
and maternal mortality rates;
(C) assessing the level of coordination among relevant
departments and agencies of the Government of the United
States, the international community, international
organizations, faith-based organizations, academic
institutions, and the private sector;
(D) assessing the contributions made by United States-
funded programs toward achieving the Millennium Development
Goals;
(E) identifying the bilateral efforts of other nations and
multilateral efforts toward achieving the Millennium
Development Goals; and
(F) preparing the annual report required by subsection (f).
(2) Consultation.--To the maximum extent practicable, the
Task Force shall consult with individuals with expertise in
the matters to be considered by the Task Force who are not
officers or employees of the Government of the United States,
including representatives of United States-based
nongovernmental organizations (including faith-based
organizations and private foundations), academic
institutions, private corporations, the United Nations
Children's Fund (UNICEF), and the World Bank.
(c) Membership.--
(1) Number and appointment.--The Task Force shall be
composed of the following members:
(A) The Administrator of the United States Agency for
International Development.
(B) The Assistant Secretary of State for Population,
Refugees and Migration.
(C) The Coordinator of United States Government Activities
to Combat HIV/AIDS Globally.
(D) The Director of the Office of Global Health Affairs of
the Department of Health and Human Services.
(E) The Under Secretary for Food, Nutrition and Consumer
Services of the Department of Agriculture.
(F) The Chief Executive Officer of the Millennium Challenge
Corporation.
(G) The Director of the Peace Corps.
(H) Other officials of relevant departments and agencies of
the Federal Government who shall be appointed by the
President.
(2) Chairperson.--The Administrator of the United States
Agency for International Development shall serve as
chairperson of the Task Force.
(d) Meetings.--The Task Force shall meet on a regular
basis, not less often than quarterly, on a schedule to be
agreed upon by the members of the Task Force, and starting
not later than 90 days after the date of the enactment of
this Act.
(e) Definition.--In this subsection, the term ``Millennium
Development Goals'' means the key development objectives
described in the United Nations Millennium Declaration, as
contained in United Nations General Assembly Resolution 55/2
(September 2000).
(f) Report.--Not later than 120 days after the date of the
enactment of this Act, and not later than April 30 of each
year thereafter, the Task Force shall submit to Congress and
the President a report on the implementation of this section.

SEC. 6. AUTHORIZATION OF APPROPRIATIONS.

(a) In General.--There are authorized to be appropriated to
carry out this Act, and the amendments made by this Act,
$660,000,000 for fiscal year 2007 and $1,200,000,000 for each
of the fiscal years 2008 through 2011.
(b) Availability of Funds.--Amounts appropriated pursuant
to the authorization of appropriations under subsection (a)
are authorized to remain available until expended.
______

By Mr. VOINOVICH (for himself, Mr. Bingaman, Mr. DeWine, and Mr.
Akaka):
S. 2772. A bill to provide for innovation in health care through
State initiatives that expand coverage and access and improve quality
and efficiency in the health care system; to the Committee on Health,
Education, Labor, and Pensions.
Mr. VOINOVICH. Mr. President, I rise to speak about a bill my
colleague Senator Bingaman and I introduced today, the Health Care
Partnership Act. For too many years, I have listened to my colleagues
on both sides of the aisle talk about the rising cost of health care
and the growing number of uninsured Americans. Yet, we have not been
able to make much progress here at the Federal level to find a
meaningful solution for the dilemma this Nation is facing regarding
access to quality, affordable health care. Next to the economy, it is
the greatest domestic challenge facing our Nation. In fact, the rising
cost of health care is a major part of what is hurting our
competitiveness in the global marketplace.
While surveys have indicated that health insurance premiums have
stabilized--a 9.2 percent increase in 2006 and 2005 and compared with a
12.3 percent in 2004; 14.7 percent in 2003; and 15.2 percent in 2002--
health insurance costs continue to be a significant factor impacting
American competitiveness. In addition, the share of costs that
individuals have paid for employer sponsored insurance has risen
roughly 2 percent each year, from 31.4 percent of health care costs in
2001 to 38.4 percent this year.
In fact, spending on health care in the United States reached $1.9
trillion in 2004--almost 16.5 percent of our GDP--the largest share
ever.
Yet, despite all the increases in health care spending some 46
million Americans--15 percent of the population--had no health
insurance at some point last year. This number has increased steadily.
In 2000, that number was 39.8 million. In 2002 it was 43.6 million.
These statistics are startling and it is time that we do something
about them. The bill Senator Bingaman and I are introducing today aims
to break the log-jam here in Washington and allow states the freedom to
explore with health care reform options. This bill would support state-
based efforts to reduce the uninsured and the cost of health care,
improve quality, improve access to care, and expand information
technology.
I have been in this situation before. As Governor of Ohio, I had to
work creatively to expand coverage and deal with increasing health care
costs for a growing number of uninsured Ohioans. I am happy to report
that we were able to make some progress toward reducing the number of
uninsured Ohioans during my time as the head of the state by
negotiating with the state unions to move to managed care; by
controlling Medicaid costs to the point where from 1995 to 1998, due to
good stewardship and management, Ohio ended up under-spending on
Medicaid without harming families; and implementing the S-CHIP program
to provide coverage for uninsured children.
Like we did in Ohio, a number of states are already actively pursuing
efforts to reduce the number of their residents who lack adequate
health care coverage. The Health Care Partnership Act will build on
what states like Massachusetts and others are doing, while providing a
mechanism to analyze results and make recommendations for future action
at the Federal level.
Under the Health Partnership Act, Congress would authorize grants to
individual states, groups of states, and

[[Page 7320]]

Indian tribes and local governments to carry out any of a broad range
of strategies to improve our Nation's health care delivery. The bill
creates a mechanism for states to apply for grants to a bipartisan
``State Health Innovation Commission'' housed at the Department of
Health and Human Services (HHS). After reviewing the state proposals,
the Commission would submit to Congress a list of recommended state
applications. The Commission would also recommend the amount of Federal
grant money each state should receive to carry out the actions
described in their plan.
Most importantly, at the end of the five-year period, the Commission
would be required to report to Congress whether the states are meeting
the goals of the Act. The Commission would then recommend future action
Congress should take concerning overall reform, including whether or
not to extend the state program.
I believe it is important that we pass this legislation to provide a
platform from which we can have a thoughtful conversation about health
care reform here in Washington. Since I have been in the Senate,
Congress has made some progress toward improving health care, most
notably for our 43 million seniors who now have access to affordable
prescription medication through the Medicare Modernization Act. We have
also increased funding for community health centers and safety net
hospitals that provide health care for the uninsured and under insured;
increased the use of technology in our health care delivery system; and
improved the safety of medical care by passing a medical errors
reporting bill.
Yet, these incremental steps are not enough, and we have been at this
too long here in Washington without comprehensive, meaningful results.
I ask for my colleagues' support for this bipartisan bill that I hope
will move us closer toward a solution to the uninsured.
I ask unanimous consent that the text of the bill be printed in the
Record.
There being no objection, the text of the bill was ordered to be
printed in the Record, as follows:

S. 2772

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

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Health Partnership Act''.

SEC. 2. STATE HEALTH REFORM PROJECTS.

(a) Purpose; Establishment of State Health Care Expansion
and Improvement Program.--The purposes of the programs
approved under this section shall include, but not be limited
to--
(1) achieving the goals of increased health coverage and
access;
(2) ensuring that patients receive high-quality,
appropriate health care;
(3) improving the efficiency of health care spending; and
(4) testing alternative reforms, such as building on the
public or private health systems, or creating new systems, to
achieve the objectives of this Act.
(b) Applications by States, Local Governments, and
Tribes.--
(1) Entities that may apply.--
(A) In general.--A State, in consultation with local
governments, Indian tribes, and Indian organizations involved
in the provision of health care, may apply for a State health
care expansion and improvement program for the entire State
(or for regions of the State) under paragraph (2).
(B) Regional groups.--A regional entity consisting of more
than one State may apply for a multi State health care
expansion and improvement program for the entire region
involved under paragraph (2).
(C) Definition.--In this Act, the term ``State'' means the
50 States, the District of Columbia, and the Commonwealth of
Puerto Rico. Such term shall include a regional entity
described in subparagraph (B).
(2) Submission of application.--In accordance with this
section, each State desiring to implement a State health care
expansion and improvement program may submit an application
to the State Health Innovation Commission under subsection
(c) (referred to in this section as the ``Commission'') for
approval.
(3) Local government applications.--
(A) In general.--Where a State declines to submit an
application under this section, a unit of local government of
such State, or a consortium of such units of local
governments, may submit an application directly to the
Commission for programs or projects under this subsection.
Such an application shall be subject to the requirements of
this section.
(B) Other applications.--Subject to such additional
guidelines as the Secretary may prescribe, a unit of local
government, Indian tribe, or Indian health organization may
submit an application under this section, whether or not the
State submits such an application, if such unit of local
government can demonstrate unique demographic needs or a
significant population size that warrants a substate program
under this subsection.
(c) State Health Innovation Commission.--
(1) In general.--Within 90 days after the date of the
enactment of this Act, the Secretary shall establish a State
Health Innovation Commission that shall--
(A) be comprised of--
(i) the Secretary;
(ii) four State governors to be appointed by the National
Governors Association on a bipartisan basis;
(iii) two members of a State legislature to be appointed by
the National Conference of State Legislators on a bipartisan
basis;
(iv) two county officials to be appointed by the National
Association of Counties on a bipartisan basis;
(v) two mayors to be appointed by the United States
Conference of Mayors on a bipartisan basis;
(vi) two individuals to be appointed by the Speaker of the
House of Representatives;
(vii) two individuals to be appointed by the Minority
Leader of the House of Representatives;
(viii) two individuals to be appointed by the Majority
Leader of the Senate;
(ix) two individuals to be appointed by the Minority Leader
of the Senate; and
(x) two individuals who are members of federally-recognized
Indian tribes to be appointed on a bipartisan basis by the
National Congress of American Indians;
(B) upon approval of \2/3\ of the members of the
Commission, provide the States with a variety of reform
options for their applications, such as tax credit
approaches, expansions of public programs such as medicaid
and the State Children's Health Insurance Program, the
creation of purchasing pooling arrangements similar to the
Federal Employees Health Benefits Program, individual market
purchasing options, single risk pool or single payer systems,
health savings accounts, a combination of the options
described in this clause, or other alternatives determined
appropriate by the Commission, including options suggested by
States, Indian tribes, or the public;
(C) establish, in collaboration with a qualified and
independent organization such as the Institute of Medicine,
minimum performance measures and goals with respect to
coverage, quality, and cost of State programs, as described
under subsection (d)(1);
(D) conduct a thorough review of the grant application from
a State and carry on a dialogue with all State applicants
concerning possible modifications and adjustments;
(E) submit the recommendations and legislative proposal
described in subsection (d)(4)(B);
(F) be responsible for monitoring the status and progress
achieved under program or projects granted under this
section;
(G) report to the public concerning progress made by States
with respect to the performance measures and goals
established under this Act, the periodic progress of the
State relative to its State performance measures and goals,
and the State program application procedures, by region and
State jurisdiction;
(H) promote information exchange between States and the
Federal Government; and
(I) be responsible for making recommendations to the
Secretary and the Congress, using equivalency or minimum
standards, for minimizing the negative effect of State
program on national employer groups, provider organizations,
and insurers because of differing State requirements under
the programs.
(2) Period of appointment; representation requirements;
vacancies.--Members shall be appointed for a term of 5 years.
In appointing such members under paragraph (1)(A), the
designated appointing individuals shall ensure the
representation of urban and rural areas and an appropriate
geographic distribution of such members. Any vacancy in the
Commission shall not affect its powers, but shall be filled
in the same manner as the original appointment.
(3) Chairperson, meetings.--
(A) Chairperson.--The Commission shall select a Chairperson
from among its members.
(B) Quorum.--A majority of the members of the Commission
shall constitute a quorum, but a lesser number of members may
hold hearings.
(C) Meetings.--Not later than 30 days after the date on
which all members of the Commission have been appointed, the
Commission shall hold its first meeting. The Commission shall
meet at the call of the Chairperson.
(4) Powers of the commission.--
(A) Negotiations with states.--The Commission may conduct
detailed discussions and negotiations with States submitting
applications under this section, either individually or in
groups, to facilitate a final set of recommendations for
purposes of subsection (d)(4)(B). Such negotiations shall
include consultations with Indian tribes, and be conducted in
a public forum.

[[Page 7321]]

(B) Hearings.--The Commission may hold such hearings, sit
and act at such times and places, take such testimony, and
receive such evidence as the Commission considers advisable
to carry out the purposes of this subsection.
(C) Meetings.--In addition to other meetings the Commission
may hold, the Commission shall hold an annual meeting with
the participating States under this section for the purpose
of having States report progress toward the purposes in
subsection (a)(1) and for an exchange of information.
(D) Information.--The Commission may secure directly from
any Federal department or agency such information as the
Commission considers necessary to carry out the provisions of
this subsection. Upon request of the Chairperson of the
Commission, the head of such department or agency shall
furnish such information to the Commission if the head of the
department or agency involved determines it appropriate.
(E) Postal services.--The Commission may use the United
States mails in the same manner and under the same conditions
as other departments and agencies of the Federal Government.
(5) Personnel matters.--
(A) Compensation.--Each member of the Commission who is not
an officer or employee of the Federal Government or of a
State or local government shall be compensated at a rate
equal to the daily equivalent of the annual rate of basic pay
prescribed for level IV of the Executive Schedule under
section 5315 of title 5, United States Code, for each day
(including travel time) during which such member is engaged
in the performance of the duties of the Commission. All
members of the Commission who are officers or employees of
the United States shall serve without compensation in
addition to that received for their services as officers or
employees of the United States.
(B) Travel expenses.--The members of the Commission shall
be allowed travel expenses, including per diem in lieu of
subsistence, at rates authorized for employees of agencies
under subchapter I of chapter 57 of title 5, United States
Code, while away from their homes or regular places of
business in the performance of services for the Commission.
(C) Staff.--The Chairperson of the Commission may, without
regard to the civil service laws and regulations, appoint and
terminate an executive director and such other additional
personnel as may be necessary to enable the Commission to
perform its duties. The employment of an executive director
shall be subject to confirmation by the Commission.
(D) Detail of government employees.--Any Federal Government
employee may be detailed to the Commission without
reimbursement, and such detail shall be without interruption
or loss of civil service status or privilege.
(E) Temporary and intermittent services.--The Chairperson
of the Commission may procure temporary and intermittent
services under section 3109(b) of title 5, United States
Code, at rates for individuals which do not exceed the daily
equivalent of the annual rate of basic pay prescribed for
level V of the Executive Schedule under section 5316 of such
title.
(6) Funding.--For the purpose of carrying out this
subsection, there are authorized to be appropriated
$3,000,000 for fiscal year 2006 and each fiscal year
thereafter.
(d) Requirements for Programs.--
(1) State plan.--A State that seeks to receive a grant
under subsection (f) to operate a program under this section
shall prepare and submit to the Commission, as part of the
application under subsection (b), a State health care plan
that shall have as its goal improvements in coverage, quality
and costs. To achieve such goal, the State plan shall comply
with the following:
(A) Coverage.--With respect to coverage, the State plan
shall--
(i) provide and describe the manner in which the State will
ensure that an increased number of individuals residing
within the State will have expanded access to health care
coverage with a specific 5-year target for reduction in the
number of uninsured individuals through either private or
public program expansion, or both, in accordance with the
options established by the Commission;
(ii) describe the number and percentage of current
uninsured individuals who will achieve coverage under the
State health program;
(iii) describe the minimum benefits package that will be
provided to all classes of beneficiaries under the State
health program;
(iv) identify Federal, State, or local and private programs
that currently provide health care services in the State and
describe how such programs could be coordinated with the
State health program, to the extent practicable; and
(v) provide for improvements in the availability of
appropriate health care services that will increase access to
care in urban, rural, and frontier areas of the State with
medically underserved populations or where there is an
inadequate supply of health care providers.
(B) Quality.--With respect to quality, the State plan
shall--
(i) provide a plan to improve health care quality in the
State, including increasing effectiveness, efficiency,
timeliness, patient focused, equity while reducing health
disparities, and medical errors; and
(ii) contain appropriate results-based quality indicators
established by the Commission that will be addressed by the
State as well as State-specific quality indicators.
(C) Costs.--With respect to costs, the State plan shall--
(i) provide that the State will develop and implement
systems to improve the efficiency of health care, including a
specific 5-year target for reducing administrative costs
(including paperwork burdens);
(ii) describe the public and private sector financing to be
provided for the State health program;
(iii) estimate the amount of Federal, State, and local
expenditures, as well as, the costs to business and
individuals under the State health program;
(iv) describe how the State plan will ensure the financial
solvency of the State health program; and
(v) provide that the State will prepare and submit to the
Secretary and the Commission such reports as the Secretary or
Commission may require to carry out program evaluations.
(D) Health information technology.--With respect to health
information technology, the State plan shall provide
methodology for the appropriate use of health information
technology to improve infrastructure, such as improving the
availability of evidence-based medical and outcomes data to
providers and patients, as well as other health information
(such as electronic health records, electronic billing, and
electronic prescribing).
(2) Technical assistance.--The Secretary shall, if
requested, provide technical assistance to States to assist
such States in developing applications and plans under this
section, including technical assistance by private sector
entities if determined appropriate by the Commission.
(3) Initial review.--With respect to a State application
for a grant under subsection (b), the Secretary and the
Commission shall complete an initial review of such State
application within 60 days of the receipt of such
application, analyze the scope of the proposal, and determine
whether additional information is needed from the State. The
Commission shall advise the State within such period of the
need to submit additional information.
(4) Final determination.--
(A) In general.--Not later than 90 days after completion of
the initial review under paragraph (3), the Commission shall
determine whether to submit a State proposal to Congress for
approval.
(B) Voting.--
(i) In general.--The determination to submit a State
proposal to Congress under subparagraph (A) shall be approved
by \2/3\ of the members of the Commission who are eligible to
participate in such determination subject to clause (ii).
(ii) Eligibility.--A member of the Commission shall not
participate in a determination under subparagraph (A) if--

(I) in the case of a member who is a Governor, such
determination relates to the State of which the member is the
Governor; or
(II) in the case of member not described in subclause (I),
such determination relates to the geographic area of a State
of which such member serves as a State or local official.

(C) Submission.--Not later than 90 days prior to October 1
of each fiscal year, the Commission shall submit to Congress
a list, in the form of a legislative proposal, of the State
applications that the Commission recommends for approval
under this section.
(D) Approval.--With respect to a fiscal year, a State
proposal that has been recommended under subparagraph (B)
shall be deemed to be approved, and subject to the
availability of appropriations, Federal funds shall be
provided to such program, unless a joint resolution has been
enacted disapproving such proposal as provided for in
subsection (e). Nothing in the preceding sentence shall be
construed to include the approval of State proposals that
involve waivers or modifications in applicable Federal law.
(5) Program or project period.--A State program or project
may be approved for a period of 5 years and may be extended
for subsequent 5-year periods upon approval by the Commission
and the Secretary, based upon achievement of targets, except
that a shorter period may be requested by a State and granted
by the Secretary.
(e) Expedited Congressional Consideration.--
(1) Introduction and Committee Consideration.--
(A) Introduction.--The legislative proposal submitted
pursuant to subsection (d)(4)(B) shall be in the form of a
joint resolution (in this subsection referred to as the
``resolution''). Such resolution shall be introduced in the
House of Representatives by the Speaker, and in the Senate,
by the Majority Leader, immediately upon receipt of the
language and shall be referred to the appropriate committee
of Congress. If the resolution is not introduced in
accordance with the

[[Page 7322]]

preceding sentence, the resolution may be introduced in
either House of Congress by any member thereof.
(B) Committee consideration.--A resolution introduced in
the House of Representatives shall be referred to the
Committee on Ways and Means of the House of Representatives.
A resolution introduced in the Senate shall be referred to
the Committee on Finance of the Senate. Not later than 15
calendar days after the introduction of the resolution, the
committee of Congress to which the resolution was referred
shall report the resolution or a committee amendment thereto.
If the committee has not reported such resolution (or an
identical resolution) at the end of 15 calendar days after
its introduction or at the end of the first day after there
has been reported to the House involved a resolution,
whichever is earlier, such committee shall be deemed to be
discharged from further consideration of such reform bill and
such reform bill shall be placed on the appropriate calendar
of the House involved.
(2) Expedited Procedure.--
(A) Consideration.--Not later than 5 days after the date on
which a committee has been discharged from consideration of a
resolution, the Speaker of the House of Representatives, or
the Speaker's designee, or the Majority Leader of the Senate,
or the Leader's designee, shall move to proceed to the
consideration of the committee amendment to the resolution,
and if there is no such amendment, to the resolution. It
shall also be in order for any member of the House of
Representatives or the Senate, respectively, to move to
proceed to the consideration of the resolution at any time
after the conclusion of such 5-day period. All points of
order against the resolution (and against consideration of
the resolution) are waived. A motion to proceed to the
consideration of the resolution is highly privileged in the
House of Representatives and is privileged in the Senate and
is not debatable. The motion is not subject to amendment, to
a motion to postpone consideration of the resolution, or to a
motion to proceed to the consideration of other business. A
motion to reconsider the vote by which the motion to proceed
is agreed to or not agreed to shall not be in order. If the
motion to proceed is agreed to, the House of Representatives
or the Senate, as the case may be, shall immediately proceed
to consideration of the resolution without intervening
motion, order, or other business, and the resolution shall
remain the unfinished business of the House of
Representatives or the Senate, as the case may be, until
disposed of.
(B) Consideration by other house.--If, before the passage
by one House of the resolution that was introduced in such
House, such House receives from the other House a resolution
as passed by such other House--
(i) the resolution of the other House shall not be referred
to a committee and may only be considered for final passage
in the House that receives it under clause (iii);
(ii) the procedure in the House in receipt of the
resolution of the other House, with respect to the resolution
that was introduced in the House in receipt of the resolution
of the other House, shall be the same as if no resolution had
been received from the other House; and
(iii) notwithstanding clause (ii), the vote on final
passage shall be on the reform bill of the other House.
Upon disposition of a resolution that is received by one
House from the other House, it shall no longer be in order to
consider the resolution bill that was introduced in the
receiving House.
(C) Consideration in conference.--Immediately upon a final
passage of the resolution that results in a disagreement
between the two Houses of Congress with respect to the
resolution, conferees shall be appointed and a conference
convened. Not later than 10 days after the date on which
conferees are appointed, the conferees shall file a report
with the House of Representatives and the Senate resolving
the differences between the Houses on the resolution.
Notwithstanding any other rule of the House of
Representatives or the Senate, it shall be in order to
immediately consider a report of a committee of conference on
the resolution filed in accordance with this subclause.
Debate in the House of Representatives and the Senate on the
conference report shall be limited to 10 hours, equally
divided and controlled by the Speaker of the House of
Representatives and the Minority Leader of the House of
Representatives or their designees and the Majority and
Minority Leaders of the Senate or their designees. A vote on
final passage of the conference report shall occur
immediately at the conclusion or yielding back of all time
for debate on the conference report.
(3) Rules of the senate and house of representatives.--This
subsection is enacted by Congress--
(A) as an exercise of the rulemaking power of the Senate
and House of Representatives, respectively, and is deemed to
be part of the rules of each House, respectively, but
applicable only with respect to the procedure to be followed
in that House in the case of a resolution, and it supersedes
other rules only to the extent that it is inconsistent with
such rules; and
(B) with full recognition of the constitutional right of
either House to change the rules (so far as they relate to
the procedure of that House) at any time, in the same manner,
and to the same extent as in the case of any other rule of
that House.
(4) Limitation.--The amount of Federal funds provided with
respect to any State proposal that is deemed approved under
subsection (d)(3) shall not exceed the cost provided for such
proposals within the concurrent resolution on the budget as
enacted by Congress for the fiscal year involved.
(f) Funding.--
(1) In general.--The Secretary shall provide a grant to a
State that has an application approved under subsection (b)
to enable such State to carry out an innovative State health
program in the State.
(2) Amount of grant.--The amount of a grant provided to a
State under paragraph (1) shall be determined based upon the
recommendations of the Commission, subject to the amount
appropriated under subsection (k).
(3) Performance-based funding allocation and
prioritization.--In awarding grants under paragraph (1), the
Secretary shall--
(A) fund a diversity of approaches as provided for by the
Commission in subsection (c)(1)(B);
(B) give priority to those State programs that the
Commission determines have the greatest opportunity to
succeed in providing expanded health insurance coverage and
in providing children, youth, and other vulnerable
populations with improved access to health care items and
services; and
(C) link allocations to the State to the meeting of the
goals and performance measures relating to health care
coverage, quality, and health care costs established under
this Act through the State project application process.
(4) Maintenance of effort.--A State, in utilizing the
proceeds of a grant received under paragraph (1), shall
maintain the expenditures of the State for health care
coverage purposes for the support of direct health care
delivery at a level equal to not less than the level of such
expenditures maintained by the State for the fiscal year
preceding the fiscal year for which the grant is received.
(5) Report.--At the end of the 5-year period beginning on
the date on which the Secretary awards the first grant under
paragraph (1), the State Health Innovation Advisory
Commission established under subsection (c) shall prepare and
submit to the appropriate committees of Congress, a report on
the progress made by States receiving grants under paragraph
(1) in meeting the goals of expanded coverage, improved
quality, and cost containment through performance measures
established during the 5-year period of the grant. Such
report shall contain the recommendation of the Commission
concerning any future action that Congress should take
concerning health care reform, including whether or not to
extend the program established under this subsection.
(g) Monitoring and Evaluation.--
(1) Annual reports and participation by states.--Each State
that has received a program approval shall--
(A) submit to the Commission an annual report based on the
period representing the respective State's fiscal year,
detailing compliance with the requirements established by the
Commission and the Secretary in the approval and in this
section; and
(B) participate in the annual meeting under subsection
(c)(4)(B).
(2) Evaluations by commission.--The Commission, in
consultation with a qualified and independent organization
such as the Institute of Medicine, shall prepare and submit
to the Committee on Finance and the Committee on Health,
Education, Labor, and Pensions of the Senate and the
Committee on Energy and Commerce, the Committee on Education
and the Workforce, and the Committee on Ways and Means of the
House of Representatives annual reports that shall contain--
(A) a description of the effects of the reforms undertaken
in States receiving approvals under this section;
(B) a description of the recommendations of the Commission
and actions taken based on these recommendations;
(C) an evaluation of the effectiveness of such reforms in--
(i) expanding health care coverage for State residents;
(ii) improving the quality of health care provided in the
States; and
(iii) reducing or containing health care costs in the
States;
(D) recommendations regarding the advisability of
increasing Federal financial assistance for State ongoing or
future health program initiatives, including the amount and
source of such assistance; and
(E) as required by the Commission or the Secretary under
subsection (f)(5), a periodic, independent evaluation of the
program.
(h) Noncompliance.--
(1) Corrective action plans.--If a State is not in
compliance with a requirements of this section, the Secretary
shall develop a corrective action plan for such State.
(2) Termination.--For good cause and in consultation with
the Commission, the Secretary may revoke any program granted
under this section. Such decisions shall be subject to a
petition for reconsideration and

[[Page 7323]]

appeal pursuant to regulations established by the Secretary.
(i) Relationship to Federal Programs.--
(1) In general.--Nothing in this Act, or in section 1115 of
the Social Security Act (42 U.S.C. 1315) shall be construed
as authorizing the Secretary, the Commission, a State, or any
other person or entity to alter or affect in any way the
provisions of title XIX of such Act (42 U.S.C. 1396 et seq.)
or the regulations implementing such title.
(2) Maintenance of effort.--No payment may be made under
this section if the State adopts criteria for benefits,
income, and resource standards and methodologies for purposes
of determining an individual's eligibility for medical
assistance under the State plan under title XIX that are more
restrictive than those applied as of the date of enactment of
this Act.
(j) Miscellaneous Provisions.--
(1) Application of certain requirements.--
(A) Restriction on application of preexisting condition
exclusions.--
(i) In general.--Subject to subparagraph (B), a State shall
not permit the imposition of any preexisting condition
exclusion for covered benefits under a program or project
under this section.
(ii) Group health plans and group health insurance
coverage.--If the State program or project provides for
benefits through payment for, or a contract with, a group
health plan or group health insurance coverage, the program
or project may permit the imposition of a preexisting
condition exclusion but only insofar and to the extent that
such exclusion is permitted under the applicable provisions
of part 7 of subtitle B of title I of the Employee Retirement
Income Security Act of 1974 and title XXVII of the Public
Health Service Act.
(B) Compliance with other requirements.--Coverage offered
under the program or project shall comply with the
requirements of subpart 2 of part A of title XXVII of the
Public Health Service Act insofar as such requirements apply
with respect to a health insurance issuer that offers group
health insurance coverage.
(2) Prevention of duplicative payments.--
(A) Other health plans.--No payment shall be made to a
State under this section for expenditures for health
assistance provided for an individual to the extent that a
private insurer (as defined by the Secretary by regulation
and including a group health plan (as defined in section
607(1) of the Employee Retirement Income Security Act of
1974), a service benefit plan, and a health maintenance
organization) would have been obligated to provide such
assistance but for a provision of its insurance contract
which has the effect of limiting or excluding such obligation
because the individual is eligible for or is provided health
assistance under the plan.
(B) Other federal governmental programs.--Except as
provided in any other provision of law, no payment shall be
made to a State under this section for expenditures for
health assistance provided for an individual to the extent
that payment has been made or can reasonably be expected to
be made promptly (as determined in accordance with
regulations) under any other federally operated or financed
health care insurance program, other than an insurance
program operated or financed by the Indian Health Service, as
identified by the Secretary. For purposes of this paragraph,
rules similar to the rules for overpayments under section
1903(d)(2) of the Social Security Act shall apply.
(3) Application of certain general provisions.--The
following sections of the Social Security Act shall apply to
States under this section in the same manner as they apply to
a State under such title XIX:
(A) Title xix provisions.--
(i) Section 1902(a)(4)(C) (relating to conflict of interest
standards).
(ii) Paragraphs (2), (16), and (17) of section 1903(i)
(relating to limitations on payment).
(iii) Section 1903(w) (relating to limitations on provider
taxes and donations).
(iv) Section 1920A (relating to presumptive eligibility for
children).
(B) Title xi provisions.--
(i) Section 1116 (relating to administrative and judicial
review), but only insofar as consistent with this title.
(ii) Section 1124 (relating to disclosure of ownership and
related information).
(iii) Section 1126 (relating to disclosure of information
about certain convicted individuals).
(iv) Section 1128A (relating to civil monetary penalties).
(v) Section 1128B(d) (relating to criminal penalties for
certain additional charges).
(vi) Section 1132 (relating to periods within which claims
must be filed).
(4) Relation to other laws.--
(A) HIPAA.--Health benefits coverage provided under a State
program or project under this section shall be treated as
creditable coverage for purposes of part 7 of subtitle B of
title I of the Employee Retirement Income Security Act of
1974, title XXVII of the Public Health Service Act, and
subtitle K of the Internal Revenue Code of 1986.
(B) ERISA.--Nothing in this section shall be construed as
affecting or modifying section 514 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1144) with respect to
a group health plan (as defined in section 2791(a)(1) of the
Public Health Service Act (42 U.S.C. 300gg-91(a)(1))).
(k) Authorization of Appropriations.--There is authorized
to be appropriated to carry out this section, such sums as
may be necessary in each fiscal year. Amounts appropriated
for a fiscal year under this subsection and not expended may
be used in subsequent fiscal years to carry out this section.

Mr. BINGAMAN. I am pleased to announce today the introduction of
bipartisan legislation with Senator Voinovich entitled the ``Health
Partnership Act of 2006'' with additional bipartisan support from
Senators DeWine and Akaka. The ``Health Partnership Act'' is intended
to move beyond the political gridlock in Washington, D.C., and set us
on a path toward finding solutions to affordable, quality health care
for all Americans by creating partnerships between the federal
government, state and local governments, private payers, and health
care providers to implement different and promising approaches to
health care.
Federal funding and support would be committed to states to reduce
the number of uninsured, reduce costs, and improve the quality of
health care for all Americans. Should a state decline to apply or if a
unique need exists, local governments also would be authorized to apply
for a federal grant for such purposes.
States, local governments, and tribes and tribal governments would be
able to submit applications to the federal government for funding to
implement a state health care expansion and improvement program to a
bipartisan ``State Health Innovation Commission.'' Based on funding
available through the federal budget process, the Commission would
approve a variety of reform options and innovative approaches.
This federalist approach to health reform would encourage a broad
array of reform options that would be closely monitored to see what is
working and what is not. As Supreme Court Justice Louis D. Brandeis
wrote in 1932, ``It is one of the happy incidents of the federal system
that a single courageous State may, if its citizens choose, serve as a
laboratory; and try novel social and economic experiments without risk
to the rest of the country.''
Our bipartisan legislation, the ``Health Partnership Act,''
encourages this type of state-based innovation and will help the nation
better address both the policy and the politics of health care reform.
We do not have consensus at the federal level on anyone approach and so
encouraging states to adopt a variety of approaches will help us all
better understand what may or may not work. And, it is well past the
time when we need action to be taking place to address the growing and
related problems of the uninsured and increasing health care costs.
In fact, spending on health care in our country has now reached $2
trillion annually, and yet, the number of uninsured has increased to 46
million people, which is six million more than in 2000. The
consequences are staggering, as uninsured citizens get about half the
medical care they need compared to those with health insurance and,
according to the Institute of Medicine, about 18,000 unnecessary deaths
occur each year in the United States because of lack of health
Insurance.
While gridlock absent a solution continues to permeate Washington,
DC, a number of states and local governments are moving ahead with
health reform. The premise on which this bill is based is that the
federal government should provide support for such efforts rather than
constantly undermining them.
The ``Health Partnership Act'' would provide such support, as it
authorizes grants to states, groups of states, local governments, and
Indian tribes and organizations to carry out any of a broad range of
strategies to reach the goals of reducing the number of uninsured,
reducing costs, and improving the quality of care.
As usual, state and local governments are not waiting around for
federal action. This is exactly what was happening in the early 1990s
as states such as New Mexico, Massachusetts,

[[Page 7324]]

Pennsylvania, Florida, Rhode Island, Hawaii, Maryland, Tennessee,
Vermont, and Washington led the way to expanding coverage to children
through the enactment of a variety of health reforms. Some of these
programs worked better than others and the federal government responded
in 1997 with passage of the ``State Children's Health Insurance
Program'' or SCHIP. This legislation received broad bipartisan support
and was built upon the experience of the state expansions. SCHIP
continues to be a state-based model that covers millions of children
and continues to have broad-based bipartisan support across this
nation.
So, why not use that successful model and build upon it? In fact,
state and local governments are already taking up that challenge and
the federal government should, through the enactment of the ``Health
Partnership Act,'' do what it can to be helpful with those efforts. For
example--
On November 15, 2005, Illinois Governor Rod Blagojevich signed into
law the ``Covering All Kids Health Insurance Act'' which, beginning in
July 2006, will attempt to make insurance coverage available to all
uninsured children.
In Massachusetts, Governor Mitt Romney recently signed into law
legislation that requires all Bay State residents to have health
insurance. Virtually everyone interested in solutions to our nation's
health care problems are looking at the Massachusetts ``experiment'' as
a possible solution.
Other states, including New Mexico, Maine, West Virginia, Oklahoma,
and New York have enacted other health reforms that have had mixed
success.
All of these efforts are very important to add to our knowledge base,
which can then lead to the formation of a possible national solution to
our uninsured and affordability crisis. We can learn from each and
every one of these efforts, whether successful or failed.
Commonwealth Fund President Karen Davis said it well by noting that
state-based reforms, such as that passed in Massachusetts, are very
good news. As she notes, ``First, any substantive effort to expand
access to coverage is worthwhile, given the growing number of uninsured
in this country and the large body of evidence showing the dangerous
health implications of lacking coverage.''
She adds, ``But something more important is at work here, While we
urgently need a national solution so that all Americans have insurance,
it doesn't appear that we'll be getting one at the federal level any
time soon. So what Massachusetts has done potentially holds lessons for
every state.'' I would add that it holds lessons for the federal
government as well and not just for the mechanics of implementing
health reform policy but also to the politics of health reform.
As she concludes, ``One particularly cogent lesson is the manner in
which the measure was crafted--via a civil process that successfully
brought together numerous players from across the political business,
health care delivery, and policy sectors.''
Mr. President, Senator Voinovich and I have worked together for many
months now on this legislation via a process much like that described
by Karen Davis. The legislation stems from past legislative efforts by
senators such as Bob Graham, Mark Hatfield, and Paul Wellstone, but
also from work across ideological lines by Henry Aaron of the Brookings
Institute and Stuart Butler of the Heritage Foundation.
The legislation also received much advice and support from Dr. Tim
Garson who, as Dean of the University of Virginia, brought a much
needed provider perspective which is reflected in support for the
legislation from the American Medical Association, the American Academy
of Pediatrics, the American College of Physicians, the American College
of Cardiology, American Gastroenterological Association, the Visiting
Nurses Association, the National Association of Community Health
Centers, and from state-based health providers such as the New Mexico
Medical Society and Ohio Association of Community Health Centers.
And the legislation also received much comment and support from
consumer-based groups advocating for national health reform, including
that by Dr. Ken Frisof and UHCAN, which is the Universal Health Care
Action Network, Bill Vaughan at Consumers Union, and from numerous
health care advocates in New Mexico, including Community Action New
Mexico, Health Action New Mexico, Health Care for All Campaign of New
Mexico, New Mexico Center on Law and Poverty, New Mexico Health Choices
Initiative, New Mexico POZ Coalition, New Mexico Public Health
Association, New Mexico Religious Coalition for Reproductive Choice,
New Mexico Progressive Alliance for Community Empowerment, and the
Health Security for New Mexicans Campaign, which includes 115
organizations based in the State.
Support from all stakeholders in our nation's health care system has
been sought and I would like to thank the many organizations from New
Mexico for their support and input to this legislation. There is great
urgency in New Mexico because our State, like all of those along the
U.S.-Mexico border, faces a severe health care crisis. In fact, New
Mexico ranks second only to Texas in the percentage of its citizens who
are uninsured. New Mexico is also the only state in the country with
less than half of its population having private health insurance
coverage.
A rather shocking statistic, which also continues to worsen, is that
one out of every three Hispanic citizens are uninsured. In fact, less
than 43 percent of the Hispanic population now has employer-based
coverage nationwide, which is in sharp comparison to the 68 percent of
non-Hispanic whites who have employer-based coverage.
The State has also enacted its own health reform plan called the
State Coverage Initiative, or SCI in July 2005. SCI is a public/private
partnership that is intended to expand employer-sponsored insurance and
was developed in part with grant funding from the Robert Wood Johnson
Foundation. As of May 1, there were just over 4,500 people covered by
this initiative and there are efforts to expand this effort to cover
over 20,000 individuals. With federal support for my State, the hope
would be to further expand coverage to as many New Mexicans as
possible.
It is also important to note that the legislation encourages reforms
at both the state and local levels of government. Senator Voinovich, as
former Mayor of Cleveland, suggested language that would capture
community-based efforts as well. Illinois, Georgia, Michigan, and
Oregon have all initiated efforts at the local level for reform,
including what is known as the ``three-share'' programs in Illinois and
Michigan. These initiatives have employers, employees, and the
community each pick up about one-third of the cost of the program.
Jeaneane Smith, deputy administrator in the Office of Oregon Health
Policy and Research was quoted in a recent Academy Health publication
saying, ``In recent years it has become apparent that there is a need
to consider both state- and community-level approaches to improved
access. We want to learn how best to support communities as they play
an integral part in addressing the gaps in coverage.''
Our hope is to spawn as much creative innovation as possible.
Brookings Institute Senior Health Fellow Henry Aaron and Heritage
Foundation Vice President Stuart Butler wrote a Health Affairs article
in March 2004 that lays out the foundation for this legislative effort.
They argue that while we remain unable to reconcile how best to expand
coverage at the federal level, we can agree to support states in their
efforts to try widely differing solutions to health coverage, cost
containment, and quality improvement. As they write, ``This approach
offers both a way to improve knowledge about how to reform health care
and a practical way to initiate a process of reform. Such a pluralist
approach respects the real, abiding differences in politics,
preferences, traditions, and institutions across the nation. It also
implies a willingness to accept differences over an extended period in
order to make progress. And it recognizes that permitting wide
diversity can foster consensus by revealing the strengths and

[[Page 7325]]

exposing the weaknesses of rival approaches.''
The most important message that I hope this bill carries is that we
must stop having the perfect be the enemy of the good. This proposal is
certainly not perfect but we hope it makes a very important
contribution to addressing our nation's health care crisis.
In addition to Dr. Garson, Mr. Aaron, Mr. Butler, and Dr. Frisof, I
would like to express my appreciation to Dan Hawkins at the National
Association of Community Health Centers, Bill Vaughan at Consumers
Union, and both Jack Meyer and Stan Dorn at ESRI for their counsel and
guidance on health reform and this legislation.
I would also like to commend the American College of Physicians, or
ACP, for their outstanding leadership on the issue of the uninsured and
for their willingness to support a variety of efforts to expand health
coverage. ACP has been a longstanding advocate for expanding health
coverage and has authored landmark reports on the important role that
health insurance has in reducing people's morbidity and mortality. In
fact, to cite the conclusion of one of those studies, ``Lack of
insurance contributes to the endangerment of the health of each
uninsured American as well as the collective health of the nation.''
And finally, I would also thank the many people at the Robert Wood
Johnson Foundation on their forethought and knowledge on all the issues
confronting the uninsured. Their efforts to maintain the focus and
dialogue on addressing the uninsured has kept the issue alive for many
years.
I hope we can break the gridlock and urge my colleagues to support
this important legislation.
I would ask for unanimous consent for a Fact Sheet and copy of the
Health Affairs article entitled ``How Federalism Could Spur Bipartisan
Action on the Uninsured'' be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

The Health Partnership Act

Introduced by Senators Voinovich and Bingaman in May 2006--
``A bill to provide for innovation in health care through
state initiatives that expand coverage and access and improve
quality and efficiency in the health care system.''
The Health Partnership Act, cosponsored by U.S. Senators
Voinovich (R-OH) and Bingaman (D-NM), is a first step to move
beyond the political deadlock that has prevented the United
States from finding paths to affordable, quality health care
for all. For decades, national solutions have proven
impossible to attain because of sharp differences on how to
pay for and organize health care services. The Health
Partnership Act breaks through the impasse. It creates
partnerships among the federal government, state governments,
private payers and health care providers to implement
different approaches to achieve sustainable reform that
provides affordable, quality health care for all. It
demonstrates federal leadership on health care through
establishing a mechanism by which federal dollars are
committed to states to reduce the number of uninsured and to
improve the quality of health care for all.
A creative new bipartisan initiative to move beyond
political deadlock and a potential first step towards
affordable quality health care for all.

the federal level

Federal dollars will fund five-year State Health Care
Expansion and Improvement Grants. The amount of federal
funding for new grants will be determined annually in the
budgetary process.
The bill establishes a bipartisan State Health Innovation
Commission composed of national, state and local leaders that
will:
Issue requests for proposals.
Establish, in collaboration with an organization such as
the Institute of Medicine, minimum performance standards and
5-year goals.
Provide states with a ``toolkit'' of reform options, such
as single-payer systems, public program expansions, pay-or-
play mechanisms, tax credit incentives, health savings
accounts, etc.
Ensure the maintenance of Medicaid--prohibiting restrictive
rule changes that would limit eligibility or benefits.
Recommend to Congress which grants to support, giving
preference to states maximizing the reduction in numbers of
the uninsured.
Monitor the progress of programs and promote information
exchange on what works.
Recommend ways to minimize negative effects on national
employer groups, providers and insurers related to differing
state requirements.

state level

Each state applying for a grant will develop a health care
plan to increase coverage, improve quality and reduce costs,
with specific targets for reduction in the number of
uninsured and the costs of administration.
States will receive renewable grants for five-year
expansion and improvement programs.
States will receive from the federal level technical
assistance, if requested, for developing proposals.
Each state plan would address:
Coverage by describing the process and setting a 5-year
target for reducing the number of uninsured individuals in
the state.
Quality by providing a plan to increase health care
effectiveness, efficiency, timeliness, and equity while
reducing health disparities and medical errors.
Costs by developing and implementing systems to improve the
efficiency of health care, including a 5-year target to
reduce administrative costs and paperwork burdens.
Information technology by designing the appropriate use of
health information technology to improve infrastructure, to
expand the availability of evidence-based medical and to
provide outcomes data to providers and patients.

states in the lead: lessons on the process of making change

Given the inaction of the federal government on health care
access issues, states have begun to address these challenges
creatively with sensitivity to local ideas and conditions.
Dozens of states are considering new proposals. Five have
already acted.
Maine, June 2003--the Dirigo Health Plan.
California, October 2003--phased-in Employer Mandate
(repealed by ballot initiative, November 2004).
Illinois, September 2005--Health Care for All Children.
Maryland, January 2006--Fair Share Health Care (employer
mandate for the largest employers).
Massachusetts, April 2006--Massachusetts Health Reform
Package--with both an individual and an employer mandate.
The recently passed Massachusetts law deserves special
attention because it is the first one enacted cooperatively
with a divided government--a strongly Democratic state
legislature and a Republican governor.
The detailed policy particulars in each of these state
measures are controversial, with strong supporters and strong
detractors. But they teach us a lot about the process of
reforming health care in America.
State political leadership at the highest level is
necessary.
Active consumer advocacy plays an important role.
Some stakeholder leadership must be willing to put the
larger public interest above their own narrow economic self-
interest.
The proposals have implementation phased in over several
years.
It is easier for these proposals to expand access than to
restrain the growth of costs--the latter being critical to
make them sustainable over the long term.
Massachusetts, in particular, demonstrated how modest
federal financial incentives (in this case the threatened
loss of less than \1/10\ of federal Medicaid funding) can
provide the critical stimulus for leaders to come together to
create comprehensive reform.

political advantages of the health partnership act

The Health Partnership Act provides positive multi-year
financial incentives to states to address these issues,
making it more likely for them to take the first steps and
less likely to backslide when money concerns arise.
Congress need not pick just one path to health care for
all. Members may be willing to let other states try models
that they would oppose in their home states.
Allowing states to design their own plans, based on simple
federal standards, has the potential to break through the
current political deadlock. Breakthroughs in some states
could be replicated elsewhere.
Advocacy is needed concurrently at the state and federal
levels, with each reinforcing the other.
Federal support has the potential to counteract likely
opposition by special interests in state efforts.

policy advantages of the health partnership act

The process of implementing a variety of partnerships
recognizes that one national plan may not address the
differences among states and encourages states to address
creatively their own needs.
Lessons learned in testing diverse state plans would
benefit other states and national reform.
____

How Federalism Could Spur Bipartisan Action on the Uninsured

(By Henry J. Aaron and Stuart M. Butler)

Nearly everyone thinks that something should be done to
reduce the number of Americans lacking health insurance.
Unfortunately, while numerous plans exist on how to reach
that goal, few agree on any one. Indeed, as authors we
disagree on how best to

[[Page 7326]]

extend and assure health insurance coverage. Nonetheless, we
believe that using the pluralism and creative power of
federalism is the best way to break the political logjam and
to discover the best way to expand coverage.
Accordingly, we believe that states should be strongly
encouraged to try any of a wide range of approaches to
increasing health insurance coverage and rewarded for their
success. This approach offers both a way to improve knowledge
about how to reform health care and a practical way to
initiate a process of reform. Such a pluralist approach
respects the real, abiding differences in politics,
preferences, traditions, and institutions across the nation.
It also implies a willingness to accept differences over an
extended period in order to make progress. And it recognizes
that permitting wide diversity can foster consensus by
revealing the strengths and exposing the weaknesses of rival
approaches.
Despite our abiding disagreements on which substantive
approach to extending coverage is best, we believe that
people of goodwill must be prepared to countenance the
testing of ideas they oppose if progress is to be made.
Moreover, we believe that there is no hope for legislation to
begin to transform the largest U.S. industry--health care--
unless such legislation enjoys strong support from both major
political parties.

Using Federalism To Spur Action

Proposals to reduce the number of uninsured Americans
abound. Some favor expanding government programs, such as
Medicaid. Others favor refundable tax credits to help
families buy private health insurance. Still others favor
regulatory approaches, such as changes in insurance rules.
But working together in health care to achieve a goal shared
by virtually everyone has proved to be impossible. One reason
for this is that the capacity to reach substantive compromise
in Washington has seriously eroded. Among the causes is the
widespread view that reforming the complex health care system
requires very carefully designed and internally consistent
actions. Some say that it is like building a new airplane:
Unless all the key parts are there and fit together
perfectly, the airplane will not fly. Thus, many proponents
of particular approaches fear that abandoning key components
of their proposals to achieve a compromise will prevent a
fair test of their favored approach and lead to failure.
Another obstacle is that many lawmakers believe that
approaches that might conceivably work in one part of the
country, given the cultural, philosophical, or health
industry conditions prevailing there, will not work in their
state or district because of different local conditions. This
view leads many in Congress to resist proposals that might
work in some areas because they believe that those proposals
could make things worse for their constituents.
These and other factors have stalled efforts to extend
health insurance and achieve other reforms for decades. The
enactment of Medicare and Medicaid stands as one notable--and
instructive--exception to that pattern. Medicare sprang from
comprehensive social insurance initiatives of congressional
Democrats, Medicaid from limited needs based approaches of
congressional Republicans. The passage of each program was
possible only because the two initiatives were linked in the
form of a trade-off, not so much by blending some elements of
each approach but by moving forward with two programs in
parallel: Medicare for the elderly and disabled, and Medicaid
for the poor of all ages. That experience illustrates a
principle of politics: that progress often requires combining
elements of competing proposals into a hybrid legislative
initiative, in which internally consistent approaches operate
in parallel.
In our view, federalism offers a promising approach to the
challenge of building support to tackle the problem of
uninsurance. While proponents of nationwide measures to
introduce health insurance tax credits, or to extend Medicare
or the State Children's Health Insurance Program (SCHIP) to
other groups, should of course continue to make their case
for national policies, we emphasize an initiative designed to
support states in launching a variety of localized
initiatives. Under this process, the federal government would
reward states that agreed to test comprehensive and
internally consistent strategies that succeeded in extending
coverage within their borders. In contrast to block grants,
federal-state covenants would operate within congressionally
specified policy constraints designed to achieve national
goals for extending health insurance. These covenants would
include plans ranging from heavy government regulation to
almost none, as long as the plans were consistent with the
broad goals and included specified protections. States could
also select items from a federally designed ``policy
toolbox'' to include in their proposals. Allowable state
plans would include forms of single-payer plans, employer
mandates, mandatory individual purchase of privately offered
insurance, tax credits, and creative new approaches. States
would be free not to undertake such experiments and continue
with the current array of programs, but sizable financial
incentives would be offered to those that chose to experiment
and financial rewards given to those that achieve agreed-upon
goals.
The model we propose builds upon proposals we have outlined
elsewhere. It is also compatible with some other federalism
approaches, such as the plan advanced by the Institute of
Medicine. We favor a wide diversity of federal-state
initiatives for three reasons. First, fostering a bold
program in a state will produce much information that will
aid the policy discovery process. Successes will encourage
others to follow, while unanticipated problems will force
redesign or abandonment and will be geographically contained.
Second, encouraging bold state action will quickly and
directly extend coverage to many of the uninsured. Instead of
facing continued national inaction or the potential for
disruption of state initiatives by future federal action,
states would have the incentive and freedom to act
decisively. Third, we see no evidence of an emerging
consensus on how to deal with these problems at the national
level. But our proposal is based on the observation that
advocates of rival plans trust their preferred approaches
enough to believe that a real-life version would persuade
opponents and create a consensus. Not all can be right, of
course, but all advocates of health insurance reform, like
residents of Lake Wobegon, seem to believe that their plans
are above average. Thus, they should be open to the idea of
testing diverse proposals. Our proposal is a process to
enable policymakers to discover which is right, either for
the whole country or for a region.

Core Elements

We propose that Congress provide financial assistance and a
legal framework to trigger a diverse set of federal-state
initiatives. To help break the impasse in Congress over most
national approaches, we propose steps designed to enable
``first choice'' political ideas to be tried in limited
areas, with the support of states and through the enactment
of a federal ``policy toolbox'' of legislated approaches that
would be available to states but not imposed on them. Our
view is that elected officials would be prepared to authorize
some approaches now bottled up in Congress if they knew that
the approach would not be imposed on their states. Our
proposed strategy would contain six key elements.
Goals and protections. First, Congress would set certain
goals and general protections. Goals would be established for
extending coverage, and perhaps improving the coverage of
some of those with inadequate coverage today. One such goal
could be a percentage reduction in the number of uninsured
people in a state. The more precise the goals, the more
contentious they are likely to be. But clear and measurable
goals under the proposed covenants are necessary if the
system of financial rewards described below is to work
effectively.
What is ``insurance''? For a coverage goal to mean
anything, it would have to define what constitutes
``insurance.'' Specifying adequate coverage in health care is
no easier than quantifying an adequate high school education,
and when money follows success, drafting such definitions
becomes even more difficult.
In defining what is meant by adequate insurance, agreement
on two characteristics is vital: the services to be covered
and the maximum residual costs (deductibles and copayments)
that the insured must bear. States could be more generous
than these standards. Instead of speciying precisely what
states must do in each of these dimensions, we suggest that
Congress establish a required actuarial minimum--such as the
cost of providing the benefit package of the Federal
Employees Health Benefits Program (FEHBP) for the state's
population--as the standard, with states retaining
considerable latitude on which services to include and how
much cost sharing to require. Whether to set this actuarial
standard high or low will be controversial and will determine
the overall cost to the federal government of eliciting state
participation.
Both high and low benefit standards suffer from well-known
problems. High standards would raise program costs and weaken
individuals' incentives to be prudent purchasers of health
care. Low standards expose patients to sizable financial risk
and raise questions about whether to restrict patients' right
to buy supplemental coverage. Thus, federal legislation would
not specify the content of insurance plans beyond some such
actuarial amount. States would then be free to design plans
as they wish, although certain types of plans might be
presumptively acceptable (see below), and others could be
negotiated as part of a covenant. The exact mix of benefits
could vary within reason, but no further limits would be
imposed. One goal of this approach, after all, is to
encourage experimentation to generate information on whether
particular configurations of benefits work better than
others. It might turn out, for example, that states would
adopt quite different plans with similar actuarial values.
One group might opt for high deductible plans covering a wide
range of services with no cost sharing above the deductible
and generous relief from the deductible for the poor, while
others might adopt a system with low deductibles and modest
cost sharing but covering a much narrower range of benefits.
Discovering how individuals' and providers' attitudes and
behavior differ

[[Page 7327]]

under such plans and how health outcomes vary would provide
valuable information for private health insurance planners
and government officials.
Protections for individuals. In addition to the
definitional question, the question also arises, What
limitations and protections should be applied to state
experiments? If a simple net reduction in uninsurance
guaranteed a financial reward to a state, for example, the
state would have the incentive to drop coverage of costly
high-risk adults and extend coverage to less costly
(healthier and younger) workers. Some such concerns could be
addressed in negotiating covenants, but some broad
protections and policy ``corridors'' would be established
under our proposal and would be necessary to achieve
political support.
One of the most politically sensitive would be a primum non
nocere limitation. That is, states could not introduce a plan
that reduced coverage for currently insured populations, most
notably the Medicaid population, beyond some minimum amount.
We believe that no reform proposal is likely to be achievable
without that restriction. Most Medicaid outlays in many
states are not strictly mandated by federal law, in the sense
that some beneficiaries and some services for all
beneficiaries are optional. States provide optional coverage
because federal law permits it, and the federal match makes
its provision attractive to states. If incentives were
introduced to cover the non-Medicaid population, states might
find it financially and politically attractive to increase
the total number of insured people by curtailing Medicaid
eligibility and benefits and using the money saved, together
with federal support, to cover a larger number of people who
are uninsured but less poor.
Designing and enforcing rules to prohibit or limit such
``insurance swapping'' would be extremely challenging but
politically--and, one could argue, morally--essential. On the
other hand, we believe that states should have some
opportunity to propose different ways of delivering the
Medicaid commitment to the currently insured population, as
long as the degree and quality of coverage were not
diminished. That form of Medicaid protection could stimulate
creativity and improvement in coverage for the poorest
citizens while avoiding any threat to their existing
coverage. To be sure, there are disagreements, including
between us, on the degree of freedom states should have in
deciding how to deliver the Medicaid commitment. Positions
range from only minor tweaking to sweeping changes in the
delivery system, such as allowing states to use Medicaid
money to subsidize individual enrollment in an equivalent
private plan. The degree of flexibility states should have,
while maintaining eligibility and level of coverage, is a
difficult political issue for Congress to decide.
Acceptable state proposals would also have to limit cost
sharing and features analogous to pension nondiscrimination
rules. We believe that requirements, consistent with the
general goals and protections we propose, are needed to
ensure that lower-income households do not face unaffordable
coverage. Without such limits, states could reduce the number
of uninsured people and secure attendant federal financial
support, for example, by instituting an individual mandate
with a high premium that would effectively make insurance
universal among the financially secure and do little for the
poor. States would need to propose a fair, plausible way of
meeting the requirement, such as by mandating some form of
community rating or through a cross-subsidy to more
vulnerable populations.
The federal government should establish broad guidelines,
but no more. A key principle of our proposal is that state
officials are more likely than federal officials to design
successful solutions to those problems that members of the
policy or congressional staff community have failed to solve.
Congress can and should set the parameters, but it should
avoid micromanagement.
``Policy toolbox'' of federal policies and programs. A
feature of the congressional impasse noted earlier is that
many plausible health initiatives that might merit testing,
and have support in some states, are blocked by other
lawmakers who oppose the introduction of the approach in
their own state or across the country. Thus, we propose that
Congress enact presumptively legitimate approaches to the
expansion of health insurance coverage as a ``policy
toolbox'' that would be available to states a la carte to
apply within their borders. Lawmakers could safely vote to
permit an initiative, confident that it would not be imposed
on their states. In this way, potentially useful policies and
programs could be ``unlocked'' from Congress and become
available for states to use in their own initiatives.
A policy toolbox likely would include expansions of
existing policies, such as raising income limits under
Medicaid or lowering the age of Medicare eligibility. It
could include arrangements to subsidize individual buy-ins to
the FEHBP, refundable tax credits or their equivalent
(perhaps with some steps to modify the federal income tax
exclusion for employee-sponsored health insurance costs),
mandating employer or individual coverage, or creating a
single state insurance plan though which everyone may buy
subsidized coverage.
Other possible examples might include the following: (1)
Remove regulatory and tax obstacles to churches, unions, and
other organizations providing group health insurance plans.
This could open up new forms of group coverage offered though
organizations with an established membership and common
values. (2) Allow Medicaid and SCHIP to cover additional
populations, with greatly enhanced federal matching payments,
and perhaps to operate in very different ways--with
appropriate safeguards to protect those who are covered under
current law. Both federal welfare legislation and SCHIP, for
example, included safeguards to preserve existing Medicaid
coverage. (3) Extend limited federal Employee Retirement
Income Security Act (ERISA) protection to large corporate
health plans willing to enroll nonemployees, and extend the
tax exclusion to those enrollees. This could lead in a state
to expanded access to comprehensive coverage. (4) Provide a
voucher to individuals designed to mimic a comprehensive
refundable tax credit for health insurance. This could allow
the practical issues of a major tax credit approach to be
examined. (5) Enact legislation to make forms of FEHBP-style
coverage available to broader populations within states. This
would enable states and federal government to explore the
issues associated with extending the program to nonfederal
employees and retirees. (6) Enable states to establish
association plans and other innovative health organizations.
We emphasize that any menu of tools would be optional for
states. None would be required. Members of Congress would be
more likely to agree to the inclusion of elements they would
deplore in their own states if they knew that no state,
including their own, would be forced to adopt them than they
would be in a nationally uniform system. Some lawmakers, for
instance, oppose association plans be cause they believe that
such plans would disrupt successful state insurance
arrangements. Under the menu approach, association plans
would be introduced only in states wishing to use them as
part of their overall strategy.
State proposals, federal approval. Under our proposed
strategy, states interested in a bold, creative initiative
would design a proposal consistent with the goals and
restrictions established by Congress. Typically this proposal
would include some elements from the federal policy toolbox
in conjunction with state initiatives.
Needless to say, a critical congressional decision would
concern mechanisms for approving state plans and monitoring
state performance. States would no doubt seek to take
advantage of every financial opportunity to game the system
and to stretch agreements to the limit, as the almost zany
history of the Medicaid upper payment level (UPL) controversy
makes painfully clear. Yet monitoring state behavior,
determining state violations, and enforcing penalties on
states is enormously difficult. Moreover, the entity could
(and we think should) have the power to negotiate parts of a
proposal, not merely approve or reject it, so that
refinements could be made consistent with Congress's
objectives.
But what entity should this be? It might seem natural to
designate an executive agency that reports to the president,
such as the Department of Health and Human Services (HHS). We
suspect, however, that many members of Congress would refuse
to cede so much selection authority to another branch of
government and that roughly half would fear partisan
decisions by an administration of the ``other'' party.
Congress would likely insist on adding suffocating selection
criteria and other restrictions to executive department
decisions, jeopardizing the very creativity we intend. Thus,
we favor instead an existing or newly created body that has
independence but ultimately answers to Congress. A new
bipartisan body might perform this function with members
selected by Congress and the administration or with members
also representing the states, with technical advice from the
U.S. Government Accountability Office (GAO). This body would
evaluate and negotiate draft state proposals according to the
general requirements specified by Congress and then present a
recommended ``slate'' of proposals to Congress for an up-or-
down vote without amendment. Once the state proposals had
been selected, HHS would be responsible for implementing the
program.
Bipartisan willingness to authorize state programs and to
appropriate sufficient funds to elicit state participation
also requires that members of Congress believe that
approaches they find congenial will receive a fair trial and
agree that approaches they reject will also receive a fair
trial. Unfortunately, current federal legislation makes two
key approaches difficult to implement in individual states or
even groups of states: a single-payer plan and an individual
mandate combined with refundable tax credits. A federalist
approach should include mechanisms that would enable states
to give such proposals as fair and complete a test as
possible, both because that would provide valuable
information and because the political support of their
advocates is important in Congress.
Crafting a single-payer experiment. ERISA, which exempts
self-insured plans

[[Page 7328]]

from state regulation, is the primary technical obstacle to
testing single-payer plans. The political sensitivity to
modifications in ERISA is difficult to exaggerate. Any
attempt to carve out an exception from ERISA for state
programs to extend cover age would probably doom federal
legislation. But states could create ``wrap around'' plans to
cover all who are not currently insured, or even to cover all
who are not insured under plans exempted by ERISA from state
regulation. While such an arrangement would not be a single-
payer plan, it could achieve universal coverage, which is one
defining characteristic of single-payer plans, and arguably
be sufficient for a valid test. After all, the U.S. health
care system is characterized by different subsystems for
certain populations and has a form of single-payer coverage
for military veterans. But of course the real test is whether
advocates of single-payer plans regard such a limited
arrangement as a fair trial.
An individual tax credit approach. The obstacles to a state
level individual mandate with a refundable credit are also
serious and complicated. We presume that an individual
mandate would require some contribution from people with
incomes above defined levels. Such a mandate raises both
political and practical questions. Testing federal tax reform
in selected geographic areas also raises constitutional and
practical issues, although advocates of the approach maintain
that other site-specific programs involving federal tax
changes, such as enterprise zones, have passed muster. In
addition, for a limited experiment it might be possible to
design subsidy programs that would mimic tax relief.
Administering a refundable tax credit would pose formidable
difficulties for some states, particularly those that do not
have a personal income tax. In all states, the logistics of
providing a credit with reasonable accuracy on a timely basis
would be challenging. So, too, would deciding how to address
such administrative problems as households that live in one
state yet work in another. Advocates for tax credits say they
have solutions to these and similar challenges, just as
supporters of single-payer approaches or employer mandates
claim to have answers to challenges facing those approaches.
For instance, some maintain that the employment-based tax
withholding system could serve as a vehicle for refundable
credits or equivalent subsidies and would make individual
enrollment practical. Whether or not they are right is of
course disputed by their critics. The beauty of a ``put up or
shut up'' federalism initiative is that it offers a chance
for advocates to offer such solutions in practice instead of
in theory.
Using ``managed federalism'' to build support? Deciding how
many states could qualify for experiments is an open
political and technical question. One approach would be to
limit it to a few states. This would limit costs but has
little else to be said for it. Accordingly, we would favor
opening the program to all states wishing to accept a federal
offer. Nevertheless, we recognize that some lawmakers would
be reluctant to vote for a process of federal-state
innovation unless they were sure that certain ``generic'' or
``standard'' approaches were included--especially if the
number of states in the program were to be limited. In
particular, we believe that our proposal can win
congressional support only if liberals and conservatives
alike are fully convinced that the approaches each holds dear
will receive a fair and full trial in practice.
While we believe that any state initiative that meets
approval should be welcomed, political considerations thus
might require that no state's proposal would be approved
unless a sufficient range of acceptable variants was
proposed. For example, strong advocates of market-based or
single-payer approaches might find the federalism option
acceptable only if each was confident that favored approaches
would be tested.
Adequate data collection. To determine whether a state was
actually making progress toward a goal, accurate and timely
data would be needed. These data would include surveys of
insurance coverage, with sufficient detail to provide state-
level estimates. Such surveys would be essential to show
whether the states were making progress in extending health
insurance coverage. They are vital to the success of the
whole approach because payments to states (apart from modest
planning assistance) should be based on actual progress in
extending coverage, not on compliance with procedural
milestones.
Congress should also assure that states report on use of
health services, costs, health status, and any other
information deemed necessary to judge the relative success of
various approaches to extending coverage. Only a national
effort could ensure that data are comparable across states.
States' cooperation with data collection would be one element
of the determination of whether a state was in compliance
with its covenant and was therefore eligible for full
incentive payments. The experience with state waivers under
welfare before enactment of the 1996 welfare reform clearly
illustrates the power and importance of such data collection.
The cumulative effect of the reports showing the
effectiveness of welfare-to-work requirements in reducing
rolls, increasing earnings, and raising recipients'
satisfaction transformed the political environment and made
welfare reform inescapable.
Rewarding progress. Congress would design a formula under
which states would be rewarded for their progress in meeting
the agreed federal-state goals of extending insurance
coverage. As experience with countless grant programs
attests, haggling over such formulas can become politics at
its grubbiest, with elected officials voting solely on the
basis of what a particular formula does for their districts.
Even without political parochialism, designing a formula that
rewards progress fairly is no easy task. For one thing,
states will be starting from quite different places. The
proportion of states' uninsured populations under age sixty-
five during 1997-1999 ranged from 27.7 percent in New Mexico
and 26.8 percent in Texas to 9.6 percent in Rhode Island and
10.5 percent in Minnesota and Hawaii. Designing an incentive
formula to reward progress amid such diverse conditions is
both an analytical and a political challenge. Moreover, the
per capita cost of health care varies across the nation,
which further complicates the assessment of progress. The
cost of extending coverage depends on the geographic
location, income, and health status of the uninsured
population. Having financial access may be hollow in
communities where services are physically unavailable or
highly limited. Extending coverage may require supply-side
measures to supplement financial access.
We believe that the only way to design such a formula is to
remove the detailed design decisions from congressional
micromanagement. We suggest that Congress be asked to adopt
the domestic equivalent of ``fast-track'' trade negotiation
rules or base-closing legislation. Under this arrangement,
Congress would designate a body appointed in equal numbers by
the two parties, to design an incentive formula that Congress
would agree to vote up or down, without amendments. Such a
formula would have to recognize the different positions from
which various states would start. Any acceptable formula
would have to reward both absolute and relative reductions in
the proportions of uninsured people. Whether financial
incentives would be offered for other dimensions of
performance and how performance would be measured constitute
additional important challenges.
Sources of funding. Bleak budget prospects could cause one
to give up on this or any other attempt to extend health
insurance coverage broadly. But as recent history amply
illustrates, the political and budgetary weather can change
dramatically and with little notice. What funding approach
would be desirable if funds were available? Under our
proposal, the federal funding would be intended for several
broad purposes: (1) A large portion of the money would be
used to help states actually fund approaches to be tested.
(2) Some funding (perhaps with assistance from private
foundations) would provide national support and technical
assistance to states. A model to consider for such support is
the Health Resources and Services Administration (HRSA) State
Planning Grants program, which both funds state planning
activities and provides federal support and technical
assistance. (3) Some funds would cover the cost of
independent performance monitoring. (4) Some funds would be
set aside to reward states for meeting the goals in their
agreed-upon plan. Congress might consider an automatic
``performance bonus'' system similar to the mechanism used in
welfare reform. Congress could also consider withholding the
periodic release of part of a state's grant pending a
periodic assessment by the independent monitor of the degree
to which the state is accomplishing the objectives specified
in its covenant. Only those states willing to offer proposals
designed to achieve the national goals would be eligible for
a share of the funding or for the menu of federal policy
tools. A state could decline to offer a proposal and remain
under current programs.
Federalism enables the states to undertake innovative
approaches to challenges facing the United States. Federal
legislation often grants states broad discretion in designing
even those programs for which the federal government bears
much or most of the cost. In health care as well as education
or welfare, states have been the primary innovators. But the
federal government limits, shapes, and facilitates such
innovation through regulation, taxation, and grants. Such a
partnership is bound to be marked by conflict and tension as
state and federal interests diverge.
A creative federalism approach of the kind we propose would
change the dynamics of discovering better ways to expand
insurance coverage, just as a version of this approach
triggered a radical change in the way states addressed
welfare dependency. By actually testing competing approaches
to reach common goals, rather than endlessly debating them,
the United States is far more likely to find the solution to
the perplexing and seemingly intractable problem of
uninsurance.

[[Page 7329]]

____________________

SUBMITTED RESOLUTIONS

______

SENATE RESOLUTION 471--RECOGNIZING THAT, DURING NATIONAL FOSTER CARE
MONTH, THE LEADERS OF THE FEDERAL, STATE, AND LOCAL GOVERNMENTS SHOULD
PROVIDE LEADERSHIP TO IMPROVE THE CARE GIVEN TO CHILDREN IN FOSTER CARE
PROGRAMS

Mr. COLEMAN (for himself, Ms. Landrieu, and Mr. Craig) submitted the
following resolution, which was considered and agreed to:

S. Res 471

Whereas more than 500,000 children are in foster care
programs throughout the United States;
Whereas, while approximately \1/4\ of all children in
foster care programs are available for adoption, only about
50,000 foster children are adopted each year;
Whereas many of the children in foster care programs have
endured--
(1) numerous years in the foster care system; and
(2) frequent moves to and from foster homes;

Whereas approximately 50 percent of foster care children
have been placed in foster care programs for longer than 1
year;
Whereas 25 percent of foster care children have been placed
in foster care programs for at least 3 years;
Whereas children who spend longer amounts of time in foster
care programs often experience worse outcomes than children
who are placed for shorter periods of time;
Whereas children who spend time in foster care programs are
more likely to--
(1) become teen parents;
(2) rely on public assistance when they become adults; and
(3) interact with the criminal justice system;

Whereas Federal, State, and local governments--
(1) share a unique relationship with foster children; and
(2) have removed children from their homes to better
provide for the safety, permanency, and well-being of the
children;

Whereas unfortunately, studies indicate that Federal,
State, and local governments have not been entirely
successful in caring for foster children;
Whereas Congress recognizes the commitment of Federal,
State, and local governments to ensure the safety and
permanency of children placed in foster care programs; and
Whereas every child deserves a loving family: Now,
therefore, be it
Resolved, That the Senate--
(1) recognizes--
(A) May 2006 as ``National Foster Care Month''; and
(B) that, during National Foster Care Month, the leaders of
the Federal, State, and local governments should rededicate
themselves to provide better care to the foster children of
the United States; and
(2) resolves to provide leadership to help identify the
role that Federal, State, and local governments should play
to ensure that foster children receive appropriate parenting
throughout their entire childhood.

____________________

AMENDMENTS SUBMITTED AND PROPOSED

SA 3861. Mr. SMITH submitted an amendment intended to be
proposed by him to the bill S. 1955, to amend the title I of
the Employee Retirement Security Act of 1974 and the Public
Health Service Act to expand health care access and reduce
costs through the creation of small business health plans and
through modernization of the health insurance marketplace;
which was ordered to lie on the table.
SA 3862. Mr. KERRY submitted an amendment intended to be
proposed by him to the bill S. 1955, supra; which was ordered
to lie on the table.
SA 3863. Mr. SMITH submitted an amendment intended to be
proposed by him to the bill S. 1955, supra; which was ordered
to lie on the table.
SA 3864. Mr. SMITH submitted an amendment intended to be
proposed by him to the bill S. 1955, supra; which was ordered
to lie on the table.
SA 3865. Mr. SMITH submitted an amendment intended to be
proposed by him to the bill S. 1955, supra; which was ordered
to lie on the table.
SA 3866. Mr. SMITH submitted an amendment intended to be
proposed by him to the bill S. 1955, supra; which was ordered
to lie on the table.
SA 3867. Ms. SNOWE submitted an amendment intended to be
proposed by her to the bill S. 1955, supra; which was ordered
to lie on the table.
SA 3868. Mr. OBAMA submitted an amendment intended to be
proposed by him to the bill S. 1955, supra; which was ordered
to lie on the table.
SA 3869. Mr. OBAMA submitted an amendment intended to be
proposed by him to the bill S. 1955, supra; which was ordered
to lie on the table.
SA 3870. Mr. OBAMA submitted an amendment intended to be
proposed by him to the bill S. 1955, supra; which was ordered
to lie on the table.
SA 3871. Mrs. FEINSTEIN (for herself, Mr. Dorgan, Mr.
Bingaman, and Ms. Stabenow) submitted an amendment intended
to be proposed by her to the bill S. 1955, supra; which was
ordered to lie on the table.
SA 3872. Mr. KERRY submitted an amendment intended to be
proposed by him to the bill S. 1955, supra; which was ordered
to lie on the table.
SA 3873. Mr. LEAHY submitted an amendment intended to be
proposed by him to the bill S. 1955, supra; which was ordered
to lie on the table.

____________________

TEXT OF AMENDMENTS

SA 3861. Mr. SMITH submitted an amendment intended to be proposed by
him to the bill S. 1955, to amend title I of the Employee Retirement
Security Act of 1974 and the Public Health Service Act to expand health
care access and reduce costs through the creation of small business
health plans and through modernization of the health insurance
marketplace; which was ordered to lie on the table; as follows:

At the appropriate place, insert the following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Local Law Enforcement
Enhancement Act of 2005''.

SEC. 2. FINDINGS.

Congress makes the following findings:
(1) The incidence of violence motivated by the actual or
perceived race, color, religion, national origin, gender,
sexual orientation, or disability of the victim poses a
serious national problem.
(2) Such violence disrupts the tranquility and safety of
communities and is deeply divisive.
(3) State and local authorities are now and will continue
to be responsible for prosecuting the overwhelming majority
of violent crimes in the United States, including violent
crimes motivated by bias. These authorities can carry out
their responsibilities more effectively with greater Federal
assistance.
(4) Existing Federal law is inadequate to address this
problem.
(5) The prominent characteristic of a violent crime
motivated by bias is that it devastates not just the actual
victim and the family and friends of the victim, but
frequently savages the community sharing the traits that
caused the victim to be selected.
(6) Such violence substantially affects interstate commerce
in many ways, including--
(A) by impeding the movement of members of targeted groups
and forcing such members to move across State lines to escape
the incidence or risk of such violence; and
(B) by preventing members of targeted groups from
purchasing goods and services, obtaining or sustaining
employment, or participating in other commercial activity.
(7) Perpetrators cross State lines to commit such violence.
(8) Channels, facilities, and instrumentalities of
interstate commerce are used to facilitate the commission of
such violence.
(9) Such violence is committed using articles that have
traveled in interstate commerce.
(10) For generations, the institutions of slavery and
involuntary servitude were defined by the race, color, and
ancestry of those held in bondage. Slavery and involuntary
servitude were enforced, both prior to and after the adoption
of the 13th amendment to the Constitution of the United
States, through widespread public and private violence
directed at persons because of their race, color, or
ancestry, or perceived race, color, or ancestry. Accordingly,
eliminating racially motivated violence is an important means
of eliminating, to the extent possible, the badges,
incidents, and relics of slavery and involuntary servitude.
(11) Both at the time when the 13th, 14th, and 15th
amendments to the Constitution of the United States were
adopted, and continuing to date, members of certain religious
and national origin groups were and are perceived to be
distinct ``races''. Thus, in order to eliminate, to the
extent possible, the badges, incidents, and relics of
slavery, it is necessary to prohibit assaults on the basis of
real or perceived religions or national origins, at least to
the extent such religions or national origins were regarded
as races at the time of the adoption of the 13th, 14th, and
15th amendments to the Constitution of the United States.
(12) Federal jurisdiction over certain violent crimes
motivated by bias enables Federal, State, and local
authorities to work together as partners in the investigation
and prosecution of such crimes.
(13) The problem of crimes motivated by bias is
sufficiently serious, widespread, and interstate in nature as
to warrant Federal assistance to States and local
jurisdictions.

SEC. 3. DEFINITION OF HATE CRIME.

In this Act, the term ``hate crime'' has the same meaning
as in section 280003(a) of the

[[Page 7330]]

Violent Crime Control and Law Enforcement Act of 1994 (28
U.S.C. 994 note).

SEC. 4. SUPPORT FOR CRIMINAL INVESTIGATIONS AND PROSECUTIONS
BY STATE AND LOCAL LAW ENFORCEMENT OFFICIALS.

(a) Assistance Other Than Financial Assistance.--
(1) In general.--At the request of a law enforcement
official of a State or Indian tribe; the Attorney General may
provide technical, forensic, prosecutorial, or any other form
of assistance in the criminal investigation or prosecution of
any crime that--
(A) constitutes a crime of violence (as defined in section
16 of title 18, United States Code);
(B) constitutes a felony under the laws of the State or
Indian tribe; and
(C) is motivated by prejudice based on the race, color,
religion, national origin, gender, sexual orientation, or
disability of the victim, or is a violation of the hate crime
laws of the State or Indian tribe.
(2) Priority.--In providing assistance under paragraph (1),
the Attorney General shall give priority to crimes committed
by offenders who have committed crimes in more than 1 State
and to rural jurisdictions that have difficulty covering the
extraordinary expenses relating to the investigation or
prosecution of the crime.
(b) Grants.--
In general.--The Attorney General may award grants to
assist State, local, and Indian law enforcement officials
with the extraordinary expenses associated with the
investigation and prosecution of hate crimes.
(2) Office of justice programs.--In implementing the grant
program, the Office of Justice Programs shall work closely
with the funded jurisdictions to ensure that the concerns and
needs of all affected parties, including community groups and
schools, colleges, and universities, are addressed through
the local infrastructure developed under the grants.
(3) Application.--
(A) In general.--Each State that desires a grant under this
subsection shall submit an application to the Attorney
General at such time, in such manner, and accompanied by or
containing such information as the Attorney General shall
reasonably require.
(B) Date for submission.--Applications submitted pursuant
to subparagraph (A) shall be submitted during the 60-day
period beginning on a date that the Attorney General shall
prescribe.
(C) Requirements.--A State or political subdivision of a
State or tribal official applying for assistance under this
subsection shall--
(i) describe the extraordinary purposes for which the grant
is needed;
(ii) certify that the State; political subdivision, or
Indian tribe lacks the resources necessary to investigate or
prosecute the hate crime;
(iii) demonstrate that, in developing a plan to implement
the grant, the State, political subdivision, or tribal
official has consulted and coordinated with nonprofit,
nongovernmental victim services programs that have experience
in providing services to victims of hate crimes; and
(iv) certify that any Federal funds received under this
subsection will be used to supplement, not supplant, non-
Federal funds that would otherwise be available for
activities funded under this subsection.
(4) Deadline.--An application for a grant under this
subsection shall be approved or disapproved by the Attorney
General not later than 30 business days after the date on
which the Attorney General receives the application.
(5) Grant amount.--A grant under this subsection shall not
exceed $100,000 for any single jurisdiction within a 1 year
period.
(6) Report.--Not later than December 31, 2006, the Attorney
General shall submit to Congress a report describing the
applications submitted for grants under this subsection, the
award of such grants, and the purposes for which the grant
amounts were expended.
(7) Authorization of appropriations.--There is authorized
to be appropriated to carry out this subsection $5,000,000
for each of fiscal years 2006 and 2007.

SEC. 5. GRANT PROGRAM.

(a) Authority To Make Grants.--The Office of Justice
Programs of the Department of Justice shall award grants, in
accordance with such regulations as the Attorney General may
prescribe, to State and local programs designed to combat
hate crimes committed by juveniles, including programs to
train local law enforcement officers in identifying,
investigating, prosecuting, and preventing hate crimes.
(b) Authorization of Appropriations.--There are authorized
to be appropriated such sums as may be necessary to carry out
this section.

SEC. 6. AUTHORIZATION FOR ADDITIONAL PERSONNEL TO ASSIST
STATE AND LOCAL LAW ENFORCEMENT.

There are authorized to be appropriated to the Department
of the Treasury and the Department of Justice, including the
Community Relations Service, for fiscal years 2006, 2007, and
2008 such sums as are necessary to increase the number of
personnel to prevent and respond to alleged violations of
section 249 of title 18, United States Code, as added by
section 7.

SEC. 7. PROHIBITION OF CERTAIN HATE CRIME ACTS.

(a) In General.--Chapter 13 of title 18, United States
Code, is amended by adding at the end the following:

Sec. 249. Hate crime acts

``(a) In General.--
``(1) Offenses involving actual or perceived race, color,
religion, or national origin.--Whoever, whether or not acting
under color of law, willfully causes bodily injury to any
person or, through the use of fire, a firearm, or an
explosive or incendiary device, attempts to cause bodily
injury to any person, because of the actual or perceived
race, color, religion, or national origin of any person--
``(A) shall be imprisoned not more than 10 years, fined in
accordance with this title, or both; and
``(B) shall be imprisoned for any term of years or for
life, fined in accordance with this title, or both, if--
``(i) death results from the offense; or
``(ii) the offense includes kidnaping or an attempt to
kidnap, aggravated sexual abuse or an attempt to commit
aggravated sexual abuse, or an attempt to kill.
``(2) Offenses involving actual or perceived religion,
national origin, gender, sexual orientation, or disability.--
``(A) In general.--Whoever, whether or not acting under
color of law, in any circumstance described in subparagraph
(B), willfully causes bodily injury to any person or, through
the use of fire, a firearm, or an explosive or incendiary
device, attempts to cause bodily injury to any person,
because of the actual or perceived religion, national origin,
gender, sexual orientation, or disability of any person--
``(i) shall be imprisoned not more than 10 years, fined in
accordance with this title, or both; and
``(ii) shall be imprisoned for any term of years or for
life, fined in accordance with this title, or both, if--
``(I) death results from the offense; or
``(II) the offense includes kidnaping or an attempt to
kidnap, aggravated sexual abuse or an attempt to commit
aggravated sexual abuse, or an attempt to kill.
``(B) Circumstances described.--For purposes of
subparagraph (A), the circumstances described in this
subparagraph are that--
``(i) the conduct described in subparagraph (A) occurs
during the course of, or as the result of, the travel of the
defendant or the victim--
``(I) across a State line or national border; or
``(II) using a channel, facility, or instrumentality of
interstate or foreign commerce;
``(ii) the defendant uses a channel, facility, or
instrumentality of interstate or foreign commerce in
connection with the conduct described in subparagraph (A);
``(iii) in connection with the conduct described in
subparagraph (A), the defendant employs a firearm, explosive
or incendiary device, or other weapon that has traveled in
interstate or foreign commerce; or
``(iv) the conduct described in subparagraph (A)--
``(I) interferes with commercial or other economic activity
in which the victim is engaged at the time of the conduct; or
``(II) otherwise affects interstate or foreign commerce.
``(b) Certification Requirement.--No prosecution of any
offense described in this subsection may be undertaken by the
United States, except under the certification in writing of
the Attorney General, the Deputy Attorney General, the
Associate Attorney General, or any Assistant Attorney General
specially designated by the Attorney General that--
``(1) he or she has reasonable cause to believe that the
actual or perceived race, color, religion, national origin,
gender, sexual orientation, or disability of any person was a
motivating factor underlying the alleged conduct of the
defendant; and
``(2) he or his designee or she or her designee has
consulted with State or local law enforcement officials
regarding the prosecution and determined that--
``(A) the State does not have jurisdiction or does not
intend to exercise jurisdiction;
``(B) the State has requested that the Federal Government
assume jurisdiction;
``(C) the State does not object to the Federal Government
assuming jurisdiction; or
``(D) the verdict or sentence obtained pursuant to State
charges left demonstratively unvindicated the Federal
interest in eradicating bias-motivated violence.
``(c) Definitions.--In this section--
``(1) the term `explosive or incendiary device' has the
meaning given the term in section 232 of this title; and
``(2) the term `firearm' has the meaning given the term in
section 921(a) of this title.''.
(b) Technical and Conforming Amendment.--The analysis for
chapter 13 of title 18, United States Code, is amended by
adding at the end the following:
``249. Hate crime acts''.

SEC. 8. DUTIES OF FEDERAL SENTENCING COMMISSION.

(a) Amendment of Federal Sentencing Guidelines.--Pursuant
to the authority provided under section 994 of title 28,
United States Code, the United States Sentencing Commission
shall study the issue of adult recruitment of juveniles to
commit hate

[[Page 7331]]

crimes and shall, if appropriate, amend the Federal
sentencing guidelines to provide sentencing enhancements (in
addition to the sentencing enhancement provided for the use
of a minor during the commission of an offense) for adult
defendants who recruit juveniles to assist in the commission
of hate crimes.
(b) Consistency With Other Guidelines.--In carrying out
this section, the United States Sentencing Commission shall--
(1) ensure that there is reasonable consistency with other
Federal sentencing guidelines; and
(2) avoid duplicative punishments for substantially the
same offense.

SEC. 9. STATISTICS.

Subsection (b)(1) of the first section of the Hate Crimes
Statistics Act (28 U.S.C. 534 note) is amended by inserting
``gender,'' after ``race,''.

SEC. 10. SEVERABILITY.

If any provision of this Act, an amendment made by this
Act, or the application of such provision or amendment to any
person or circumstance is held to be unconstitutional, the
remainder of this Act, the amendments made by this Act, and
the application of the provisions of such to any person or
circumstance shall not be affected thereby.
______

SA 3862. Mr. KERRY submitted an amendment intended to be proposed by
him to the bill S. 1955, to amend title I of the Employee Retirement
Security Act of 1974 and the Public Health Service Act to expand health
care access and reduce costs through the creation of small business
health plans and through modernization of the health insurance
marketplace; which was ordered to lie on the table; as follows:

Strike all after the enacting clause and insert the
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title.--This Act may be cited as the ``Kids Come
First Act of 2006''.
(b) Table of Contents.--The table of contents of this Act
is as follows:

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

TITLE I--EXPANDED COVERAGE OF CHILDREN UNDER MEDICAID AND SCHIP

Sec. 101. State option to receive 100 percent FMAP for medical
assistance for children in poverty in exchange for
expanded coverage of children in working poor families
under medicaid or SCHIP.
Sec. 102. Elimination of cap on SCHIP funding for States that expand
eligibility for children.

TITLE II--STATE OPTIONS FOR INCREMENTAL CHILD COVERAGE EXPANSIONS

Sec. 201. State option to provide wrap-around SCHIP coverage to
children who have other health coverage.
Sec. 202. State option to enroll low-income children of State employees
in SCHIP.
Sec. 203. Optional coverage of legal immigrant children under medicaid
and SCHIP.
Sec. 204. State option for passive renewal of eligibility for children
under medicaid and SCHIP.

TITLE III--TAX INCENTIVES FOR HEALTH INSURANCE COVERAGE OF CHILDREN

Sec. 301. Refundable credit for health insurance coverage of children.
Sec. 302. Forfeiture of personal exemption for any child not covered by
health insurance.

TITLE IV--MISCELLANEOUS

Sec. 401. Requirement for group market health insurers to offer
dependent coverage option for workers with children.
Sec. 402. Effective date.

TITLE V--REVENUE PROVISION

Sec. 501. Partial repeal of rate reduction in the highest income tax
bracket.

SEC. 2. FINDINGS.

Congress makes the following findings:
(1) Need for universal coverage.--
(A) Currently, there are 9,000,000 children under the age
of 19 that are uninsured. One out of every 8 children are
uninsured while 1 in 5 Hispanic children and 1 in 7 African
American children are uninsured. Three-quarters,
approximately 6,800,000, of these children are eligible but
not enrolled in the medicaid program or the State children's
health insurance program (SCHIP). Long-range studies found
that 1 in 3 children went without health insurance for all or
part of 2002 and 2003.
(B) Low-income children are 3 times as likely as children
in higher income families to be uninsured. It is estimated
that 65 percent of uninsured children have at least 1 parent
working full time over the course of the year.
(C) It is estimated that 50 percent of all legal immigrant
children in families with income that is less than 200
percent of the Federal poverty line are uninsured. In States
without programs to cover immigrant children, 57 percent of
non-citizen children are uninsured.
(D) Children in the Southern and Western parts of the
United States were nearly 1.7 times more likely to be
uninsured than children in the Northeast. In the Northeast,
9.4 percent of children are uninsured while in the Midwest,
8.3 percent are uninsured. The South's rate of uninsured
children is 14.3 percent while the West has an uninsured rate
of 13 percent.
(E) Children's health care needs are neglected in the
United States. One-quarter of young children in the United
States are not fully up to date on their basic immunizations.
One-third of children with chronic asthma do not get a
prescription for the necessary medications to manage the
disease.
(F) According to the Centers for Disease Control and
Prevention, nearly \1/2\ of all uninsured children have not
had a well-child visit in the past year. One out of every 5
children has problems accessing needed care, and 1 out of
every 4 children do not receive annual dental exams. One in 6
uninsured children had a delayed or unmet medical need in the
past year. Minority children are less likely to receive
proven treatments such as prescription medications to treat
chronic disease.
(G) There are 7,600,000 young adults between the ages of 19
and 20. In the United States, approximately 28 percent, or
2,100,000 individuals, of this group are uninsured.
(H) Chronic illness and disability among children are on
the rise. Children most at risk for chronic illness and
disability are children who are most likely to be poor and
uninsured.
(2) Role of the medicaid and state children's health
insurance programs.--
(A) The medicaid program and SCHIP serve as a crucial
health safety net for 30,000,000 children. During the recent
economic downturn and the highest number of uninsured
individuals ever recorded in the United States, the medicaid
program and SCHIP offset losses in employer-sponsored
coverage. While the number of children living in low-income
families increased by 2,000,000 between 2000 and 2003, the
number of uninsured children fell due to the medicaid program
and SCHIP.
(B) In 2003, 25,000,000 children were enrolled in the
medicaid program, accounting for \1/2\ of all enrollees and
only 19 percent of total program costs.
(C) The medicaid program and SCHIP do more than just fill
in the gaps. Gains in public coverage have reduced the
percentage of low-income uninsured by a \1/3\ from 1997 to
2003. In addition, a recent study found that publicly-insured
children are more likely to obtain medical care, preventive
care and dental care than similar low-income privately-
insured children.
(D) Publicly funded programs such as the medicaid program
and SCHIP actually improve children's health. Children who
are currently insured by public programs are in better health
than they were a year ago. Expansion of coverage for children
and pregnant women under the medicaid program and SCHIP
reduces rates of avoidable hospitalizations by 22 percent.
(E) Studies have found that children enrolled in public
insurance programs experienced a 68 percent improvement in
measures of school performance.
(F) Despite the success of expansions in general under the
medicaid program and SCHIP, due to current budget
constraints, many States have stopped doing aggressive
outreach and have raised premiums and cost-sharing
requirements on families under these programs. In addition, 8
States stopped enrollment in SCHIP for a period of time
between April 2003 and July 2004. As a result, SCHIP
enrollment fell by 200,000 children for the first time in the
program's history.
(G) It is estimated that nearly 50 percent of children
covered through SCHIP do not remain in the program due to
reenrollment barriers. A recent study found that between 10
and 40 percent of these children are ``lost'' in the system.
Difficult renewal policies and reenrollment barriers make
seamless coverage in SCHIP unattainable. Studies indicate
that as many as 67 percent of children who were eligible but
not enrolled for SCHIP had applied for coverage but were
denied due to procedural issues.
(H) While the medicaid program and SCHIP expansions to date
have done much to offset what otherwise would have been a
significant loss of coverage among children because of
declining access to employer coverage, the shortcomings of
previous expansions, such as the failure to enroll all
eligible children and caps on enrollment in SCHIP because of
under-funding, also are clear.

TITLE I--EXPANDED COVERAGE OF CHILDREN UNDER MEDICAID AND SCHIP

SEC. 101. STATE OPTION TO RECEIVE 100 PERCENT FMAP FOR
MEDICAL ASSISTANCE FOR CHILDREN IN POVERTY IN
EXCHANGE FOR EXPANDED COVERAGE OF CHILDREN IN
WORKING POOR FAMILIES UNDER MEDICAID OR SCHIP.

(a) State Option.--Title XIX of the Social Security Act (42
U.S.C. 1396 et seq.) is amended by redesignating section 1939
as section 1940, and by inserting after section 1938 the
following:

[[Page 7332]]

``STATE OPTION FOR INCREASED FMAP FOR MEDICAL ASSISTANCE FOR CHILDREN
IN POVERTY IN EXCHANGE FOR EXPANDED COVERAGE OF CHILDREN IN WORKING
POOR FAMILIES UNDER THIS TITLE OR TITLE XXI

``Sec. 1939. (a) 100 Percent FMAP.--
``(1) In general.--Notwithstanding any other provision of
this title, in the case of a State that, through an amendment
to each of its State plans under this title and title XXI (or
to a waiver of either such plan), agrees to satisfy the
conditions described in subsections (b), (c), and (d) the
Federal medical assistance percentage shall be 100 percent
with respect to the total amount expended by the State for
providing medical assistance under this title for each fiscal
year quarter beginning on or after the date described in
subsection (e) for children whose family income does not
exceed 100 percent of the poverty line.
``(2) Limitation on scope of application of increase.--The
increase in the Federal medical assistance percentage for a
State under this section shall apply only with respect to the
total amount expended for providing medical assistance under
this title for a fiscal year quarter for children described
in paragraph (1) and shall not apply with respect to--
``(A) any other payments made under this title, including
disproportionate share hospital payments described in section
1923;
``(B) payments under title IV or XXI; or
``(C) any payments made under this title or title XXI that
are based on the enhanced FMAP described in section 2105(b).
``(b) Eligibility Expansions.--The condition described in
this subsection is that the State agrees to do the following:
``(1) Coverage under medicaid or schip for children in
families whose income does not exceed 300 percent of the
poverty line.--
``(A) In general.--The State agrees to provide medical
assistance under this title or child health assistance under
title XXI to children whose family income exceeds the
medicaid applicable income level (as defined in section
2110(b)(4) but by substituting `January 1, 2006' for `March
31, 1997'), but does not exceed 300 percent of the poverty
line.
``(B) State option to expand coverage through subsidized
purchase of family coverage.--A State may elect to carry out
subparagraph (A) through the provision of assistance for the
purchase of dependent coverage under a group health plan or
health insurance coverage if--
``(i) the dependent coverage is consistent with the benefit
standards under this title or title XXI, as approved by the
Secretary; and
``(ii) the State provides additional benefits under this
title or title XXI.
``(C) Deemed satisfaction for certain states.--A State
that, as of January 1, 2006, provides medical assistance
under this title or child health assistance under title XXI
to children whose family income is 300 percent of the poverty
line shall be deemed to satisfy this paragraph.
``(2) Coverage for children under age 21.--The State agrees
to define a child for purposes of this title and title XXI as
an individual who has not attained 21 years of age.
``(3) Opportunity for higher income children to purchase
schip coverage.--The State agrees to permit any child whose
family income exceeds 300 percent of the poverty line to
purchase full or additional coverage under title XXI at the
full cost of providing such coverage, as determined by the
State.
``(4) Coverage for legal immigrant children.--The State
agrees to--
``(A) provide medical assistance under this title and child
health assistance under title XXI for alien children who are
lawfully residing in the United States (including battered
aliens described in section 431(c) of the Personal
Responsibility and Work Opportunity Reconciliation Act of
1996) and who are otherwise eligible for such assistance in
accordance with section 1903(v)(4) and 2107(e)(1)(E); and
``(B) not establish or enforce barriers that deter
applications by such aliens, including through the
application of the removal of the barriers described in
subsection (c).
``(c) Removal of Enrollment and Access Barriers.--The
condition described in this subsection is that the State
agrees to do the following:
``(1) Presumptive eligibility for children.--The State
agrees to--
``(A) provide presumptive eligibility for children under
this title and title XXI in accordance with section 1920A;
``(B) treat any items or services that are provided to an
uncovered child (as defined in section 2110(c)(8)) who is
determined ineligible for medical assistance under this title
as child health assistance for purposes of paying a provider
of such items or services, so long as such items or services
would be considered child health assistance for a targeted
low-income child under title XXI.
``(2) Adoption of 12-month continuous enrollment.--The
State agrees to provide that eligibility for assistance under
this title and title XXI shall not be regularly redetermined
more often than once every year for children.
``(3) Acceptance of self-declaration of income.--The State
agrees to permit the family of a child applying for medical
assistance under this title or child health assistance under
title XXI to declare and certify by signature under penalty
of perjury family income for purposes of collecting financial
eligibility information.
``(4) Adoption of acceptance of eligibility determinations
for other assistance programs.--The State agrees to accept
determinations (made within a reasonable period, as found by
the State, before its use for this purpose) of an
individual's family or household income made by a Federal or
State agency (or a public or private entity making such
determination on behalf of such agency), including the
agencies administering the Food Stamp Act of 1977, the
Richard B. Russell National School Lunch Act, and the Child
Nutrition Act of 1966, notwithstanding any differences in
budget unit, disregard, deeming, or other methodology, but
only if--
``(A) such agency has fiscal liabilities or
responsibilities affected or potentially affected by such
determinations; and
``(B) any information furnished by such agency pursuant to
this subparagraph is used solely for purposes of determining
eligibility for medical assistance under this title or for
child health assistance under title XXI.
``(5) No assets test.--The State agrees to not (or
demonstrates that it does not) apply any assets or resources
test for eligibility under this title or title XXI with
respect to children.
``(6) Eligibility Determinations and Redeterminations.--
``(A) In general.--The State agrees for purposes of initial
eligibility determinations and redeterminations of children
under this title and title XXI not to require a face-to-face
interview and to permit applications and renewals by mail,
telephone, and the Internet.
``(B) Nonduplication of information.--
``(i) In general.--For purposes of redeterminations of
eligibility for currently or previously enrolled children
under this title and title XXI, the State agrees to use all
information in its possession (including information
available to the State under other Federal or State programs)
to determine eligibility or redetermine continued eligibility
before seeking similar information from parents.
``(ii) Rule of construction.--Nothing in clause (i) shall
be construed as limiting any obligation of a State to provide
notice and a fair hearing before denying, terminating, or
reducing a child's coverage based on such information in the
possession of the State.
``(7) No waiting list for children under schip.--The State
agrees to not impose any numerical limitation, waiting list,
waiting period, or similar limitation on the eligibility of
children for child health assistance under title XXI or to
establish or enforce other barriers to the enrollment of
eligible children based on the date of their application for
coverage.
``(8) Adequate provider payment rates.--The State agrees
to--
``(A) establish payment rates for children's health care
providers under this title that are no less than the average
of payment rates for similar services for such providers
provided under the benchmark benefit packages described in
section 2103(b);
``(B) establish such rates in amounts that are sufficient
to ensure that children enrolled under this title or title
XXI have adequate access to comprehensive care, in accordance
with the requirements of section 1902(a)(30)(A); and
``(C) include provisions in its contracts with providers
under this title guaranteeing compliance with these
requirements.
``(d) Maintenance of Medicaid Eligibility Levels for
Children.--
``(1) In general.--The condition described in this
subsection is that the State agrees to maintain eligibility
income, resources, and methodologies applied under this title
(including under a waiver of such title or under section
1115) with respect to children that are no more restrictive
than the eligibility income, resources, and methodologies
applied with respect to children under this title (including
under such a waiver) as of January 1, 2006.
``(2) Rule of construction.--Nothing in this section shall
be construed as implying that a State does not have to comply
with the minimum income levels required for children under
section 1902(l)(2).
``(e) Date Described.--The date described in this
subsection is the date on which, with respect to a State, a
plan amendment that satisfies the requirements of subsections
(b), (c), and (d) is approved by the Secretary.
``(f) Definition of Poverty Line.--In this section, the
term `poverty line' has the meaning given that term in
section 2110(c)(5).''.
(b) Conforming Amendments.--
(1) The third sentence of section 1905(b) of the Social
Security Act (42 U.S.C. 1396d(b)) is amended by inserting
before the period the following: ``, and with respect to
amounts expended for medical assistance for children on or
after the date described in subsection (d) of section 1939,
in the case of a State that has, in accordance with such
section, an approved plan amendment under this title and
title XXI''.
(2) Section 1903(f)(4) of the Social Security Act (42
U.S.C. 1396b(f)(4)) is amended--
(A) in subparagraph (C), by adding ``or'' after ``section
1611(b)(1),''; and

[[Page 7333]]

(B) by inserting after subparagraph (C), the following:
``(D) who would not receive such medical assistance but for
State electing the option under section 1939 and satisfying
the conditions described in subsections (b), (c), and (d) of
such section,''.

SEC. 102. ELIMINATION OF CAP ON SCHIP FUNDING FOR STATES THAT
EXPAND ELIGIBILITY FOR CHILDREN.

(a) In General.--Section 2105 of the Social Security Act
(42 U.S.C. 1397dd) is amended by adding at the end the
following:
``(h) Guaranteed Funding for Child Health Assistance for
Coverage Expansion States.--
``(1) In general.--Only in the case of a State that has, in
accordance with section 1939, an approved plan amendment
under this title and title XIX, any payment cap that would
otherwise apply to the State under this title as a result of
having expended all allotments available for expenditure by
the State with respect to a fiscal year shall not apply with
respect to amounts expended by the State on or after the date
described in section 1939(d).
``(2) Appropriation.--There is appropriated, out of any
money in the Treasury not otherwise appropriated, such sums
as may be necessary for the purpose of paying a State
described in paragraph (1) for each quarter beginning on or
after the date described in section 1939(d), an amount equal
to the enhanced FMAP of expenditures described in paragraph
(1) and incurred during such quarter.''.
(b) Conforming Amendments.--Section 2104 of the Social
Security Act (42 U.S.C. 1397dd) is amended--
(1) in subsection (a), by inserting ``subject to section
2105(h),'' after ``under this section,'';
(2) in subsection (b)(1), by inserting ``and section
2105(h)'' after ``Subject to paragraph (4)''; and
(3) in subsection (c)(1), by inserting ``subject to section
2105(h),'' after ``for a fiscal year,''.

TITLE II--STATE OPTIONS FOR INCREMENTAL CHILD COVERAGE EXPANSIONS

SEC. 201. STATE OPTION TO PROVIDE ADDITIONAL SCHIP COVERAGE
TO CHILDREN WHO HAVE OTHER HEALTH COVERAGE.

(a) In General.--Section 2110(b) of the Social Security Act
(42 U.S.C. 1397jj(b)) is amended--
(1) in paragraph (1)(C), by inserting ``, subject to
paragraph (5),'' after ``under title XIX or''; and
(2) by adding at the end the following new paragraph:
``(5) State option to provide additional coverage.--
``(A) In general.--A State may waive the requirement of
paragraph (1)(C) that a targeted low-income child may not be
covered under a group health plan or under health insurance
coverage in order to provide--
``(i) items or services that are not covered, or are only
partially covered, under such plan or coverage; or
``(ii) cost-sharing protection.
``(B) Eligibility.--In waiving such requirement, a State
may limit the application of the waiver to children whose
family income does not exceed a level specified by the State,
so long as the level so specified does not exceed the maximum
income level otherwise established for other children under
the State child health plan.
``(C) Continued application of duty to prevent substitution
of existing coverage.--Nothing in this paragraph shall be
construed as modifying the application of section
2102(b)(3)(C) to a State.''.
(b) Application of Enhanced Match under Medicaid.--Section
1905 of such Act (42 U.S.C. 1396d) is amended--
(1) in subsection (b), in the fourth sentence, by striking
``subsection (u)(3)'' and inserting ``(u)(3), or (u)(4)'';
and
(2) in subsection (u), by redesignating paragraph (4) as
paragraph (5) and by inserting after paragraph (3) the
following:
``(4) For purposes of subsection (b), the expenditures
described in this paragraph are expenditures for items and
services for children described in section 2110(b)(5).''.
(c) Application of Secondary Payor Provisions.--Section
2107(e)(1) of such Act (42 U.S.C. 1397gg(e)(1)) is amended--
(1) by redesignating subparagraphs (B) through (D) as
subparagraphs (C) through (E), respectively; and
(2) by inserting after subparagraph (A) the following new
subparagraph:
``(B) Section 1902(a)(25) (relating to coordination of
benefits and secondary payor provisions) with respect to
children covered under a waiver described in section
2110(b)(5).''.

SEC. 202. STATE OPTION TO ENROLL LOW-INCOME CHILDREN OF STATE
EMPLOYEES IN SCHIP.

Section 2110(b)(2) of the Social Security Act (42 U.S.C.
1397jj(b)(2)) is amended--
(1) by redesignating subparagraphs (A) and (B) as clauses
(i) and (ii), respectively and realigning the left margins of
such clauses appropriately;
(2) by striking ``Such term'' and inserting the following:
``(A) In general.--Such term''; and
(3) by adding at the end the following:
``(B) State option to enroll low-income children of state
employees.--At the option of a State, subparagraph (A)(ii)
shall not apply to any low-income child who would otherwise
be eligible for child health assistance under this title but
for such subparagraph.''.

SEC. 203. OPTIONAL COVERAGE OF LEGAL IMMIGRANT CHILDREN UNDER
MEDICAID AND SCHIP.

(a) Medicaid Program.--Section 1903(v) of the Social
Security Act (42 U.S.C. 1396b(v)) is amended--
(1) in paragraph (1), by striking ``paragraph (2)'' and
inserting ``paragraphs (2) and (4)''; and
(2) by adding at the end the following:
``(4)(A) A State may elect (in a plan amendment under this
title) to provide medical assistance under this title for
aliens who are lawfully residing in the United States
(including battered aliens described in section 431(c) of the
Personal Responsibility and Work Opportunity Reconciliation
Act of 1996) and who are otherwise eligible for such
assistance, within any of the following eligibility
categories:
``(i) Children.--Children (as defined under such plan),
including optional targeted low-income children described in
section 1905(u)(2)(B).
``(B)(i) In the case of a State that has elected to provide
medical assistance to a category of aliens under subparagraph
(A), no debt shall accrue under an affidavit of support
against any sponsor of such an alien on the basis of
provision of assistance to such category and the cost of such
assistance shall not be considered as an unreimbursed cost.
``(ii) The provisions of sections 401(a), 402(b), 403, and
421 of the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 shall not apply to a State that
makes an election under subparagraph (A).''.
(b) Title XXI.--Section 2107(e)(1) of the Social Security
Act (42 U.S.C. 1397gg(e)(1)) is amended by adding at the end
the following:
``(E) Section 1903(v)(4) (relating to optional coverage of
permanent resident alien children), but only if the State has
elected to apply such section to that category of children
under title XIX.''.

SEC. 204. STATE OPTION FOR PASSIVE RENEWAL OF ELIGIBILITY FOR
CHILDREN UNDER MEDICAID AND SCHIP.

(a) In General.--Section 1902(l) of the Social Security Act
(42 U.S.C. 1396a(l)) is amended by adding at the end the
following:
``(5) Notwithstanding any other provision of this title, a
State may provide that an individual who has not attained 21
years of age who has been determined eligible for medical
assistance under this title shall remain eligible for medical
assistance until such time as the State has information
demonstrating that the individual is no longer so
eligible.''.
(b) Application under Title XXI.--Section 2107(e)(1) of the
Social Security Act (42 U.S.C. 1397gg(e)) is amended--
(1) by redesignating subparagraphs (B) through (D) as
subparagraphs (C) through (E), respectively; and
(2) by inserting after subparagraph (A), the following:
``(B) Section 1902(l)(5) (relating to passive renewal of
eligibility for children).''.

TITLE III--TAX INCENTIVES FOR HEALTH INSURANCE COVERAGE OF CHILDREN

SEC. 301. REFUNDABLE CREDIT FOR HEALTH INSURANCE COVERAGE OF
CHILDREN.

(a) In General.--Subpart C of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 (relating to
refundable credits) is amended by redesignating section 36 as
section 37 and by inserting after section 35 the following
new section:

``SEC. 36. HEALTH INSURANCE COVERAGE OF CHILDREN.

``(a) In General.--In the case of an individual, there
shall be allowed as a credit against the tax imposed by this
subtitle an amount equal to so much of the amount paid during
the taxable year, not compensated for by insurance or
otherwise, for qualified health insurance for each dependent
child of the taxpayer, as exceeds 5 percent of the adjusted
gross income of such taxpayer for such taxable year.
``(b) Dependent Child.--For purposes of this section, the
term `dependent child' means any child (as defined in section
152(f)(1)) who has not attained the age of 19 as of the close
of the calendar year in which the taxable year of the
taxpayer begins and with respect to whom a deduction under
section 151 is allowable to the taxpayer.
``(c) Qualified Health Insurance.--For purposes of this
section--
``(1) In general.--The term `qualified health insurance'
means insurance, either employer-provided or made available
under title XIX or XXI of the Social Security Act, which
constitutes medical care as defined in section 213(d) without
regard to--
``(A) paragraph (1)(C) thereof, and
``(B) so much of paragraph (1)(D) thereof as relates to
qualified long-term care insurance contracts.
``(2) Exclusion of certain other contracts.--Such term
shall not include insurance if a substantial portion of its
benefits are excepted benefits (as defined in section
9832(c)).
``(d) Medical Savings Account and Health Savings Account
Contributions.--
``(1) In general.--If a deduction would (but for paragraph
(2)) be allowed under section

[[Page 7334]]

220 or 223 to the taxpayer for a payment for the taxable year
to the medical savings account or health savings account of
an individual, subsection (a) shall be applied by treating
such payment as a payment for qualified health insurance for
such individual.
``(2) Denial of double benefit.--No deduction shall be
allowed under section 220 or 223 for that portion of the
payments otherwise allowable as a deduction under section 220
or 223 for the taxable year which is equal to the amount of
credit allowed for such taxable year by reason of this
subsection.
``(e) Special Rules.--
``(1) Determination of insurance costs.--The Secretary
shall provide rules for the allocation of the cost of any
qualified health insurance for family coverage to the
coverage of any dependent child under such insurance.
``(2) Coordination with deduction for health insurance
costs of self-employed individuals.--In the case of a
taxpayer who is eligible to deduct any amount under section
162(l) for the taxable year, this section shall apply only if
the taxpayer elects not to claim any amount as a deduction
under such section for such year.
``(3) Coordination with medical expense and high deductible
health plan deductions.--The amount which would (but for this
paragraph) be taken into account by the taxpayer under
section 213 or 224 for the taxable year shall be reduced by
the credit (if any) allowed by this section to the taxpayer
for such year.
``(4) Denial of credit to dependents.--No credit shall be
allowed under this section to any individual with respect to
whom a deduction under section 151 is allowable to another
taxpayer for a taxable year beginning in the calendar year in
which such individual's taxable year begins.
``(5) Denial of double benefit.--No credit shall be allowed
under subsection (a) if the credit under section 35 is
allowed and no credit shall be allowed under 35 if a credit
is allowed under this section.
``(6) Election not to claim credit.--This section shall not
apply to a taxpayer for any taxable year if such taxpayer
elects to have this section not apply for such taxable
year.''.
(b) Information Reporting.--
(1) In general.--Subpart B of part III of subchapter A of
chapter 61 of the Internal Revenue Code of 1986 (relating to
information concerning transactions with other persons) is
amended by inserting after section 6050T the following new
section:

``SEC. 6050U. RETURNS RELATING TO PAYMENTS FOR QUALIFIED
HEALTH INSURANCE.

``(a) In General.--Any governmental unit or any person who,
in connection with a trade or business conducted by such
person, receives payments during any calendar year from any
individual for coverage of a dependent child (as defined in
section 36(b)) of such individual under creditable health
insurance, shall make the return described in subsection (b)
(at such time as the Secretary may by regulations prescribe)
with respect to each individual from whom such payments were
received.
``(b) Form and Manner of Returns.--A return is described in
this subsection if such return--
``(1) is in such form as the Secretary may prescribe, and
``(2) contains--
``(A) the name, address, and TIN of the individual from
whom payments described in subsection (a) were received,
``(B) the name, address, and TIN of each dependent child
(as so defined) who was provided by such person with coverage
under creditable health insurance by reason of such payments
and the period of such coverage, and
``(C) such other information as the Secretary may
reasonably prescribe.
``(c) Creditable Health Insurance.--For purposes of this
section, the term `creditable health insurance' means
qualified health insurance (as defined in section 36(c)).
``(d) Statements To Be Furnished to Individuals With
Respect to Whom Information Is Required.--Every person
required to make a return under subsection (a) shall furnish
to each individual whose name is required under subsection
(b)(2)(A) to be set forth in such return a written statement
showing--
``(1) the name and address of the person required to make
such return and the phone number of the information contact
for such person,
``(2) the aggregate amount of payments described in
subsection (a) received by the person required to make such
return from the individual to whom the statement is required
to be furnished, and
``(3) the information required under subsection (b)(2)(B)
with respect to such payments.

The written statement required under the preceding sentence
shall be furnished on or before January 31 of the year
following the calendar year for which the return under
subsection (a) is required to be made.
``(e) Returns Which Would Be Required To Be Made by 2 or
More Persons.--Except to the extent provided in regulations
prescribed by the Secretary, in the case of any amount
received by any person on behalf of another person, only the
person first receiving such amount shall be required to make
the return under subsection (a).''.
(2) Assessable penalties.--
(A) Subparagraph (B) of section 6724(d)(1) of such Code
(relating to definitions) is amended by redesignating clauses
(xiii) through (xviii) as clauses (xiv) through (xix),
respectively, and by inserting after clause (xii) the
following new clause:
``(xiii) section 6050U (relating to returns relating to
payments for qualified health insurance),''.
(B) Paragraph (2) of section 6724(d) of such Code is
amended by striking ``or'' at the end of the next to last
subparagraph, by striking the period at the end of the last
subparagraph and inserting ``, or'', and by adding at the end
the following new subparagraph:
``(CC) section 6050U(d) (relating to returns relating to
payments for qualified health insurance).''.
(3) Clerical amendment.--The table of sections for subpart
B of part III of subchapter A of chapter 61 of such Code is
amended by inserting after the item relating to section 6050T
the following new item:

``Sec. 6050U. Returns relating to payments for qualified health
insurance.''.

(c) Conforming Amendments.--
(1) Paragraph (2) of section 1324(b) of title 31, United
States Code, is amended by inserting before the period ``, or
from section 36 of such Code''.
(2) The table of sections for subpart C of part IV of
subchapter A of chapter 1 of the Internal Revenue Code of
1986 is amended by striking the last item and inserting the
following new items:

``Sec. 36. Health insurance coverage of children.
``Sec. 37. Overpayments of tax.''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2006.

SEC. 302. FORFEITURE OF PERSONAL EXEMPTION FOR ANY CHILD NOT
COVERED BY HEALTH INSURANCE.

(a) In General.--Section 151(d) of the Internal Revenue
Code of 1986 (relating to exemption amount) is amended by
adding at the end the following new paragraph:
``(5) Reduction of exemption amount for any child not
covered by health insurance.--
``(A) In general.--Except as otherwise provided in this
paragraph, the exemption amount otherwise determined under
this subsection for any dependent child (as defined in
section 36(b)) for any taxable year shall be reduced by the
same percentage as the percentage of such taxable year during
which such dependent child was not covered by qualified
health insurance (as defined in section 36(c)).
``(B) Full reduction if no proof of coverage is provided.--
For purposes of subparagraph (A), in the case of any taxpayer
who fails to attach to the return of tax for any taxable year
a copy of the statement furnished to such taxpayer under
section 6050U, the percentage reduction under such
subparagraph shall be deemed to be 100 percent.
``(C) Nonapplication of paragraph to taxpayers in lowest
tax bracket.--This paragraph shall not apply to any taxpayer
whose taxable income for the taxable year does not exceed the
initial bracket amount determined under section
1(i)(1)(B).''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2006.

TITLE IV--MISCELLANEOUS

SEC. 401. REQUIREMENT FOR GROUP MARKET HEALTH INSURERS TO
OFFER DEPENDENT COVERAGE OPTION FOR WORKERS
WITH CHILDREN.

(a) ERISA.--
(1) In general.--Subpart B of part 7 of subtitle B of title
I of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1185 et seq.) is amended by adding at the end the
following:

``SEC. 714. REQUIREMENT TO OFFER OPTION TO PURCHASE DEPENDENT
COVERAGE FOR CHILDREN.

``(a) Requirements for Coverage.--A group health plan, and
a health insurance issuer providing health insurance coverage
in connection with a group health plan, shall offer an
individual who is enrolled in such coverage the option to
purchase dependent coverage for a child of the individual.
``(b) No Employer Contribution Required.--An employer shall
not be required to contribute to the cost of purchasing
dependent coverage for a child by an individual who is an
employee of such employer.
``(c) Definition of Child.--In this section, the term
`child' means an individual who has not attained 21 years of
age.''.
(2) Clerical amendment.--The table of contents in section 1
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1001) is amended by inserting after the item relating
to section 713 the following:

``Sec. 714. Requirement to offer option to purchase dependent coverage
for children.''.

(b) Public Health Service Act.--Subpart 2 of part A of
title XXVII of the Public

[[Page 7335]]

Health Service Act (42 U.S.C. 300gg-4 et seq.) is amended by
adding at the end the following:

``SEC. 2707. REQUIREMENT TO OFFER OPTION TO PURCHASE
DEPENDENT COVERAGE FOR CHILDREN.

``(a) Requirements for Coverage.--A group health plan, and
a health insurance issuer providing health insurance coverage
in connection with a group health plan, shall offer an
individual who is enrolled in such coverage the option to
purchase dependent coverage for a child of the individual.
``(b) No Employer Contribution Required.--An employer shall
not be required to contribute to the cost of purchasing
dependent coverage for a child by an individual who is an
employee of such employer.
``(c) Definition of Child.--In this section, the term
`child' means an individual who has not attained 21 years of
age.''.
(c) Effective Date.--The amendments made by this section
shall apply with respect to plan years beginning on or after
January 1, 2007.

SEC. 402. EFFECTIVE DATE.

Unless otherwise provided, the amendments made by this Act
shall take effect on October 1, 2006, and shall apply to
child health assistance and medical assistance provided on or
after that date without regard to whether or not final
regulations to carry out such amendments have been
promulgated by such date.

TITLE V--REVENUE PROVISION

SEC. 501. PARTIAL REPEAL OF RATE REDUCTION IN THE HIGHEST
INCOME TAX BRACKET.

Section 1(i)(2) of the Internal Revenue Code of 1986 is
amended by adding at the end the following flush sentence:
``In the case of taxable years beginning during calendar year
2006 and thereafter, the final item in the fourth column in
the preceding table shall be applied by substituting for
`35.0%' such rate as the Secretary determines is necessary to
provide sufficient revenues to offset the Federal outlays
required to implement the provisions of, and amendments made
by, the Kids Come First Act of 2006.''.
______

SA 3863. Mr. SMITH submitted an amendment intended to be proposed by
him to the bill S. 1955 to amend title I of the Employee Retirement
Security Act of 1974 and the Public Health Service Act to expand health
care access and reduce costs through the creation of small business
health plans and through modernization of the health insurance
marketplace; which was ordered to lie on the table; as follows:

In section 2922 of the Public Health Service Act, as added
by section 201 of the bill, strike subsection (a) and insert
the following:
``(a) Benefit Choice Options.--
``(1) Development.--Not later than 6 months after the date
of enactment of this title, the Secretary shall issue, by
interim final rule, Benefit Choice Standards that implement a
standard benefit package as provided for in this part.
``(2) Requirement.--The Benefit Choice Standards shall
provide that a health insurance issuer in a State, may offer
a coverage plan or plan in the small group market, individual
market, large group market, or through a small business
health plan, that does not comply with one or more mandates
regarding covered benefits, services, or category of provider
as may be in effect in such State with respect to such market
or markets (either prior to or following the date of
enactment of this title), if such coverage or plan provides
for coverage of a standard benefit package as provided for in
paragraph (3).
``(3) Standard benefit package.--A health insurance issuer
described in paragraph (2) shall offer to purchasers
(including, with respect to a small business health plan, the
participating employers of such plan) a plan that, at a
minimum, provides coverage for such benefits, services, and
categories of providers as are required under the laws of at
least 25 States, as determined by the Secretary.
``(4) Publication of benefit package.--Not later than 3
months after the date of enactment of this title, and on the
first day of every calendar year thereafter, the Secretary
shall publish in the Federal Register the standard benefit
package required under this subsection. In making such
publication the Secretary shall resolve any variations that
exist in the scope of the benefits, services, and categories
of providers required under the laws of the States considered
by the Secretary for purposes of paragraph (3).
``(5) Updating of benefit package.--Not later than 2 years
after the date on which the standard benefit package is
issued under paragraph (3), and every 2 years thereafter, the
Secretary, in consultation with the National Association of
Insurance Commissioners, shall update the package. The
Secretary shall issue the updated package by regulation, and
such updated package shall be effective upon the first plan
year following the issuance of such regulation.
______

SA 3864. Mr. SMITH submitted an amendment intended to be proposed by
him to the bill S. 1955 to amend title I of the Employee Retirement
Security Act of 1974 and the Public Health Service Act to expand health
care access and reduce costs through the creation of small business
health plans and through modernization of the health insurance
marketplace; which was ordered to lie on the table; as follows:

At the end of the amendment, add the following:
``(__) Provision of Mental Health Benefits.--The standard
benefit package under this part shall require that health
plans include coverage (and cost sharing if applicable) for
mental health care in a manner that is comparable to the
coverage (and cost sharing if applicable) provided under such
plan for items and services relating to physical health.
______

SA 3865. Mr. SMITH submitted an amendment intended to be proposed by
him to the bill S. 1955 to amend title I of the Employee Retirement
Security Act of 1974 and the Public Health Service Act to expand health
care access and reduce costs through the creation of small business
health plans and through modernization of the health insurance
marketplace; which was ordered to lie on the table; as follows:

In section 2922(a) of the Public Health Service Act, as
added by section 201 of the bill, add at the end the
following:
``(5) Application of cost sharing.--A health insurance
issuer in a State that offers a basic option plan as provided
for in paragraph (2) and an enhanced option plan as provided
for in paragraph (3), shall ensure that any cost sharing
required under either such option is comparable, with respect
to dollar amounts, to the cost sharing required under the
other such option.
______

SA 3866. Mr. SMITH submitted an amendment intended to be proposed by
him to the bill S. 1955 to amend title I of the Employee Retirement
Security Act of 1974 and the Public Health Service Act to expand health
care access and reduce costs through the creation of small business
health plans and through modernization of the health insurance
marketplace; which was ordered to lie on the table; as follows:

In section 2922(a) of the Public Health Service Act, as
added by section 201 of the bill, add at the end the
following:
``(5) Provision of mental health benefits.--A health
insurance issuer in a State that offers a basic option plan
as provided for in paragraph (2) and an enhanced option plan
as provided for in paragraph (3), shall ensure that each such
plan provides coverage (and cost sharing if applicable) for
mental health care in a manner that is comparable to the
coverage (and cost sharing if applicable) provided under each
such plan for items and services relating to physical health.
______

SA 3867. Ms. SNOWE submitted an amendment intended to be proposed by
her to the bill S. 1955 to amend title I of the Employee Retirement
Security Act of 1974 and the Public Health Service Act to expand health
care access and reduce costs through the creation of small business
health plans and through modernization of the health insurance
marketplace; which was ordered to lie on the table; as follows:

At the appropriate place, insert the following:

SEC. __. NEGOTIATING FAIR PRICES FOR MEDICARE PRESCRIPTION
DRUGS.

(a) In General.--Section 1860D-11 (42 U.S.C. 1395w-111) is
amended by striking subsection (i) (relating to
noninterference) and inserting the following:
``(i) Authority To Negotiate Prices With Manufacturers.--
``(1) In general.--Subject to paragraph (4), in order to
ensure that beneficiaries enrolled under prescription drug
plans and MA-PD plans pay the lowest possible price, the
Secretary shall have authority similar to that of other
Federal entities that purchase prescription drugs in bulk to
negotiate contracts with manufacturers of covered part D
drugs, consistent with the requirements and in furtherance of
the goals of providing quality care and containing costs
under this part.
``(2) Mandatory responsibilities.--The Secretary shall be
required to--
``(A) negotiate contracts with manufacturers of covered
part D drugs for each fallback prescription drug plan under
subsection (g); and
``(B) participate in negotiation of contracts of any
covered part D drug upon request of an approved prescription
drug plan or MA-PD plan.
``(3) Rule of construction.--Nothing in paragraph (2) shall
be construed to limit the authority of the Secretary under
paragraph (1) to the mandatory responsibilities under
paragraph (2).
``(4) No particular formulary or price structure.--In order
to promote competition under this part and in carrying out
this

[[Page 7336]]

part, the Secretary may not require a particular formulary or
institute a price structure for the reimbursement of covered
part D drugs.''.
(b) Effective Date.--The amendment made by this section
shall take effect on the date of enactment of this Act.
______

SA 3868. Mr. OBAMA submitted an amendment intended to be proposed by
him to the bill S. 1955, to amend title I of the Employee Retirement
Security Act of 1974 and the Public Health Service Act to expand health
care access and reduce costs through the creation of small business
health plans and through modernization of the health insurance
marketplace; which was ordered to lie on the table; as follows:

Strike all after the enacting clause and insert the
following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Hospital Quality Report Card
Act of 2006''.

SEC. 2. PURPOSE.

The purpose of this Act is to expand hospital quality
reporting by establishing the Hospital Quality Report Card
Initiative under the Medicare program to ensure that hospital
quality measures data are readily available and accessible in
order to--
(1) assist patients and consumers in making decisions about
where to get health care;
(2) assist purchasers and insurers in making decisions that
determine where employees, subscribers, members, or
participants are able to go for their health care;
(3) assist health care providers in identifying
opportunities for quality improvement and cost containment;
and
(4) enhance the understanding of policy makers and public
officials of health care issues, raise public awareness of
hospital quality issues, and to help constituents of such
policy makers and officials identify quality health care
options.

SEC. 3. HOSPITAL QUALITY REPORT CARD INITIATIVE.

(a) In General.--Title XVIII of the Social Security Act (42
U.S.C. 1395 et seq.) is amended by adding at the end the
following new section:

``SEC. 1898. HOSPITAL QUALITY REPORT CARD INITIATIVE.

``(a) In General.--Not later than 18 months after the date
of the enactment of the Hospital Quality Report Card Act of
2006, the Secretary, acting through the Administrator of the
Centers for Medicare & Medicaid Services (in this section
referred to as the `Administrator') and in consultation with
the Director of the Agency for Healthcare Research and
Quality, shall, directly or through contracts with States,
establish and implement a Hospital Quality Report Card
Initiative (in this section referred to as the `Initiative')
to report on health care quality in subsection (d) hospitals.
``(b) Subsection (d) Hospital.--For purposes of this
section, the term `subsection (d) hospital' has the meaning
given such term in section 1886(d)(1)(B).
``(c) Requirements of Initiative.--
``(1) Quality measurement reports for hospitals.--
``(A) Quality measures.--Not less than 2 times each year,
the Secretary shall publish reports on hospital quality. Such
reports shall include quality measures data submitted under
section 1886(b)(3)(B)(viii), and other data as feasible, that
allow for an assessment of health care--
``(i) effectiveness;
``(ii) safety;
``(iii) timeliness;
``(iv) efficiency;
``(v) patient-centeredness; and
``(vi) equity.
``(B) Report card features.--In collecting and reporting
data as provided for under subparagraph (A), the Secretary
shall include hospital information, as possible, relating
to--
``(i) staffing levels of nurses and other health
professionals, as appropriate;
``(ii) rates of nosocomial infections;
``(iii) the volume of various procedures performed;
``(iv) the availability of interpreter services on-site;
``(v) the accreditation of hospitals, as well as sanctions
and other violations found by accreditation or State
licensing boards;
``(vi) the quality of care for various patient populations,
including pediatric populations and racial and ethnic
minority populations;
``(vii) the availability of emergency rooms, intensive care
units, obstetrical units, and burn units;
``(viii) the quality of care in various hospital settings,
including inpatient, outpatient, emergency, maternity, and
intensive care unit settings;
``(ix) the use of health information technology,
telemedicine, and electronic medical records;
``(x) ongoing patient safety initiatives; and
``(xi) other measures determined appropriate by the
Secretary.
``(C) Tailoring of hospital quality reports.--The Director
of the Agency for Healthcare Research and Quality may modify
and publish hospital reports to include quality measures for
diseases and health conditions of particular relevance to
certain regions, States, or local areas.
``(D) Risk adjustment.--
``(i) In general.--In reporting data as provided for under
subparagraph (A), the Secretary may risk adjust quality
measures to account for differences relating to--

``(I) the characteristics of the reporting hospital, such
as licensed bed size, geography, teaching hospital status,
and profit status; and
``(II) patient characteristics, such as health status,
severity of illness, insurance status, and socioeconomic
status.

``(ii) Availability of unadjusted data.--If the Secretary
reports data under subparagraph (A) using risk-adjusted
quality measures, the Secretary shall establish procedures
for making the unadjusted data available to the public in a
manner determined appropriate by the Secretary.
``(E) Costs.--The Secretary shall--
``(i) compile data relating to the average hospital cost
for ICD-9 conditions for which quality measures data are
collected; and
``(ii) report such information in a manner that allows cost
comparisons between or among subsection (d) hospitals.
``(F) Verification.--Under the Initiative, the Secretary
may verify data reported under this paragraph to ensure
accuracy and validity.
``(G) Disclosure.--The Secretary shall disclose the entire
methodology for the reporting of data under this paragraph to
all relevant organizations and all subsection (d) hospitals
that are the subject of any such information that is to be
made available to the public prior to the public disclosure
of such information.
``(H) Public input.--The Secretary shall provide an
opportunity for public review and comment with respect to the
quality measures to be reported for subsection (d) hospitals
under this section for at least 60 days prior to the
finalization by the Secretary of the quality measures to be
used for such hospitals.
``(I) Availability of reports and findings.--
``(i) Electronic availability.--The Secretary shall ensure
that reports are made available under this section in an
electronic format, in an understandable manner with respect
to various populations (including those with low functional
health literacy), and in a manner that allows health care
quality comparisons to be made between local hospitals.
``(ii) Findings.--The Secretary shall establish procedures
for making report findings available to the public, upon
request, in a non-electronic format, such as through the
toll-free telephone number 1-800-MEDICARE.
``(J) Identification of methodology.--The analytic
methodologies and limitations on data sources utilized by the
Secretary to develop and disseminate the comparative data
under this section shall be identified and acknowledged as
part of the dissemination of such data, and include the
appropriate and inappropriate uses of such data.
``(K) Adverse selection of patients.--On at least an annual
basis, the Secretary shall compare quality measures data
submitted by each subsection (d) hospital under section
1886(b)(3)(B)(viii) with data submitted in the prior year or
years by the same hospital in order to identify and report
actions that would lead to false or artificial improvements
in the hospital's quality measurements, including--
``(i) adverse selection against patients with severe
illness or other factors that predispose patients to poor
health outcomes; and
``(ii) provision of health care that does not meet
established recommendations or accepted standards for care.
``(2) Data safeguards.--
``(A) Unauthorized use and disclosure.--The Secretary shall
develop and implement effective safeguards to protect against
the unauthorized use or disclosure of hospital data that is
reported under this section.
``(B) Inaccurate information.--The Secretary shall develop
and implement effective safeguards to protect against the
dissemination of inconsistent, incomplete, invalid,
inaccurate, or subjective hospital data.
``(C) Identifiable data.--The Secretary shall ensure that
identifiable patient data shall not be released to the
public.
``(d) Grants and Technical Assistance.--The Secretary may
award grants to national or State organizations,
partnerships, or other entities that may assist with hospital
quality improvement.
``(e) Hospital Quality Advisory Committee.--
``(1) Establishment.--The Administrator, in consultation
with the Director of the Agency for Healthcare Research and
Quality, shall establish the Hospital Quality Advisory
Committee (in this subsection referred to as the `Advisory
Committee') to provide advice to the Administrator on the
submission, collection, and reporting of quality measures
data. The Administrator shall serve as the chairperson of the
Advisory Committee.
``(2) Membership.--The Advisory Committee shall include
representatives of the following (except with respect to
subparagraphs (A) through (D), to be appointed by the
Administrator):

[[Page 7337]]

``(A) The Agency for Healthcare Research and Quality.
``(B) The Health Resources and Services Administration.
``(C) The Department of Veterans Affairs.
``(D) The Centers for Disease Control and Prevention.
``(E) National membership organizations that focus on
health care quality improvement.
``(F) Public and private hospitals.
``(G) Physicians, nurses, and other health professionals.
``(H) Patients and patient advocates.
``(I) Health insurance purchasers and other payers.
``(J) Health researchers, policymakers, and other experts
in the field of health care quality.
``(K) Health care accreditation entities.
``(L) Other agencies and groups as determined appropriate
by the Administrator.
``(3) Duties.--The Advisory Committee shall review and
provide guidance and recommendations to the Administrator
on--
``(A) the establishment of the Initiative;
``(B) integration and coordination of Federal quality
measures data submission requirements, to avoid needless
duplication and inefficiency;
``(C) legal and regulatory barriers that may hinder quality
measures data collection and reporting; and
``(D) necessary technical and financial assistance to
encourage quality measures data collection and reporting;
``(4) Staff and resources.--The Administrator shall provide
the Advisory Committee with appropriate staff and resources
for the functioning of the Advisory Committee.
``(5) Duration.--The Advisory Committee shall terminate at
the discretion of the Administrator, but in no event later
than 5 years after the date of enactment of this section.
``(f) Authorization of Appropriations.--There are
authorized to be appropriated to carry out this section such
sums as may be necessary for each of fiscal years 2007
through 2016.''.
(b) Conforming Amendment.--Section 1886(b)(3)(B)(viii) of
the Social Security Act (42 U.S.C. 1395ww(b)(3)(B)(viii)), as
added by section 5001 of the Deficit Reduction Act of 2005,
is amended to read as follows:
``(VII) The Secretary shall use the data submitted under
this clause for the Hospital Quality Report Card Initiative
under section 1898.''.

SEC. 4. EVALUATION OF THE HOSPITAL QUALITY REPORT CARD
INITIATIVE.

(a) In General.--The Director of the Agency for Healthcare
Research and Quality, directly or through contract, shall
evaluate and periodically report to Congress on the
effectiveness of the Hospital Quality Report Card Initiative
established under section 1898 of the Social Security Act, as
added by section 3, including the effectiveness of the
Initiative in meeting the purpose described in section 2. The
Director shall make such reports available to the public.
(b) Research.--The Director of the Agency for Healthcare
Research and Quality, in consultation with the Administrator
of the Centers for Medicare & Medicaid Services, shall use
the outcomes from the evaluation conducted pursuant to
subsection (a) to increase the usefulness of the Hospital
Quality Report Card Initiative, particularly for patients, as
necessary.
______

SA 3869. Mr. OBAMA submitted an amendment intended to be proposed by
him to the bill S. 1955, to amend title I of the Employee Retirement
Security Act of 1974 and the Public Health Service Act to expand health
care access and reduce costs through the creation of small business
health plans and through modernization of the health insurance
marketplace; which was ordered to lie on the table; as follows:

Strike all after the enacting clause and insert the
following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Health Care for Hybrids
Act''.

SEC. 2. FINDINGS.

Congress makes the following findings:
(1) The United States imports over half the oil it
consumes.
(2) According to present trends, the United States reliance
on foreign oil will increase to 68 percent of its total
consumption by 2025.
(3) With only 3 percent of the world's known oil reserves,
the health of the United States economy is dependent on world
oil prices.
(4) World oil prices are overwhelmingly dictated by
countries other than the United States, thus endangering our
economic and national security.
(5) Legacy health care costs associated with retiree
workers are an increasing burden on the global
competitiveness of American industries.
(6) American automakers have lagged behind their foreign
competitors in producing hybrid and other energy efficient
automobiles.
(7) Innovative uses of new technology in automobiles in the
United States will help retain American jobs, support health
care obligations for retiring workers in the automotive
sector, decrease America's dependence on foreign oil, and
address pressing environmental concerns.

TITLE I--PROGRAM

SEC. 101. COORDINATING TASK FORCE.

Not later than 6 months after the date of enactment of this
Act, the Secretary of Energy, the Secretary of Health and
Human Services, the Secretary of Transportation, and the
Secretary of the Treasury shall establish, and appoint an
equal number of representatives to, a task force (referred to
in this Act as the ``task force'') to administer the program
established under this Act.

SEC. 102. ESTABLISHMENT OF PROGRAM.

(a) In General.--Not later than 1 year after the date of
enactment of this Act, the task force established under
section 101 shall establish a program to provide financial
assistance to eligible domestic automobile manufacturers for
the costs incurred in providing health benefits to their
retired employees.
(b) Consultation.--In establishing the program under
subsection (a), the task force shall consult with
representatives from the domestic automobile manufacturers,
unions representing employees of such manufacturers, and
consumer and environmental groups.
(c) Eligible Domestic Automobile Manufacturer.--To be
eligible to receive financial assistance under the program
established under subsection (a), a domestic automobile
manufacturer shall--
(1) submit an application to the task force at such time,
in such manner, and containing such information as the task
force shall require;
(2) certify that such manufacturer is providing full health
care coverage to all of its domestic employees;
(3) provide an assurance that the manufacturer will invest
an amount equal to not less than 50 percent of the amount of
health savings derived by the manufacturer as a result of its
retiree health care costs being covered under the program
under this section, in--
(A) the domestic manufacture and commercialization of
petroleum fuel reduction technologies, including alternative
or flexible fuel vehicles, hybrids, and other state-of-the-
art fuel saving technologies;
(B) the retraining of workers and retooling of assembly
lines for such domestic manufacture and commercialization;
(C) research and development, design, commercialization,
and other costs related to the diversifying of domestic
production of automobiles through the offering of high
performance fuel efficient vehicles; and
(D) assisting domestic automobile component suppliers to
retool their domestic manufacturing plants to produce
components for petroleum fuel reduction technologies,
including alternative or flexible fuel vehicles, hybrid,
advanced diesel, or other state-of-the-art fuel saving
technologies; and
(4) provide additional assurances and information as the
task force may require, including information needed by the
task force to audit the manufacturer's compliance with the
requirements of the program.
(d) Limitation.--The total amount of financial assistance
that may be provided each year under the program under this
section with respect to any single domestic automobile
manufacturer shall not exceed an amount equal to 10 percent
of the retiree health care costs of that manufacturer for
that year.

SEC. 103. REPORTING.

Not later than 6 months after the date of enactment of this
Act, and every 6 months thereafter, the task force shall
submit to Congress a report on any financial assistance
provided under this program under this Act and the resulting
changes in the manufacture and commercialization of fuel
saving technologies implemented by auto manufacturers as a
result of such financial assistance. Not later than 1 year
after the date of enactment of this Act, the task force shall
submit a report to Congress on the effectiveness of current
consumer incentives available for the purchase of hybrid
vehicles in encouraging the purchase of such vehicles and
whether these incentives should be expanded.

SEC. 104. AUTHORIZATION OF APPROPRIATIONS.

There are authorized to be appropriated, such sums as may
be necessary in each fiscal year to carry out this Act.

SEC. 105. LIMITATION ON BACKSLIDING.

To be eligible to receive financial assistance under this
title, a manufacturer shall provide assurances to the task
force that fuel savings achieved with respect its average
adjusted fuel economy will not result in decreases with
respect to fuel economy elsewhere in the domestic fleet. The
task force shall determine compliance with such assurances
using accepted measurements of fuel savings.

SEC. 106. TERMINATION OF PROGRAM.

The program established under this title shall terminate on
December 31, 2015.

TITLE II--OFFSETS

SEC. 201. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

(a) In General.--Section 7701 of the Internal Revenue Code
of 1986 is amended by redesignating subsection (o) as
subsection (p) and by inserting after subsection (n) the
following new subsection:

[[Page 7338]]

``(o) Clarification of Economic Substance Doctrine; Etc.--
``(1) General rules.--
``(A) In general.--In any case in which a court determines
that the economic substance doctrine is relevant for purposes
of this title to a transaction (or series of transactions),
such transaction (or series of transactions) shall have
economic substance only if the requirements of this paragraph
are met.
``(B) Definition of economic substance.--For purposes of
subparagraph (A)--
``(i) In general.--A transaction has economic substance
only if--

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

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

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

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

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

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

SEC. 202. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO
TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

(a) In General.--Subchapter A of chapter 68 of the Internal
Revenue Code of 1986 is amended by inserting after section
6662A the following new section:

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

``(a) Imposition of Penalty.--If a taxpayer has an
noneconomic substance transaction understatement for any
taxable year, there shall be added to the tax an amount equal
to 40 percent of the amount of such understatement.
``(b) Reduction of Penalty for Disclosed Transactions.--
Subsection (a) shall be applied by substituting `20 percent'
for `40 percent' with respect to the portion of any
noneconomic substance transaction understatement with respect
to which the relevant facts affecting the tax treatment of
the item are adequately disclosed in the return or a
statement attached to the return.
``(c) Noneconomic Substance Transaction Understatement.--
For purposes of this section--
``(1) In general.--The term `noneconomic substance
transaction understatement' means any amount which would be
an understatement under section 6662A(b)(1) if section 6662A
were applied by taking into account items attributable to
noneconomic substance transactions rather than items to which
section 6662A would apply without regard to this paragraph.
``(2) Noneconomic substance transaction.--The term
`noneconomic substance transaction' means any transaction
if--
``(A) there is a lack of economic substance (within the
meaning of section 7701(o)(1)) for the transaction giving
rise to the claimed benefit or the transaction was not
respected under section 7701(o)(2), or
``(B) the transaction fails to meet the requirements of any
similar rule of law.
``(d) Rules Applicable to Compromise of Penalty.--
``(1) In general.--If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of Appeals has
been sent with respect to a penalty to which this section
applies, only the Commissioner of Internal Revenue may
compromise all or any portion of such penalty.
``(2) Applicable rules.--The rules of paragraphs (2) and
(3) of section 6707A(d) shall apply for purposes of paragraph
(1).
``(e) Coordination With Other Penalties.--Except as
otherwise provided in this part, the penalty imposed by this
section shall be in addition to any other penalty imposed by
this title.
``(f) Cross References.--
``(1) For coordination of penalty with understatements
under section 6662 and other special rules, see section
6662A(e).
``(2) For reporting of penalty imposed under this section
to the Securities and Exchange Commission, see section
6707A(e).''.
(b) Coordination With Other Understatements and
Penalties.--
(1) The second sentence of section 6662(d)(2)(A) of the
Internal Revenue Code of 1986 is amended by inserting ``and
without regard to items with respect to which a penalty is
imposed by section 6662B'' before the period at the end.
(2) Subsection (e) of section 6662A of the Internal Revenue
Code of 1986 is amended--
(A) in paragraph (1), by inserting ``and noneconomic
substance transaction understatements'' after ``reportable
transaction understatements'' both places it appears,
(B) in paragraph (2)(A), by inserting ``and a noneconomic
substance transaction understatement'' after ``reportable
transaction understatement'',
(C) in paragraph (2)(B), by inserting ``6662B or'' before
``6663'',
(D) in paragraph (2)(C)(i), by inserting ``or section
6662B'' before the period at the end,
(E) in paragraph (2)(C)(ii), by inserting ``and section
6662B'' after ``This section'',
(F) in paragraph (3), by inserting ``or noneconomic
substance transaction understatement'' after ``reportable
transaction understatement'', and
(G) by adding at the end the following new paragraph:
``(3) Noneconomic substance transaction understatement.--
For purposes of this subsection, the term `noneconomic
substance transaction understatement' has the meaning given
such term by section 6662B(c).''.
(3) Subsection (e) of section 6707A of the Internal Revenue
Code of 1986 is amended--
(A) by striking ``or'' at the end of subparagraph (B), and
(B) by striking subparagraph (C) and inserting the
following new subparagraphs:
``(C) is required to pay a penalty under section 6662B with
respect to any noneconomic substance transaction, or
``(D) is required to pay a penalty under section 6662(h)
with respect to any transaction and would (but for section
6662A(e)(2)(C)) have been subject to penalty under section
6662A at a rate prescribed under section 6662A(c) or under
section 6662B,''.

[[Page 7339]]

(c) Clerical Amendment.--The table of sections for part II
of subchapter A of chapter 68 of the Internal Revenue Code of
1986 is amended by inserting after the item relating to
section 6662A the following new item:

``Sec. 6662B. Penalty for understatements attributable to transactions
lacking economic substance, etc.''.
(d) Effective Date.--The amendments made by this section
shall apply to transactions entered into after the date of
the enactment of this Act.

SEC. 203. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS
ATTRIBUTABLE TO NONECONOMIC SUBSTANCE
TRANSACTIONS.

(a) In General.--Section 163(m) of the Internal Revenue
Code of 1986 (relating to interest on unpaid taxes
attributable to nondisclosed reportable transactions) is
amended--
(1) by striking ``attributable'' and all that follows and
inserting the following: ``attributable to--
``(1) the portion of any reportable transaction
understatement (as defined in section 6662A(b)) with respect
to which the requirement of section 6664(d)(2)(A) is not met,
or
``(2) any noneconomic substance transaction understatement
(as defined in section 6662B(c)).''; and
(2) by inserting ``and noneconomic substance transactions''
after ``transactions''.
(b) Effective Date.--The amendments made by this section
shall apply to transactions after the date of the enactment
of this Act in taxable years ending after such date.
______

SA 3870. Mr. OBAMA submitted an amendment intended to be proposed by
him to the bill S. 1955, to amend title I of the Employee Retirement
Security Act of 1974 and the Public Health Service Act to expand health
care access and reduce costs through the creation of small business
health plans and through modernization of the health insurance
marketplace; which was ordered to lie on the table; as follows:

Strike out all after the enacting clause and insert the
following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Healthy Places Act of
2006''.

SEC. 2. DEFINITIONS.

In this Act:
(1) Administrator.--The term ``Administrator'' means the
Administrator of the Environmental Protection Agency.
(2) Built environment.--The term ``built environment''
means an environment consisting of all buildings, spaces, and
products that are created or modified by people, including--
(A) homes, schools, workplaces, parks and recreation areas,
greenways, business areas, and transportation systems;
(B) electric transmission lines;
(C) waste disposal sites; and
(D) land-use planning and policies that impact urban,
rural, and suburban communities.
(3) Director.--The term ``Director'' means the Director of
the Centers for Disease Control and Prevention.
(4) Environmental health.--The term ``environmental
health'' means the health and well-being of a population as
affected by--
(A) the direct pathological effects of chemicals,
radiation, and some biological agents; and
(B) the effects (often indirect) of the broad physical,
psychological, social, and aesthetic environment.
(5) Health impact assessment.--The term ``health impact
assessment'' means any combination of procedures, methods,
tools, and means used under section 4 to analyze the actual
or potential effects of a policy, program, or project on the
health of a population (including the distribution of those
effects within the population).
(6) Secretary.--The term ``Secretary'' means the Secretary
of Health and Human Services.

SEC. 3. INTERAGENCY WORKING GROUP ON ENVIRONMENTAL HEALTH.

(a) Definitions.--In this section:
(1) Institute.--The term ``Institute'' means the Institute
of Medicine of the National Academies of Science.
(2) IWG.--The term ``IWG'' means the interagency working
group established under subsection (b).
(b) Establishment.--The Secretary, in coordination with the
Administrator, shall establish an interagency working group
to discuss environmental health concerns, particularly
concerns disproportionately affecting disadvantaged
populations.
(c) Membership.--The IWG shall be composed of a
representative from each Federal agency (as appointed by the
head of the agency) that has jurisdiction over, or is
affected by, environmental policies and projects, including--
(1) the Council on Environmental Quality;
(2) the Department of Agriculture;
(3) the Department of Commerce;
(4) the Department of Defense;
(5) the Department of Education;
(6) the Department of Energy;
(7) the Department of Health and Human Services;
(8) the Department of Housing and Urban Development;
(9) the Department of the Interior;
(10) the Department of Justice;
(11) the Department of Labor;
(12) the Department of State;
(13) the Department of Transportation;
(14) the Environmental Protection Agency; and
(15) such other Federal agencies as the Administrator and
the Secretary jointly determine to be appropriate.
(d) Duties.--The IWG shall--
(1) facilitate communication and partnership on
environmental health-related projects and policies--
(A) to generate a better understanding of the interactions
between policy areas; and
(B) to raise awareness of the relevance of health across
policy areas to ensure that the potential positive and
negative health consequences of decisions are not overlooked;
(2) serve as a centralized mechanism to coordinate a
national effort--
(A) to discuss and evaluate evidence and knowledge on the
relationship between the general environment and the health
of the population of the United States;
(B) to determine the range of effective, feasible, and
comprehensive actions to improve environmental health; and
(C) to examine and better address the influence of social
and environmental determinants of health;
(3) survey Federal agencies to determine which policies are
effective in encouraging, and how best to facilitate outreach
without duplicating, efforts relating to environmental health
promotion;
(4) establish specific goals within and across Federal
agencies for environmental health promotion, including
determinations of accountability for reaching those goals;
(5) develop a strategy for allocating responsibilities and
ensuring participation in environmental health promotions,
particularly in the case of competing agency priorities;
(6) coordinate plans to communicate research results
relating to environmental health to enable reporting and
outreach activities to produce more useful and timely
information;
(7) establish an interdisciplinary committee to continue
research efforts to further understand the relationship
between the built environment and health factors (including
air quality, physical activity levels, housing quality,
access to primary health care practitioners and health care
facilities, injury risk, and availability of nutritional,
fresh food) that coordinates the expertise of the public
health, urban planning, and transportation communities;
(8) develop an appropriate research agenda for Federal
agencies--
(A) to support--
(i) longitudinal studies;
(ii) rapid-response capability to evaluate natural
conditions and occurrences; and
(iii) extensions of national databases; and
(B) to review evaluation and economic data relating to the
impact of Federal interventions on the prevention of
environmental health concerns;
(9) initiate environmental health impact demonstration
projects to develop integrated place-based models for
addressing community quality-of-life issues;
(10) provide a description of evidence-based best
practices, model programs, effective guidelines, and other
strategies for promoting environmental health;
(11) make recommendations to improve Federal efforts
relating to environmental health promotion and to ensure
Federal efforts are consistent with available standards and
evidence and other programs in existence as of the date of
enactment of this Act;
(12) monitor Federal progress in meeting specific
environmental health promotion goals;
(13) assist in ensuring, to the maximum extent practicable,
integration of the impact of environmental policies,
programs, and activities on the areas under Federal
jurisdiction;
(14) assist in the implementation of the recommendations
from the reports of the Institute of Medicine entitled ``Does
the Built Environment Influence Physical Activity? Examining
the Evidence'' and dated January 11, 2005, and ``Rebuilding
the Unity of Health and the Environment: A New Vision of
Environmental Health for the 21st Century'' and dated January
22, 2001, including recommendations for--
(A) the expansion of national public health and travel
surveys to provide more detailed information about the
connection between the built environment and health,
including expansion of such surveys as--
(i) the Behavioral Risk Factor Surveillance System, the
National Health and Nutrition Examination Survey, and the
National Health Interview Survey conducted by the Centers for
Disease Control and Prevention;
(ii) the American Community survey conducted by the Census
Bureau;
(iii) the American Time Use Survey conducted by the Bureau
of Labor Statistics;
(iv) the Youth Risk Behavior Survey conducted by the
Centers for Disease Control and Prevention; and

[[Page 7340]]

(v) the National Longitudinal Cohort Survey of American
Children (the National Children's Study) conducted by the
National Institute of Child Health and Human Development;
(B) collaboration with national initiatives to learn from
natural experiments such as observations from changes in the
built environment and the consequent effects on health;
(C) development of a program of research with a defined
mission and recommended budget, concentrating on multiyear
projects and enhanced data collection;
(D) development of interdisciplinary education programs--
(i) to train professionals in conducting recommended
research; and
(ii) to prepare practitioners with appropriate skills at
the intersection of physical activity, public health,
transportation, and urban planning;
(15) not later than 2 years after the date of enactment of
this Act, submit to Congress a report that describes the
extent to which recommendations from the Institute of
Medicine reports described in paragraph (14) were executed;
and
(16) assist the Director with the development of guidance
for the assessment of the potential health effects of land
use, housing, and transportation policy and plans.
(e) Meetings.--
(1) In general.--The IWG shall meet at least 3 times each
year.
(2) Annual conference.--The Secretary, acting through the
Director and in collaboration with the Administrator, shall
sponsor an annual conference on environmental health and
health disparities to enhance coordination, build
partnerships, and share best practices in environmental
health data collection, analysis, and reporting.
(f) Authorization of Appropriations.--There are authorized
to be appropriated such sums as are necessary to carry out
this section.

SEC. 4. HEALTH IMPACT ASSESSMENTS.

(a) Definition of Eligible Entity.--In this section, the
term ``eligible entity'' means any unit of State or local
government the jurisdiction of which includes individuals or
populations the health of which are or will be affected by an
activity or a proposed activity.
(b) Establishment.--The Secretary, acting through the
Director and in collaboration with the Administrator, shall--
(1) establish a program at the National Center of
Environmental Health at the Centers for Disease Control and
Prevention focused on advancing the field of health impact
assessment, including--
(A) collecting and disseminating best practices;
(B) administering capacity building grants, in accordance
with subsection (d);
(C) providing technical assistance;
(D) providing training;
(E) conducting evaluations; and
(F) awarding competitive extramural research grants;
(2) in accordance with subsection (f), develop guidance to
conduct health impact assessments; and
(3) establish a grant program to allow eligible entities to
conduct health impact assessments.
(c) Guidance.--The Director, in collaboration with the IWG,
shall--
(1) develop guidance for the assessment of the potential
health effects of land use, housing, and transportation
policy and plans, including--
(A) background on international efforts to bridge urban
planning and public health institutions and disciplines,
including a review of health impact assessment best practices
internationally;
(B) evidence-based causal pathways that link urban
planning, transportation, and housing policy and objectives
to human health objectives;
(C) data resources and quantitative and qualitative
forecasting methods to evaluate both the status of health
determinants and health effects; and
(D) best practices for inclusive public involvement in
planning decision-making;
(2) not later than 1 year after the date of enactment of
this Act, promulgate the guidance; and
(3) present the guidance to the public at the annual
conference described in section 3(e)(2).
(d) Grant Program.--The Secretary, acting through the
Director and in collaboration with the Administrator, shall
establish a program under which the Secretary shall provide
funding and technical assistance to eligible entities to
prepare health impact assessments--
(1) to ensure that appropriate health factors are taken
into consideration as early as practicable during any
planning, review, or decision-making process; and
(2) to evaluate the effect on the health of individuals and
populations, and on social and economic development, of
decisions made outside of the health sector that result in
modifications of a physical or social environment.
(e) Applications.--
(1) In general.--To receive a grant under this section, an
eligible entity shall submit to the Secretary an application
in accordance with this subsection, in such time, in such
manner, and containing such additional information as the
Secretary may require.
(2) Inclusion.--
(A) In general.--An application under this subsection shall
include an assessment by the eligible entity of the
probability that an applicable activity or proposed activity
will have at least 1 significant, adverse health effect on an
individual or population in the jurisdiction of the eligible
entity, based on the criteria described in subparagraph (B).
(B) Criteria.--The criteria referred to in subparagraph (A)
include, with respect to the applicable activity or proposed
activity--
(i) any substantial adverse effect on--

(I) existing air quality, ground or surface water quality
or quantity, or traffic or noise levels;
(II) a significant habitat area;
(III) physical activity;
(IV) injury;
(V) mental health;
(VI) social capital;
(VII) accessibility;
(VIII) the character or quality of an important historical,
archeological, architectural, or aesthetic resource
(including neighborhood character) of the community of the
eligible entity; or
(IX) any other natural resource;

(ii) any increase in--

(I) solid waste production; or
(II) problems relating to erosion, flooding, leaching, or
drainage;

(iii) any requirement that a large quantity of vegetation
or fauna be removed or destroyed;
(iv) any conflict with the plans or goals of the community
of the eligible entity;
(v) any major change in the quantity or type of energy used
by the community of the eligible entity;
(vi) any hazard presented to human health;
(vii) any substantial change in the use, or intensity of
use, of land in the jurisdiction of the eligible entity,
including agricultural, open space, and recreational uses;
(viii) the probability that the activity or proposed
activity will result in an increase in tourism in the
jurisdiction of the eligible entity;
(ix) any substantial, adverse aggregate impact on
environmental health resulting from--

(I) changes caused by the activity or proposed activity to
2 or more elements of the environment; or
(II) 2 or more related actions carried out under the
activity or proposed activity; and

(x) any other significant change of concern, as determined
by the eligible entity.
(C) Factors for consideration.--In making an assessment
under subparagraph (A), an eligible entity may take into
consideration any reasonable, direct, indirect, or cumulative
effect relating to the applicable activity or proposed
activity, including the effect of any action that is--
(i) included in the long-range plan relating to the
activity or proposed activity;
(ii) likely to be carried out in coordination with the
activity or proposed activity;
(iii) dependent on the occurrence of the activity or
proposed activity; or
(iv) likely to have a disproportionate impact on
disadvantaged populations.
(f) Use of Funds.--
(1) In general.--An eligible entity shall use assistance
received under this section to prepare and submit to the
Secretary a health impact assessment in accordance with this
subsection.
(2) Purposes.--The purposes of a health impact assessment
are--
(A) to facilitate the involvement of State and local health
officials in community planning and land use decisions to
identify any potential health concern relating to an activity
or proposed activity;
(B) to provide for an investigation of any health-related
issue addressed in an environmental impact statement or
policy appraisal relating to an activity or a proposed
activity;
(C) to describe and compare alternatives (including no-
action alternatives) to an activity or a proposed activity to
provide clarification with respect to the costs and benefits
of the activity or proposed activity; and
(D) to contribute to the findings of an environmental
impact statement with respect to the terms and conditions of
implementing an activity or a proposed activity, as
necessary.
(3) Requirements.--A health impact assessment prepared
under this subsection shall--
(A) describe the relevance of the applicable activity or
proposed activity (including the policy of the activity) with
respect to health issues;
(B) assess each health impact of the applicable activity or
proposed activity;
(C) provide recommendations of the eligible entity with
respect to--
(i) the mitigation of any adverse impact on health of the
applicable activity or proposed activity; or
(ii) the encouragement of any positive impact of the
applicable activity or proposed activity;
(D) provide for monitoring of the impacts on health of the
applicable activity or proposed activity, as the eligible
entity determines to be appropriate; and
(E) include a list of each comment received with respect to
the health impact assessment under subsection (e).

[[Page 7341]]

(4) Methodology.--In preparing a health impact assessment
under this subsection, an eligible entity--
(A) shall follow guidelines developed by the Director, in
collaboration with the IWG, that--
(i) are consistent with subsection (c);
(ii) will be established not later than 1 year after the
date of enactment of this Act; and
(iii) will be made publicly available at the annual
conference described in section 3(e)(2); and
(B) may establish a balance, as the eligible entity
determines to be appropriate, between the use of--
(i) rigorous methods requiring special skills or increased
use of resources; and
(ii) expedient, cost-effective measures.
(g) Public Participation.--
(1) In general.--Before preparing and submitting to the
Secretary a final health impact assessment, an eligible
entity shall request and take into consideration public and
agency comments, in accordance with this subsection.
(2) Requirement.--Not later than 30 days after the date on
which a draft health impact assessment is completed, an
eligible entity shall submit the draft health impact
assessment to each Federal agency, and each State and local
organization, that--
(A) has jurisdiction with respect to the activity or
proposed activity to which the health impact assessment
applies;
(B) has special knowledge with respect to an environmental
or health impact of the activity or proposed activity; or
(C) is authorized to develop or enforce any environmental
standard relating to the activity or proposed activity.
(3) Comments requested.--
(A) Request by eligible entity.--An eligible entity may
request comments with respect to a health impact assessment
from--
(i) affected Indian tribes;
(ii) interested or affected individuals or organizations;
and
(iii) any other State or local agency, as the eligible
entity determines to be appropriate.
(B) Request by others.--Any interested or affected agency,
organization, or individual may--
(i) request an opportunity to comment on a health impact
assessment; and
(ii) submit to the appropriate eligible entity comments
with respect to the health impact assessment by not later
than--

(I) for a Federal, State, or local government agency or
organization, the date on which a final health impact
assessment is prepared; and
(II) for any other individual or organization, the date
described in subclause (I) or another date, as the eligible
entity may determine.

(4) Response to comments.--A final health impact assessment
shall describe the response of the eligible entity to
comments received within a 90-day period under this
subsection, including--
(A) a description of any means by which the eligible
entity, as a result of such a comment--
(i) modified an alternative recommended with respect to the
applicable activity or proposed activity;
(ii) developed and evaluated any alternative not previously
considered by the eligible entity;
(iii) supplemented, improved, or modified an analysis of
the eligible entity; or
(iv) made any factual correction to the health impact
assessment; and
(B) for any comment with respect to which the eligible
entity took no action, an explanation of the reasons why no
action was taken and, if appropriate, a description of the
circumstances under which the eligible entity would take such
an action.
(h) Health Impact Assessment Database.--The Secretary,
acting through the Director and in collaboration with the
Administrator, shall establish and maintain a health impact
assessment database, including--
(1) a catalog of health impact assessments received under
this section;
(2) an inventory of tools used by eligible entities to
prepare draft and final health impact assessments; and
(3) guidance for eligible entities with respect to the
selection of appropriate tools described in paragraph (2).
(i) Authorization of Appropriations.--There are authorized
to be appropriated to carry out this section such sums as are
necessary.

SEC. 5. GRANT PROGRAM.

(a) Definitions.--In this section:
(1) Director.--The term ``Director'' means the Director of
the Centers for Disease Control and Prevention, acting in
collaboration with the Administrator and the Director of the
National Institute of Environmental Health Sciences.
(2) Eligible entity.--The term ``eligible entity'' means a
State or local community that--
(A) bears a disproportionate burden of exposure to
environmental health hazards;
(B) has established a coalition--
(i) with not less than 1 community-based organization; and
(ii) with not less than 1--

(I) public health entity;
(II) health care provider organization; or
(III) academic institution;

(C) ensures planned activities and funding streams are
coordinated to improve community health; and
(D) submits an application in accordance with subsection
(c).
(b) Establishment.--The Director shall establish a grant
program under which eligible entities shall receive grants to
conduct environmental health improvement activities.
(c) Application.--To receive a grant under this section, an
eligible entity shall submit an application to the Director
at such time, in such manner, and accompanied by such
information as the Director may require.
(d) Cooperative Agreements.--An eligible entity may use a
grant under this section--
(1) to promote environmental health; and
(2) to address environmental health disparities.
(e) Amount of Cooperative Agreement.--
(1) In general.--The Director shall award grants to
eligible entities at the 2 different funding levels described
in this subsection.
(2) Level 1 cooperative agreements.--
(A) In general.--An eligible entity awarded a grant under
this paragraph shall use the funds to identify environmental
health problems and solutions by--
(i) establishing a planning and prioritizing council in
accordance with subparagraph (B); and
(ii) conducting an environmental health assessment in
accordance with subparagraph (C).
(B) Planning and prioritizing council.--
(i) In general.--A prioritizing and planning council
established under subparagraph (A)(i) (referred to in this
paragraph as a ``PPC'') shall assist the environmental health
assessment process and environmental health promotion
activities of the eligible entity.
(ii) Membership.--Membership of a PPC shall consist of
representatives from various organizations within public
health, planning, development, and environmental services and
shall include stakeholders from vulnerable groups such as
children, the elderly, disabled, and minority ethnic groups
that are often not actively involved in democratic or
decision-making processes.
(iii) Duties.--A PPC shall--

(I) identify key stakeholders and engage and coordinate
potential partners in the planning process;
(II) establish a formal advisory group to plan for the
establishment of services;
(III) conduct an in-depth review of the nature and extent
of the need for an environmental health assessment, including
a local epidemiological profile, an evaluation of the service
provider capacity of the community, and a profile of any
target populations; and
(IV) define the components of care and form essential
programmatic linkages with related providers in the
community.

(C) Environmental health assessment.--
(i) In general.--A PPC shall carry out an environmental
health assessment to identify environmental health concerns.
(ii) Assessment process.--The PPC shall--

(I) define the goals of the assessment;
(II) generate the environmental health issue list;
(III) analyze issues with a systems framework;
(IV) develop appropriate community environmental health
indicators;
(V) rank the environmental health issues;
(VI) set priorities for action;
(VII) develop an action plan;
(VIII) implement the plan; and
(IX) evaluate progress and planning for the future.

(D) Evaluation.--Each eligible entity that receives a grant
under this paragraph shall evaluate, report, and disseminate
program findings and outcomes.
(E) Technical assistance.--The Director may provide such
technical and other non-financial assistance to eligible
entities as the Director determines to be necessary.
(3) Level 2 cooperative agreements.--
(A) Eligibility.--
(i) In general.--The Director shall award grants under this
paragraph to eligible entities that have already--

(I) established broad-based collaborative partnerships; and
(II) completed environmental assessments.

(ii) No level 1 requirement.--To be eligible to receive a
grant under this paragraph, an eligible entity is not
required to have successfully completed a Level 1 Cooperative
Agreement (as described in paragraph (2).
(B) Use of grant funds.--An eligible entity awarded a grant
under this paragraph shall use the funds to further
activities to carry out environmental health improvement
activities, including--
(i) addressing community environmental health priorities in
accordance with paragraph (2)(C)(ii), including--

(I) air quality;
(II) water quality;
(III) solid waste;
(IV) land use;
(V) housing;
(VI) food safety;
(VII) crime;
(VIII) injuries; and
(IX) healthcare services;

(ii) building partnerships between planning, public health,
and other sectors, to address how the built environment
impacts

[[Page 7342]]

food availability and access and physical activity to promote
healthy behaviors and lifestyles and reduce obesity and
related co-morbidities;
(iii) establishing programs to address--

(I) how environmental and social conditions of work and
living choices influence physical activity and dietary
intake; or
(II) how those conditions influence the concerns and needs
of people who have impaired mobility and use assistance
devices, including wheelchairs and lower limb prostheses; and

(iv) convening intervention programs that examine the role
of the social environment in connection with the physical and
chemical environment in--

(I) determining access to nutritional food; and
(II) improving physical activity to reduce morbidity and
increase quality of life.

(f) Authorization of Appropriations.--There are authorized
to be appropriated to carry out this section--
(1) $25,000,000 for fiscal year 2007; and
(2) such sums as are necessary for the period of fiscal
years 2008 through 2011.

SEC. 6. ADDITIONAL RESEARCH ON THE RELATIONSHIP BETWEEN THE
BUILT ENVIRONMENT AND THE HEALTH OF COMMUNITY
RESIDENTS.

(a) Definition of Eligible Institution.--In this section,
the term ``eligible institution'' means a public or private
nonprofit institution that submits to the Secretary and the
Administrator an application for a grant under the grant
program authorized under subsection (b)(2) at such time, in
such manner, and containing such agreements, assurances, and
information as the Secretary and Administrator may require.
(b) Research Grant Program.--
(1) Definition of health.--In this section, the term
``health'' includes--
(A) levels of physical activity;
(B) consumption of nutritional foods;
(C) rates of crime;
(D) air, water, and soil quality;
(E) risk of injury;
(F) accessibility to healthcare services; and
(G) other indicators as determined appropriate by the
Secretary.
(2) Grants.--The Secretary, in collaboration with the
Administrator, shall provide grants to eligible institutions
to conduct and coordinate research on the built environment
and its influence on individual and population-based health.
(3) Research.--The Secretary shall support research that--
(A) investigates and defines the causal links between all
aspects of the built environment and the health of residents;
(B) examines--
(i) the extent of the impact of the built environment
(including the various characteristics of the built
environment) on the health of residents;
(ii) the variance in the health of residents by--

(I) location (such as inner cities, inner suburbs, and
outer suburbs); and
(II) population subgroup (such as children, the elderly,
the disadvantaged); or

(iii) the importance of the built environment to the total
health of residents, which is the primary variable of
interest from a public health perspective;
(C) is used to develop--
(i) measures to address health and the connection of health
to the built environment; and
(ii) efforts to link the measures to travel and health
databases;
(D) distinguishes carefully between personal attitudes and
choices and external influences on observed behavior to
determine how much an observed association between the built
environment and the health of residents, versus the lifestyle
preferences of the people that choose to live in the
neighborhood, reflects the physical characteristics of the
neighborhood; and
(E)(i) identifies or develops effective intervention
strategies to promote better health among residents with a
focus on behavioral interventions and enhancements of the
built environment that promote increased use by residents;
and
(ii) in developing the intervention strategies under clause
(i), ensures that the intervention strategies will reach out
to high-risk populations, including low-income urban and
rural communities.
(4) Priority.--In providing assistance under the grant
program authorized under paragraph (2), the Secretary and the
Administrator shall give priority to research that
incorporates--
(A) interdisciplinary approaches; or
(B) the expertise of the public health, physical activity,
urban planning, and transportation research communities in
the United States and abroad.
(c) Authorization of Appropriations.--There are authorized
to be appropriated such sums as are necessary to carry out
this section.
______

SA 3871. Mrs. FEINSTEIN (for herself, Mr. Dorgan, Mr. Bingaman, and
Ms. Stabenow) submitted an amendment intended to be proposed by her to
the bill S. 1955, to amend title I of the Employee Retirement Security
Act of 1974 and the Public Health Service Act to expand health care
access and reduce costs through the creation of small business health
plans and through modernization of the health insurance marketplace;
which was ordered to lie on the table; as follows:

Strike all after the enacting clause and insert the
following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Medicare Drug Formulary
Protection Act''.

SEC. 2. REMOVAL OF COVERED PART D DRUGS FROM THE PRESCRIPTION
DRUG PLAN FORMULARY.

(a) Limitation on Removal or Change of Covered Part D Drugs
From the Prescription Drug Plan Formulary.--Section 1860D-
4(b)(3)(E) of the Social Security Act (42 U.S.C. 1395w-
104(b)(3)(E)) is amended to read as follows:
``(E) Removing a drug from formulary or imposing a
restriction or limitation on coverage.--
``(i) Limitation on removal, limitation, or restriction.--

``(I) In general.--Subject to subclause (II) and clause
(ii), beginning with 2006, the PDP sponsor of a prescription
drug plan may not remove a covered part D drug from the plan
formulary or impose a restriction or limitation on the
coverage of such a drug (such as through the application of a
preferred status, usage restriction, step therapy, prior
authorization, or quantity limitation) other than at the
beginning of each plan year.
``(II) Special rule for newly enrolled individuals.--
Subject to clause (ii), in the case of an individual who
enrolls in a prescription drug plan on or after the date of
enactment of this subparagraph, the PDP sponsor of such plan
may not remove a covered part D drug from the plan formulary
or impose a restriction or limitation on the coverage of such
a drug (such as through the application of a preferred
status, usage restriction, step therapy, prior authorization,
or quantity limitation) during the period beginning on the
date of such enrollment and ending on December 31 of the
immediately succeeding plan year.

``(ii) Exceptions to limitation on removal.--Clause (i)
shall not apply with respect to a covered part D drug that--

``(I) is a brand name drug for which there is a generic
drug approved under section 505(j) of the Food and Drug
Cosmetic Act (21 U.S.C. 355(j)) that is placed on the market
during the period in which there are limitations on removal
or change in the formulary under clause (i);
``(II) is a brand name drug that goes off-patent during
such period;
``(III) is a drug for which the Commissioner of Food and
Drugs issues a clinical warning that imposes a restriction or
limitation on the drug during such period or removes the drug
from the market;
``(IV) is a drug that the plan's pharmacy and therapeutic
committee determines, based on scientific evidence, to be
unsafe or ineffective during such period; or
``(V) is a drug for which the Secretary has determined an
exception to such application is appropriate (such as to take
into account new therapeutic uses and newly covered part D
drugs).

``(iii) Notice of removal under application of exception to
limitation.--The PDP sponsor of a prescription drug plan
shall provide appropriate notice (such as under subsection
(a)(3)) of any removal or change under clause (ii) to the
Secretary, affected enrollees, physicians, pharmacies, and
pharmacists.''.
(b) Notice for Change in Formulary and Other Restrictions
or Limitations on Coverage.--
(1) In general.--Section 1860D-4(a) of such Act (42 U.S.C.
1395w-104(a)) is amended by adding at the end the following
new paragraph:
``(5) Annual notice of changes in formulary and other
restrictions or limitations on coverage.--Each PDP sponsor
offering a prescription drug plan shall furnish to each
enrollee at the time of each annual coordinated election
period (referred to in section 1860D-1(b)(1)(B)(iii)) for a
plan year a notice of any changes in the formulary or other
restrictions or limitations on coverage of a covered part D
drug under the plan that will take effect for the plan
year.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to annual, coordinated election periods beginning
after the date of the enactment of this Act.
______

SA 3872. Mr. KERRY submitted an amendment intended to be proposed by
him to the bill S. 1955, to amend title I of the Employee Retirement
Security Act of 1974 and the Public Health Service Act to expand health
care access and reduce costs through the creation of small business
health plans and through modernization of the health insurance
marketplace; which was ordered to lie on the table; as follows:

At the appropriate place insert the following:

SEC. __. CREDIT FOR EMPLOYEE HEALTH INSURANCE EXPENSES.

(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 of the Internal

[[Page 7343]]

Revenue Code of 1986 (relating to business-related credits)
is amended by adding at the end the following:

``SEC. 45N. EMPLOYEE HEALTH INSURANCE EXPENSES.

``(a) General Rule.--For purposes of section 38, in the
case of a qualified small employer, the employee health
insurance expenses credit determined under this section is an
amount equal to the applicable percentage of the amount paid
by the taxpayer during the taxable year for qualified
employee health insurance expenses.
``(b) Applicable Percentage.--For purposes of subsection
(a), the applicable percentage is--
``(1) 50 percent in the case of an employer with less than
10 qualified employees,
``(2) 25 percent in the case of an employer with more than
9 but less than 25 qualified employees, and
``(3) 20 percent in the case of an employer with more than
24 but less than 50 qualified employees.
``(c) Per Employee Dollar Limitation.--
``(1) In general.--The amount of qualified employee health
insurance expenses taken into account under subsection (a)
with respect to any qualified employee for any taxable year
shall not exceed--
``(A) $4,000 for self-only coverage, and
``(B) $10,000 for family coverage.
``(2) Phaseout of per employee dollar limitation.--
``(A) In general.--The amount determined under paragraph
(1) with respect to any qualified employee for any taxable
year shall be reduced by the amount determined under
subparagraph (B).
``(B) Amount of reduction.--The amount determined under
this subparagraph shall be the amount which bears the same
ratio to such amount determined under paragraph (1) as--
``(i) the excess of--

``(I) the qualified employee's compensation from the
qualified small employer for such taxable year, over
``(II) $30,000, bears to

``(ii) $20,000.
The rules of subparagraphs (B) and (C) of section 219(g)(2)
shall apply to any reduction under this subparagraph.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Qualified small employer.--
``(A) In general.--The term `qualified small employer'
means any small employer which--
``(i) provides eligibility for health insurance coverage
(after any waiting period (as defined in section 9801(b)(4)))
to all qualified employees of the employer under similar
terms, and
``(ii) pays at least 50 percent of the cost of such
coverage for each qualified employee.
``(B) Small employer.--
``(i) In general.--For purposes of this paragraph, the term
`small employer' means, with respect to any taxable year, any
employer if--

``(I) the average gross receipts of such employer for the
preceding 3 taxable years does not exceed $5,000,000, and
``(II) such employer employed an average of more than 1 but
less than 50 employees on business days during the preceding
taxable year.

``(ii) Employers not in existence in preceding year.--For
purposes of clause (i)(II)--

``(I) a preceding taxable year may be taken into account
only if the employer was in existence throughout such year,
and
``(II) in the case of an employer which was not in
existence throughout the preceding taxable year, the
determination of whether such employer is a qualified small
employer shall be based on the average number of employees
that it is reasonably expected such employer will employ on
business days in the current taxable year.

``(iii) Aggregation rules.--All persons treated as a single
employer under subsection (a) or (b) of section 52 or
subsection (m) or (o) of section 414 shall be treated as one
person for purposes of this subparagraph.
``(iv) Predecessors.--The Secretary may prescribe
regulations which provide for references in this subparagraph
to an employer to be treated as including references to
predecessors of such employer.
``(2) Qualified employee health insurance expenses.--
``(A) In general.--The term `qualified employee health
insurance expenses' means any amount paid by an employer for
health insurance coverage to the extent such amount is
attributable to coverage provided to any employee while such
employee is a qualified employee.
``(B) Exception for amounts paid under salary reduction
arrangements.--No amount paid or incurred for health
insurance coverage pursuant to a salary reduction arrangement
shall be taken into account under subparagraph (A).
``(C) Health insurance coverage.--The term `health
insurance coverage' has the meaning given such term by
section 9832(b)(1).
``(3) Qualified employee.--
``(A) In general.--The term `qualified employee' means an
employee of an employer who, with respect to any period, is
not provided health insurance coverage under--
``(i) a health plan of the employee's spouse,
``(ii) title XVIII, XIX, or XXI of the Social Security Act,
``(iii) chapter 17 of title 38, United States Code,
``(iv) chapter 55 of title 10, United States Code,
``(v) chapter 89 of title 5, United States Code, or
``(vi) any other provision of law.
For purposes of clause (i), the Secretary shall prescribe by
regulation the manner by which an employee's health insurance
coverage under a health plan of the employee's spouse is
certified to the employee's employer.
``(B) Employee.--The term `employee'--
``(i) means any individual, with respect to any calendar
year, who is reasonably expected to receive at least $5,000,
but not more than $50,000, of compensation from the employer
during such year, and
``(ii) includes a leased employee within the meaning of
section 414(n).
``(C) Compensation.--The term `compensation' means amounts
described in section 6051(a)(3).
``(D) Inflation adjustment.--
``(i) In general.--In the case of a taxable year beginning
after 2007, the $50,000 amount in subparagraph (B)(i) shall
be increased by an amount equal to--

``(I) such dollar amount, multiplied by
``(II) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2006'
for `calendar year 1992' in subparagraph (B) thereof.

``(ii) Rounding.--If any amount as adjusted under clause
(i) is not a multiple of $1,000, such amount shall be rounded
to the next lowest multiple of $1,000.
``(e) Portion of Credit Made Refundable.--
``(1) In general.--The aggregate credits allowed to a
taxpayer under subpart C shall be increased by the lesser
of--
``(A) the credit which would be allowed under subsection
(a) without regard to this subsection and the limitation
under section 38(c), or
``(B) the amount by which the aggregate amount of credits
allowed by this subpart (determined without regard to this
subsection) would increase if the limitation imposed by
section 38(c) for any taxable year were increased by the
amount of employer payroll taxes imposed on the taxpayer
during the calendar year in which the taxable year begins.
The amount of the credit allowed under this subsection shall
not be treated as a credit allowed under this subpart and
shall reduce the amount of the credit otherwise allowable
under subsection (a) without regard to section 38(c).
``(2) Employer payroll taxes.--For purposes of this
subsection--
``(A) In general.--The term `employer payroll taxes' means
the taxes imposed by--
``(i) subsections (a) and (b) of section 3111, and
``(ii) sections 3211(a) and 3221(a) (determined at a rate
equal to the sum of the rates under subsections (a) and (b)
of section 3111).
``(B) Special rule.--A rule similar to the rule of section
24(d)(2)(C) shall apply for purposes of subparagraph (A).
``(f) Denial of Double Benefit.--No deduction or credit
under any other provision of this chapter shall be allowed
with respect to qualified employee health insurance expenses
taken into account under subsection (a).''.
(b) Credit to Be Part of General Business Credit.--Section
38(b) of the Internal Revenue Code of 1986 (relating to
current year business credit) is amended by striking ``and''
at the end of paragraph (29), by striking the period at the
end of paragraph (30) and inserting ``, plus'', and by adding
at the end the following:
``(31) the employee health insurance expenses credit
determined under section 45N.''.
(c) Conforming Amendment.--Section 6211(b)(4)(A) of the
Internal Revenue Code of 1986 is amended by striking ``and
34'' and inserting ``34, and 45N(e)''.
(d) Clerical Amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1 of the Internal
Revenue Code of 1986 is amended by adding at the end the
following:

``Sec. 45N. Employee health insurance expenses.''.

(e) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred in taxable years
beginning after December 31, 2006.
______

SA 3873. Mr. LEAHY submitted an amendment intended to be proposed by
him to the bill S. 1955, to amend title I of the Employee Retirement
Security Act of 1974 and the Public Health Service Act to expand health
care access and reduce costs through the creation of small business
health plans and through modernization of the health insurance
marketplace; which was ordered to lie on the table; as follows:

At the appropriate place, insert the following:

[[Page 7344]]

SEC. __. MEDICAL MALPRACTICE INSURANCE ANTITRUST PROVISIONS.

(a) Short Title.--This section may be cited as the
``Medical Malpractice Insurance Antitrust Act of 2005''.
(b) Prohibition on Anti-Competitive Activities.--
Notwithstanding any other provision of law, nothing in the
Act of March 9, 1945 (15 U.S.C. 1011 et seq., commonly known
as the ``McCarran-Ferguson Act'') shall be construed to
permit commercial insurers to engage in any form of price
fixing, bid rigging, or market allocations in connection with
the conduct of the business of providing medical malpractice
insurance.
(c) Application to Activities of State Commissions of
Insurance and Other State Insurance Regulatory Bodies.--This
section does not apply to the information gathering and rate
setting activities of any State commissions of insurance, or
any other State regulatory body with authority to set
insurance rates.

____________________

AUTHORITY FOR COMMITTEES TO MEET

subcommittee on aviation

Mr. ENZI. Mr. President. I ask unanimous consent that the Senate
Committee on Commerce Science and Transportation's Subcommittee on
Aviation be authorized to meet on Tuesday, May 9, 2006, at 2:30 p.m. on
the Department of Transportation's Notice of Proposed Rulemaking.
The PRESIDING OFFICER. Without objection, it is so ordered.

Committee on Health, Education, Labor, and Pensions

Mr. ENZI. Mr. President, I ask unanimous consent that the Committee
on Health, Education, Labor, and Pensions, Subcommittee on Employment
and Workplace Safety, be authorized to hold a hearing during the
session of the Senate on Tuesday, May 9, 2006 at 10 a.m. in SD-430.
The PRESIDING OFFICER. Without objection, it is so ordered.

committee on the judiciary

Mr. ENZI. Mr. President, I ask unanimous consent that the Senate
Committee on the Judiciary be authorized to meet to conduct a hearing
on ``Judicial Nominations'' on Tuesday, May 9, 2006, at 2 p.m. in Room
226 of the Dirksen Senate Office Building. The witness list will be
provided when it becomes available.
The PRESIDING OFFICER. Without objection, it is so ordered.

committee on the judiciary

Mr. ENZI. Mr. President, I ask unanimous consent that the Senate
Committee on the Judiciary be authorized to meet to conduct a hearing
on ``An Introduction to the Expiring Provisions of the Voting Rights
Act and Legal Issues Relating to Reauthorization'' on Tuesday, May 9,
2006, at 9:30 a.m. in Room 226 of the Dirksen Senate Office Building.

Witness List:

Panel I: Chandler Davidson, Radoslav Tsanoff Professor Emeritus and
Research Professor, Rice University, Houston, TX; Ted Shaw, Director-
Counsel and President, NAACP Legal Defense and Educational Fund, Inc.
(LDF), New York City, NY; Richard L. Hasen, William H. Hannon
Distinguished Professor of Law, Loyola Law School, Los Angeles, CA;
Laughlin McDonald, Director of the ACLU Voting Rights Project, Atlanta,
GA; and Samuel Issacharoff, Reiss Professor of Constitutional Law, New
York University School of Law, New York, NY.
The PRESIDING OFFICER. Without objection, it is so ordered.

subcommittee on surface transportation and merchant marine

Mr. ENZI. Mr. President, I ask unanimous consent that the Senate
Committee on Commerce, Science, and Transportation's Subcommittee on
Surface Transportation and Merchant Marine be authorized to meet on
Tuesday, May 9, 2006, at 10 a.m. on Corporate Average Fuel Economy
(CAFE) Standards.
The PRESIDING OFFICER. Without objection, it is so ordered.

____________________

PRIVILEGES OF THE FLOOR

Mr. DODD. Mr. President, I ask unanimous consent that Elizabeth
Hoffman, a fellow in my office, be granted the privileges of the floor
for the duration of the debate on this legislation.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. WYDEN. Mr. President, on behalf of Senator Baucus, I ask
unanimous consent that the following interns and fellows be granted
floor privileges during consideration of S. 1955: Leona Cutler, David
Schwartz, Diedra Henry-Spires, Britt Sandler, Tiffany Smith, Tom
Louthan, and Christal Edwards.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. HARKIN. Mr. President, I ask unanimous consent that Courtney
Wilcox of my staff be granted floor privileges for the duration of
today's session.
The PRESIDING OFFICER. Without objection, it is so ordered.

____________________

APPOINTMENTS

The PRESIDING OFFICER. The Chair, on behalf of the majority leader,
after consultation with the ranking member of the Senate Committee on
Finance, pursuant to Public Law 106-170, announces the appointment of
the following individual to serve as a member of the Ticket to Work and
Work Incentives Advisory Panel: Katie Beckett of Iowa.
The Chair, on behalf of the majority leader, in consultation with the
Democratic Leader, pursuant to Public Law 68-541, as amended by Public
Law 102-246, appoints John Medveckis, of Pennsylvania, as a member of
the Library of Congress Trust Fund Board for a term of 5 years.

____________________

NATIONAL FOSTER CARE MONTH

Mr. VOINOVICH. Mr. President, I ask unanimous consent that the Senate
now proceed to the consideration of S. Res. 471 which was submitted
earlier today.
The PRESIDING OFFICER. The clerk will report the resolution by title.
The legislative clerk read as follows:

A resolution (S. Res. 471) recognizing that, during
National Foster Care Month, the leaders of the Federal,
State, and local governments should provide leadership to
improve the care given to children in foster care programs.

There being no objection, the Senate proceeded to consider the
resolution.
Mr. VOINOVICH. Mr. President, I ask unanimous consent that the
resolution be agreed to, the preamble be agreed to, and the motion to
reconsider be laid upon the table.
The PRESIDING OFFICER. Without objection, it is so ordered.
The resolution (S. Res. 471) was agreed to.
The preamble was agreed to.
The resolution, with its preamble, reads as follows:

S. Res. 471

[[Page 7345]]

Resolved, That the Senate--
(1) recognizes--
(A) May 2006 as ``National Foster Care Month''; and
(B) that, during National Foster Care Month, the leaders of
the Federal, State, and local governments should rededicate
themselves to provide better care to the foster children of
the United States; and
(2) resolves to provide leadership to help identify the
role that Federal, State, and local governments should play
to ensure that foster children receive appropriate parenting
throughout their entire childhood.

____________________

ORDERS FOR WEDNESDAY, MAY 10, 2006

Mr. VOINOVICH. Mr. President, I ask unanimous consent that when the
Senate completes its business today, it stand in adjournment until 9:30
a.m. on Wednesday, May 10. I further ask that following the prayer and
pledge, the morning hour be deemed expired, the Journal of proceedings
be approved to dare, the time for the two leaders be reserved, and the
Senate proceed to a period of morning business for up to 60 minutes,
with the first 30 minutes under the control of the majority leader or
his designee and the final 30 minutes under the control of the
Democratic leader or his designee; further, that the Senate then begin
consideration of S. 1955, the small business health plans bill.
The PRESIDING OFFICER. Without objection, it is so ordered.

____________________

PROGRAM

Mr. VOINOVICH. Mr. President, today cloture was invoked on the motion
to proceed to the small business health plans bill by a vote of 96 to
2. Tomorrow morning, we will begin consideration of the bill. Chairman
Enzi will be here and will be available to discuss relevant amendments
that Senators may want to offer during tomorrow's session. Therefore,
rollcall votes are possible during Wednesday's session on the small
business health plans-related amendments.

____________________

ADJOURNMENT UNTIL 9:30 A.M. TOMORROW

Mr. VOINOVICH. Mr. President, if there is no further business to come
before the Senate, I ask that the Senate stand in adjournment under the
previous order.
There being no objection, the Senate, at 7:31 p.m., adjourned until
Wednesday, May 10, 2006, at 9:30 a.m.

____________________

NOMINATIONS

Executive nominations received by the Senate May 9, 2006:

DEPARTMENT OF THE TREASURY

ERIC SOLOMON, OF NEW JERSEY, TO BE AN ASSISTANT SECRETARY
OF THE TREASURY, VICE PAMELA F. OLSON, RESIGNED.

NATIONAL COUNCIL ON DISABILITY

VICTORIA RAY CARLSON, OF IOWA, TO BE A MEMBER OF THE
NATIONAL COUNCIL ON DISABILITY FOR A TERM EXPIRING SEPTEMBER
17, 2007, VICE JOEL KAHN, TERM EXPIRED.
CHAD COLLEY, OF FLORIDA, TO BE A MEMBER OF THE NATIONAL
COUNCIL ON DISABILITY FOR A TERM EXPIRING SEPTEMBER 17, 2007,
VICE DAVID WENZEL, TERM EXPIRED.
LISA MATTHEISS, OF TENNESSEE, TO BE A MEMBER OF THE
NATIONAL COUNCIL ON DISABILITY FOR A TERM EXPIRING SEPTEMBER
17, 2007, VICE CAROL HUGHES NOVAK, TERM EXPIRED.
JOHN R. VAUGHN, OF FLORIDA, TO BE A MEMBER OF THE NATIONAL
COUNCIL ON DISABILITY FOR A TERM EXPIRING SEPTEMBER 17, 2007,
VICE LEX FRIEDEN, TERM EXPIRED.

UNITED STATES POSTAL SERVICE

ELLEN C. WILLIAMS, OF KENTUCKY, TO BE A GOVERNOR OF THE
UNITED STATES POSTAL SERVICE FOR THE REMAINDER OF THE TERM
EXPIRING DECEMBER 8, 2007, VICE JOHN S. GARDNER.

IN THE NAVY

THE FOLLOWING NAMED OFFICER FOR APPOINTMENT IN THE UNITED
STATES NAVY TO THE GRADE INDICATED UNDER TITLE 10, U.S.C.,
SECTION 624:

To be rear admiral (lower half)

CAPT. THOMAS P. MEEK, 0000

THE FOLLOWING NAMED OFFICER FOR APPOINTMENT IN THE UNITED
STATES NAVY TO THE GRADE INDICATED UNDER TITLE 10, U.S.C.,
SECTION 624:

To be read admiral (lower half)

CAPT. JANICE M. HAMBY, 0000

THE FOLLOWING NAMED OFFICER FOR APPOINTMENT IN THE UNITED
STATES NAVY TO THE GRADE INDICATED UNDER TITLE 10, U.S.C.,
SECTION 624:

To be rear admiral (lower half)

CAPT. STEVEN R. EASTBURG, 0000

THE FOLLOWING NAMED OFFICER FOR APPOINTMENT IN THE UNITED
STATES NAVY TO THE GRADE INDICATED UNDER TITLE 10, U.S.C.,
SECTION 624:

To be read admiral (lower half)

CAPT. GREGORY J. SMITH, 0000

THE FOLLOWING NAMED OFFICERS FOR APPOINTMENT IN THE UNITED
STATES NAVY TO THE GRADE INDICATED UNDER TITLE 10, U.S.C.,
SECTION 624:

To be rear admiral (lower half)

CAPT. JOSEPH F. CAMPBELL, 0000
CAPT. THOMAS J. ECCLES, 0000

THE FOLLOWING NAMED OFFICERS FOR APPOINTMENT IN THE UNITED
STATES NAVY TO THE GRADE INDICATED UNDER TITLE 10, U.S.C.,
SECTION 624:

To be rear admiral (lower half)

CAPTAIN TOWNSEND G. ALEXANDER, 0000
CAPTAIN DAVID H. BUSS, 0000
CAPTAIN KENDALL L. CARD, 0000
CAPTAIN JOHN N. CHRISTENSON, 0000
CAPTAIN MICHAEL J. CONNOR, 0000
CAPTAIN JOHN ELNITSKY II, 0000
CAPTAIN KENNETH E. FLOYD, 0000
CAPTAIN PHILIP H. GREENE, 0000
CAPTAIN BRUCE E. GROOMS, 0000
CAPTAIN JAMES C. GRUNEWALD, 0000
CAPTAIN EDWARD S. HEBNER, 0000
CAPTAIN MICHELLE J. HOWARD, 0000
CAPTAIN ARNOLD O. LOTRING, JR, 0000
CAPTAIN JAMES P. MCMANAMON, 0000
CAPTAIN JOSEPH P. MULLOY, 0000
CAPTAIN CHARLES E. SMITH, 0000
CAPTAIN SCOTT H. SWIFT, 0000
CAPTAIN DAVID M. THOMAS, 0000
CAPTAIN KURT W. TIDD, 0000
CAPTAIN MICHAEL P. TILLOTSON, 0000
CAPTAIN MARK A. VANCE, 0000
CAPTAIN GARRY R. WHITE, 0000
CAPTAIN EDWARD G. WINTERS III, 0000

[[Page 7346]]
HOUSE OF REPRESENTATIVES--Tuesday, May 9, 2006

The House met at 12:30 p.m. and was called to order by the Speaker
pro tempore (Mrs. Drake).

____________________

DESIGNATION OF SPEAKER PRO TEMPORE

The SPEAKER pro tempore laid before the House the following
communication from the Speaker:

Washington, DC,

May 9, 2006.
I hereby appoint the Honorable Thelma D. Drake to act as
Speaker pro tempore on this day.
J. Dennis Hastert,
Speaker of the House of Representatives.

____________________

MORNING HOUR DEBATES

The SPEAKER pro tempore. Pursuant to the order of the House of
January 31, 2006, the Chair will now recognize Members from lists
submitted by the majority and minority leaders for morning hour
debates. The Chair will alternate recognition between the parties, with
each party limited to not to exceed 30 minutes, and each Member, except
the majority leader, the minority leader, or the minority whip, limited
to not to exceed 5 minutes.
The Chair recognizes the gentleman from California (Mr. Daniel E.
Lungren) for 5 minutes.

____________________

IMMIGRATION

Mr. DANIEL E. LUNGREN of California. Madam Speaker, in assessing the
effectiveness of immigration policy, it is helpful to look at both the
push factors and the pull factors which contribute to the phenomenon of
illegal immigration.
In assessing the push factors, we must not overlook the role of the
government of Mexico. On a human level, it is a sad fact that people
are motivated to make what is often a dangerous trek north to the
United States because of the absence of economic opportunity in Mexico
itself. Yet this flow of illegal immigration into the United States
acts as a pressure relief valve by allowing the Mexican government to
escape political accountability to those it has failed.
Ironically, the Mexican government's laissez fare attitude towards
immigration out of Mexico is not reflected in its policy concerning its
own southern border. When you hear the President of Mexico or other
Mexican politicians rail against the House-passed border control bill,
please keep in mind that when it comes to their own border policies,
all of the rhetoric concerning the right to migration is suddenly
nowhere to be found. In the end, the Mexican government's policy will
prove to be shortsighted and will ultimately cause serious damage to
their own country. Imagine the long-term effects of a nation losing
millions of its hardest working younger people. The future of Mexico is
sending its government a clear and unmistakable message of adios as
they vote with their feet.
Furthermore, when one factors Mexico's demographic future into the
equation, a dire picture emerges. According to an article by Philip
Longman in the May/June issue of Foreign Affairs, ``Mexican fertility
rates have dropped so dramatically, the country is now aging five times
faster than is the United States. It took 50 years for the American
median age to rise just five years, from 30 to 35. By contrast, between
2000 and 2050, Mexico's median age, according to U.N. projections, will
increase by 20 years, leaving half the population over 42. Meanwhile,
the median American age in the year 2050 is expected to be 39.7.''
Thus, ultimately illegal immigration from Mexico into the U.S. is not
good for either Mexico or the United States.
According to the Associated Press, President Fox has characterized
the House immigration bill as, quote, stupid. To his credit, the same
AP story quoted President Fox as acknowledging that his government must
``generate opportunities here in Mexico.'' However, it is the
responsibility of the United States Government to control our own
borders and to take action to reduce the pull factors which draw people
to the United States. We must demagnetize the attraction of illegal
employment in the U.S. Unfortunately, our track record here reflects a
failure of government policy on our side of the border.
The Immigration Reform and Control Act of 1986, IRCA, or Simpson-
Mazzoli, for the first time imposed sanctions on employers for the
hiring of those ineligible to work in the United States. Yet since the
passage of that bill, administrations of both political parties have
failed to enforce the law. The fact that there were only three cases
last year, three, of a notice to file a prosecution for the unlawful
hiring of illegal aliens is utterly indefensible. There must be a will
to enforce the law.
I wish to recount what in retrospect was the death knell to an
effective regime of employer sanctions. An amendment to Simpson-Mazzoli
was accepted which completely undermined the employment verification
system. In its place, a series of documents required to be submitted
with the I-9 employment eligibility verification form was substituted.
The end result was the creation of a new cottage industry for the
production of false documentation. I would like to emphasize once again
that it was the negation of an effective employer verification system,
which in combination with the lack of enforcement, undermined the
usefulness of employer sanctions as an immigration enforcement tool.
It was for this reason that the basic pilot project was created in
1996 by this Congress. The system allows employers to voluntarily check
the names and Social Security numbers of its employees against the
records maintained by the Social Security Administration and the
Department of Homeland Security. Building on this project, H.R. 4437,
the House-passed bill, would create a nationwide mandatory program.
Unlike the watered-down language in the 1986 bill, the employment
verification provisions in the House-passed bill offers a genuine
prospect for effective employer sanctions necessary to demagnetize the
attraction of unlawful employment in the U.S.
An effective employer sanctions regime, coupled with the need to
fully fund the additional 2,000 Border Patrol positions authorized this
year and in the out years, is essential if we are going to control
illegal immigration. At the same time if we are to maximize the
cooperation of employers with the implementation of an effective system
of employer sanctions, it is necessary to ensure that in those cases
where U.S. workers are unavailable, employers have the option of
employing temporary foreign workers. Let me suggest that regulating the
stream of workers which have crossed back and forth our southern border
since the 1870s will facilitate the job of a larger Border Patrol and
the implementation of an effective system of employer sanctions.
By definition however, in a temporary worker program, the workers
should be temporary. Along the lines of an amendment I offered
unsuccessfully in 1986, workers could work in the United States for up
to 10 months of the year. During that time a portion of their wages
could be withheld. The money would be placed in an escrow account and
would only be returned to the workers upon their return to their home
country--in most cases--Mexico. The proposal has a built in incentive
for the temporary workers to return

[[Page 7347]]

home to work their own small farms and to reunite with their families.
In fact, Mexico and Canada have entered into a temporary agricultural
worker program along these lines, which by all accounts has operated
quite successfully.
Finally, we cannot avoid the issue of what we will do with those who
have entered our country illegally and have settled in our communities.
I certainly do not favor an amnesty. But the use of the word
``amnesty'' does not excuse anyone on this side of the argument from
explaining exactly what they propose to do with as many as 11 million
people.
By the same token, those who have violated our laws should not be
allowed to cut in line in front of those who have obeyed them. A middle
ground solution would allow those undocumented persons with sufficient
equities in our society to remain. They could continue to work and
travel back and forth between the United States and their home country.
They would be legal residents, ``blue card'' holders if you will.
However, they would not be afforded the legal equivalent of a diamond
lane to citizenship. If they wish to become citizens, they would be
required to return home, file an application and get in line like
everyone else.
Such requirements are necessary to reassure Americans who have been
turned off by the ideologically driven multicultural agenda of those
groups promoting identification with the Mexican flag, an alternative
national anthem, and celebration of May Day in solidarity with leftist
Mexican trade unions. It is hard for me to conceive of anything which
could do more damage to the case one might make on behalf of those who
demand acceptance by us to be equal partners in our society. For the
common element of all immigrants who have come to this land has been a
deep and burning desire to become Americans. The welcome mat extended
to previous generations of immigrants was predicated upon a commitment
to a common patrimony. Nothing less should be expected of those who
currently seek to become a part of the tapestry of a larger tradition
and history of American immigration.

____________________

ENERGY

The SPEAKER pro tempore. Pursuant to the order of the House of
January 31, 2006, the gentleman from California (Mr. George Miller) is
recognized during morning hour debates for 5 minutes.
Mr. GEORGE MILLER of California. Madam Speaker, Members of the House,
as Americans are paying over $3 a gallon for gasoline and have been
doing so for a couple of months, we see the Bush administration and
Congressional Republicans running away from their record of supporting
the oil and gas industry and trying to convince the public that they
are deeply concerned and on the side of consumers. They even went so
far as to insult the public by suggesting that they would increase the
deficit and give them back a $100 check at the end of the summer.
Fortunately, the Republican leadership in the House called the idea
stupid and it seems to have waned.
What the American public really wants is a comprehensive energy
policy that gives them choices about their transportation, gives them
choices in the heating of their homes and the cooling of their homes,
gives them choices in energy conservation. That is what they are
looking for, but that is not what the Republicans have delivered over
the last 6 years.
Why? Because 6 years ago, Vice President Cheney sat down with the
executives of the oil companies and made a decision that they would put
the oil companies in charge of America's energy policy. They would put
the oil companies in charge of whether or not we would have innovation,
whether or not we would have new technologies, whether or not we would
have alternative energies such as solar, biofuels and all the rest of
that. And the oil companies basically decided we would keep doing
business on our energy policy as we have since the 1950s and 1960s,
that is, we would just let the oil companies continue to drill.
That meeting with Mr. Cheney made it very, very profitable for the
oil companies because since that time the Congress has done nothing but
lavish tax breaks on the oil and gas industry. The policy seems to have
worked because when you look at the profits, they have gone through the
roof. Chevron netted $4 billion in 3 months. That is a profit of $44
million a day. But they look like a small business alongside of
ExxonMobil which reported a profit of $8.4 billion, and that is after
they gave the CEO of ExxonMobil a $400 million pay package. And they
were still able to get a profit into the billions. I bet they loved
being in that meeting with Mr. Cheney where they got the rights to do
all this.
So Congress has continued to lavish tens of billions of dollars of
tax breaks on the industry, income tax deductions for Humvee purchases,
opening the California coast and other protected places for oil
exploration, liability protection for the oil industry against MTBE
contamination of cities' drinking waters that is occurring all over the
country, and, finally, a royalty holiday, treating the oil companies
like royalty. They won't have to pay the United States taxpayers for
the right to drill oil on those lands that are owned by the taxpayer.
They will get a royalty holiday. But, of course, today, now the
Republican leadership is running around and the President has said that
a royalty holiday makes no sense when oil is at $70 a barrel. He
actually said it when it was at $50 a barrel. It makes no sense at $50
a barrel, it makes no sense at $60 a barrel, and it makes no sense at
$70 a barrel. But the fact of the matter is we don't see one step being
taken in this Congress to end that royalty holiday and end it today and
give that money back to the taxpayers and reduce the deficit.
No, what the Republicans ought to do is they ought to check their
voting record and see how voted this last year when our colleague from
Arizona (Mr. Grijalva) offered that amendment in April, 2005, to make
sure that we would get rid of the royalty holiday. But it didn't pass.
It didn't pass because that is not on the oil companies' agenda. And as
we now know, the oil companies are running the agenda for this
Congress.
The Democrats have a better idea. We believe that working together
across all of the talents of America, that we can provide energy
independence within 10 years. But to do so you would have to
dramatically encourage new technologies, alternative forms of
transportation, of mass transportation, the use of solar, the use of
biofuels, the use of these kinds of conservation efforts combined with
new fuels and new technologies to let America be independent, to make
choices about its energy future.
Today, the President of the United States walks hand in hand with the
Sheik from Saudi Arabia and that is our energy policy: Don't do
anything to upset the Saudis.
The fact of the matter is we have to take control of our energy
policy. But we will only do that when we break the link between the
Republican Party and the oil and gas industry in this country. We will
only have the chance to bring new forms of transportation online, to
bring solar energy at a much more affordable price for American
consumers, to bring alternative fuel sources online at a more
affordable price, to break our dependency on Middle East oil. As our
leader said over the weekend on Meet the Press, we want to send our
money to the middle west to develop biofuels, to develop switch fuels,
to develop syn fuels, to develop ethanol. That is what we want to do,
instead of sending our money to the Middle East where it is being used
for very dubious purposes in terms of the interests of this country.
But this administration to date has not broken its alliance with the
oil sheiks in the Middle East and has not broken its alliance with the
oil industry in this country. And Americans today continue to drive to
work paying over $3 a gallon for gas with no respite in the future
because of the absence, the abandonment of this country by this
administration for an energy policy that works to the benefit of
America's consumers.

____________________

WORKING TOGETHER TO ADDRESS RISING ENERGY PRICES

The SPEAKER pro tempore. Pursuant to the order of the House of
January 31, 2006, the gentleman from Virginia (Mr. Wolf) is recognized
during morning hour debates for 5 minutes.

[[Page 7348]]

Mr. WOLF. Madam Speaker, I rise today because we must find ways to
effectively address the rising gas prices the citizens of the Nation
are paying at the pump.
Last week the House passed new legislation to address price gouging
at the pump and set Federal penalties for price manipulation. The major
oil companies say there are many factors in gas pricing, including
basic economics of supply and demand, the switch to ethanol from MTBE
as a clean fuel additive, and lack of refining capacity, among others,
and that they have no control over the spiking gas prices.
But my constituents, especially working people raising families and
those on fixed incomes whose wallets are being pinched tighter and
tighter, tell me they are not satisfied with those answers.
Madam Speaker, it is time for the President to use the bully pulpit
to get to the bottom of this issue the way that Teddy Roosevelt did. He
should call to the Oval Office every chief executive of the major oil
companies and let them explain to the American people why the average
price for a gallon of unleaded gasoline in the United States today is
nearly $3, and in some areas at least a dime over that.
There is another area of the energy market that also needs attention.
Recent news accounts have theorized that the commodity futures trading
market could be partly responsible for the rapid jumps in gasoline
prices over the past couple of months. This past weekend, television
investigative reports pointed to the energy trading industry as an area
in need of investigation to see if fraud or manipulation is occurring.
I learned yesterday that bipartisan legislation was introduced in the
Senate on this matter. Senators Feinstein and Snowe have a bill that
would increase transparency and accountability in the energy markets.
Madam Speaker, according to our colleagues, energy trades are often
made using an electronic trading platform where no records are kept, so
there is no audit trail for the Government to monitor. Currently, most
energy exchanges occur on the New York Mercantile Exchange or on
electronic exchanges such as the InterContinental Exchange. I was
surprised to learn that while the New York Mercantile Exchange is
regulated by the Commodity Futures Trading Commission, the electronic
exchanges like the InterContinental Exchange are largely unregulated,
even though it is estimated that up to 80 percent of our energy
commodities are traded on the InterContinental Exchange. Under CFTC
regulations, traders using the New York Mercantile Exchange must keep
records for 5 years and report large trading positions to the
commission. But traders using the InterContinental Exchange keep no
records. Additionally, traders using the New York exchange are subject
to other Federal regulations, like limits on how much of a given
commodity can be traded in one day. Traders using the InterContinental
Exchange are not.
Where is the transparency? Where is the accountability? Who are these
speculators? The American people need to know their government is
leaving no stone unturned in investigating this issue. After Hurricane
Katrina, we saw prices jump. Many Americans certainly understood
Katrina's wrath, but there were questions raised then about the almost
overnight jump of gasoline prices. To find out if indeed there was
gouging at the pump, this Congress ordered an investigation in last
year's commerce spending bill. The FTC will report on May 22.
Can markets really be manipulated? Think back to the electricity
market manipulation by Enron. As a result, last year's energy bill gave
more authority to the Federal Energy Regulatory Commission in the
regulation of natural gas and electricity markets including more
transparency.
In closing, there is no similar process for the Commodity Futures
Trading Commission in the unregulated energy markets. Who is to say
whether investment firms, commercial bankers or hedge funds could
actually be driving up oil prices through futures trading?
Madam Speaker, as I mentioned at the beginning, a good place to start
would be for the President to have an Oval Office chat with the big oil
executives. It would also be important to have the heads of the
Securities and Exchange Commission, Chris Cox, our former colleague who
is running the SEC; and the Commodity Futures Trading Commission in
that meeting.
We owe it to our constituents to find the answers, to bring everybody
together. And so I urge the administration to do exactly what Teddy
Roosevelt would have done, bring all the parties together to hammer
this out, look at all of the trading to show and demonstrate we are
doing everything we can to get to the bottom of this to begin to reduce
these prices.

____________________

ON NATURAL DISASTERS AND GLOBAL WARMING

The SPEAKER pro tempore. Pursuant to the order of the House of
January 31, 2006, the gentleman from Oregon (Mr. Blumenauer) is
recognized during morning hour debates for 5 minutes.
Mr. BLUMENAUER. Madam Speaker, beyond the day's headlines of crimes,
scandal and foreign affairs, there are still stories of flooding, fire,
hurricanes, tornadoes and mudslides still in the news. They are much on
the minds of the American public. After years in local government and
in Congress, I share their concerns about these threats that we face
from natural disasters, how we make these threats worse by what we do,
and how we learn little from our experience. Mostly I wonder what it
will take to provoke a coordinated, thoughtful response from the
Federal Government to the challenges posed by natural disasters.
For years before Katrina, I had been discussing on this floor what
was likely to happen in New Orleans when the ``big one'' hit. My
concerns became more urgent as I witnessed firsthand the devastation in
Asia from the tsunami.
It is not like we don't know what to do to protect our constituents.
After the floods in the upper Mississippi River, FEMA in the Clinton
Adminisration, under the leadership of James Lee Witt, took a
coordinated approach with the natural environment, forming partnerships
with private companies, landowners and local governments to
dramatically reduce the damage in subsequent floods. We took similar
actions in Portland, Oregon. We know what works.
After years of struggle, Congress is finally reforming the flood
insurance program to stop encouraging people to live in harm's way, to
reduce the damage by building smarter, or moving families to safer,
higher ground. For years we have been sponsoring round table
discussions with experts on coordinated policy response in all of these
elements, from fire and earthquake to flooding. People are ready to
support legislation introduced before Katrina, to provide resources for
communities to plan to avoid disaster.
There are national and local visionaries ready to develop a
comprehensive response to Katrina throughout the gulf region so that we
are ready for the next inevitable round of hurricanes. But what will it
take for people to act on the discussion, the plans, the legislation,
to get real action?
What about the Federal Government? Will it take the next disaster
season to force Congress and the administration to respond thoughtfully
with simple changes? After 25 years, will we update the hopelessly
outdated operating principles and guidelines of the Corps of Engineers?
Can we eliminate the perverse budget rules that make it actually
cheaper for Congress to spend billions of dollars on emergency flood
relief than a few million on prevention? Can we see past the next
sensational headlines so that the Federal Government can exercise its
responsibility on its own land in order to prevent development from
sprawling into forested areas near cities, putting more people at risk
and sending the costs of firefighting spiraling upward exponentially?
Can we avoid another example like Los Alamos, where the Federal
Government incredibly put sensitive, dangerous and expensive nuclear
facilities in the middle of an area that has

[[Page 7349]]

burned repeatedly from wildfires every few years for centuries?
Will the next round of disasters prompt the Federal Government to
finally show leadership on global warming, which will make all of these
problems more intense? With global warming, it is not just the damage
to New Orleans from hurricanes but risks to coastal communities from
New York's Long Island to the Rio Grande Valley in Texas. Rising
temperatures have already defrosted and eroded ever larger portions of
Alaska. Will scientists at NASA and NOAA at last be able to speak
freely about global warming?
These questions are not beyond our capacity. Simple, cost-effective
solutions are at hand that can be understood by the public who will end
up paying the bill. I think progress is possible because this is not a
Red State or a Blue State issue, not liberal or conservative, not big
government versus small government. Exercising common sense, bipartisan
cooperation and a tiny bit of leadership will save lives and money.
I had hoped that the devastation caused by Hurricane Katrina would
have already spurred us toward some meaningful, comprehensive action.
Instead, our response to Katrina has stalled and people are trickling
back into harm's way without a real plan or a vision, and the
protections against the next hurricane are not in place.
I do think there is hope. With the evidence so clear and the Katrina
memories so vivid, we begin another predicted serious hurricane season.
Maybe this will be the time that we learn from what has happened and
finally act to make our communities safer, healthier, and more
economically secure.

____________________

SECURING OUR BORDERS, SECURING OUR NATION

The SPEAKER pro tempore. Pursuant to the order of the House of
January 31, 2006, the gentleman from Florida (Mr. Stearns) is
recognized during morning hour debates for 5 minutes.
Mr. STEARNS. La Ladrillera, a brickyard in Sasabe, Mexico, is the
last gathering place where coyotes deliver final words of advice before
smuggling their human cargo across the border into the United States.
Each illegal immigrant pays anywhere from $1,500 to $2,000 to these
opportunists to be guided on their 3-day journey across the desert into
their ideal of a promised land, the United States.
My colleagues, let us be clear on the nature of these smugglers. They
are not generous humanitarians aiding their fellow man. Many of these
illegal immigrants are beaten, robbed and even raped before they even
reach the Mexico-U.S. border. Yet they keep paying the coyotes enough
money so that these smugglers have access to sophisticated arms,
weapons, GPS equipment and high quality mobile radios. Many of them
have better equipment than our own Border Patrol agents.
In today's Washington Times, Gilbert Reyes, one of these smugglers,
or successful local businessmen, describes the situation of these
immigrants: ``They want to get into the United States, and they are
willing to do almost anything, even walk for mile after mile in the
desert. They think they can go into America and get a pay to stay
permanently. Maybe they can. Maybe they can't.''
His assertion about the immigrants' belief rings true as we look at
the facts on immigration. In 1986, the Immigration Reform and Control
Act granted amnesty to 2.7 million illegal immigrants, and now today we
have 11 to 12 million illegal immigrants seeking amnesty. Two years
ago, President Bush first announced his guest worker program, and
illegal immigrant numbers have risen steadily since. A survey conducted
by the Border Patrol in 2004 revealed that of those illegal aliens in
custody of the Border Patrol, 45 percent were influenced to come to the
U.S. by the promise of amnesty. The immigration bill we passed in the
House directly strengthened legal recourse against these coyotes and
focused on securing our borders, increasing the number of Border Patrol
agents, and enforcing the immigration laws that we currently have.
These are essential steps that must be taken before any form of
immigration reform has a hope of succeeding. And the American people
agree. In a recent Zogby poll, 64 percent of respondents preferred the
House bill's approach of enforcement first and only 30 percent
preferred the Senate's approach of amnesty. Additionally, 73 percent of
respondents had little or no confidence in the ability of our
government to screen out terrorists or criminals if there is a mass
amnesty for those 12 million illegals already in this country.
And yet the pressure is mounting in favor of this unpopular and
impractical proposal. There are some journalistic groups that have even
begun to object to the use of the word ``illegal'' when referring to
these immigrants. We are supposed to refer to these individuals as,
quote, undocumented or even the other extreme proposal, to call them
economic refugees. But calling breaking the law by any other name does
not make it less of a crime. According to the Immigration and
Nationality Act, it is illegal to enter the United States illegally. It
is illegal to smuggle human beings into the United States for a price.
And it is illegal to knowingly hire and aid a person you know entered
our country illegally.
Another central issue with immigration reform is to ensure that those
waiting and hoping to enter this country will be treated fairly. Many
of them have undergone grueling ordeals to be able to enter the United
States. I have heard from one couple in my district that had to undergo
multiple in-depth interviews at the embassy before getting their
permits. The embassy was a 3-hour commute away for them. As they had no
transportation, they had to walk. But they told me they were happy to
do so for the simple chance to come into the United States. Many legal
immigrants have to wait 5, 10, sometimes 15 years before they get their
final approval to immigrate. To allow those who bypassed all the rules
and snuck into the U.S. amnesty and a path to citizenship is an
egregious slap in the face to all those immigrants who sacrificed to
respect our laws and enter legally.
My colleagues, we are a nation of immigrants. Immigrants have
vitalized our society, brought new life to our democracy and
strengthened our communities simply by their contributions. However, we
are also a nation of laws, and those whose first action is to willfully
break them should be held accountable, not given preferential
treatment.

____________________

THE DEBT AND THE DEFICIT

The SPEAKER pro tempore. Pursuant to the order of the House of
January 31, 2006, the gentleman from Oregon (Mr. DeFazio) is recognized
during morning hour debates for 5 minutes.
Mr. DeFAZIO. Well, it is going to be a big week for America and a big
week for Republicans in the House. The long-delayed budget is going to
be adopted. It is estimated that if this budget is adopted, the deficit
will be about $500 billion next year. That means they are going to
borrow more than $1.4 billion a day to run the government. But don't
worry, some of it is off the books. They are borrowing all of the
Social Security surplus, $193 billion, which is supposed to go to pay
for future benefits in the trust fund but they are going to borrow and
spend that. So they are going to really say, oh, the deficit is only
$300 billion, that's all we're borrowing from China and Japan and other
foreign investors. But we are also borrowing and spending all the
Social Security trust fund. So a $500 billion, half a trillion dollar
deficit, borrowing $1.4 billion a day, the party of fiscal
responsibility and small government.
In the meantime, they are cutting programs important to the middle
class. Student financial aid. Hey, those kids have got to pay higher
interest on their loans and their parents, too, because we're in
trouble financially. At the same time, this week they are going to pass
a $70 billion extension of tax cuts which favor investors over workers.
Why do the Republicans hate people who work for wages and salaries so

[[Page 7350]]

much? That is a question that begs answering around here. Because
investors who can clip coupons off their stocks pay a lower rate of
taxes to the Federal Government than a policeman, a fireman or a
teacher. And that is the way the Republicans say it should be. Those
who are lucky enough to inherit or otherwise able to invest for a
living, they shouldn't pay taxes like those suckers who work for salary
and wages.
What contempt they are showing for the people of America. They are
not only cutting the programs essential to them, borrowing in their
name, handing them the bill, now they are borrowing money to give to
rich investors which the middle class will have to pay for, because in
the Republicans' world only the middle class pays taxes.
The tax cuts they are proposing this week to extend will give an
average cut of $20 to the middle fifth of taxpayers, those who average
$36,000 a year. But for the lucky winners, the top 1 percent, average
income $5.3 million, they will save $82,415. Or if you could put it
another way, the person who earns $36,000 will be obligated and their
kids will be obligated to borrow $82,415 to give to that wealthy
investor because we don't have a surplus to give taxes away to those
folks. They say, Oh, don't worry. These tax cuts pay for themselves.
Oh, okay. If that is true, why on page 121, buried almost
indecipherably in their budget, 151 pages long, page 121, the
Republicans for the fifth time in 5 years are increasing the debt limit
of the United States without discussion on the floor of the House or a
vote? They are going to increase it by $653 billion.
Let's see. If the tax cuts pay for themselves, why would they have to
increase the debt limit of the United States for the fifth time in 5
years in a stealth fashion like this? That is underhanded.
When President Bush took office, we had a borrowing limit of $5.95
trillion, $6 trillion. When their budget passes this week, it is going
to be $9.62 trillion. Not bad. Up 60 percent in 5 years. The party of
small government and fiscal responsibility has indebted the United
States, increased the debt by more than 60 percent in 5 short years.
They have amassed more foreign debt than all of the administrations
that preceded them since the beginning of the Republic. So we are not
only borrowing against our future, borrowing against Social Security,
handing a bill to the middle class, we are also indebting the country
to foreign holders of debt, particularly China, Japan and others.
What a great vision they have for America. The wealthy will live on
their estates behind big walls with private security. They will send
their kids to private schools in private limousines, they will ride
their private jets to private resorts, and then the rest of us can mow
their lawns and carry their golf clubs and wait on their tables. And
there won't be much left for the rest of us.
They can't afford a decent bill for homeland security. They can't
afford money for cops, police, fire, public education, but we can
afford more tax cuts for the wealthiest among us because the investors
are the important people to the Republicans. They are also their big
contributors.

____________________

RECESS

The SPEAKER pro tempore. Pursuant to clause 12(a) of rule I, the
Chair declares the House in recess until 2 p.m. today.
Accordingly (at 1 o'clock and 6 minutes p.m.), the House stood in
recess until 2 p.m.

____________________

{time} 1400
AFTER RECESS

The recess having expired, the House was called to order by the
Speaker pro tempore (Mr. Bishop of Utah) at 2 p.m.

____________________

PRAYER

The Chaplain, the Reverend Daniel P. Coughlin, offered the following
prayer:
Lord God, we invite the Nation to pray for the Members of Congress
today with heartfelt compassion. They are in need of Your wisdom and
our understanding.
The making of law is never an easy task. It requires dedicated
attention, artful skills of language, personal integrity and
responsibility to be truly effective. Because of the multiple issues
facing the Nation and the complexity of every problem, intelligent
minds and enlightened convictions are necessary for each Member of this
legislative body to supply answers, to seek healing and build peaceful
unity.
In a democracy as ours, laws can be crafted by diverse minds
representing a variety of interests. But in the end, every law and
every policy of government must seek the consent of the governed and
ultimately Your almighty judgment of justice.
In You alone, Lord God, do we find the fulfillment of the law both
now and forever. Amen.

____________________

THE JOURNAL

The SPEAKER pro tempore. The Chair has examined the Journal of the
last day's proceedings and announces to the House his approval thereof.
Pursuant to clause 1, rule I, the Journal stands approved.

____________________

PLEDGE OF ALLEGIANCE

The SPEAKER pro tempore. Will the gentleman from South Carolina (Mr.
Wilson) come forward and lead the House in the Pledge of Allegiance.
Mr. WILSON of South Carolina led the Pledge of Allegiance as follows:

I pledge allegiance to the Flag of the United States of
America, and to the Republic for which it stands, one nation
under God, indivisible, with liberty and justice for all.

____________________

MESSAGE FROM THE SENATE

A message from the Senate by Ms. Curtis, one of its clerks, announced
that the Senate has passed with an amendment in which the concurrence
of the House is requested, a bill of the House of the following title:

H.R. 4939. An act making emergency supplemental
appropriations for the fiscal year ending September 30, 2006,
and for other purposes.

The message also announced that the Senate insists upon its amendment
to the bill (H.R. 4939) ``An Act making emergency supplemental
appropriations for the fiscal year ending September 30, 2006, and for
other purposes,'' requests a conference with the House on the
disagreeing votes of the two Houses, thereon, and appoints Mr. Cochran,
Mr. Stevens, Mr. Specter, Mr. Domenici, Mr. Bond, Mr. McConnell, Mr.
Burns, Mr. Shelby, Mr. Gregg, Mr. Bennett, Mr. Craig, Mrs. Hutchison,
Mr. DeWine, Mr. Brownback, Mr. Allard, Mr. Byrd, Mr. Inouye, Mr. Leahy,
Mr. Harkin, Ms. Mikulski, Mr. Reid, Mr. Kohl, Mrs. Murray, Mr. Dorgan,
Mrs. Feinstein, Mr. Durbin, Mr. Johnson, and Ms. Landreiu, to be the
conferees on the part of the Senate.

____________________

ASSOCIATION HEALTH PLANS

(Mr. KELLER asked and was given permission to address the House for 1
minute and to revise and extend his remarks.)
Mr. KELLER. Mr. Speaker, I rise today to urge the Senate to help
small business people with the skyrocketing costs of health insurance
by passing Association Health Plans.
Of the 45 million Americans without health insurance, 60 percent are
small business employees and their families. By joining together, small
businesses in central Florida will have the same bargaining power to
negotiate lower health insurance rates as big companies, like Disney
World and Darden. This will help lower their health insurance premiums
by up to 30 percent, and expand access to millions of people without
health insurance.
On April 27, 2005, the House of Representatives passed my Small
Business Bill of Rights which created a blueprint for this Congress to
follow to help small business create additional jobs. On the top of the
list was passage of Association Health Plans.
Three months later, on July 26, 2005, the House passed Association
Health Plans with a wide margin of 263-153.

[[Page 7351]]

I applaud the Senate for taking up this important debate today, and I
urge them to act now to pass Association Health Plans.

____________________

MEDICARE PART D ENROLLMENT DEADLINE

(Mrs. CAPPS asked and was given permission to address the House for 1
minute and to revise and extend her remarks.)
Mrs. CAPPS. Mr. Speaker, the May 15 Medicare part D enrollment
deadline is now 6 days away; but a significant number of eligible
beneficiaries do not even know that. The enrollment deadline is 6 days
away, and eligible beneficiaries don't know about the penalty fee they
would incur for the rest of their lives.
Mr. Speaker, the enrollment deadline is 6 days away, but call centers
are still giving eligible beneficiaries inaccurate or incomplete
information. This Sunday, sons and daughters should be spending time
with their mothers taking them to brunch or showering them with gifts,
not trying to navigate a complex Web site or holding onto the phone.
The administration's insistence on this deadline is offensive to
millions of Medicare beneficiaries. Many of them are telling me just
that, and many are the most vulnerable in our society.
I urge my colleagues to press for extending the deadline for part D
enrollment. We owe it to the unenrolled seniors and seniors who are
disabled, who need more time to figure out this complex program. We owe
it to all beneficiaries so that we can continue fixing the many flaws
of the Medicare prescription drug plan.

____________________

THE HERO ACT

(Ms. FOXX asked and was given permission to address the House for 1
minute and to revise and extend her remarks.)
Ms. FOXX. Mr. Speaker, I rise today in strong support of H.R. 1499,
the Heroes Earned Retirement Opportunities Act. I introduced this bill
after learning our current Tax Code prohibits many of our men and women
serving in combat zones from taking advantage of individual retirement
accounts.
Most of our troops serving in these combat zones are paid in wages
designated as military hazard pay. These wages are not taxed, nor
should they be. However, since this compensation is nontaxable, the
wages are not eligible for IRA contributions. IRAs are an excellent
tool for responsible retirement savings.
Our troops defending America in harm's way should not be excluded
from full participation in this important investment opportunity
because of a glitch in our Tax Code.
The HERO Act will correct this glitch by designating combat hazard
pay earned by members of the Armed Forces as eligible for contribution
to retirement accounts. This bill has been endorsed by the Reserve
Officers Association and the MOAA.
I encourage my colleagues to support this important bill this
afternoon and give our troops the opportunity they deserve to save for
their future.

____________________

MEDICARE PART D DEADLINE

(Ms. EDDIE BERNICE JOHNSON of Texas asked and was given permission to
address the House for 1 minute and to revise and extend her remarks.)
Ms. EDDIE BERNICE JOHNSON of Texas. Mr. Speaker, I want to call
attention to the May 15 deadline for seniors to enroll in the Medicare
part D prescription drug plan. The fact is, seniors who are eligible
for Medicare part D who do not sign up by May 15 will face a higher
monthly premium if they enroll at a later time. This puts a lot of
pressure on the seniors.
I had a town hall meeting and lots of seniors came. Most of them knew
nothing about how to do it or did not understand it.
But, seniors, as hard as we have tried, we cannot extend this
deadline beyond May 15. There are nearly 48,000 residents aged 65 and
older in Dallas, Texas. Not that many came to the town hall, but quite
a few. I am concerned that they are not getting the message.
Missing May 15 may have expensive consequences. We would like to have
a bit more compassion. America's health is about more than just numbers
on an insurance company's roll book.

____________________

SIX DAYS AWAY

(Mr. PRICE of Georgia asked and was given permission to address the
House for 1 minute and to revise and extend his remarks.)
Mr. PRICE of Georgia. Mr. Speaker, 6 days. In just 6 days, that is
when the deadline for the Medicare prescription drug program is: May
15.
Thirty million Americans have already signed up. However, there
remain other seniors who would benefit from this voluntary program, and
they should take these next few days to see if Medicare part D is right
for them.
To help facilitate the enrollment process in my district, I have held
Medicare seminars to educate seniors on the options available,
including two just last Friday. Many have said they are happy with the
choices they have, and they are grateful for the time we took to sit
down and explain this new program.
Yesterday I also had the chance to visit two pharmacies in my
district and speak with the pharmacists and their staffs. This offered
a great, behind-the-scenes look at the process these pharmacists have
used to help local seniors understand and utilize this new prescription
drug plan.
The general sense is that the kinks have been worked out and most
seniors are truly gaining great benefit, better health.
Over the next 6 days, I urge all of my colleagues in Congress to do
all that we can to provide seniors whatever assistance they may require
to sign up for and navigate their new plan.

____________________

MEDICARE PART D AND THE LATINO COMMUNITY

(Ms. SOLIS asked and was given permission to address the House for 1
minute and to revise and extend her remarks.)
Ms. SOLIS. Mr. Speaker, I rise today because the Medicare part D
plan, as written, in my opinion is bad for Latino seniors. Latinos are
less likely to have worked at firms with employer-provided pension
plans, tend to work at a lower-paying job resulting in less accumulated
savings and smaller Social Security checks. And 62 percent have incomes
below 150 percent of the Federal poverty level.
Yet more than 1 million Latino seniors have not yet even enrolled in
this program because of cultural, language and economic barriers. That
is more than 30 percent of all eligible Latino seniors who lack
coverage.
The lack of detailed, easy-to-understand culturally competent
information makes it even more difficult for community organizations to
focus resources on this vulnerable population. Our Latino seniors and
all seniors need our help.
I urge my colleagues to pass legislation to extend the enrollment
deadline, take away the fear of penalty, and give Medicare
beneficiaries more time to check their facts, know their options, and
make informed decisions about part D.

____________________

EMERGENCY SUPPLEMENTAL RESTRAINT

(Mr. WILSON of South Carolina asked and was given permission to
address the House for 1 minute and to revise and extend his remarks.)
Mr. WILSON of South Carolina. Mr. Speaker, Webster's dictionary
defines emergencies as serious situations or occurrences that happen
unexpectedly and demand immediate attention.
As Congress considers this year's emergency supplemental spending
bill, I hope all of my colleagues will remember the definition of an
emergency and support Majority Leader Boehner's strong efforts to
ensure that we spend taxpayer money on America's most urgent needs.
Last week I was proud when he clearly articulated that the House will
not take up an emergency supplemental bill that spends $1 more than the
President's budget request. By declaring

[[Page 7352]]

that Congress will use this funding for troops' efforts in the global
war on terrorism and rebuilding communities throughout the gulf coast,
Majority Leader Boehner is leading House Republicans to rein in the
Federal budget and spend taxpayer dollars wisely.
As the budget process continues, I am confident that Majority Leader
Boehner will continue to define the difference between irresponsible
wishes and American emergencies.
In conclusion, God bless our troops, and we will never forget
September 11.

____________________

DARFUR PEACE AGREEMENT

(Mr. WOLF asked and was given permission to address the House for 1
minute and to revise and extend his remarks.)
Mr. WOLF. Mr. Speaker, I rise to welcome the news of the signing of
the Darfur peace agreement. It is important to recognize the hard work
that our international partners and the administration have done on
this issue. Specifically, President Bush has done an outstanding job,
as have Secretary Rice, Deputy Secretary Zoellick and Roger Winter; and
there should be special gratitude expressed to Secretary Zoellick who
went out there and spent 5 days to bring this to fruition.
Their efforts have moved the parties to an agreement, and the United
States now must remain steadfast in this effort. It is my hope this
agreement will be a stepping stone toward achieving lasting peace and
security for the people of Darfur.
The international community and the American people now have an
opportunity to take meaningful steps to improve the lives of the people
of Darfur.
Most of the food in Darfur where I visited is coming from the United
States Government and from the American people as a result of what the
Bush administration has done. However, we must remember that women and
children are still dying in the camps. Men are still being killed, and
the genocide is still taking place. We must build on that momentum.
But the efforts of the administration are to be commended. And
although the road ahead is long, this administration and Bob Zoellick
have done an outstanding job. And the people who rallied on the Mall
last week ought to be congratulated, too.

____________________

STAR-SPANGLED BANNER SUNG IN ENGLISH

(Mr. DREIER asked and was given permission to address the House for 1
minute and to revise and extend his remarks.)
Mr. DREIER. Mr. Speaker, Americans hail from many different
backgrounds, but we are united by our freedoms, our democratic
government, and our language. It goes without saying that the Star-
Spangled Banner should be sung in English. This Spanish-language anthem
is nothing but a cynical attempt to divide our country during the
debate on this most vigorous and divisive issue of immigration and
illegal immigration.
It will not distract from the critical tasks at hand, securing our
borders. I am committed to enforcing our immigration laws and
effectively reforming our immigration system without providing amnesty,
and I believe that all of our colleagues should join in cosponsoring
the legislation offered by our colleague from Kansas (Mr. Ryun) H. Res.
793, which will underscore the fact that the Star Spangled Banner
should be sung in English.

____________________

{time} 1415
URGING A CONFERENCE ON CHILDREN'S SAFETY ACT

(Ms. GINNY BROWN-WAITE of Florida asked and was given permission to
address the House for 1 minute and to revise and extend her remarks.)
Ms. GINNY BROWN-WAITE of Florida. Mr. Speaker, despite the fact of
having a bit of laryngitis, I rise today on a very important issue. I
want to commend the Senate for passing Senate 1086, the Sex Offender
Registration and Notification Act.
Now that the Senate has joined the House in passing legislation to
protect our children, I urge the appointment of a conference committee
so that we can see this actually enacted into law this year.
Nine-year-old Jessica Lunsford lost her life at the hands of a
convicted sex offender more than a year ago. This monster assaulted
her, buried her in a plastic garbage bag, and killed her just across
the street from her home and her family.
We cannot let one more minute go by without closing the loophole in
the law that her tragic death revealed. I can't go back to my district
and tell Jessica's father that Congress's schedule was too busy and
that we will pass something into law next year. The time to act is now.

____________________

MEDICARE PART D

(Mr. GINGREY asked and was given permission to address the House for
1 minute.)
Mr. GINGREY. Mr. Speaker, this Sunday is Mother's Day. I know there
must be people out there, who, like me, are looking for a last minute
gift for their mothers, and I have a great suggestion.
If your mother or father, and Father's Day is coming up soon too, if
either of them is a senior, you can give them the gift of health by
helping them enroll in a Medicare prescription drug plan.
The initial enrollment period for Medicare part D ends next Monday,
May 15, the day after Mother's Day. That means seniors have less than a
week remaining to enroll in a plan and be guaranteed the lowest
premiums and the most savings.
Already, more than 30 million seniors have enrolled, and those
seniors are saving an average of $1,100 a year on their medications. A
recent survey showed that 90 percent of seniors say their plan is
convenient to use, and 85 percent say their plan is affordable and
covers the medicines that they need.
As a physician, I know if seniors can't afford their medication, they
will go without to the detriment of their health.
After years of promises, Mr. Speaker, President Bush and this
Republican Congress have finally delivered on prescription drug
coverage under Medicare. Now, in this final week, I encourage all
seniors to sign up and start saving.

____________________

RESPECT FOR AMERICA'S FALLEN HEROES ACT

(Mrs. BLACKBURN asked and was given permission to address the House
for 1 minute and to revise and extend her remarks.)
Mrs. BLACKBURN. Mr. Speaker, today I rise to draw to the attention of
the House H.R. 5037. This is the Respect For America's Fallen Heroes
Act, and I would like to encourage each Member of this body to join me
and my colleagues in this act. What it is going to do is to put in
place criteria that will prohibit a person from carrying out
demonstrations at the funeral of one of our fallen heroes.
We are going to have a press conference, Mr. Speaker, at 2:30 today
to talk more about this, and I want to commend my colleagues,
Representative Rogers from Michigan, our Veterans Affairs' Committee
Chairman, Mr. Buyer of Indiana, Mr. Chabot of Ohio, Mr. Wilson of South
Carolina, Mr. Carter of Texas, and Mr. Garrett of New Jersey for
joining with me on this piece of legislation and for joining to honor
the members of the Patriot Guard Riders, who stand with our families to
honor our fallen heroes.

____________________

COMMUNICATION FROM HON. NANCY PELOSI, DEMOCRATIC LEADER

The SPEAKER pro tempore laid before the House the following
communication from Nancy Pelosi, Democratic Leader:

House of Representatives,

Office of the Democratic Leader,

Washington, DC, May 9, 2006.
Hon. J. Dennis Hastert,
Speaker, United States House of Representatives
Washington, DC.
Dear Mr. Speaker: Pursuant to clause 5(a)(4)(A) of rule X
of the Rules of the House

[[Page 7353]]

of Representatives, I designate the following Members to be
available for service on an investigative subcommittee of the
Committee on Standards of Official Conduct: Mr. Becerra of
California, Mr. Capuano of Massachusetts, Mr. Chandler of
Kentucky, Mr. Delahunt of Massachusetts, Mr. Schiff of
California, Mr. Scott of Virginia, Ms. Solis of California,
Mr. Stupak of Michigan, Ms. Tauscher of California, and Mr.
Van Hollen of Maryland.
Sincerely,
Nancy Pelosi,
Democratic Leader.

____________________

COMMUNICATION FROM THE CLERK OF THE HOUSE

The SPEAKER pro tempore laid before the House the following
communication from the Clerk of the House of Representatives:

Office of the Clerk,

U.S. House of Representatives,

Washington, DC, May 9, 2006.
Hon. J. Dennis Hastert,
Speaker, U.S. House of Representatives, Washington, D.C.
Dear Mr. Speaker: Pursuant to the permission granted in
Clause 2(h) of Rule II of the Rules of the U.S. House of
Representatives, I have the honor to transmit a sealed
envelope received from the White House on May 8, 2006, at
4:43 p.m. and said to contain a message from the President
whereby he notifies the Congress he has extended the national
emergency with respect to Syria.
With best wishes, I am
Sincerely,
Karen L. Haas,
Clerk of the House.

____________________

CONTINUATION OF NATIONAL EMERGENCY WITH RESPECT TO SYRIA--MESSAGE FROM
THE PRESIDENT OF THE UNITED STATES (H. DOC. NO. 109-109)

The SPEAKER pro tempore laid before the House the following message
from the President of the United States; which was read and, together
with the accompanying papers, without objection, referred to the
Committee on International Relations and ordered to be printed:
To the Congress of the United States:
Section 202(d) of the National Emergencies Act (50 U.S.C. 1622(d))
provides for the automatic termination of a national emergency unless,
prior to the anniversary date of its declaration, the President
publishes in the Federal Register and transmits to the Congress a
notice stating that the emergency is to continue in effect beyond the
anniversary date. In accordance with this provision, I have sent to the
Federal Register for publication the enclosed notice, stating that the
national emergency declared in Executive Order 13338 of May 11, 2004,
and expanded in scope in Executive Order 13399 of April 25, 2006,
authorizing the blocking of property of certain persons and prohibiting
the exportation and reexportation of certain goods to Syria, is to
continue in effect beyond May 11, 2006. The most recent notice
continuing this emergency was published in the Federal Register on May
10, 2005 (70 FR 24697).
The actions of the Government of Syria in supporting terrorism,
interfering in Lebanon, pursuing weapons of mass destruction and
missile programs, and undermining United States and international
efforts with respect to the stabilization and reconstruction of Iraq,
pose a continuing unusual and extraordinary threat to the national
security, foreign policy, and economy of the United States. For these
reasons, I have determined that it is necessary to continue in effect
the national emergency authorizing the blocking of property of certain
persons and prohibiting the exportation and reexportation of certain
goods to Syria and to maintain in force the sanctions to respond to
this threat.
George W. Bush.
The White House, May 8, 2006.

____________________

COMMUNICATION FROM DEPUTY CHIEF OF STAFF OF HON. WILLIAM J. JEFFERSON,
MEMBER OF CONGRESS

The SPEAKER pro tempore laid before the House the following
communication from Roberta Y. Hopkins, Deputy Chief of Staff of the
Honorable William J. Jefferson, Member of Congress:
Congress of the United States,

House of Representatives,

Washington, DC, May 9, 2006.
Hon. J. Dennis Hastert,
Speaker, U.S. House of Representatives,
Washington, DC.
Dear Mr. Speaker: This is to notify you formally, pursuant
to Rule VIII of the Rules of the House of Representatives,
that I have been served with a grand jury subpoena for
testimony issued by the U.S. District Court for the Eastern
District of Virginia.
After consultation with the Office of General Counsel, I
have determined that compliance with the subpoena is
consistent with the precedents and privileges of the House.
Sincerely,
Roberta Y. Hopkins,
Deputy Chief of Staff.

____________________

ANNOUNCEMENT BY THE SPEAKER PRO TEMPORE

The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, the Chair
will postpone further proceedings today on motions to suspend the rules
on which a recorded vote or the yeas and nays are ordered, or on which
the vote is objected to under clause 6 of rule XX.
Record votes on postponed questions will be taken after 6:30 p.m.
today.

____________________

AMERICAN RIVER PUMP STATION PROJECT TRANSFER ACT OF 2006

Mr. RADANOVICH. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 4204) to direct the Secretary of the Interior to transfer
ownership of the American River Pump Station Project, and for other
purposes, as amended.
The Clerk read as follows:

H.R. 4204

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

SECTION 1. SHORT TITLE.

This Act may be cited as the ``American River Pump Station
Project Transfer Act of 2006''.

SEC. 2. AUTHORITY TO TRANSFER.

The Secretary of the Interior (hereafter in this Act
referred to as the ``Secretary'') shall transfer ownership of
the American River Pump Station Project located at Auburn,
California, which includes the Pumping Plant, associated
facilities, and easements necessary for permanent operation
of the facilities, to the Placer County Water Agency, in
accordance with the terms of Contract No. 02-LC-20-7790
between the United States and Placer County Water Agency and
the terms and conditions established in this Act.

SEC. 3. FEDERAL COSTS NONREIMBURSABLE.

Federal costs associated with construction of the American
River Pump Station Project located at Auburn, California, are
nonreimbursable.

SEC. 4. GRANT OF REAL PROPERTY INTEREST.

The Secretary is authorized to grant title to Placer County
Water Agency as provided in section 2 in full satisfaction of
the United States' obligations under Land Purchase Contract
14-06-859-308 to provide a water supply to the Placer County
Water Agency.

SEC. 5. COMPLIANCE WITH ENVIRONMENTAL LAWS.

(a) In General.--Before conveying land and facilities
pursuant to this Act, the Secretary shall comply with all
applicable requirements under--
(1) the National Environmental Policy Act of 1969 (42
U.S.C. 4321 et seq.);
(2) the Endangered Species Act of 1973 (16 U.S.C. 1531 et
seq.); and
(3) any other law applicable to the land and facilities.
(b) Effect.--Nothing in this Act modifies or alters any
obligations under--
(1) the National Environmental Policy Act of 1969 (42
U.S.C. 4321 et seq.); or
(2) the Endangered Species Act of 1973 (16 U.S.C. 1531 et
seq.).

SEC. 6. RELEASE FROM LIABILITY.

Effective on the date of transfer to the Placer County
Water Agency of any land or facility under this Act, the
United States shall not be liable for damages arising out of
any act, omission, or occurrence relating to the land and
facilities, consistent with Article 9 of Contract No. 02-LC-
20-7790 between the United States and Placer County Water
Agency.

The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
California (Mr. Radanovich) and the gentlewoman from the Virgin Islands
(Mrs. Christensen) each will control 20 minutes.
The Chair recognizes the gentleman from California.

General Leave

Mr. RADANOVICH. Mr. Speaker, I ask unanimous consent that all Members
may be given 5 legislative days to revise and extend their remarks and
include extraneous material on the bill under consideration.

[[Page 7354]]

The SPEAKER pro tempore. Is there objection to the request of the
gentleman from California?
There was no objection.
Mr. RADANOVICH. Mr. Speaker, I yield myself as much time as I may
consume.
Mr. Speaker, H.R. 4204, introduced by our distinguished colleague,
John Doolittle, directs the Secretary of the Interior to transfer
ownership of the American River Pump Station Project to the Placer
County Water Agency in northern California.
To facilitate construction of the Auburn Dam nearly 40 years ago, the
Federal Government removed a locally owned pump station located at the
dam site. The dam was never built, and now the Federal Government is
building a permanent pump station to replace the one it removed years
earlier. Under an agreement, the Federal Government must transfer the
pump station to the local water users once construction is complete.
Before transfer can take place, congressional authorization is needed,
and this legislation achieves that objective. I urge my colleagues to
support this commonsense bill.
Mr. Speaker, I reserve the balance of my time.
Mrs. CHRISTENSEN. Mr. Speaker, I yield myself such time as I may
consume.
We on this side of the aisle have reviewed the legislation and have
no objection to the passage of H.R. 4204. The bill would fulfill the
legal commitment of the United States Government to replace the water
supply for the Placer County Water Agency.
The majority has already correctly characterized and explained the
bill.
Mr. Speaker, I yield back the balance of my time.
Mr. RADANOVICH. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from California (Mr. Radanovich) that the House suspend the
rules and pass the bill, H.R. 4204, as amended.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.

____________________

UPPER HOUSATONIC VALLEY NATIONAL HERITAGE AREA ACT

Mr. RADANOVICH. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 5311) to establish the Upper Housatonic Valley National
Heritage Area.
The Clerk read as follows:

H.R. 5311

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

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Upper Housatonic Valley
National Heritage Area Act''.

SEC. 2. FINDINGS AND PURPOSES.

(a) Findings.--Congress finds the following:
(1) The upper Housatonic Valley, encompassing 29 towns in
the hilly terrain of western Massachusetts and northwestern
Connecticut, is a singular geographical and cultural region
that has made significant national contributions through its
literary, artistic, musical, and architectural achievements,
its iron, paper, and electrical equipment industries, and its
scenic beautification and environmental conservation efforts.
(2) The upper Housatonic Valley has 139 properties and
historic districts listed on the National Register of
Historic Places, including--
(A) five National Historic Landmarks--
(i) Edith Wharton's home, The Mount, Lenox, Massachusetts;
(ii) Herman Melville's home, Arrowhead, Pittsfield,
Massachusetts;
(iii) W.E.B. DuBois' Boyhood Homesite, Great Barrington,
Massachusetts;
(iv) Mission House, Stockbridge, Massachusetts; and
(v) Crane and Company Old Stone Mill Rag Room, Dalton,
Massachusetts; and
(B) four National Natural Landmarks--
(i) Bartholomew's Cobble, Sheffield, Massachusetts, and
Salisbury, Connecticut;
(ii) Beckley Bog, Norfolk, Connecticut;
(iii) Bingham Bog, Salisbury, Connecticut; and
(iv) Cathedral Pines, Cornwall, Connecticut.
(3) Writers, artists, musicians, and vacationers have
visited the region for more than 150 years to enjoy its
scenic wonders, making it one of the country's leading
cultural resorts.
(4) The upper Housatonic Valley has made significant
national cultural contributions through such writers as
Herman Melville, Nathaniel Hawthorne, Edith Wharton, and
W.E.B. DuBois, artists Daniel Chester French and Norman
Rockwell, and the performing arts centers of Tanglewood,
Music Mountain, Norfolk (Connecticut) Chamber Music Festival,
Jacob's Pillow, and Shakespeare & Company.
(5) The upper Housatonic Valley is noted for its pioneering
achievements in the iron, paper, and electrical generation
industries and has cultural resources to interpret those
industries.
(6) The region became a national leader in scenic
beautification and environmental conservation efforts
following the era of industrialization and deforestation and
maintains a fabric of significant conservation areas
including the meandering Housatonic River.
(7) Important historical events related to the American
Revolution, Shays' Rebellion, and early civil rights took
place in the upper Housatonic Valley.
(8) The region had an American Indian presence going back
10,000 years and Mohicans had a formative role in contact
with Europeans during the seventeenth and eighteenth
centuries.
(9) The Upper Housatonic Valley National Heritage Area has
been proposed in order to heighten appreciation of the
region, preserve its natural and historical resources, and
improve the quality of life and economy of the area.
(b) Purposes.--The purposes of this Act are as follows:
(1) To establish the Upper Housatonic Valley National
Heritage Area in the State of Connecticut and the
Commonwealth of Massachusetts.
(2) To implement the national heritage area alternative as
described in the document entitled ``Upper Housatonic Valley
National Heritage Area Feasibility Study, 2003''.
(3) To provide a management framework to foster a close
working relationship with all levels of government, the
private sector, and the local communities in the upper
Housatonic Valley region to conserve the region's heritage
while continuing to pursue compatible economic opportunities.
(4) To assist communities, organizations, and citizens in
the State of Connecticut and the Commonwealth of
Massachusetts in identifying, preserving, interpreting, and
developing the historical, cultural, scenic, and natural
resources of the region for the educational and inspirational
benefit of current and future generations.

SEC. 3. DEFINITIONS.

In this Act:
(1) Heritage area.--The term ``Heritage Area'' means the
Upper Housatonic Valley National Heritage Area, established
in section 4.
(2) Management entity.--The term ``Management Entity''
means the management entity for the Heritage Area designated
by section 4(d).
(3) Management plan.--The term ``Management Plan'' means
the management plan for the Heritage Area specified in
section 6.
(4) Map.--The term ``map'' means the map entitled
``Boundary Map Upper Housatonic Valley National Heritage
Area'', numbered P17/80,000, and dated February 2003.
(5) Secretary.--The term ``Secretary'' means the Secretary
of the Interior.
(6) State.--The term ``State'' means the State of
Connecticut and the Commonwealth of Massachusetts.

SEC. 4. UPPER HOUSATONIC VALLEY NATIONAL HERITAGE AREA.

(a) Establishment.--There is established the Upper
Housatonic Valley National Heritage Area.
(b) Boundaries.--The Heritage Area shall be comprised of--
(1) part of the Housatonic River's watershed, which extends
60 miles from Lanesboro, Massachusetts to Kent, Connecticut;
(2) the towns of Canaan, Colebrook, Cornwall, Kent,
Norfolk, North Canaan, Salisbury, Sharon, and Warren in
Connecticut; and
(3) the towns of Alford, Becket, Dalton, Egremont, Great
Barrington, Hancock, Hinsdale, Lanesboro, Lee, Lenox,
Monterey, Mount Washington, New Marlboro, Pittsfield,
Richmond, Sheffield, Stockbridge, Tyringham, Washington, and
West Stockbridge in Massachusetts.
(c) Availability of Map.--The map shall be on file and
available for public inspection in the appropriate offices of
the National Park Service, Department of the Interior.
(d) Management Entity.--The Upper Housatonic Valley
National Heritage Area, Inc. shall be the management entity
for the Heritage Area.

SEC. 5. AUTHORITIES, PROHIBITIONS, AND DUTIES OF THE
MANAGEMENT ENTITY.

(a) Duties of the Management Entity.--To further the
purposes of the Heritage Area, the management entity shall--
(1) prepare and submit a management plan for the Heritage
Area to the Secretary in accordance with section 6;
(2) assist units of local government, regional planning
organizations, and nonprofit

[[Page 7355]]

organizations in implementing the approved management plan
by--
(A) carrying out programs and projects that recognize,
protect and enhance important resource values within the
Heritage Area;
(B) establishing and maintaining interpretive exhibits and
programs within the Heritage Area;
(C) developing recreational and educational opportunities
in the Heritage Area;
(D) increasing public awareness of and appreciation for
natural, historical, scenic, and cultural resources of the
Heritage Area;
(E) protecting and restoring historic sites and buildings
in the Heritage Area that are consistent with heritage area
themes;
(F) ensuring that signs identifying points of public access
and sites of interest are posted throughout the Heritage
Area; and
(G) promoting a wide range of partnerships among
governments, organizations and individuals to further the
purposes of the Heritage Area;
(3) consider the interests of diverse units of government,
businesses, organizations and individuals in the Heritage
Area in the preparation and implementation of the management
plan;
(4) conduct meetings open to the public at least semi-
annually regarding the development and implementation of the
management plan;
(5) submit an annual report to the Secretary for any fiscal
year in which the management entity receives Federal funds
under this Act, setting forth its accomplishments, expenses,
and income, including grants to any other entities during the
year for which the report is made;
(6) make available for audit for any fiscal year in which
it receives Federal funds under this Act, all information
pertaining to the expenditure of such funds and any matching
funds, and require in all agreements authorizing expenditures
of Federal funds by other organizations, that the receiving
organizations make available for such audit all records and
other information pertaining to the expenditure of such
funds; and
(7) encourage by appropriate means economic development
that is consistent with the purposes of the Heritage Area.
(b) Authorities.--The management entity may, for the
purposes of preparing and implementing the management plan
for the Heritage Area, use Federal funds made available
through this Act to--
(1) make grants to the State of Connecticut and the
Commonwealth of Massachusetts, their political subdivisions,
nonprofit organizations and other persons;
(2) enter into cooperative agreements with or provide
technical assistance to the State of Connecticut and the
Commonwealth of Massachusetts, their subdivisions, nonprofit
organizations, and other interested parties;
(3) hire and compensate staff, which shall include
individuals with expertise in natural, cultural, and
historical resources protection, and heritage programming;
(4) obtain money or services from any source including any
that are provided under any other Federal law or program;
(5) contract for goods or services; and
(6) undertake to be a catalyst for any other activity that
furthers the purposes of the Heritage Area and is consistent
with the approved management plan.
(c) Prohibitions on the Acquisition of Real Property.--The
management entity may not use Federal funds received under
this Act to acquire real property, but may use any other
source of funding, including other Federal funding outside
this authority, intended for the acquisition of real
property.

SEC. 6. MANAGEMENT PLAN.

(a) In General.--The management plan for the Heritage Area
shall--
(1) include comprehensive policies, strategies and
recommendations for conservation, funding, management and
development of the Heritage Area;
(2) take into consideration existing State, county, and
local plans in the development of the management plan and its
implementation;
(3) include a description of actions that governments,
private organizations, and individuals have agreed to take to
protect the natural, historical and cultural resources of the
Heritage Area;
(4) specify the existing and potential sources of funding
to protect, manage, and develop the Heritage Area in the
first 5 years of implementation;
(5) include an inventory of the natural, historical,
cultural, educational, scenic, and recreational resources of
the Heritage Area related to the themes of the Heritage Area
that should be preserved, restored, managed, developed, or
maintained;
(6) describe a program of implementation for the management
plan including plans for resource protection, restoration,
construction, and specific commitments for implementation
that have been made by the management entity or any
government, organization, or individual for the first 5 years
of implementation; and
(7) include an interpretive plan for the Heritage Area.
(b) Deadline and Termination of Funding.--
(1) Deadline.--The management entity shall submit the
management plan to the Secretary for approval within 3 years
after funds are made available for this Act.
(2) Termination of funding.--If the management plan is not
submitted to the Secretary in accordance with this
subsection, the management entity shall not qualify for
Federal funding under this Act until such time as the
management plan is submitted to the Secretary.

SEC. 7. DUTIES AND AUTHORITIES OF THE SECRETARY.

(a) Technical and Financial Assistance.--The Secretary may,
upon the request of the management entity, provide technical
assistance on a reimbursable or non-reimbursable basis and
financial assistance to the Heritage Area to develop and
implement the approved management plan. The Secretary is
authorized to enter into cooperative agreements with the
management entity and other public or private entities for
this purpose. In assisting the Heritage Area, the Secretary
shall give priority to actions that in general assist in--
(1) conserving the significant natural, historical,
cultural, and scenic resources of the Heritage Area; and
(2) providing educational, interpretive, and recreational
opportunities consistent with the purposes of the Heritage
Area.
(b) Approval and Disapproval of Management Plan.--
(1) In general.--The Secretary shall approve or disapprove
the management plan not later than 90 days after receiving
the management plan.
(2) Criteria for approval.--In determining the approval of
the management plan, the Secretary shall consider whether--
(A) the management entity is representative of the diverse
interests of the Heritage Area, including governments,
natural and historic resource protection organizations,
educational institutions, businesses, and recreational
organizations;
(B) the management entity has afforded adequate
opportunity, including public hearings, for public and
governmental involvement in the preparation of the management
plan;
(C) the resource protection and interpretation strategies
contained in the management plan, if implemented, would
adequately protect the natural, historical, and cultural
resources of the Heritage Area; and
(D) the management plan is supported by the appropriate
State and local officials whose cooperation is needed to
ensure the effective implementation of the State and local
aspects of the management plan.
(3) Action following disapproval.--If the Secretary
disapproves the management plan, the Secretary shall advise
the management entity in writing of the reasons therefore and
shall make recommendations for revisions to the management
plan. The Secretary shall approve or disapprove a proposed
revision within 60 days after the date it is submitted.
(4) Approval of amendments.--Substantial amendments to the
management plan shall be reviewed by the Secretary and
approved in the same manner as provided for the original
management plan. The management entity shall not use Federal
funds authorized by this Act to implement any amendments
until the Secretary has approved the amendments.

SEC. 8. DUTIES OF OTHER FEDERAL AGENCIES.

Any Federal agency conducting or supporting activities
directly affecting the Heritage Area shall--
(1) consult with the Secretary and the management entity
with respect to such activities;
(2) cooperate with the Secretary and the management entity
in carrying out their duties under this Act and, to the
maximum extent practicable, coordinate such activities with
the carrying out of such duties; and
(3) to the maximum extent practicable, conduct or support
such activities in a manner which the management entity
determines will not have an adverse effect on the Heritage
Area.

SEC. 9. REQUIREMENTS FOR INCLUSION OF PRIVATE PROPERTY.

(a) Notification and Consent of Property Owners Required.--
No privately owned property shall be preserved, conserved, or
promoted by the management plan for the Heritage Area until
the owner of that private property has been notified in
writing by the management entity and has given written
consent for such preservation, conservation, or promotion to
the management entity.
(b) Landowner Withdraw.--Any owner of private property
included within the boundary of the Heritage Area shall have
their property immediately removed from the boundary by
submitting a written request to the management entity.

SEC. 10. PRIVATE PROPERTY PROTECTION.

(a) Access to Private Property.--Nothing in this Act shall
be construed to--
(1) require any private property owner to allow public
access (including Federal, State, or local government access)
to such private property; or
(2) modify any provision of Federal, State, or local law
with regard to public access to or use of private property.
(b) Liability.--Designation of the Heritage Area shall not
be considered to create any liability, or to have any effect
on any liability

[[Page 7356]]

under any other law, of any private property owner with
respect to any persons injured on such private property.
(c) Recognition of Authority to Control Land Use.--Nothing
in this Act shall be construed to modify the authority of
Federal, State, or local governments to regulate land use.
(d) Participation of Private Property Owners in Heritage
Area.--Nothing in this Act shall be construed to require the
owner of any private property located within the boundaries
of the Heritage Area to participate in or be associated with
the Heritage Area.
(e) Effect of Establishment.--The boundaries designated for
the Heritage Area represent the area within which Federal
funds appropriated for the purpose of this Act may be
expended. The establishment of the Heritage Area and its
boundaries shall not be construed to provide any nonexisting
regulatory authority on land use within the Heritage Area or
its viewshed by the Secretary, the National Park Service, or
the management entity.

SEC. 11. AUTHORIZATION OF APPROPRIATIONS.

(a) In General.--There is authorized to be appropriated for
the purposes of this Act not more than $1,000,000 for any
fiscal year. Not more than a total of $10,000,000 may be
appropriated for the Heritage Area under this Act.
(b) Matching Funds.--Federal funding provided under this
Act may not exceed 50 percent of the total cost of any
assistance or grant provided or authorized under this Act.

SEC. 12. SUNSET.

The authority of the Secretary to provide assistance under
this Act shall terminate on the day occurring 15 years after
the date of the enactment of this Act.

General Leave

Mr. RADANOVICH. Mr. Speaker, I ask unanimous consent that all Members
may have 5 legislative days to revise and extend their remarks and
include extraneous material on the bill under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from California?
There was no objection.
Mr. RADANOVICH. Mr. Speaker, I yield myself as much time as I may
consume.
Mr. Speaker, H.R. 5311 is introduced by Mrs. Johnson of Connecticut
and would establish the Upper Housatonic Valley National Heritage Area
in Connecticut and Massachusetts. The valley is recognized for its
cultural achievements through such authors as Herman Melville,
Nathaniel Hawthorne and W.E.B. DuBois, and was the site of countless
significant events in American history. Proponents of the bill hope to
preserve, recognize, and enhance the area's contributions in
literature, art, music, architecture, iron, paper, and its electrical
equipment industries.
I would note that the text of the bill passed this House in the 108th
Congress and in the previous session of the 109th Congress. I urge
adoption of the bill.
Mr. Speaker, I reserve the balance of my time.
Mrs. CHRISTENSEN. Mr. Speaker, I yield myself such time as I may
consume.
The majority has described the variety of historic and natural
resources that will be preserved and interpreted in the proposed
National Heritage Area, and we do not oppose this legislation.
We would note, however, that the majority's approach to heritage area
legislation has been widely inconsistent. The Republican leadership has
gone from opposing heritage areas to approving them in large packages
to now approving some of the same ones over again as stand-alone bills.
This inconsistency is particularly frustrating to those of us, like
myself, with heritage area proposals of our own which have been caught
up in this needless legislative red tape and sometimes for several
years and several Congresses. It is my hope that once we have approved
H.R. 5311, the majority will provide all remaining meritorious heritage
area proposals similar consideration.
Mr. Speaker, I yield back the balance of my time.
Mr. RADANOVICH. Mr. Speaker, I yield 4 minutes to the gentlewoman
from Connecticut (Mrs. Johnson).
Mrs. JOHNSON of Connecticut. Mr. Speaker, I thank the gentleman from
California for recognizing me on this bill to designate the Upper
Housatonic Valley National Heritage Area. This area encompasses 29
towns in the hilly terrain of western Massachusetts and northwestern
Connecticut which is a singular and important geographic and cultural
area. And my colleague, Mr. Olver, while he may be here before we
finish debate, has worked closely with me on this as it links our two
districts together.
Its residents, over hundreds of years, have made significant national
contributions to American literature, art, music and architecture,
founded the iron industry in America, and host unique minerals and
environmental treasures. This area has been awaiting designation for
several years, and I am thrilled to have it on the floor today.
I would like to thank Chairman Pombo and the Resources Committee for
recognizing that through this locally led initiative, the States of
Connecticut and Massachusetts will be able to make real progress in
protecting the river and the river valley, its heritage and also
collaborating regionally to develop the economy in harmony with its
history, environmental resources, and unique cultural heritage.

{time} 1430

The Heritage designation enjoys overwhelming support throughout the
region from individuals. Historic and civic organizations, local
businesses, and local and State elected officials all have expressed
strong support for the establishment of the National Heritage Area, and
are enthusiastic about the potential that designation creates for the
small towns of the area to work together to celebrate and preserve our
heritage.
It has inspired the development of a local organization that has
already begun hosting hiking events, historic visits and numerous
educational programs, laying a new foundation for regional action for
both preservation and economic development.
Congress established criteria in 2000 clarifying that designation
requires a cultural, natural and historical heritage of national
significance and must have broad public support and a qualified
organization to manage the area. The National Park Service agreed that
the Upper Housatonic Valley meets the Department's 10 criteria for
designation and even cite it as a national model of how to become a
National Heritage Area.
The Upper Housatonic Valley National Heritage Area will extend from
Lanesboro, Massachusetts, 60 miles south to Kent, Connecticut. This
region of New England is home to the Nation's first industrial iron
sites from 1730 to the 1920s. The first blast furnace was built here in
1762 by Ethan Allen and supplied the iron for the cannons that helped
George Washington's Army defeat the British in Boston and to make other
weapons for the soldiers of the Revolutionary War.
While many of the furnaces, mine sites and charcoal pits have been
lost to development and time, those that remain are in need of
refurbishment. The Beckley Furnace in Canaan, Connecticut, was
designated as an official project by the Millennium Committee to Save
America's Treasures and now has been well restored.
The valley's history as a cultural retreat from Boston and New York
provides both past and current riches for the country. Since the 1930s,
visitors from all over have come to hear music at Tanglewood,
Massachusetts and Music Mountain in Falls Village, Connecticut; to see
paintings at the Norman Rockwell Museum and at the Eric Sloane Museum
and to watch serious theater at Stockbridge, Massachusetts, and
Norfolk, Connecticut. Today's local authors have drawn on a long
tradition going back to the 19th century when Herman Melville,
Nathaniel Hawthorne and Edith Wharton lived and wrote in these hills.
The Housatonic Valley is also rich with environmental and
recreational treasures. On the Housatonic River just below Falls
Village, Connecticut,

[[Page 7357]]

is one of the prize fly fishing centers in the northeast and is enjoyed
by fishermen not only from Connecticut and Massachusetts, but the
entire eastern seaboard.
Olympic rowers have trained on this river as our children have
learned to swim, boat, fish and value its ecosystem. The Appalachian
Trail winds through this area, as do the trails on Canaan Mountain and
in the Great Mountain Forest.
The Upper Housatonic Valley with its remoteness from, but ties to,
large cities occupies a special niche in our national culture, and I
encourage my colleagues to support this legislation. I thank the
gentleman from California.
Mr. RADANOVICH. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Bishop of Utah). The question is on the
motion offered by the gentleman from California (Mr. Radanovich) that
the House suspend the rules and pass the bill, H.R. 5311.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the bill was passed.
A motion to reconsider was laid on the table.

____________________

PUYALLUP INDIAN TRIBE LAND CLAIMS SETTLEMENT

Mr. RADANOVICH. Mr. Speaker, I move to suspend the rules and pass the
Senate bill (S. 1382) to require the Secretary of the Interior to
accept the conveyance of certain land, to be held in trust for the
benefit of the Puyallup Indian tribe.
The Clerk read as follows:

S. 1382

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

SECTION 1. PUYALLUP INDIAN TRIBE LAND CLAIMS SETTLEMENT.

(a) In General.--The Secretary of the Interior shall--
(1) accept the conveyance of the parcels of land within the
Puyallup Reservation described in subsection (b); and
(2) hold the land in trust for the benefit of the Puyallup
Indian tribe.
(b) Land Description.--The parcels of land referred to in
subsection (a) are as follows:
(1) Parcel a.--Lot B, boundary line adjustment 9508150496,
as depicted on the map dated August 15, 1995, held in the
records of the Pierce County Auditor, situated in the city of
Fife, county of Pierce, State of Washington.
(2) Parcel b.--
(A) In general.--Parcel B shall be comprised of land
situated in the city of Fife, county of Pierce, State of
Washington, more particularly described as follows:
(i) Lots 3 and 4, Pierce County Short Plat No. 8908020412,
as depicted on the map dated August 2, 1989, held in the
records of the Pierce County Auditor, together with portion
of SR 5 abutting lot 4, conveyed by the deed recorded under
Recording No. 9309070433, described as follows:

(I) That portion of Government lot 1, sec. 07, T. 20 N., R.
4 E., of the Willamette Meridian, described as commencing at
Highway Engineer's Station AL 26 6+38.0 P.O.T. on the AL26
line survey of SR 5, Tacoma to King County line.
(II) Thence S8854'30" E., along the north line of said lot
1 a distance of 95 feet to the true point of beginning.
(III) Thence S0105'30" W87.4' feet.
(IV) Thence westerly to a point opposite Highway Engineer's
Station AL26 5+50.6 P.O.T. on said AL26 line survey and 75
feet easterly therefrom.
(V) Thence northwesterly to a point opposite AL26 5+80.6 on
said AL26 line survey and 55 feet easterly therefrom.
(VI) Thence northerly parallel with said line survey to the
north line of said lot 1.
(VII) Thence N8854'30" E., to the true point of beginning.

(ii) Chicago Title Insurance Company Order No. 4293514 lot
A boundary line adjustment recorded under Recording No.
9508150496, as depicted on the map dated August 15, 1995,
held in the records of the Pierce County Auditor.
(B) Exclusion.--Excluded from Parcel B shall be that
portion of lot 4 conveyed to the State of Washington by deed
recorded under recording number 9308100165 and more
particularly described as follows:
(i) Commencing at the northeast corner of said lot 4.
(ii) Thence N8953'30" W., along the north line of said lot
4 a distance of 147.44 feet to the true point of beginning
and a point of curvature.
(iii) Thence southwesterly along a curve to the left, the
center of which bears S006'30" W., 55.00 feet distance,
through a central angle of 8901'00", an arc distance of
85.45 feet.
(iv) Thence S0105'30" W., 59.43 feet.
(v) Thence N8854'30" W., 20.00 feet to a point on the
westerly line of said lot 4.
(vi) Thence N057'10" E., along said westerly line 113.15
feet to the northwest corner of said lot 4.
(vii) Thence S8953'30" east along said north line, a
distance of 74.34 feet to the true point of beginning.
(3) Additional lots.--Any lots acquired by the Puyallup
Indian tribe located in block 7846, 7850, 7945, 7946, 7949,
7950, 8045, or 8049 in the Indian Addition to the city of
Tacoma, State of Washington.

General Leave

Mr. RADANOVICH. Mr. Speaker, I ask unanimous consent that all Members
may have 5 legislative days to revise and extend their remarks and
include extraneous material on the bill under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from California?
There was no objection.
Mr. RADANOVICH. Mr. Speaker, I yield myself as much time as I may
consume.
Mr. Speaker, S. 1382 will expedite the approval process for
relocating a casino owned by the Puyallup Indian tribe of Washington
State. This business is affected by the planned expansion of the Port
of Tacoma. On November 16, 2004 the Port of Tacoma, State of
Washington, the tribe and the cities of Fife and Tacoma signed an
agreement to pursue a major expansion of terminal facilities at that
time Port of Tacoma.
The agreement allows the tribe to move its Emerald Queen Casino,
which is impacted by the construction of the new Port of Tacoma
terminal facility, to a new location within the boundaries of the
tribe's reservation. The agreement will create nearly 4,000 jobs for
the local area and increase the cargo capacity of the Port of Tacoma,
already the seventh busiest waterborne freight gateway in the United
States.
S. 1382 has the full support of the Washington State delegation, and
I look forward to the support of this House.
Mr. Speaker, I reserve the balance of my time.
Mrs. CHRISTENSEN. Mr. Speaker, I yield myself such time as I may
consume.
I rise in strong support of this legislation and to congratulate the
gentleman from Washington, Norm Dicks, who is the author of the House
companion bill.
Mr. Dicks has worked tirelessly over the last several months to bring
this bill before us today. This provision would enable the Puyallup
Indian tribe to continue its ability to provide needed services to its
members and to preserve a significant number of jobs held by both
Indians and non-Indians.
The port and other State and local entities support the tribe's
effort to have this land placed into trust. Once enacted, this
legislation will assist the tribe in its business ventures.
I would again pay tribute to Congressman Dicks for his tenacity in
getting this bill moved through the House. This provision has already
passed the Senate and has the support of State and local government.
I urge all of our colleagues to support the passage of S. 1382.
Mr. Speaker, I would like to yield such time as he might consume to
the sponsor of the bill, Mr. Dicks.
Mr. DICKS. Mr. Speaker, I appreciate the distinguished gentlewoman
from the Virgin Islands for recognizing me. I want to thank the
chairman and the others who presented the bill.
I rise in strong support of this bill, S. 1382, which would require
that reservation land be put into trust on behalf of the Puyallup
Indians. I introduced similar legislation in the House, which was
approved by the Resources Committee in March.
Passage of the Senate bill today will clear the legislation for the
President's signature. I want to thank Resources Chairman Pombo for his
support of this legislation and the action of the Resources Committee
took to move the bill forward. I also want to extend my gratitude
toward ranking Democratic

[[Page 7358]]

Member Rahall for his assistance. The staff of both of these Members
have been very helpful.
The legislation is consistent with previous actions that Congress has
taken on behalf of the Puyallup tribe. After many years of
negotiations, the tribe and the local community came together to settle
the serious and long-standing land claims that affected a large portion
of what is now the Port of Tacoma.
When the settlement agreement was reached in 1989, Congress approved
specific legislation authorizing the terms of this landmark settlement,
which has now led to robust development in the Port of Tacoma. The
creation of a substantial number of new jobs in shipping and trade-
related businesses and to the development of many new tribal
enterprises that will sustain the current and next generation of
Puyallup tribe members really was a win-win situation for the tribe,
the Port of Tacoma, the city of Tacoma, the city of Fife and for Pierce
County.
With the support of Congress, it has resulted in a very productive
working relationship between all of those parties. A prime example of
this improved relationship is the mutually beneficial situation that
led to the legislation we are considering today.
A few years ago, the Port of Tacoma was presented with the
opportunity to build a large new container terminal that would lead to
the creation of many new family wage jobs if it could build on tribal-
owned land in the port. After some negotiation, the tribe agreed to
relocate a casino that was situated on this land in order to allow for
the type of cargo-handling development to occur at the waterfront,
consistent with the goals of the settlement agreement.
This is another case in which everyone wins. The State of Washington
and all local governments have recognized the tribe's cooperative
spirit and have actively supported this relocation. Thus, this
legislation would simply allow for the alternate parcel of reservation
land in Fife to be put into trust status in order to meet the
requirements of the State of Washington.
Again, I want to thank the chairman, the ranking member and the
Resources Committee for their assistance in moving this piece of
legislation that will result in further job creation and economic
development in the Port of Tacoma, not only helping the tribe in the
local community, but positively affecting our Nation's balance of
trade.
Mr. SMITH of Washington. Mr. Speaker, I am pleased that today the
House of Representatives passed S. 1382, a bill which would allow the
Puyallup Indian Tribe to convert parts of their tribal land into a
Trust held by the Department of the Interior.
The Puyallup Tribe has worked in partnership with the State of
Washington, the Port of Tacoma, Pierce County, the Cities of Fife,
Puyallup, and Tacoma to finalize an arrangement that will enable more
than $450 million in new investment and create an estimated 4,000
construction jobs and nearly 6,000 permanent jobs in Pierce County.
Under the multi-party agreement--which builds on the 1988 Puyallup
Indian Land Claims Settlement--relocation of some of the tribal lands
will enable construction of a major new container terminal on the Blair
Waterway.
S. 1382 is critical to the success of this broad-based agreement, and
I look forward to the President signing this important legislation into
law so that it can be fully implemented and the region can realize the
benefits. I commend all parties involved on the way they worked
together to allow for this expansion which will be an economic driver
for the region.
Mrs. CHRISTENSEN. I yield back the balance of my time.
Mr. RADANOVICH. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from California (Mr. Radanovich) that the House suspend the
rules and pass the Senate bill, S. 1382.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the Senate bill was passed.
A motion to reconsider was laid on the table.

____________________

PROVIDING FOR CONCURRENCE BY HOUSE WITH AMENDMENT IN SENATE AMENDMENT
TO H.R. 1499, HEROES EARNED RETIREMENT OPPORTUNITIES ACT

Mr. SAM JOHNSON of Texas. Mr. Speaker, I move to suspend the rules
and agree to the resolution (H. Res. 803) providing for the concurrence
by the House with amendment in the amendment of the Senate to H.R.
1499.
The Clerk read as follows:

H. Res. 803

Resolved, That upon the adoption of this resolution the
bill (H.R. 1499) entitled ``An Act to amend the Internal
Revenue Code of 1986 to allow members of the Armed Forces
serving in a combat zone to make contributions to their
individual retirement plans even if the compensation on which
such contribution is based is excluded from gross income, and
for other purposes'', with the Senate amendment thereto,
shall be considered to have been taken from the Speaker's
table to the end that the Senate amendment thereto be, and
the same is hereby, agreed to with an amendment as follows:
Add at the end of the Senate amendment the following:
Page 3, after line 3, insert the following new subsection:
(c) Contributions for Taxable Years Ending Before
Enactment.--
(1) In general.--In the case of any taxpayer with respect
to whom compensation was excluded from gross income under
section 112 of the Internal Revenue Code of 1986 for any
taxable year beginning after December 31, 2003, and ending
before the date of the enactment of this Act, any
contribution to an individual retirement plan made on account
of such taxable year and not later than the last day of the
3-year period beginning on the date of the enactment of this
Act shall be treated, for purposes of such Code, as having
been made on the last day of such taxable year.
(2) Waiver of limitations.--
(A) Credit or refund.--If the credit or refund of any
overpayment of tax resulting from a contribution to which
paragraph (1) applies is prevented at any time by the
operation of any law or rule of law (including res judicata),
such credit or refund may nevertheless be allowed or made if
the claim therefor is filed before the close of the 1-year
period beginning on the date that such contribution is made
(determined without regard to paragraph (1)).
(B) Assessment of deficiency.--The period for assessing a
deficiency attributable to a contribution to which paragraph
(1) applies shall not expire before the close of the 3-year
period beginning on the date that such contribution is made.
Such deficiency may be assessed before the expiration of such
3-year period notwithstanding the provisions of any other law
or rule of law which would otherwise prevent such assessment.
(3) Individual retirement plan defined.--For purposes of
this subsection, the term ``individual retirement plan'' has
the meaning given such term by section 7701(a)(37) of such
Code.

The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Texas (Mr. Sam Johnson) and the gentleman from Michigan (Mr. Levin)
each will control 20 minutes.
The Chair recognizes the gentleman from Texas.
Mr. SAM JOHNSON of Texas. Mr. Speaker, this is an important bill that
will allow our troops serving in combat zones to contribute some of
their tax-exempt combat pay to retirement savings. Because combat pay
is exempt from tax, it does not qualify as earned income that is
normally allowed in an individual retirement account.
Mr. Speaker, I would now like to yield as much time as she may
consume to the Representative from North Carolina (Ms. Foxx).

{time} 1445

Ms. FOXX. Mr. Speaker, I am truly honored to be here today. I am
honored because the mere consideration of this bill represents the
greatness of our Republican democracy. At this time 2 years ago, I
dreamed of coming before this House and working for the people of the
Fifth Congressional District of North Carolina. Here I am today
promoting a bill I wrote to help those very constituents who deserve it
the most.
Just over a year ago, the family of Army Specialist Michael Hensley
from my district in Clemmons, North Carolina, contacted me with a
problem that his son and many of our other brave soldiers are facing.
Specialist Hensley wanted to do the responsible thing by making the
maximum allowable contribution to his individual retirement account,
but found out that because of the nature of his wages, he would not be
able to contribute to his nest egg this year.

[[Page 7359]]

Thanks to the Republican leadership of this House, we stand here this
afternoon to solve this problem.
Mr. Speaker, our current Tax Code wrongfully prohibits many of our
brave men and women serving in combat zones from taking advantage of
individual retirement accounts, or IRAs. Most soldiers serving in these
combat zones are paid in wages designated as military hazard pay. As
deployment times have grown longer and longer, many soldiers now serve
entire calendar years overseas, making their yearly compensation
consist of hazard pay exclusively. These wages are not taxed, nor
should they be. However, since this compensation is nontaxable, the
wages are not eligible for IRA contributions. That is entirely unfair.
As we all know, IRAs are an excellent tool for responsible retirement
savings, and responsible retirement savings should be encouraged for
everyone, but especially for those who take up arms in war zones and
fight for our freedom.
The men and women defending America in harm's way overseas should not
be excluded from fully participating in the important retirement
investment opportunity that IRAs provide because of a glitch in our Tax
Code.
H.R. 1499, the Heroes Earned Retirement Opportunities, or HERO Act,
will correct this serious injustice. The HERO Act simply designates
combat hazard pay earned by a member of the Armed Forces as eligible
for contribution to retirement accounts. The legislation, which is
endorsed by the Reserve Officers Association and the Military Officers
Association of America, would not actually tax these wages. It would
merely allow them to be invested in the same retirement accounts
available to all Americans.
To quote the Military Officers Association of America in their letter
of support for the bill: ``This change makes perfect sense in view of
all we are asking our servicemembers to do in the war on terror in
Iraq, Afghanistan and elsewhere.'' I could not have said it better
myself.
Mr. Speaker, our heroes defending America overseas certainly deserve
the same access to retirement savings that we receive. In fact, we
should be encouraging and even facilitating retirement savings whenever
possible. Americans need to take responsibility for and control of
their retirement. Those responsible enough to save their hard-earned
wages should be rewarded, not burdened with taxes and regulations.
I would like to thank our Republican majority leader, John Boehner,
as well as Chairman Bill Thomas, for recognizing the importance of this
bill and for expeditiously bringing it to the floor of this House. I
would also like to thank Chairman Duncan Hunter for his service to our
Nation in Vietnam, for his excellent leadership on the House Armed
Services Committee and for cosponsoring and supporting this great bill.
His commitment to our troops is to be applauded.
Lastly, I would like to thank Congressman Sam Johnson for his 29
years of service to our Nation and for his cosponsorship of this bill
and his assistance in the Ways and Means Committee to bring the bill to
the floor of the House. Congressman Johnson is a true hero, having
served as a prisoner of war. It is an honor to have him as a cosponsor
and to have had his strong support throughout the effort to get this
bill passed.
I urge all my colleagues to help right this fundamental wrong by
voting for this straightforward, commonsense legislation.
Mr. LEVIN. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I stand today in support of H.R. 1499. This bill is
actively supported by my Democratic colleagues. On May 23, 2005, this
bill passed the House under suspension of the rules by voice vote. The
bill was referred to the Senate and was approved with an amendment to
change the effective date. Because of the later effective date as
passed by the Senate, the bill is before us again today merely to
incorporate a technical change. This change would indeed ensure that
our service men and women can make eligible contributions for previous
tax years, 2004 and 2005, for which the deadline has passed, but years
for which they were eligible to make these contributions.
We acknowledge fully the work of our military personnel who continue
to perform so ably for our Nation. We honor their bravery and their
sacrifice. Therefore, it goes without saying that we endorse this
effort by the Congress to make it possible for these men and women to
take advantage of every tax benefit that is available to them,
including saving for their retirement.
H.R. 1499, as my colleague and friend, the gentleman from Texas, Mr.
Johnson, has said, would allow our service men and women to treat their
compensation received while serving in combat as taxable income in
order to help them meet the income eligibility requirement for making
contributions to an individual retirement account.
At a recent hearing of our committee, two of our five witnesses
highlighted the large shortfall in retirement savings many of our
workers in this country face. I am sure that many members of the
military fall within this group. This bill is a small step in the right
direction of closing that gap.
Other larger steps need to be taken. For example, Democratic Members
of this Congress are hopeful that we can work with our Republican
colleagues to preserve another tax benefit that may be of even greater
help to many military families. A provision in current law would permit
military families to treat combat pay as taxable compensation for
purposes of claiming the Earned Income Tax Credit. This provision,
though, is set to expire at the end of this year.
The EITC is a refundable credit many low- and middle-income taxpayers
can claim when they file their Federal tax returns. Eligible families
may claim a portion of their credit ratably during the year. The EITC
helps to relieve the Federal tax burden on many families who are
working full-time, yet find themselves at or below the poverty level.
We had hoped that this provision could be included as part of the
bill before us today to further help military families. However, we
were assured that this provision will be taken up later in the year,
and we will continue to press for the extension of this provision
before it expires.
Also let me finish by expressing my hope and the hope of so many on
my side of the aisle that this Congress and the administration will
meet their responsibilities to our veterans on health, on re-
employment, and on so many other major needs of those in the military
and the veterans of this country.
Mr. Speaker, I would say to my friend, Mr. Johnson, therefore
anticipating your remarks, and your remarks indeed reflect your service
to this country, I yield back the balance of my time.
Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield myself such time as I
may consume.
Mr. Speaker, as Mr. Levin pointed out, we passed this legislation
before. Our colleagues in the Senate then passed the bill by unanimous
consent back in October, but made a change regarding the effective
date.
The HERO Act will help our combat troops save for their retirement,
as Mr. Levin pointed out, or for first-time home purchases or for
education by saving in a Roth IRA.
Currently, all Americans can save up to $4,000 this year in an IRA or
a Roth IRA. This cap on annual contributions will increase to $5,000 in
2008. Right now our combat troops are not able to contribute to IRAs
because that combat pay does not fit the definition of taxable earned
income.
As Mr. Levin pointed out, our combat troops are putting their lives
on the line in a very dangerous situation, and to recognize this
service, their pay is not subject to tax. This bill is a way for
Congress and the American people to say thank you every payday.
There are a lot of young servicemembers who are single who come home
at the end of a tour in a combat zone with a nice little nest egg. Once
we get this bill signed into law, it will be great for these young men
and women to put some of that money into a Roth IRA for the purchase of
a home, to spend on

[[Page 7360]]

school, or just for long-term retirement. While there are plenty of
other tantalizing things for these young people to spend their money
on, we need to at least give them the opportunity to save some of it in
the same way that all other Americans can save.
I am one of the conferees working out the differences between the
House and Senate on the pension bill. I look forward to getting that
bill completed soon so we can increase the opportunity of all Americans
to save and to make their pension plans safer. However, our troops are
prohibited from even contributing combat pay to an IRA, and we need to
remedy this situation right now.
According to the Joint Committee on Taxation, the bill would provide
$70 million of tax benefits to military families over the next decade.
We will pass the HERO Act with no controversy, and I hope our
colleagues in the other body follow suit in the near future.
Mr. Speaker, I thank Mr. Levin for his comments, and I appreciate Ms.
Foxx introducing the bill. It is the right thing to do.
Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Texas (Mr. Sam Johnson) that the House suspend the rules
and agree to the resolution, H. Res. 803.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of
those present have voted in the affirmative.
Mr. LEVIN. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the
Chair's prior announcement, further proceedings on this question will
be postponed.

____________________

RURAL HEALTH CARE CAPITAL ACCESS ACT OF 2006

Mr. RENZI. Mr. Speaker, I move to suspend the rules and pass the bill
(H.R. 4912) to amend section 242 of the National Housing Act to extend
the exemption for critical access hospitals under the FHA program for
mortgage insurance for hospitals.
The Clerk read as follows:

H.R. 4912

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

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Rural Health Care Capital
Access Act of 2006''.

SEC. 2. EXTENSION.

Paragraph (1) of section 242(i) of the National Housing Act
(12 U.S.C. 1715z-7(i)(1)) is amended by striking ``July 31,
2006'' and inserting ``July 31, 2011''.

{time} 1500

It is common for rural hospitals and nursing homes to operate as a
single unit in order to take advantage of savings related to cost-
sharing of some services and staff.
To deny critical-access hospitals access to FHA mortgage insurance on
these grounds unfairly disadvantages these facilities that are
desperately in need of capital improvements.
H.R. 659, the Hospital Mortgage Insurance Act of 2003 amended section
242 of the National Housing Act and included an exemption that
eliminated the so-called Patient Day Test for critical-access
hospitals, which allowed these rural hospitals to be eligible for FHA
mortgage insurance. The exemption expires on July 31, 2006. H.R. 4912
would simply extend this vital exemption for 5 years, which would give
FHA and the Department of Housing and Urban Development time to review
the exemption's impact and recommend to the Congress whether it should
be made permanent.
I am a proud cosponsor of this important legislation, which will
benefit 11 critical-access hospitals in my home State of Arizona and
three hospitals in my district: Page Memorial Hospital in Page,
Arizona, Sage Memorial Hospital in Ganado, located on the Navajo
Nation, and Winslow Memorial Hospital located in the town of Winslow,
Arizona.
I would like to thank the Housing Subcommittee chairman, Congressman
Ney, Ranking Member Waters, full committee Chairman Oxley, Ranking
Member Frank and all of those who worked hard to pull this together for
their support of this legislation.
Mr. Speaker, I urge my colleagues to support this bipartisan piece of
legislation that would allow more opportunities for critical-access
hospitals to improve the quality of health care in rural America.
Mr. Speaker, I reserve the balance of my time.
Mr. BACA. Mr. Speaker, I yield myself such time as I might consume.
Mr. Speaker, I rise today to express my strong support for H.R. 4912,
the Rural Health Care Capital Access Act of 2006, along with Mr. Frank
who is one of the cosponsors of this important legislation.
This bill extends and exempts under the Hospital Mortgage Insurance
Act of 2003 small, rural critical-access hospitals. This allows them to
qualify for the Department of Housing and Urban Development section 242
mortgage insurance program.
This section 242 program is an important program which provides
mortgage insurance for loans made for construction, renovation and
equipment of acute-care hospitals. To be eligible for section 242
requires that at least half of the hospital's net patient days qualify
as acute care, which is referred to as a Patient's Day Test.
Small, rural hospitals sometimes have a hard time meeting these
requirements. This is because rural communities often have hospitals
and nursing homes combined in order to achieve savings by sharing
facilities and services such as pharmacy and food services.
The Hospital Mortgage Insurance Act of 2003 eliminated the so-called
Patient Day Test for critical-access hospital, but limited the
exemption to 3 years. The exemption expires on July 31, 2006.
Today only one hospital sought approval under this exemption. This is
not surprising considering the length of time required for applying to
the program, particularly for small hospitals with limited staff and
resources to devote to such complicated processes.
As we all know, there are many small hospitals throughout the Nation
that

[[Page 7361]]

need this kind of help. It is very complicated, applying for this kind
of a process. Nevertheless, this exemption is necessary for small
hospitals to have access, and I state, to have access to section 242
programs. And it is important that they do have the access.
H.R. 4912, the Rural Health Care Capital Access Act of 2006, would
extend the exemption for an additional 5 years. During this time, HUD
and FHA can review the impact and recommend to Congress whether the
exemption should be made permanent.
Again, Mr. Speaker, I express my strong support for this bill.
Mr. Speaker, I reserve the balance of my time.
Mr. RENZI. Mr. Speaker, I have no additional speakers, and reserve
the balance of my time.
Ms. WATERS. Mr. Speaker, l rise in strong support of H.R. 4912, the
``Rural Health Care Capital Access Act of 2006'', of which I am an
original sponsor. The Committee on Financial Services marked-up H.R.
4912 on March 13, 2006, so I am delighted that this important measure
has reached the floor today. Mr. Ney, the Chairman of the Subcommittee
on Housing and Community Affairs, is to be applauded for his efforts on
behalf of rural communities.
The bill would allow hospitals located in rural areas access to the
Federal Housing Administration (FHA) mortgage insurance program for
hospitals, under Section 242 of the National Housing Act. These
hospitals are located in rural areas of the country, and are not always
able to meet the bed capacity requirements for critical care
facilities. Thus, the bill would extend the exemption for another 5
years, enabling rural hospitals to be exempted from critical bed
requirements.
The bill addresses the mortgage insurance needs of Critical Access
Hospitals. These hospitals are rural hospitals with a maximum of 25
beds and must be 35 miles from the nearest hospital. Another
requirement is related to the so-called ``patient day'' requirement.
Under Section 242, not more than 50 percent of a hospital's adjusted
net patient days could be ``assignable to the categories of chronic
convalescent and rest, drug and alcoholic, epileptic, mentally
deficient, mental, nervous and mental, and tuberculosis . . .'' These
are onerous requirements for small rural hospitals to meet. When we
passed the Hospital Insurance Mortgage Act of 2003, it eliminated the
patient day requirement, but it expires on July 31, 2006.
By supporting H.R. 4912 to extend the exemption for another 5 years,
we will be addressing an issue of major concern in rural areas.
Hospitals are far and few apart. Within many of our rural communities
hospitals double up with nursing homes to meet these bed requirements,
as well as to share in cost savings, to qualify for Section 242
mortgage insurance. H.R. 4912 removes another barrier to health care in
rural communities, and therefore, I urge support of the measure.
Mr. BACA. Mr. Speaker, I have no additional speakers. I appreciate
the gentleman from Arizona's leadership in taking up this legislation
along with the cosponsor, Mr. Frank, who feels this is important for a
lot of the hospitals in rural communities, and I yield back the balance
of my time.
Mr. RENZI. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Price of Georgia). The question is on
the motion offered by the gentleman from Arizona (Mr. Renzi) that the
House suspend the rules and pass the bill, H.R. 4912.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the bill was passed.
A motion to reconsider was laid on the table.

____________________

BYRON NELSON CONGRESSIONAL GOLD MEDAL ACT

Mr. RENZI. Mr. Speaker, I move to suspend the rules and pass the bill
(H.R. 4902) to award a Congressional gold medal to Byron Nelson in
recognition of his significant contributions to the game of golf as a
player, a teacher, and a commentator.
The Clerk read as follows:

H.R. 4902

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

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Byron Nelson Congressional
Gold Medal Act''.

SEC. 2. FINDINGS.

The Congress finds as follows:
(1) Byron Nelson was a top player in the sport of golf
during the World War II era and his accomplishments as a
player, a teacher, and commentator are renowned.
(2) Byron Nelson won 54 career victories, including a
record 11 in a row in 1945, during his short 13-year career.
(3) Byron Nelson won 5 majors, including 2 Masters (1937
and 1942), two Professional Golf Association (PGA)
Championships (1940 and 1945) and the U.S. Open (1939).
(4) Sports journalist Bill Nichols recently ranked the
greatest seasons on the PGA tour for The Dallas Morning News
and picked Roanoke, Texas-resident Byron Nelson's 1945 tour
as the greatest season of golf in American history.
(5) In 1945, Byron Nelson accumulated 18 total victories,
11 of which were consecutive, while averaging 68.33 strokes
per round for 30 tournaments.
(6) At the Seattle Open in 1945, Byron Nelson shot a record
62 for 18 holes and the world record 259, 29 shots under par
for 72 holes.
(7) Byron Nelson is one of only two golfers to be named
``Male Athlete of the Year'' twice by the Associated Press:
in 1944, when he won 7 tournaments and averaged 69.67 strokes
for 85 rounds, and again after his 1945 season.
(8) The World Golf Hall of Fame honored Byron Nelson in
2004 by featuring an exhibit entitled ``Byron Nelson: A
Champion . . . A Gentleman''.
(9) Byron Nelson was selected for the Ryder Cup 4 times--in
1937, 1939, 1947 and 1965, and on that last occasion he led
the United States Ryder Cup team as team captain to victory
over Great Britain.
(10) Byron Nelson was also a pioneer in the golf business,
helping to develop the golf shoes and umbrellas used today.
(11) In 1966, True Temper created the ``Iron Byron'' robot
to replicate Byron Nelson's swing in order to test the
company's equipment, but the robot was eventually used for
club and ball testing by the United States Golf Association
(USGA) and many other manufacturing companies.
(12) Byron Nelson mentored many golf hopefuls, including
1964 Player of the Year Ken Venturi and 6-time PGA Player of
the Year Tom Watson.
(13) Byron Nelson was one of the first golf analysts on
network television where his understanding of the game in
general, and the golf swing in particular, was demonstrably
profound.
(14) Byron Nelson received the United States Golf
Association's Bob Jones Award for distinguished sportsmanship
in golf in 1974.
(15) In 1974, the Golf Writers Association of America
presented Byron Nelson with the Richardson Award for
consistently outstanding contributions to golf.
(16) Since 1983, the Byron and Louise Nelson Golf Endowment
Fund has provided over $1,500,000 in endowment funds to
Abilene Christian University in Abilene, Texas.
(17) Byron Nelson received the PGA Distinguished Service
Award in 1993. This award is presented to an individual who
has helped perpetuate the ideals and values of the PGA.
(18) Byron Nelson has served as an honorary chairperson for
the Metroport Meals on Wheels since 1992.
(19) In 1994, the Golf Course Superintendents Association
of America presented Byron Nelson with the Old Tom Morris
Award for outstanding contributions to the game.
(20) Byron Nelson helped to develop the Tournament Players
Course (TPC) Four Seasons at Los Colinas, Texas, site of the
EDS Byron Nelson Championship and the Byron Nelson Golf
School, into a world-class facility.
(21) The EDS Byron Nelson Championship is the only PGA tour
event named in honor of a professional golfer and
traditionally attracts the strongest players in the sport.
(22) Since its inception, the EDS Byron Nelson Championship
has raised $88,000,000 for Salesmanship Club Youth and Family
Centers, a nonprofit agency that provides education and
mental health services for more than 2,700 children and their
families in the greater Dallas area.
(23) In 2002, Byron Nelson received the prestigious Donald
Ross Award from the American Society of Golf Course
Architects (ASGCA) for his significant contribution to the
game of golf and the profession of golf course architecture.
(24) The United States Golf Association presented Byron
Nelson the Ike Grainger Award for volunteer service to the
game of golf in 2002.
(25) In 2002, the National Golf Foundation presented Byron
Nelson with the Graffis Award for outstanding lifelong
contributions to the game of golf.

SEC. 3. CONGRESSIONAL GOLD MEDAL.

(a) Presentation Authorized.--The Speaker of the House of
Representatives and the President pro tempore of the Senate
shall make appropriate arrangements for the presentation, on
behalf of the Congress, of a gold medal of appropriate design
to Byron Nelson in recognition of his significant
contributions to the game of golf as a player, a teacher, and
a commentator.
(b) Design and Striking.--For purposes of the presentation
referred to in subsection (a), the Secretary of the Treasury
(hereafter in this Act referred to as the ``Secretary'')

[[Page 7362]]

shall strike a gold medal with suitable emblems, devices, and
inscriptions, to be determined by the Secretary.

SEC. 4. DUPLICATE MEDALS.

The Secretary may strike and sell duplicates in bronze of
the gold medal struck pursuant to section 3 under such
regulations as the Secretary may prescribe, at a price
sufficient to cover the cost thereof, including labor,
materials, dies, use of machinery, and overhead expenses, and
the cost of the gold medal.

SEC. 5. STATUS OF MEDALS.

(a) National Medals.--The medals struck pursuant to this
Act are national medals for purposes of chapter 51 of title
31, United States Code.
(b) Numismatic Items.--For purposes of section 5134 of
title 31, United States Code, all medals struck under this
Act shall be considered to be numismatic items.

SEC. 6. AUTHORITY TO USE FUND AMOUNTS; PROCEEDS OF SALE.

(a) Authority to Use Fund Amounts.--There is authorized to
be charged against the United States Mint Public Enterprise
Fund, such amounts as may be necessary to pay for the costs
of the medals struck pursuant to this Act.
(b) Proceeds of Sale.--Amounts received from the sale of
duplicate bronze medals authorized under section 4 shall be
deposited into the United States Mint Public Enterprise Fund.

The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Arizona (Mr. Renzi) and the gentleman from California (Mr. Baca) each
will control 20 minutes.
The Chair recognizes the gentleman from Arizona.
Mr. RENZI. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise today in support of H.R. 4902, the Byron Nelson
Congressional Gold Medal Act, sponsored by my friend from Texas (Mr.
Burgess).
Mr. Speaker, while most people know Byron Nelson's significant
contributions to the game of golf, it is his humanitarian and
philanthropic activities that make him worthy of receiving this medal.
The highest civilian honor Congress can bestow is this gold medal.
Mr. Nelson is a golf champion, but he is also a champion for the
underprivileged. He has given his time, his talent and his treasure to
make this world a better place. Through the EDS Byron Nelson
Championship, Mr. Nelson has helped raise more than $88 million for the
Salesmanship Club Youth and Family Centers, a nonprofit agency that
provides education and mental health services to more than 2,700
children and their families throughout our Nation.
Additional, the Byron and Louise Nelson Golf Endowment Fund has
provided more than $1.5 million in endowment funding to Abilene
Christian University in Abilene, Texas.
Further, since 1992, Mr. Nelson has been the honorary chairman of the
Metroport Meals on Wheels which provides daily home delivery of hot
lunches for the frail, elderly and chronically ill residents of Texas.
Mr. Speaker, Byron Nelson is a legend in the game of golf, much noted
for his unprecedented 11 consecutive wins in 1945, his five victories
at major tournaments, and his overall 54 career victories.
Byron Nelson is one of the greatest players the game of golf has ever
seen. Through his outstanding accomplishments as a golfer and a
humanitarian, Byron Nelson has provided and shown us what it is to be a
United States citizen.
The time has come for Congress to bestow on this gentleman an honor
worthy of his lifelong accomplishments and what he has put forth to
improve the lives of those who are less privileged.
Therefore, Mr. Speaker, I urge my colleagues to support this
legislation.
Mr. Speaker, I reserve the balance of my time.
Mr. BACA. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I stand in strong support of H.R. 4902, the Byron Nelson
Congressional Gold Medal Act. We are honoring Byron Nelson for his
accomplishments in golf. He truly has set a legacy, not only for those
of us who have watched golf, but have participated in golf and have
seen him during this period of time.
He is a true champion. He is a teacher, he is a course designer, and
he is a commentator. But most of all, he brought integrity to the game
of golf. For those of us that play the game, we aspire to be like him.
Some of us would love to shoot the rounds that he has. And some of us
will probably never do that. But at least we have those dreams and the
hopes that one day we can achieve what he has achieved.
I know that for many youth he has been a positive role model and he
has set a good example. In addition, he has given back to the community
by supporting nonprofit agencies in the greater Dallas area.
Byron Nelson was also a top player in the sport of golf during the
World War II era. He grew up near Ft. Worth, Texas, and first got
involved in golf as a caddy. And that is inspiration when we see many
of the movies that have occurred where caddies ultimately became, then,
professional golfers.
And when you see someone, and someone is caddying, you also learn how
to hit the ball, pick up the club, give directions and learn just the
course management and the integrity of the game itself.
He did this at a local club at Glen Garden Country Club. In fact,
among the other caddies that were there was Ben Hogan, another
individual that we admire very much, who also became a champion golfer.
But in 1927, Byron Nelson competed against Ben Hogan in the club's
caddy championship, and he, Byron Nelson, won that match.
In 1944, he won seven tournaments, averaging 69.67 strokes for 85
rounds. Can you imagine what that is like? And the average is 72 per
course. That means three strokes under, that he accomplished during
that period of time.
And like I said, I only shoot a round once in a while of 68, but
never on a consistent basis, and for someone to do it on a consistent
basis for 85 rounds is very difficult. He was named Male Athlete of the
Year, but he would be even better than that.
In 1945 Byron Nelson had what is still considered today the best
season ever by a male golfer. He won 18 different tournaments that
year, including a remarkable 11 in a row at one point. And that is
something that you do not even see in a lot of the eras that are here
today.
That season he averaged 68.33 strokes per round for 31 tournaments.
Again, imagine, 31 tournaments going under 72.
At the Seattle Open in 1945, he shot a record of 62, and that is
something that I dream about. I probably will never accomplish in my
life, but one day, in my dreams I will shoot a 62 and under for 18
holes, and a 259 and a 29 shots under for 72 holes.
In 1945, the AP again named him Male Athlete of the Year. Only two
golfers have received that honor twice. He was selected for the Ryder
Cup four times, in 1937, 1939, 1947, and again in 1965, when he led the
American team to victory over the Britons.
Byron Nelson won five majors, including the Masters twice, 1937 and
1942; the Professional Golf Association PGA, that really stands for
posture, grip and alignment, Championship twice, in 1940 and 1945; and
the U.S. Open once in 1939.
He won a total of 54 victories during his short 13-year career. He
retired from full-time competition in golf at the age of 34 to buy a
ranch in his native Texas. Can you imagine what he would have done on
the Senior Tour if he would have continued to golf, and if it was
available for him to have participated? He would have probably added
additional tournaments on the Senior Tour, as well, but he decided to
retire at the young age of 34.
After his playing days were over, Byron Nelson continued to
contribute to golf. He served as a coach, as a mentor to other players,
including Tom Watson, and as a role model for many individuals. He has
also shared his knowledge of the sport as a television analyst.
Byron Nelson also was a pioneer in the golf business, helping to
develop golf shoes and umbrellas used today. Of course, I bought a
couple of his golf shoes, a couple of his umbrellas that I still use on
rainy days.
He has helped design world class golf courses. Byron Nelson also
helped to develop the Tournament Players Course, TPC, Four Seasons at
Las Colinas in Texas into a world-class facility. That course is the
home of the

[[Page 7363]]

Byron Nelson Classic, and Byron Nelson's Golf School.
The Byron Nelson Classic is the only PGA tour event named in honor of
a professional golfer, and traditionally attracts the strongest players
in sports.
The Byron Nelson Classic has raised a total of $82 million for the
Salesmanship Club Youth and Family Centers, a nonprofit agency that
provides education and mental health services for almost 3,000 children
and their families in the greater Dallas area.
So we are honored, not only to have a great golfer but a good man and
a man whose legacy will live on because he has contributed an awful lot
to the sport of golf and contributed as a role model, too.
In the spirit of celebration, I have also introduced a separate piece
of legislation that will honor the achievements of Arnold Palmer and
Tiger Woods, each of whom has excelled in golf and has contributed to
the public through significant charitable work, and both have served as
role models and inspiration to many others.
Arnold Palmer once commented, ``Byron Nelson's accomplishment is a
thing on the pro tour that will never be seen and will never be
approached again''. So it is with pride that we stand in honor of one
of the true great heroes of golf. And his legacy will live on forever;
that is Byron Nelson.
Again, Mr. Speaker, I express my strong support for this bill.
Mr. Speaker, I reserve the balance of my time.
Mr. RENZI. Mr. Speaker, I thank the gentleman from California for
that tribute, and I yield to the author of the bill for as much time as
he may consume, the gentleman from Texas (Mr. Burgess).
Mr. BURGESS. Mr. Speaker, I thank the gentleman from Arizona for
bringing this bill to the floor. I thank the gentleman from California
for his recollection of the deeds and the triumphs of Byron Nelson.
Back in Texas, we know Byron Nelson by many terms: gifted athlete,
philanthropist, and today, thanks to their efforts, we are going to
know him by what he really is, a national treasure.

{time} 1515

He is a philanthropist. He is a gentleman who just happens to be an
excellent golfer. In fact, it is Byron Nelson who provided the marriage
between unparalleled athleticism and unparalleled philanthropy.
I first became aware of Byron Nelson as a child growing up in north
Texas. I am not a golfer nor have I ever pretended to be, but my mother
was. My mother was a fan of ``Lord Byron'' back in the 1950s. And so
much of it was not because he was a famous golfer, but because of the
gentleman that Mr. Nelson was.
As I grew older, I continued to hear of the wonderful giving nature
of Mr. Nelson. He continually seeks to help his fellow man. Over the
decades, he did not promote the game of golf; he embodied a life of
service. He was and is today the most humble of men. Some of you may
not know of all the great humanitarian efforts he has championed, but
that is because the man himself shuns recognition for his generosity.
And the school that the gentleman from California and the gentleman
from Arizona referenced that the Salesmanship Club sponsors down in
Texas, I have visited that school. It not only serves the children
there, but it serves as a template, a model for other schools around
the Nation. It is a living research laboratory for the right way to
teach children.
Mr. Nelson has never limited giving of himself and encouraging others
to do the same when it comes to helping others. His charitable work
with the Salesmanship Club of Dallas, the Metroport Meals on Wheels,
and the creation of an endowment scholarship fund are but a few of his
leadership roles.
Thrust into the national scene in the 1930s and 1940s for his golf
prowess, Mr. Nelson took a sport and helped to move it into the
philanthropic giant that it is today. Since 1938, the PGA tour
tournaments have provided over $1 billion for their local charities.
The Byron Nelson Championship, which is played this week in Irving,
Texas, is the only PGA tour that is named for a specific player. The
EDS Byron Nelson Championship has raised over $88 million for the
Salesmanship Club of Dallas since 1968, and I believe with the ticket
sales this year are going to be very close to the $100 million mark.
So why is Byron Nelson the only golfer to have a tournament named
after him? Because Mr. Nelson represents the adage, ``sportsmanship
then victory.'' He understood that helping others was the only way to
true victory in life.
Mr. Speaker, we lost my mother a couple of years ago; but in her
library I found a book, a book that Mr. Nelson wrote and published in
1995. In it he describes many different facets and philosophies that
have influenced him over the years, and I would like to take a moment
to highlight a passage that I believe depicts the true character of
Byron Nelson, a character that is infused with his kindness, generosity
and his humility. He borrows a philosophy from his days playing golf
and applies it to life.
Under the chapter called ``Sportsmanship'' from the golf tournament
in 1941 says: ``Perhaps more than any other sport, golf remains a game
of etiquette and sportsmanship. Golfers are expected to abide by a
traditional set of rules and that sometimes means either accepting a
strange ruling that works against you or calling a penalty on yourself,
even when no one else has witnessed the indiscretion. That's why they
say golf is truly a game of character.''
Byron understands that it is not what people see you do that truly
matters, but that you know your worth and you have done what you can do
to help others in this world. You are worth what you give back to the
world.
Most Members of Congress come here not to be show horses, but to make
a difference in society. Byron was not a leader in humanitarian causes
that raised millions for families for the glory. Far from it. He shied
away from acknowledgment of his work; but I believe, and so do over 300
Members of this House, that the time has come to recognize the true
giving nature of Byron Nelson by nominating him for the Congressional
Gold Medal.
This generous man has been giving back to America for over 90 years;
and in recognition of these efforts, I am honored to bring forth H.R.
4902, to award Byron Nelson, my constituent, the Congressional Gold
Medal.
Mr. BACA. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I would like to add that not only did he touch the lives
of many individuals, as I stated before as a positive role model, but
he gave of himself and he gave of himself to the community; and that is
important when someone plays the game with integrity and character that
sets positive examples for many of our youth. And if you look at Byron
Nelson's contribution on the golf course and off the golf course, he
truly is an example that all of us should follow. His integrity and his
legacy will live forever. I urge everyone to support this bill.
Mr. Speaker, I yield back the balance of my time.
Mr. RENZI. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I thank the gentleman from California. Mr. Speaker, I
have a good friend in Flagstaff, Arizona, a guy named Joe Galli who is
a terrific golfer himself and he was kind enough just to inform me that
my neighbor in Flagstaff is PGA pro Ted Purdy. He was the 2005 Byron
Nelson Classic champion last year. He defends that title this year. So
from Flagstaff, Arizona, I want to thank you for allowing me to manage
this bill today.
It is certainly exemplary of the fine spirit, that generosity, that
philanthropic endeavor that this gentleman has given to our Nation. So
I congratulate the Nelson family.
Mr. OXLEY. Mr. Speaker, I rise in strong support of this legislation,
authored by the gentleman from Texas.
It's no secret that I enjoy the game of golf, and it's no secret that
I admire the achievements of the greats of the game, and Byron Nelson
certainly is one of those greats. In fact, he's something of a legend
of the game.

[[Page 7364]]

Much noted for his unprecedented winning streak in 1945, for his five
victories at major tournaments, and for his overall 54 career
victories, it is not an overstatement to call Byron Nelson one of the
greatest players the game has ever seen. He was twice named ``Male
Athlete of the Year'' by the Associated Press, a feat only accomplished
by one other golfer, Tiger Woods. Additionally, Byron Nelson was
selected for the Ryder Cup four times, leading the United States team
as Captain to victory over Great Britain in 1965.
He is also the only PGA professional golfer to have a PGA tour named
in his honor: the EDS Byron Nelson Championship. The World Golf Hall of
Fame honored Byron Nelson in 2004 by featuring an exhibit entitled
``Byron Nelson: A Champion . . . A Gentleman.'' Byron Nelson's
accomplishments as a professional golfer are as impressive as his golf
swing, and an inspiration to us all.
Just as impressive are his achievements off the links. They already
have been well-detailed here, but suffice it to say that Byron Nelson
is the perfect example of the unselfish sports hero, the sort of hero
that I and a lot of others wish there were more of, in every sport.
With that, Mr. Speaker, let me just say that I support this
legislation, and that I urge its immediate passage.
Mr. GENE GREEN of Texas. Mr. Speaker, I rise today to honor a man who
is a living legend to golf, Byron Nelson.
Throughout his career, this Native Texan has exhibited sportsmanship
and a competitive drive unparalleled by most athletes.
In 1945, Byron Nelson achieved 11 simultaneous wins--a record that
stands today.
He has won the Masters twice, the U.S. Open and the PGA Championship.
He was also the first winner of the Shell Houston Open in 1946.
He has been named ``Male Athlete of the Year'' twice by the Associate
Press, and led the U.S. to defeat Great Britain to win the Ryder Cup in
1965.
While these accomplishments are impressive, Byron Nelson is also
known as a great philanthropist.
The Byron Nelson golf tournament has raised well over $88 million to
provide educational and mental health services to thousands of children
and their families.
In addition, he has been involved as an honorary chairperson of Meals
on Wheels for the Dallas Metroplex area.
I believe Byron Nelson exhibits the qualities worthy of a
Congressional Gold Medal.
His accomplishments on the golf course are impressive, but his
commitment to improving and helping his community over several decades
speaks to his character.
I urge my colleagues to support this resolution and grant Byron
Nelson the Congressional Gold Medal.
Mr. RENZI. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Arizona (Mr. Renzi) that the House suspend the rules and
pass the bill, H.R. 4902.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the bill was passed.
A motion to reconsider was laid on the table.

____________________

GENERAL LEAVE

Mr. RENZI. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days to revise and extend their remarks on H.R. 4902
and H.R. 4912 and to insert extraneous material thereon.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Arizona?
There was no objection.

____________________

CONGRATULATING CHRIS CARPENTER ON BEING NAMED THE CY YOUNG AWARD WINNER
FOR THE NATIONAL LEAGUE FOR THE 2005 MAJOR LEAGUE BASEBALL SEASON

Mrs. MILLER of Michigan. Mr. Speaker, I move to suspend the rules and
agree to the resolution (H. Res. 627) congratulating Chris Carpenter on
being named the Cy Young Award winner for the National League for the
2005 Major League Baseball season.
The Clerk read as follows:

H. Res. 627

Whereas Chris Carpenter of the St. Louis Cardinals was
named the Cy Young Award winner for being the best pitcher in
the National League during the 2005 Major League Baseball
season;
Whereas during the 2005 season Chris Carpenter posted a
record of 21 wins and 5 losses and an outstanding winning
percentage of .808;
Whereas in 2005 Chris Carpenter had an earned run average
of 2.83, one of the best in Major League Baseball; and
Whereas Chris Carpenter has demonstrated an outstanding
ability to overcome injury and adversity and won the Player's
Choice National League Comeback Player of the Year award in
2004: Now, therefore, be it
Resolved, That the House of Representatives congratulates
Chris Carpenter on being named the Cy Young Award winner for
the National League for the 2005 Major League Baseball
season.

The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from
Michigan (Mrs. Miller) and the gentleman from Missouri (Mr. Carnahan)
each will control 20 minutes.
The Chair recognizes the gentlewoman from Michigan.

General Leave

Mrs. MILLER of Michigan. Mr. Speaker, I ask unanimous consent that
all Members have 5 legislative days in which to revise and extend their
remarks and to include extraneous material on the resolution under
consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentlewoman from Michigan?
There was no objection.
Mrs. MILLER of Michigan. Mr. Speaker, I yield myself such time as I
may consume.
Mr. Speaker, I rise in support of H. Res. 627 offered by the
distinguished gentleman from Missouri (Mr. Carnahan).
This resolution would congratulate Chris Carpenter on being named the
Cy Young Award winner for the National League in 2005.
After missing the 2003 season while rehabilitating his injured
shoulder, Chris Carpenter made a miraculous recovery to win the 2005 Cy
Young Award. He went 21-5 with a 2.83 ERA for the St. Louis Cardinals,
receiving 19 of 32 first place votes and finishing with 132 points in
balloting by the Baseball Writers Association of America.
Carpenter began his career with Toronto. After compiling a 49-50
record in his first six seasons, Carpenter had surgery in September of
2002 to repair a tear in his pitching shoulder and the Blue Jays
contemplated sending him back to the minors. He refused the assignment
and chose to become a free agent before signing with St. Louis.
Finally healthy in 2004, Carpenter went 15-5 with a 3.45 ERA to earn
National League's comeback player of the year honors from his peers. In
2005, Carpenter won 13 straight decisions from June 14 through
September 8, helping the Cardinals to the best record in baseball at
100 wins and 62 losses. He struck out 213 batters and got the best of
several aces around the league.
I would urge all Members to come together and honor the perseverance
and dedication of Chris Carpenter, the winner of one of Major League
Baseball's most prestigious awards, by adopting House Resolution 627.
Mr. Speaker, I reserve the balance of my time.
Mr. CARNAHAN. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, this has been a real pleasure to cosponsor this with
several Members from around the country and on both sides of the aisle.
I want to offer House Resolution 627, congratulating Chris Carpenter of
the St. Louis Cardinals on winning the Cy Young Award for the 2005
Major League Baseball season.
Chris is a 1992 graduate from Trinity High School in Manchester, New
Hampshire, where he earned the athlete of the year honors as a senior.
He was elected to the All State Team for 3 years in both baseball and
hockey, and as a member of the Globe All Scholastic Team as a senior,
captured the State championship in baseball in 1992.
He played American Legion, Babe Ruth, and Little League Baseball.
Chris and his wife have two children, and they make their off-season
home in Bedford, Massachusetts. We are proud that he is one of the star
players, not just in the league but for the St. Louis Cardinals.
After missing the 2003 season recovering from shoulder surgery, many

[[Page 7365]]

wondered how Chris Carpenter would respond. He responded in 2004 with a
15-win season and with an earned run average of 3.46. Through his hard
work, perseverance and skill, he improved upon those lofty numbers and
turned in a spectacular 21-win season with a 2.83 earned run average in
the 2005 season.
He was a major factor in the Cardinals' 100 wins last year and earned
a place among the most elite pitchers in baseball. For his feats,
Carpenter was recognized with the Cy Young Award as the best pitcher in
the National League.
As a lifelong Cardinals fan, it is an absolute joy to watch a
thrilling player like Chris Carpenter. I look forward to watching his
continued success.
In addition, I would like to mention Chris's teammate, Albert Pujols,
who won the National League MVP last year. This marks the first time
since 1968 that the Cardinals have had both the MVP and the Cy Young
Award winner the same year.
I have cosponsored a companion resolution with many others in this
House congratulating Albert Pujols, and I hope the House will have an
opportunity to take that up in the near future.
Once again, I wish my heartiest congratulations to Chris Carpenter
and all that he has accomplished and wish him the best in the future.
Mr. Speaker, I yield back the balance of my time.
Mrs. MILLER of Michigan. Mr. Speaker, I would urge all Members to
support the adoption of House Resolution 627. I have no further
requests for time, and I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentlewoman from Michigan (Mrs. Miller) that the House suspend the
rules and agree to the resolution, H. Res. 627.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the resolution was agreed to.
A motion to reconsider was laid on the table.

____________________

RESPECT FOR AMERICA'S FALLEN HEROES ACT

Mr. BUYER. Mr. Speaker, I move to suspend the rules and pass the bill
(H.R. 5037) to amend titles 38 and 18, United States Code, to prohibit
certain demonstrations at cemeteries under the control of the National
Cemetery Administration and at Arlington National Cemetery, and for
other purposes.
The Clerk read as follows:

H.R. 5037

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

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Respect for America's Fallen
Heroes Act''.

SEC. 2. PROHIBITION ON CERTAIN DEMONSTRATIONS AT CEMETERIES
UNDER THE CONTROL OF THE NATIONAL CEMETERY
ADMINISTRATION AND AT ARLINGTON NATIONAL
CEMETERY.

(a) Prohibition.--Chapter 24 of title 38, United States
Code, is amended by adding at the end the following new
section:

``Sec. 2413. Prohibition on certain demonstrations at
cemeteries under control of National Cemetery
Administration and at Arlington National Cemetery

``(a) Prohibition.--No person may carry out--
``(1) a demonstration on the property of a cemetery under
the control of the National Cemetery Administration or on the
property of Arlington National Cemetery unless the
demonstration has been approved by the cemetery
superintendent or the director of the property on which the
cemetery is located; or
``(2) with respect to such a cemetery at which a funeral or
memorial service or ceremony is to be held, a demonstration
within 500 feet of that cemetery that--
``(A) is conducted during the period beginning 60 minutes
before and ending 60 minutes after the funeral or memorial
service or ceremony is held; and
``(B) includes, as a part of such demonstration, any
individual willfully making or assisting in the making of any
noise or diversion that disturbs or tends to disturb the
peace or good order of the funeral or memorial service or
ceremony.
``(b) Demonstration.--For purposes of this section, the
term `demonstration' includes the following:
``(1) Any picketing or similar conduct.
``(2) Any oration, speech, use of sound amplification
equipment or device, or similar conduct before an assembled
group of people that is not part of a funeral or memorial
service or ceremony.
``(3) The display of any placard, banner, flag, or similar
device, unless such a display is part of a funeral or
memorial service or ceremony.
``(4) The distribution of any handbill, pamphlet, leaflet,
or other written or printed matter other than a program
distributed as part of a funeral or memorial service or
ceremony.''.
(b) Clerical Amendment.--The table of sections at the
beginning of such chapter is amended by adding at the end the
following new item:

``2413. Prohibition on demonstrations at cemeteries under control of
National Cemetery Administration and at Arlington
National Cemetery.''.

SEC. 3. PENALTY FOR VIOLATION OF PROHIBITION ON UNAPPROVED
DEMONSTRATIONS AT CEMETERIES UNDER THE CONTROL
OF THE NATIONAL CEMETERY ADMINISTRATION AND AT
ARLINGTON NATIONAL CEMETERY.

(a) Penalty.--Chapter 67 of title 18, United States Code,
is amended by adding at the end the following new section:

``Sec. 1387. Demonstrations at cemeteries under the control
of National Cemetery Administration and at Arlington
National Cemetery

``Whoever violates section 2413 of title 38 shall be fined
under this title, imprisoned for not more than one year, or
both.''.
(b) Clerical Amendment.--The table of sections at the
beginning of such chapter is amended by adding at the end the
following new item:

``1387. Demonstrations at cemeteries under the control of National
Cemetery Administration and at Arlington National
Cemetery.''.

SEC. 4. SENSE OF CONGRESS ON STATE RESTRICTION OF
DEMONSTRATIONS NEAR MILITARY FUNERALS.

It is the sense of Congress that each State should enact
legislation to restrict demonstrations near any military
funeral.

The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Indiana (Mr. Buyer) and the gentleman from Texas (Mr. Reyes) each will
control 20 minutes.
The Chair recognizes the gentleman from Indiana.
Mr. BUYER. Mr. Speaker, I yield myself such time as I may consume.

{time} 1530

Mr. Speaker, I rise today in support of well-considered legislation
that will protect the sanctity of military funerals at national
cemeteries and will protect the privacy of grieving families as they
bury their precious loved ones who died in the service of our country.
The first to rise, however, were the principal individuals in an
organization called the Patriot Guard Riders, members of which are in
Washington today. The Patriot Riders have two goals: to show respect
for fallen heroes, their families and their communities; and to protect
the mourning family and friends from interruptions created by any
protestor or group of protestors. We owe them our deep sense of thanks
and gratitude.
Mr. Speaker, this bill was jointly referred to the Committee on
Judiciary, who waived consideration of the bill, and I will insert my
letter requesting the waiver and Chairman Sensenbrenner's letter in the
Congressional Record at this point.

House of Representatives,

Committee on Veterans' Affairs,

Washington, DC, April 25, 2006.
Hon. F. James Sensenbrenner, Jr.
Chairman, Committee on Judiciary, House of Representatives,
Washington, DC.
Dear Chairman Sensenbrenner: In order to expedite
consideration of H.R. 5037, the ``Respect for America's
Fallen Heroes Act,'' the Committee on Veterans' Affairs
requests that the Committee on the Judiciary waive
consideration of the bill. As you know, H.R. 5037 was
referred to the Committee on the Judiciary in addition to the
Committee on Veterans' Affairs. The Committee on Veterans'
Affairs acknowledges the jurisdiction of the Committee on the
Judiciary over portions of this legislation, particularly
section 3, which provides for criminal penalties under title
18 of the United States Code.
The Committee on Veterans' Affairs would not construe a
waiver of consideration as a waiver of jurisdiction by the
Committee on Judiciary over the subject matter contained in
this or similar legislation, and the Committee on Veterans'
Affairs would fully support any request by you seeking an
appointment to any House-Senate conference on this
legislation. I will place a copy of your reply letter in the
Congressional Record during consideration of the bill on the
House floor.

[[Page 7366]]

I very much appreciate the cooperation by you and your
staff in this matter.
Sincerely,
Steve Buyer,
Chairman.
____

Congress of the United States,

House of Representatives,

Washington, DC, April 25, 2006.
Hon. Steve Buyer,
Chairman, Committee on Veterans' Affairs, House of
Representatives, Washington, DC.
Dear Chairman Buyer: In recognition of the desire to
expedite consideration of H.R. 5037, the ``Respect for
America's Fallen Heroes Act,'' the Committee on the Judiciary
hereby waives consideration of the bill. There are provisions
contained in H.R. 5037 that implicate the rule X jurisdiction
of the Committee on the Judiciary. Specifically, section 3
provides for an additional penalty under title 18 of the
United States Code. This provision implicates the rule
X(I)(1)(7) jurisdiction of the Committee over ``criminal law
enforcement.''
The Committee takes this action with the understanding that
by forgoing consideration of H.R. 5037, the Committee on the
Judiciary does not waive any jurisdiction over subject matter
contained in this or similar legislation. The Committee also
reserves the right to seek appointment to any House-Senate
conference on this legislation and requests your support if
such a request is made. Finally, I would appreciate your
including this letter in the Congressional Record during
consideration of H.R. 5037 on the House floor. Thank you for
your attention to these matters.
Sincerely,
F. James Sensenbrenner, Jr.,
Chairman.

Mr. Speaker, I would like to thank Chairman Sensenbrenner and his
staff for working closely with us to craft this important legislation.
We have all seen the stories right now of the extremist protestors in
their demonstrations, placards that read, ``Thank God for IEDs'' and
``Thank God our Soldiers are Dead,'' and individuals such as Sergeant
Ricky Jones in Indiana whose home had been egged twice and somebody put
trash all over their yard and called his mother on the phone to tell
them that they were thankful that their son had died.
On March 2, I stood here and described to my colleagues the
perversions committed by this individual who claimed a first amendment
right to disrupt the solemn ritual of a military funeral. They would
manipulate the Constitution to justify harassing families who are
mourning a lost family member. By the stunned silence in this Chamber
and the gasp that ensued that moment, I knew that most all my
colleagues shared a deep abhorrence to these outrageous acts and that
we share equally a deep desire to prevent them.
Today, we bring for a vote a bill that will do just that. H.R. 5037,
the Respect for America's Fallen Heroes Act, will prohibit
demonstrations within 500 feet of a national cemetery and Arlington
National Cemetery 60 minutes before and after a funeral. This is a
bipartisan effort with over 174 cosponsors.
We have worked closely with the Judiciary Committee. We have examined
the issues of both constitutionality and the proportionality with
regard to sentencing. The Federal circuit court of appeals in Griffin
v. Secretary of Veterans Affairs upheld the constitutional existing
Department of Veterans Affairs regulations setting requirements for the
decorum and decency while on VA property. H.R. 5037 essentially
codifies the regulation.
The United States Supreme Court had addressed the ``time, place or
manner'' standard in several cases, including Grayned v. City of
Rockford. In that decision, the Court upheld an anti-noise ordinance
that prohibited activities adjacent to a school that ``disturbs or
tends to disturb the peace or good order of such school session or
class thereof.''
H.R. 5037's restrictions on ``willfully making or assisting in the
making of any noise or diversion that disturbs or tends to disturb the
peace or good order of the funeral or memorial service or ceremony,''
closely tracked the language approved in the Supreme Court opinion.
Additional cases that address the time, place and manner standard
include Ward v. Rock against Racism and Renton v. Playtime Theaters,
Inc.
Mr. Speaker, H.R. 5037 does not unconstitutionally draw distinction
on what demonstrations are or are not allowed based on the content of
the speech. It would not prevent the Secretary of Veterans Affairs from
promulgating or enforcing regulations that prohibit or restrict the VA
property or other conduct that is not specifically referenced in this
legislation.
Penalties associated with the violations of this legislation are fair
and appropriate. Violating the prohibition on demonstrations would be a
class A misdemeanor under title 18, United States Code, resulting in
fines up to $100,000 and imprisonment of not more than 1 year or both.
The penalty balances the need for deterrence with the equally important
requirement for proportionality.
Mr. Speaker, I reserve the balance of my time.
Mr. REYES. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I would like to thank Congressman Mike Rogers
specifically for his leadership in introducing H.R. 5037, the Respect
for America's Fallen Heroes Act. I would also like to thank House
Veterans' Affairs Committee Chairman Buyer and Ranking Member Lane
Evans for their strong support and for helping bring this legislation
to the House floor.
Today, I was scheduled to be in my congressional district in El Paso,
Texas, to participate in a Medicare prescription drug conference, which
I helped to organize, so that our seniors would be provided the latest
information on Medicare part D.
Mr. Speaker, while I would have liked to have been able to attend
that conference, this issue is just as important, and I am proud to be
here today and serve as the lead Democrat cosponsor of this bill, which
has gained, by the way, Mr. Speaker, very strong bipartisan support,
including the entire House Democratic leadership.
I know that all of us agree that our servicemembers who have made the
ultimate sacrifice while serving their country deserve to be laid to
rest with respect and dignity. The families of these courageous men and
women also deserve funerals that allow them to say good-bye to their
loved ones and mourn their loss in that same peace and dignity.
Organized protests have disrupted the sanctity of these funerals that
have been conducted throughout the United States for servicemembers who
have been killed while serving in our current military operations. Some
protestors have disrupted these funerals with shouts and signs that
read, ``Thank God for IEDs'' and ``Thank God for Dead Soldiers.''
In my congressional district of El Paso, our community has mourned
the loss of 20 servicemembers who have made this ultimate sacrifice
while serving our country in Iraq and Afghanistan.
As a Vietnam combat veteran and member of the House Veterans' Affairs
and House Armed Services Committees, I knew I had to do my part to
ensure that our Nation's heroes are given the burial that they deserve.
To that end, the respect for America's Fallen Heroes Act would,
first, prohibit all demonstrations during the 60 minutes prior to and
after funerals taking place at Department of Veterans Affairs national
cemeteries or the Department of the Army's Arlington National Cemetery.
Second, impose 500-foot restriction on demonstrations near national
cemeteries and Arlington National Cemetery during the funeral and for a
brief period before and after the funeral to allow mourners to enter
and leave that cemetery in peace and dignity.
Third, allow for civil infraction for violations, including monetary
fines and/or jail time of 6 months to a year, as consistent with
authority granted to the Secretary of Veterans Affairs to maintain
order in national cemeteries under current regulations.
Fourth, express the sense of Congress that all States should enact
similar restrictions for State and private cemeteries, as well as
funeral homes.
Mr. Speaker, this bill is narrowly tailored to protect military
families at the sacred time from verbal attacks, while protecting our
freedom of speech at the same time. Furthermore, provisions in this
legislation are in line with judicial precedents specific to time,
place and manner of demonstration.
In Griffin v. Secretary of Veterans Affairs, the United States
Supreme

[[Page 7367]]

Court upheld the constitutionality of existing regulations that
prohibit demonstrations on property under the control of the National
Cemetery Administration. The Supreme Court held: ``All visitors are
expected to observe proper standards of decorum and decency while on VA
property. Toward this end, any service, ceremony, or demonstration
except as authorized by the head of the facility or his designee, is
prohibited.''
As mentioned earlier, our bill is limited to Federal land under the
control of the Department of Veterans Affairs and the Department of the
Army's Arlington National Cemetery.
Furthermore, Mr. Speaker, in Grayned v. City of Rockford, the Supreme
Court held that the Secretary of Veterans Affairs maintains very broad
discretion to implement regulations to prohibit demonstrations. The
Court stated: ``Because the judgment necessary to ensure that
cemeteries remain `sacred to honor and memory of those interred or
memorialized there' may defy objective description and may vary with
individual circumstances, we conclude that the discretion vested in VA
administrators is reasonable in light of the characteristic nature and
function of our national cemeteries.''
Mr. Speaker, this legislation is narrowly drawn to allow the families
and friends of our fallen heroes to lay their loved ones to rest in
peace and dignity. The restriction on freedom of speech is content
neutral.
The restriction is limited in time, manner and place to balance the
constitutionally protected rights of law-abiding speakers against the
legitimate competing interests of unwilling listeners who would
otherwise be distracted from an important social objective, the
dignified burial of our honored dead.
So with that, Mr. Speaker, in a few weeks, our Nation will come
together to remember and honor our servicemembers who have made the
ultimate sacrifice while in service to our country. I ask all my
colleagues to join me, to join us, in honoring our fallen
servicemembers by voting in favor of H.R. 5037.
Mr. Speaker, I reserve the balance of my time.
Mr. BUYER. Mr. Speaker, I would like to inform the body that the
Congressional Budget Office has determined that implementing H.R. 5037
would have no significant cost to the Federal Government, and it has no
intergovernmental mandate as defined by Federal law.
Mr. Speaker, I yield 4 minutes to the gentleman from Michigan (Mr.
Rogers), a former captain in the United States Army and former FBI
agent, who has worked closely with this legislation.
Mr. ROGERS of Michigan. Mr. Speaker, I want to thank Chairman Buyer
for his counsel and his leadership working through this bill. I greatly
appreciate it. I know certainly the families do as well.
To my good friend and colleague, Silvestre Reyes, thank you for
lending your leadership and your voice and assistance and counsel on
this very important piece of legislation. Thank you for your service,
not only for the military but the Border Patrol and now to the people
of your district back home. I certainly appreciate it.
Mr. Chairman, this started for me when I attended the funeral of
Sergeant Joshua Youmans, a very brave and great American who gave his
life defending freedom in Iraq; and as I arrived to the funeral to the
chants and the taunting and some of the most vile things I had ever
heard, it was almost staggering to me that someone would take the time
and energy to show up and preach that kind of hateful speech upon some
very vulnerable individuals as they went into the church to mourn the
loss of a great American patriot.
What struck me that day is this very young widow who got before a
very packed church service to lay her honored husband to rest and told
the story about how this soldier, before he passed away, had the
privilege of holding his daughter for the first and only time. She
talked about how proud she was of her husband and what he had done for
his country, how proud she was to be an Army wife and how she could not
wait to tell her young daughter, McKenzie, the courage and sacrifice of
a great American, her husband, Joshua Youmans.
You juxtapose that with what they had to go through, this gauntlet of
terror, people taunting and jeering and saying the most hateful things
you possibly can imagine, and I walked out of that church that day
knowing that we as Americans can and must do better by these families.
This is their chance to stand up and mourn the loss of a family member.
A father once told me that at a service of his son he knew that this
was the moment between sanity and insanity for him, and you can imagine
that when people stop by and grieve and support and love and comfort
these families, when America steps up to put their arms around these
families to say that we love you, we support you and we respect you and
we appreciate your sacrifice, it means the difference in that father
returning to sanity after the burial of his son or, in this case, the
burial of the husband.
It is so important that we stand by the men and women who sacrifice
so much, and this bill does that. It protects the first amendment. They
can still preach their vile hatred, if they want to do that an hour
before and an hour after; but, again, it also creates a bubble. It
creates a hub of American people around these families to give them the
right, which they so richly deserve, to grieve in peace and have the
dignity and the honor to lay their loved ones to rest in peace.
I can say it no better, Mr. Speaker, than so many people who e-mailed
me, almost 30,000 people from Baghdad Iraq to Brighton, Michigan, my
hometown and told stories of why this was so important, some of them
very moving.
I will read you one now: ``Over the last 6 months my unit has taken
over 30 casualties in some of the most vicious areas south of Baghdad.
The thought of their families having to face protestors after their
memorials incites a rage I have never known before. These protestors
mock all that we have accomplished here, the lives that have been
forever changed, and the lives that have been lost, using our most
valued doctrines of faith and freedom as their defense. I cannot thank
you, and Congress, enough for your dedication to this effort. I can
only hope that your colleagues will join you in this battle. Mr.
Speaker, so many have. Signed, Sergeant Ashley A. Voss, Baghdad,
Iraq.''

{time} 1545

I will share another letter from a grieving mother.
``Thank you for creating and seeking to help grieving families of our
American heroes. My husband and I support this act 100 percent. Our
son, Sergeant Trevor Blumberg, was killed in action in Iraq on
September 14, 2003. We know the pain and horror in losing a heroic son;
no less than to have to face cruel, inhumane people who cannot dignify
your time of grief. Please continue to place these families in
America's hearts and minds. Nothing less is deserved.''
That was from Janet M. Blumberg, a proud parent of an American hero.
Thanks to all who support the act.
Mr. REYES. Mr. Speaker, I yield 4 minutes to the gentleman from
California (Mr. Baca) who knows the pride of wearing America's military
uniform, an Army veteran.
Mr. BACA. Mr. Speaker, I rise today in support of H.R. 5037, which I
am a proud cosponsor of as a veteran, the Respect for America's Fallen
Heroes Act.
These are individuals who have sacrificed their lives for this
country, men and women who have served us, and we must remember those
who have sacrificed their lives because we are enjoying our lives,
because they gave ultimately so we would enjoy the freedom and peace we
have today.
So we have the same responsibility, and that is what this bill does
to honor those individuals. As we commemorate Military Appreciation
Month in May as well as Memorial Day on May 29, I urge my colleagues to
support this bill. It seeks to provide every fallen soldier with a
private and dignified burial for

[[Page 7368]]

those who have given to this country, the men and women who have
sacrificed a lot.
All around the country, grieving families of soldiers who were killed
in service to our Nation are being harassed at funeral sites. These
protesters show us with hurtful signs and messages, adding undue stress
to military families seeking to bury their loved ones with pride and
dignity.
While we respect the right of free speech in this country, military
families have a right to mourn the loss of their husbands, wives, and
children in peace. H.R. 5037 would enforce the right by banning
protests at VA national cemeteries, as well as Arlington National
Cemetery, 60 minutes before and after a funeral takes place.
This bill would also impose a 500-foot restriction on demonstrations
at the site to give families privacy. Additionally, this bill would
create a class A misdemeanor for violations with penalties up to
$100,000 in fines or 1 year in prison.
Finally, H.R. 5037 expresses a sense of Congress that all States
should enact similar bans for both State-run and privately owned
cemeteries and funeral homes.
Mr. Speaker, this bill is consistent with the Supreme Court ruling.
It is consistent with the Supreme Court ruling and it is
constitutional. This bill provides additional rights to free speech
while giving the Armed Forces and their families the due respect and
the dignity that they deserve because their families have given so much
to this country, and we deserve to give it back to them.
I ask Members to support this important bill.
Mr. BUYER. Mr. Speaker, I yield 3 minutes to the gentleman from Ohio
(Mr. Chabot), the chairman of the Subcommittee on the Constitution.
Mr. CHABOT. Mr. Speaker, I rise today in support of H.R. 5037, the
Respect for America's Fallen Heroes Act, and I am very pleased to have
been an original cosponsor and to have helped to author the bill, along
with Chairman Buyer, Chairman Miller and Representative Rogers.
We are all painfully aware of the recent trend of demonstrations and
protests occurring near military funerals and national cemeteries.
These protests have included signs saying ``God Hates America'' and
``Thank God for IEDs,'' which are those improvised explosive devices
which are responsible for so many of the deaths of our honorable
military soldiers in Iraq and Afghanistan. Such demonstrations are not
compatible with respect due to our Nation's fallen heroes and they
should not be consistent with our Nation's laws.
This act prohibits such demonstrations in a manner that is fully
consistent with the Constitution while fully protecting the respect and
dignity of funerals held on and near national cemeteries.
The first provision of H.R. 5037 prohibits demonstrations on national
cemetery grounds unless such demonstrations are approved by the
cemetery director. It is common sense.
This provision is clearly constitutional under judicial precedents,
most recently Griffin v. Secretary of Veterans Affairs. In that case,
the Federal Circuit Court of Appeals, just a few years ago, upheld as
constitutional an existing Federal regulation providing ``any service,
ceremony, or demonstration, except as authorized by the head of the
facility or designee, is prohibited'' on Veterans Affairs property. The
first provision of H.R. 5037 simply codifies that principle in statute.
The second provision of H.R. 5037 prohibits any demonstration within
500 feet of national cemeteries within 60 minutes before or after the
service, if the demonstration includes ``any individual willfully
making or assisting in the making of any noise or diversion that
disturbs or tends to disturb the peace or good order of the funeral or
memorial service or ceremony.'' This exact language has been upheld as
constitutional by the Supreme Court in the case of Grayned v. City of
Rockford.
At the same time, this language does not unconstitutionally draw
distinctions regarding what demonstrations are allowed and are not
allowed, based on the content of the speech. The Supreme Court, again
in the Grayned case, upheld this precise language as constitutional
because the language ``contains no broad invitation to subjective or
discriminatory enforcement.''
This is clearly important legislation, and I strongly urge its
passing.
Let me say that all supporters of H.R. 5037 are asking is that the
families and friends of our Nation's fallen heroes be given a few hours
of peace during which to honor their loved one's greatest sacrifice, a
few hours to pay respect to a selfless life devoted to protecting
others. That is not unconstitutional. That is not even an imposition.
That is the least we can do for those who fight to uphold the
Constitution.
I urge all my colleagues to join in supporting this bill, which will
give the families of those who died for us the comfort of knowing they
will be able to pray in peace and thank the fallen on and near the
sacred ground where they will rest forever so we can live free today.
Mr. REYES. Mr. Speaker, I reserve the balance of my time.
Mr. BUYER. Mr. Chairman, I yield 1 minute to the gentleman from
Minnesota (Mr. Kennedy).
Mr. KENNEDY of Minnesota. Mr. Speaker, just over 2 months ago, during
the funeral of Corporal Andrew Kemple, a Minnesotan who was killed
while fighting for freedom, vile slogans like ``God Hates America'' and
``God Loves IEDs'' were chanted by protesters, and I use that term
loosely, with a radical, hateful agenda.
Words like ``reprehensible'' and ``disgusting'' simply do not
adequately describe the slogans or this stunt on such a solemn
occasion. The men and women who have given what Lincoln called ``the
last full measure of devotion'' deserve better than this.
I urge my colleagues to support the Respect for America's Fallen
Heroes Act. Our men and women in uniform never fail us when the Nation
calls upon them. We owe them nothing less than the same commitment to
duty.
Mr. REYES. Mr. Speaker, I yield myself such time as I may consume to
read into the Record a statement from our minority leader, Ms. Pelosi.
``I urge all of my colleagues to vote today for H.R. 5037, the
Respect for America's Fallen Heroes Act. I am proud to be a cosponsor
of this bipartisan legislation that will ensure grieving military
families are protected from protesters spewing a message of hatred. For
our men and women in uniform who have made the ultimate sacrifice for
our country, and for their families, we must act today to ensure that
they receive the respect and the moments of solemnity that they have
earned and deserve.
``No Americans have stood stronger and braver for our Nation than
those who have served in our Armed Forces. Our soldiers have
courageously answered when called, gone when ordered, and defended our
Nation with great honor. Their noble service reminds us of our mission
as a nation, to build a future worthy of their courage and sacrifice.
``Americans may debate and disagree about foreign and domestic
policy. This is the essence of our democracy. But when it comes to our
military men and women, America must stand united and honor them as the
heroes that they are.''
Minority Leader Nancy Pelosi.
Mr. Speaker, I continue to reserve the balance of my time.
Mr. BUYER. Mr. Speaker, I yield 1 minute to the gentlewoman from
Michigan (Mrs. Miller).
Mrs. MILLER of Michigan. Mr. Speaker, during this time of conflict,
we have seen so many examples of heroism exhibited by the men and women
of our armed services.
Every day these great heroes are on the front line of the war in Iraq
and Afghanistan and throughout the entire world, defending our liberty
and freedom and democracy. And most Americans, thank goodness, support
their efforts and their mission; and the vast majority honor their
service and sacrifice.
But some do not and have expressed their objections in a variety of
ways that have been articulated on this floor

[[Page 7369]]

today. Some are protesting the Congress or the President, and that is
fine because we are the policy-makers and we are the correct targets
for indicating support or opposition to the war.
But some have taken their objections to places where they simply do
not belong. Many have begun to protest our fallen heroes as they are
being laid to rest by their loved ones. Groups like the Patriot Guard,
God bless them, have stood up and shielded families from this obscene
type of protest, but we need to do more.
No fallen soldier, sailor, airman or marine's family should ever be
subjected to such trauma at a time of such great grief. Instead, our
fallen heroes should be afforded the honor and dignity befitting their
sacrifice.
I urge my colleagues to support this important piece of legislation.
Mr. REYES. Mr. Speaker, I reserve the balance of my time.
Mr. BUYER. Mr. Speaker, I yield 1 minute to the gentleman from
Maryland (Mr. Bartlett).
Mr. BARTLETT of Maryland. Mr. Speaker, when the unbridled expression
of one right infringes on another, we appropriately limit that right,
and that is what we do today.
On March 3 of this year, 20-year-old Lance Corporal Matthew Snyder of
Westminster, Maryland, was killed when his Humvee overturned on
assignment in Iraq.
Before his deployment, Matthew explained that he volunteered for
convoy escort security because, ``There was a position that needs to be
filled, and I am a Marine.''
Outside the church where Matthew's family and friends gathered for
his funeral, a group of six out-of-State protesters loudly chanted and
carried signs, including, ``Thank God for Dead Soldiers.''
I stand today joined in spirit by members of the American Legion and
the For Our Troops Club of Hereford High School in support of this bill
that will honor America's fallen soldiers and respect the privacy of
their families by protecting the dignity of their funerals.
Mr. REYES. Mr. Speaker, I reserve the balance of my time.
Mr. BUYER. Mr. Speaker, I yield 1 minute to the gentleman from
Georgia (Mr. Gingrey).
Mr. GINGREY. Mr. Speaker, I thank Chairman Buyer, Chairman Chabot,
Chairman Miller, Mr. Reyes, and all of the Members that have brought
forth this bill, the Respect for America's Fallen Heroes Act.
Mr. Speaker, it is unbelievable that we would need this kind of a
bill, but we do know what is going on. You have heard that from the
other Members that have spoken. It is unbelievable that people would
trample on the families of these fallen soldiers during such a
sensitive time.
In my district, Mr. Speaker, had they showed up at the funeral of
Justin Johnston or Paul Saylors or Lieutenant Tyler Brown, who was
buried at Arlington, I am sure those families would have had a lot of
difficulty restraining themselves, as would this Member.
I think we need to pay tribute, of course, to the Patriot Guard
riders who have been keeping these people away from the funeral sites
until this legislation has its intended effect.
This bill to pass today is going to require 66 percent vote of this
body. I think it will get 100 percent.
Mr. REYES. Mr. Speaker, I reserve the balance of my time.
Mr. BUYER. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from
Minnesota (Mr. Gutknecht).
Mr. GUTKNECHT. Mr. Speaker, I rise in strong support of H.R. 5037,
the Respect for America's Fallen Heroes Act. I am a proud cosponsor of
this act which will ban protests at military funerals at national
cemeteries, including Arlington National Cemetery.
Burying a child, father, husband or wife is hard enough without
having to see signs that say things like ``God Hates You'' or hearing
hateful language shouted at your family during a funeral procession or
graveside ceremony.

{time} 1600

On February 23, 2006, the funeral of Army Corporal Andrew Kemple from
Anoka, Minnesota, was disrupted by protestors who claimed that U.S.
military deaths are divine retribution for the Nation's tolerance for
homosexuality. The protestors even went so far as to taunt Andrew's
mother as she entered the church for her son's funeral service.
It is hard to think of a more shameful act than taunting a woman who
just gave her son in service to our Nation.
All Americans are proud of the sacrifices made by our Nation's brave
Americans in uniform. We have seen their skill and their courage in the
armored charges and midnight raids and in their lonely hours of
faithful watch. We have seen the joy when they return home and felt the
pain when one is lost.
No matter what one's position may be on U.S. policy matters, we
should all agree that demonstrating at the funeral of one of our fallen
heroes is disgraceful and unacceptable. We must stand behind our
Nation's military families, especially on the day when caskets draped
with the American flag are carried that last mile.
The Minnesota State legislature passed a bill on Monday, May 1, to
ban all protests at military funerals, burials, and memorial services.
I encourage other States to follow Minnesota's lead, and I urge the
House of Representatives to pass the Respect For America's Fallen
Heroes Act today. Our Nation's heroes deserve no less.
Mr. REYES. Mr. Speaker, I have no further requests for time, so I
will now close and then yield back the time.
Mr. Speaker, this afternoon, all around the country they have seen
Members of Congress come together to stand up for our men and women in
uniform and for their families. I think the message is clear that we
want those that have made the ultimate sacrifice, and those that are
laying them to rest, to have the opportunity to do so with peace and
dignity. So I am proud to be here, and I am proud to work with my
colleagues and thank them for their support in bringing this to the
floor this afternoon.
Mr. BUYER. Mr. Speaker, will the gentleman yield?
Mr. REYES. I yield to the gentleman from Indiana.
Mr. BUYER. Mr. Speaker, and my colleagues, I want to thank the
gentleman from Texas. It is a pleasure to have worked with you. We are
colleagues on the Veterans' Affairs Committee, and I appreciate your
service over the years. But you and I haven't had a chance specifically
to work on a bill. And I have enjoyed my associations with you. And the
cause is right. The spirit of the country is right. They want us to set
the standards of dignity, and you recognized that early on and
championed this cause in a bipartisan fashion. And it says a lot about
who you are. I think it is because you know who you are, and that makes
this is a pretty easy process. For that I want to thank the gentleman.
Mr. REYES. Thank you, Mr. Chairman. I really equally appreciate the
opportunity to work with you because we know, as veterans, the
sacrifices that men and women make on behalf of this country and their
families, and so it has been a privilege to be able to work with you
and my colleague, Mike Rogers, who also has been a leader on this very
important issue for our country and for our country's military.
Mr. BUYER. Mr. Reyes, you probably share the very same sense I do
when you see the Patriot Guard Riders. And you know, one thing I want
to comment to you, that I am proud about them, not only for taking an
individual initiative, but also for their restraint.
I do recall what it was like when I came back from the first gulf
war, and we buried a friend, and we stood there in our military
uniforms, so proud of our service. At the same time we were grieving,
and we were also moved that one of the finest of our unit was killed,
and it was so powerful to all of us. And it was also yet so private and
personal to all of us, given what we had just gone through on behalf of
a country.
And as I reflect upon that moment, I could not imagine someone from
the outside, based on some other reason or rationale and their own
image, would

[[Page 7370]]

interrupt that moment in time for us. And I think a lot of these
Patriot Guard Riders also share that very same feeling I have. And I
just want to compliment their restraint; because I could tell you, it
would be hard, it would be really hard, if I were in the family, if I
were one of the family members and this was happening, I would want to
go over there and take matters into my own hands. But you know what?
People haven't done that. And I am really proud of some of the families
and the Patriot Guard Riders themselves.
So we are not only setting the standards of decency. We are also
setting the standards for criminal conduct so everybody is well
behaved. But I just want to thank the gentleman.
Mr. REYES. Absolutely. And I also would make two observations. First,
the great restraint that they are showing shows the great respect that
we have as a Nation of laws because while we may disagree with the
message, we don't disagree that they have a right to deliver it. It is
just not appropriate. And somewhere along the line they didn't learn
the lesson that they should not intrude on somebody's private time to
grieve and to be at peace, especially for their loved ones who have
just sacrificed everything for their country.
Yesterday morning I had the opportunity to be with some of our
military troops at Fort Bliss in my district. And I had several of them
come to me and very privately, because, you know, our men and women in
uniform are that way. They are courageous, they are professional. They
are top-notch, but they are also very private. And in a private way
they thanked me and said, please convey to all your colleagues in
Congress our deep appreciation that we know that if something happens
to us, our families will be taken care of, and specifically referred to
this legislation and the peace of mind that they have, and they wanted
us to convey that message.
Mr. BUYER. I am glad and pleased that you and Mr. Rogers took this
initiative. But at the same time it is a sad commentary that we
actually have to come to the House floor and create a law in title
XVIII to do this. We shouldn't have to be doing this. So when people
say you are regulating speech again, well, nobody really wants to do
that. We have such respect for the first amendment. But at the same
time there is a significant government interest here and that deals
with our decency that you spoke of in setting those standards.
And also the case law that you cited. The Supreme Court has been very
clear to give us that ability to do just that, as Mr. Chabot had also
testified to before our committee.
But it is unfortunate we have to be here to do that. But we cannot
permit the repugnant acts of a few to define the character of America.
Mr. REYES. I agree with you, Mr. Chairman.
Mr. Speaker, I yield back the balance of my time.
Mr. BUYER. Mr. Speaker, when I rose in March to tell this body of the
outrageous acts committed against one grieving family in Indiana, I
said that the great virtue of the American character is our compassion.
It is our compassion and human decency that represents the very best of
our Nation.
I had a task to perform and that was very similar to many of my
colleagues in this body, and that is, when we get the word that someone
from our congressional districts has died in the service of our
country. So it is an easy call to make, but it is a difficult
conversation to have.
And I remember calling the mother of Sergeant Ricky Jones in Kokomo,
Indiana, and when I spoke with her and said, Ma'am, is there anything
that I can do for you or the family, she said, You can't believe what
this has been like. And I said, Well, I have two children. You are
right. I can't believe that. She said, No, no, you don't understand,
and then began to convey to me that, When I had heard that Ricky had
died, I began receiving family and friends to the home. They would also
call on the telephone. The phone rang. I thought it was going to be
either family or friend, and she picked up the phone and the voice on
the other end said, I am glad your son is dead. He deserved to die, and
hung up the phone. She was shocked and appalled. And she recovered from
that.
About an hour later the phone rings again and it is another voice on
the other end of the phone that said, I am glad your son is coming home
in a body bag. I am glad he is dead, and hangs up the phone.
Later, someone had egged their family home twice. And then they put
trash all over their yard in the middle of the night. And all this was
done while the body of Sergeant Ricky Jones was being transported back
to Indiana.
I was pleased that the Deputy Secretary of Veterans Affairs, Gordon
Mansfield, and the Under Secretary for Memorial Affairs, Bill Turk,
came to Indiana to stand with this family, with myself, and also the
Governor of Indiana was also present. But for Gordon Mansfield to have
made that trip was very meaningful because Gordon Mansfield is a highly
decorated combat veteran from Vietnam who is a paraplegic. He is in a
wheelchair from his combat wounds. And for him to also have been so
disturbed by what happened, for him to travel to Indiana to be with
that family says so much about Gordon Mansfield and the leadership that
he gives at the Department of Veterans Affairs.
I was pleased. It was the first time I had ever seen the Patriot
Guard Riders. Hundreds of them were there. And that is why, Mr. Reyes,
that I spoke about their restraint, because when you see them, you are
not sure what's about to happen here. These are some pretty tough guys.
And one thing that I recall from that experience that was very
intriguing was that many of them were also Vietnam veterans. Not all of
them were Vietnam veterans, and not all of them were even veterans.
Some of them were not. They are patriots.
And Sergeant Ricky Jones is the son of an Air Force Vietnam veteran;
so these Vietnam era veterans, they know exactly what it was like when
they came home.
Mr. Speaker, I ask unanimous consent for an additional 5 minutes.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Indiana?
There was no objection.
Mr. BUYER. They know exactly what it was like when they came home,
and they were not going to permit this to occur to their son or
daughter; but they were going to set those standards. And so for that
reason, and many others, I am so proud of the Patriot Guard Riders.
We have before us an opportunity to make a clear expression of that
compassion and decency on behalf of those who are passing their darkest
hours and on behalf of all Americans who would give them peace during
that difficult journey.
Mr. Speaker, I would like to thank the chief sponsors of this bill,
Mr. Rogers of Michigan, Silvestre Reyes of Texas, and Jeff Miller of
Florida. Together they have done their due diligence to ensure that the
legislation will withstand any judicial scrutiny.
I would like to thank Kingston Smith and Mary Ellen McCarthy, counsel
of the Veterans' Affairs Committee; Paige McManus of the Veterans'
Affairs Committee for their work on the bill; as well as Andy Kaiser of
Congressman Rogers' staff.
I would also like to thank, of the Judiciary Committee staff: Paul
Taylor, Hillary Funk and Mike Volkov.
Mr. Speaker, I urge my colleagues to unanimously support H.R. 5037.
Mr. TIAHRT. Mr. Speaker, every so often a bill comes before this
House that I wish was unnecessary. A bill that is so intrinsically
rooted in basic human decency that no one could imagine a legislative
remedy would be needed. H.R. 5037, Respect for America's Fallen Heroes
Act, is such a bill.
H.R. 5037 would prohibit protests at the funerals of our fallen
military men and women. A small group of people are hurling insult onto
tragedy for the family and friends of fallen heroes. For me and my
constituents, this blight on human decency is personal.
On November 29, 2005, Kansans Sergeant Jerry Mills and Sergeant
Donald Hasse were patrolling Taji, Iraq their vehicle was hit by an
improvised explosive device--tragically cutting

[[Page 7371]]

their lives short. Their bodies were returned to Kansas for burial and
everlasting respect of their grateful countrymen.
Sergeants Mills and Hasse were heroes. They gave their lives for this
country. Both of these heroes deserved funerals befitting of their
patriotism and sacrifice. Regrettably, some wanted to turn a solemn
event into a political statement.
Protesters arrived at Sergeant Hasse's funeral in Wichita, Kansas.
Fortunately, so did the Patriot Guard Riders, a group of motorcycle
riders dedicated to honoring fallen service men and women and
protecting the funeral proceedings from protestors. The Patriot Guard
Riders, invited by the Hasse family, kept the protestors at bay and
protected Sergeant Hasse's young son from having to witness such
inhumanity.
Although the same protesters were due to also demonstrate at the
funeral for Sergeant Mills in Arkansas City, Kansas, they never
arrived. The Patriot Guard, invited by the Mills family, did attend to
honor the memory of Sergeant Mills. An injustice was adverted.
No family should have to endure such a double tragedy of losing a
loved one and then being berated by protesters. The Respect for
America's Fallen Heroes Act will keep protesters away from grieving
families and friends--allowing these heroes to be mourned and honored
with dignity and respect. I ask all my colleagues to join me in
supporting this important piece of legislation that is unfortunately
needed. I ask my fellow Americans to remember and honor these heroes,
and their families, who have made the ultimate sacrifice defending
freedom.
Mr. BACA. Mr. Speaker, I rise today in support of H.R. 5037, the
``Respect for America's Fallen Heroes Act.''
As we commemorate Military Appreciation Month in May, as well as
Memorial Day on the 29th, I urge my colleagues to support a bill that
seeks to provide every fallen American soldier with a private,
dignified burial.
All around the country, grieving families of soldiers killed in
service to our nation are being harassed at funeral sites. These
protesters show up with hurtful signs or messages, adding undue stress
to military families seeking to bury their loved ones.
While we respect the right to free speech in this country, military
families also have a right to mourn the loss of their husbands, wives,
and children in peace. H.R. 5037 would enforce that right by banning
protests at VA national cemeteries, as well as at Arlington Cemetery,
60 minutes before and after a funeral takes place. This bill would also
impose a 500-foot restriction on demonstrations at these sites and
create a Class A Misdemeanor for violations with penalties up to
$100,000 in fines or 1 year in prison. Finally, H.R. 5037 would express
the sense of Congress that all states should enact similar bans for
both state-run and privately-owned cemeteries and funeral homes.
Mr. Speaker, this bill is constitutional and preserves the
individual's right to free speech, while giving our Armed Forces and
their families their due respect. It is the right thing to do and I ask
my colleagues vote in support of this important piece of legislation.
Mr. DAVIS of Florida. Mr. Speaker, I rise in strong support of H.R.
5037, the Respect for America's Fallen Heroes Act, which would ban all
non-approved demonstrations 60 minutes prior to and after funerals
taking place at VA national cemeteries or at Arlington National
Cemetery, as well as impose a 500-foot restriction on demonstrations.
Furthermore, the bill would allow for a Class A Misdemeanor for
violations with penalties up to $100,000 in fines or up to one year in
prison.
As we have seen, a troubling public display has been taking place
around the country perpetuated by groups who wish to call attention to
a cause. This activity is not a case of free speech and should be
stopped. There is a time and a place for protest in our Democracy, but
it is wholly inappropriate to use a funeral as an opportunity to make
statements about a personal belief, a political cause or federal
policy. Families and loved ones should be allowed to grieve in peace.
For this reason, I am a cosponsor of this legislation along with more
than 170 of my colleagues.
Mr. Speaker, more than 2,500 brave men and women have given this
country the ultimate sacrifice while serving their country in Iraq and
Afghanistan. Their families and loved ones should be proud of their
service to their country. The sadness of those left behind is bad
enough without having to face screaming protesters with an agenda.
This bipartisan bill is consistent with the Constitution and is not a
limitation of the freedom of speech that we enjoy in this country. I
strongly support this legislation and stand with my colleagues. I hope
that this legislation becomes law as soon as possible.
I urge my colleagues to vote ``yes'' on H.R. 5037.
Mr. PORTER. Mr. Speaker, over 2,400 brave men and women have paid the
ultimate sacrifice fighting the War on Terror and the great State of
Nevada has lost 19 heroic sons, 9 of which, are in my district. Just
last week, on May 5, First Sergeant Carlos N. Saenz of Las Vegas died
when an improvised explosive device detonated near his military
vehicle.
As we continue to fight the War on Terror, it is imperative that we
protect America's fallen heroes by ensuring that they are treated with
respect, while being laid to rest.
As a member of Congress, and a parent, I understand the importance of
ensuring that families are able to provide a meaningful and proper
burial for their loved ones. As we protect the constitutional rights of
those who disagree with the war, we must also protect the rights of our
fallen heroes and their families.
The Respect for America's Fallen Heroes Act, which bans all
demonstrations 60 minutes prior to and after funerals taking place at
Department of Veterans Affairs' national cemeteries or the Department
of Army's Arlington National Cemetery, seeks to protect the families
right to grieve in peace.
The National Cemetery Administration's (NCA) vision is to serve all
veterans and their families with the utmost dignity, respect, and
compassion and to ensure that every national cemetery will be a place
that inspires visitors to understand and appreciate the service and
sacrifice of our Nation's veterans. In order to ensure that the NCA and
the Department of Veterans Affairs are able to keep their commitment to
America's veterans and their families, I am in full support of this
important piece of legislation.
Mr. Speaker and my distinguished colleagues, I offer my full support
for this important piece of legislation and I support your efforts to
protect the rights of America's fallen heroes and their families.
Mr. MILLER of Florida. Mr. Speaker, I rise today to offer my
unwavering support for H.R. 5037, the Respect for America's Fallen
Heroes Act. I am proud to be an original cosponsor of this bill.
The rights of free speech and expression under the Constitution's
First Amendment are not absolute, and there are many U.S. Supreme Court
decisions interpreting and explaining the right and its limits. As
Chairman Buyer explained, there are several judicial precedents which
make clear that H.R. 5037 is constitutional. On April 6, the
Subcommittee on Disability Assistance and Memorial Affairs, the
subcommittee I chair, took testimony on this bill.
Said David Forte, Professor of Law, Cleveland-Marshall College of
Law, Cleveland State University, in written testimony submitted to the
Subcommittee:

``There are thus two constitutional issues to be
confronted: (1) Does the ban on ``certain'' demonstrations
meet the requirement of First Amendment law as laid down in
Supreme Court precedents, and (2) Is the discretion lodged in
the cemetery superintendent to permit exceptions fall within
an acceptable constitutional range? I conclude that the
answer to both questions is in the affirmative and that the
bill is well within constitutional limits.

Mr. Speaker, at this time I ask unanimous consent that Mr. Forte's
statement be included in the Congressional Record.
I have visited the troops in Afghanistan and Iraq several times over
the years.
While always moving and inspiring experiences, one time in particular
stands out. It was September 2003 and we were preparing to return to
the States. After quite a wait, we were told that they were loading
onto the plane the casket of Sergeant Trevor Blumberg, and we would be
leaving Baghdad with his body. I have had few honors as great as that
one. I am pleased to say that Mrs. Blumberg has since contacted
Representative Rogers' office to express her and her husband's support
for this bill.
Our Nation's veterans have made the ultimate sacrifice, and it is
appalling to see and hear their military service being derided.
Unfortunately, throughout the country, that is indeed what is happening
and it must stop.
I want to thank Mr. Rogers, Chairman Buyer, and Mr. Reyes for all
their work in crafting this legislation and their continued dedication
to the men and women of our armed forces.
I would also like to recognize Mr. Paul Taylor and Ms. Hilary Funk,
staff on the Judiciary. Committee's Subcommittee on the Constitution,
for working so closely with my staff and me.
Mr. Speaker, I urge all my colleagues to support this bill.

[[Page 7372]]

Testimony of David F. Forte, Professor of Law, Cleveland-Marshall
College of Law, Cleveland State University, in Support of H.R. 5037
Before the House Committee on Veterans' Affairs, Subcommittee on
Disability Assistance and Memorial Affairs, Jeff Miller, Chairman,
April 18, 2006

I. Introduction

H.R. 5037, entitled the ``Respect for America's Fallen
Heroes Act,'' seeks to limit ``certain demonstrations'' in
cemeteries under the control of the National Cemetery
Administration or on the property of Arlington National
Cemetery. The bill defines what constitutes a demonstration
disruptive of the memorial services or funerals being held in
or within 500 feet of such cemeteries, but allows an
exception for demonstrations on cemetery grounds if
``approved by the cemetery superintendent.'' There are thus
two constitutional issues to be confronted: (1) Does the ban
on ``certain'' demonstrations meet the requirements of First
Amendment law as laid down in Supreme Court precedents, and
(2) Is the discretion lodged in the cemetery superintendent
to permit exceptions fall within an acceptable constitutional
range? I conclude that the answer to both questions is in the
affirmative and that the bill is well within constitutional
limits.

II. The Ban on Demonstrations

Demonstrations are a form of expressive conduct. In all
governmental restrictions on expressive conduct, Supreme
Court jurisprudence requires application of the O'Brien test,
United States v. O'Brien, 391 U.S. 367 (1968) or of the
``time, place, and manner'' test. Cox v. New Hampshire, 312
U.S. 569 (1941). The Court has declared that both tests have
similar standards. Clark v. Community for Creative Non-
Violence, 468 U.S. 288 (1984).
Under the O'Brien test, ``a governmental regulation is
sufficiently justified if it is within the constitutional
power of the government; if it furthers an important or
substantial governmental interest; if the governmental
interest is unrelated to the suppression of free expression;
and if the incidental restriction on alleged First Amendment
freedoms is no greater than is essential to the furtherance
of that interest.'' 391 U.S. at 376. Under the ``time, place,
and manner'' test, government regulations of expressive
conduct are valid ``provided that they are justified without
reference to the content of the regulated speech, that they
are narrowly tailored to serve a significant governmental
interest, and that they leave open alternative channels for
communication of the information.'' Clark, 468 U.S. at 293.
It is clear from the text of H.R. 5037 that the purpose of
the bill is to assure the dignity of funerals or memorial
services held in honor of our fallen dead by preventing
demonstrations that are disruptive of those ceremonies. To
that end, the bill delineates what kind of demonstrations
shall be prohibited, viz, a demonstration within five hundred
feet of a cemetery in which a funeral or memorial service is
to be held if the demonstration takes place within a time
period from 60 minutes before until 60 minutes after the
funeral or memorial service. Furthermore, the bill requires
that only those demonstrations in which a ``noise or
diversion'' is willfully made and ``that disturbs or tends to
disturb the peace or good order of the funeral service or
memorial service or ceremony'' shall be prohibited.
Maintaining cemeteries for veterans is clearly within the
constitutional power of government. It is also clear that,
under 38 U.S.C. sect. 2403, the purpose of maintaining
cemeteries ``as a tribute to our gallant dead'' is an
important or substantial governmental interest. It is
similarly evident from the text of the bill that its purpose
is to prevent conduct that is intentionally disruptive of a
funeral or memorial service without reference to the content
of the expressive conduct. The text does not ban accidental
noises present in our modern society near to many cemeteries,
such as traffic or the sounds of children playing. Nor does
it ban only demonstrations with a particular kind of message.
A demonstration connected with a labor dispute that is
disruptive of a funeral is as violative of the law as would
be an anti-war demonstration or a ``support our troops''
march. Finally, ``the incidental restriction on First
Amendment freedoms is no greater than is essential to the
furtherance'' of the interest of maintaining the dignity of a
funeral for our fallen dead. Demonstrations 60 minutes before
or 60 minutes after the ceremony are permitted. Even during
the period in which a ceremony is being held, a demonstration
beyond 500 feet of the cemetery is permitted. This is no
blanket ban at all.
The fact that H.R. 5037 prohibits disruptive demonstrations
on grounds that are not part of a national cemetery finds
support in Supreme Court precedent. The case of Grayned v.
City of Rockford, 408 U.S. 104 (1972) is directly on point.
In Grayned, the Supreme Court upheld an antinoise ordinance,
which read: ``No person, while on public or private grounds
adjacent to any building in which a school or any class
thereof is in session, shall willfully make or assist in the
making on any noise or diversion which disturbs or tends to
disturb the peace or good order of such school session or
class thereof.'' 408 U.S. at 107-08. It is axiomatic in our
legal tradition that the state may take reasonable steps to
abate a nuisance that may emanate from private property. What
H.R. 5037 does is to abate a nuisance that would disturb the
good order of a federally mandated activity in our national
cemeteries, namely, to provide memorial services and
ceremonies that are ``a tribute to our gallant dead.''
It should be noted that in Grayned, the Supreme Court held
that the antinoise ordinance was good against claims of
overbreadth or vagueness. H.R. 5037's prohibition on
``willfully making or assisting in the making of any noise or
diversion that disturbs or tends to disturb the peace or good
order of the funeral or memorial service or ceremony'' tracks
the language approved by the Court in Grayned.
Furthermore, the language of H.R. 5037 finds support in the
case of Boos v. Barry, 485 U.S. 312 (1988). In the case, the
Supreme Court reviewed a District of Columbia law that made
it unlawful to display any sign that brought a foreign
government into ``public odium'' or ``public disrepute''
within 500 feet of an embassy, and which banned
``congregating'' within 500 feet of an embassy. The Court
struck down the ban on displaying a sign critical of a
foreign government, but upheld the ban on congregating if, as
construed by the lower courts, the congregation was
``directed at a foreign embassy.'' H.R. 5037 bans only those
demonstrations within 500 feet of a cemetery that are
intentionally disruptive of ceremonies or funerals within
national cemeteries. The disruptive requirement does not need
judicial construction. It is made in the terms of the statute
and is fully supported by the decision in Boos v. Barry.
Under H.R. 5037, a person who displays ``any placard,
banner, flag, or similar device, unless the display is part
of a funeral or memorial service or ceremony,'' and such a
display causes a ``diversion that disturbs or tends to
disturb the good order of the funeral or memorial service''
is subject to the law. This prohibition is closely akin to
the focused picketing ordinance upheld by the Supreme Court
in Frisby v. Schultz, 484 U.S. 474 (1988). That ordinance
banned picketing ``before and about'' any residence. Although
in most public areas, people may picket and expostulate even
though others may object to the message, in certain areas the
functioning of the forum takes precedence, provided there are
alternative ways the protestor may express his message.
Schools are one forum whose functioning may not be disturbed
or diverted. Grayned. The home is another place. Justice
O'Connor noted that the picketers could still march through
the neighborhood to express their opposition to abortion and
abortionists. They simply could not disrupt the
``tranquility'' of a doctor's home. 484 U.S. at 484.
Similarly, in H.R. 5037, the bill seeks to protect the
tranquility and dignity of a memorial service. It allows the
picketer or demonstrator to display whatever kind of sign or
device he wishes one hour before or one hour after the
ceremony, or at any time if more than 500 feet distant from
the cemetery, even if it offends those who may be traveling
to the ceremony.
If, however, a person displays ``any placard, banner, flag,
or similar device, unless the display is part of a funeral or
memorial service or ceremony,'' and the display occurs within
a cemetery, there is no requirement in the bill that it be
part of a disruptive demonstration. But in that case, the
display does not take place in a traditional public forum,
such as a public sidewalk, but rather within a non-public
forum dedicated to honoring our veterans. In that situation,
the ban is a reasonable, and thereby a valid, restriction in
a non-public forum designed to preserve the appropriate
functioning of the forum, i.e., a national cemetery. I
discuss the law applying to non-public forums in Part III
below.
Thus, under either the O'Brien test or under the time,
place and manner test, the statute is drawn to be within
Constitutional standards.
Nonetheless, I find one phrase in the bill puzzling. Under
section (b)(2), a demonstration is defined as ``Any oration,
speech, use of sound amplification equipment or device, or
similar conduct before an assembled group of people that is
not part of a funeral or memorial service or ceremony.''
(emphasis added) It would see that a single individual with a
bullhorn who disrupts a ceremony might not be covered under
this section. Thus, I do not see the use of the phrase
``before an assembled group of people.'' In any event, with
such a phrase, the restriction on expressive conduct is even
less than would be permitted to be under the Constitution.

III. The discretion of the cemetery superintendent

It is a central canon of our First Amendment jurisprudence
that permission to engage in expressive conduct cannot be
left to the unbridled discretion of a governmental official.
City of Lakewood v. Plain Dealer Publishing Co., 486 U.S. 750
(1988). Such a discretion carries with it the dangers of
prior restraint, vagueness, overbreadth, and content and
viewpoint discrimination. Section (a)(1) of H.R. 5037
prohibits demonstrations in cemeteries under the control of
the National Cemetery Administration or in Arlington National
Cemetery ``unless the demonstration has been approved by the
cemetery superintendent.'' Nonetheless, I do not believe

[[Page 7373]]

that this section permits unbridled discretion in the
cemetery superintendent. Rather, I think that his discretion
is well-cabined within and defined by the administrative
function the law places upon the cemetery superintendent.
A case directly on point is Griffin v. Secretary of
Veterans Affairs, 288 F.3d 1309 (Fed. Cir. 2002). Some
veterans were not permitted under federal regulations from
placing a Confederate flag at a national cemetery. Placing a
flag was interpreted as a forbidden demonstration under 38
C.F.R., sect. 1.218(a)(14). Subsection (i) declares in part,
``[A]ny service, ceremony, or demonstration, except as
authorized by the head of the facility or designee, is
prohibited.'' Petitioners asserted that the section gave
unconstitutional discretion to the administrator of the
facility.
In Griffin, the Federal Circuit Court pointed out that
cemeteries are non-public forums the regulations of which are
subject only to a reasonable basis test. However, although
the government may limit the content of expression in non-
public forums, it may not engage in viewpoint discrimination.
The question was whether the discretion given by the law to
the cemetery's administrator brought with it the danger of
viewpoint discrimination. After all, a Confederate flag
carries a different viewpoint from the Stars and Stripes.
The Federal Circuit found that the Supreme Court had
applied the viewpoint discrimination doctrine only in
traditional public forums or in designated public forums. 288
F.3d at 1321. The court zeroed in on the relevant variable in
this kind of case: ``We are obliged to examine the nature of
the forum because the restrictions in nonpublic fora may be
reasonable if they are aimed at preserving the property for
the purpose to which it is dedicated.'' 288 F.3d at 1323.
Finding that there was sufficient Supreme Court support,
citing United States v. Kokinda, 497 U.S. 720 (1990), the
Federal Circuit upheld the discretion lodged in the
cemetery's administrator ``when such discretion is necessary
to preserve the function and character of the forum.'' 288
F.3d at 1323.
The purpose of many non-public forums is normative and
preserving the function of that forum may entail restricting
opposing normative viewpoints. Schools, for example, are
nonpublic forums charged with developing students' character
for participation as well-informed and well-developed
citizens in our system of representative government. To that
end, schools may insist that students observe rules of
respect and avoid hateful or immoral language. A student with
an opposite viewpoint who fails to observe the rules of
respect and makes his point with crude language is not
protected by the First Amendment. Hazelwood School District
v. Kuhlmeier, 484 U.S. 260 (1968). Accordingly, the
superintendent of a national cemetery is charged with
maintaining the cemetery and its activities ``as a tribute to
our gallant dead.'' Under H.R. 5037 he is granted reasonable
discretion to assure that all activities within the cemetery
accord with its lawfully stated purpose. He may permit
ceremonies or demonstrations or signs or programs that accord
with such purpose and forbid those that do not. In doing so,
the restriction imposed is ``reasonable and not an effort to
suppress expression merely because public officials oppose
the speaker's view.'' 288 F.3d at 1321, citing, Cornelius v.
NAACP Legal Del & Educ. Fund, Inc., 473 U.S. 788, 800 (1985).

IV. Conclusion

H.R. 5037 is a well-crafted bill that seeks to maintain the
decorum necessary to honor our veterans and those who have
died for our freedoms and who now rest in national
cemeteries. I find that the bill's careful limitations on
disruptive demonstrations and the limited discretion it gives
to cemetery superintendents to be well with constitutional
limits.

Mr. CANTOR. Mr. Speaker, I rise today in strong support of H.R. 5037,
the Respect for America's Fallen Heroes Act.
Throughout the history of our country, countless Americans have made
the ultimate sacrifice so that we could live freely.
We owe these fallen heroes a debt of gratitude, and we should
guarantee the fallen and their families a peaceful journey to their
final resting place.
Mr. Speaker, our military cemeteries are hallowed grounds. During the
Gettysburg Address, I believe President Abraham Lincoln said it best:

We have come to dedicate a portion of that field, as a
final resting place for those who here gave their lives that
the nation might live. It is altogether fitting and proper
that we should do this.
But, in a larger sense, we can not dedicate--we can not
consecrate--we can not hallow--this ground. The brave men,
living and dead, who struggled here, have consecrated it, far
above our poor power to add or detract. The world will little
note, nor long remember what we say here, but it can never
forget what they did here.

For these reasons, I am greatly troubled that groups exploit the
sacrifice of so many Americans. These groups trespass on the memories
and hallowed ground of our heroes.
Demonstrations at cemeteries disrespect those who have fallen and the
loved ones they leave behind. As they held their lines--we must do the
same. This bill strikes a proper balance between the liberties they
defended and the respect earned.
I urge the passage of this bill for we must support their loved ones
and honor their sacrifice.
Mr. RYUN of Kansas. Mr. Speaker, I rise today in support of H.R.
5037, the Respect for America's Fallen Heroes Act. This is a much
needed piece of legislation to curb the unfortunate actions of a small
minority of people.
Although I am glad to have this opportunity to support the
servicemembers in my home state of Kansas and around the world, I am
disappointed that we even need this bill.
I have a lot of servicemembers in my district who are courageously
serving our country in combat. I have talked to many of them and I have
seen their desire and passion to serve their country out of a love for
freedom, democracy, and for their country.
Unfortunately, some of these service-
members have lost their lives and their families must now grieve their
loss. The families of our fallen servicemembers--our true heroes--
should not be subjected to protests, hate-filled phone calls, and other
obscenities. No one should experience that, especially not after losing
a loved one. That is why I support this bill that will help protect the
families of our fallen servicemembers from unwelcome protestors.
Our servicemembers embody the exact opposite of hate by sacrificing
their lives so that we can keep ours. I pay tribute to them, and I
wholeheartedly support this legislation.
Mr. ORTIZ. Mr. Speaker, I rise today in support of the Respect for
America's Fallen Heroes Act--of which I am a proud co-sponsor.
Like so many of my colleagues, I was horrified that members of
Topeka, Kansas, based Westboro Baptist Church were verbally abusing--
and interrupting--the funerals of service members who gave the last
full measure of devotion to this Nation. My constituents and I have
been revolted by this offensive activity.
It matters not what your individual position is on either war we are
currently prosecuting--in Iraq or Afghanistan--certainly we can all
agree protesting at military funerals is a cruel and unnecessary
hardship on our military families during their most difficult hour.
I respect the first amendment rights of protesters, and I do not
believe this legislation would restrict that right. The restrictions
placed in this bill would allow families the privacy to conduct
funerals, while still preserving the constitutional right of political
protest either before or after family funerals conducted within the
National Cemetery System.
We can best respect fallen service members by respecting the
principles for which they made the supreme sacrifice. Today's bill
respects them by honoring those principles of freedom--even when a
callous few ineffectively attempt to demean their dignity--and it
allows their families to grieve without being victimized by those who
feel the need to denigrate fallen soldiers and their families at a most
private moment.
I ask that all our States pass similar legislation at their State
cemeteries, and I urge my colleagues to vote yes on this bill.
Mr. ADERHOLT. Mr. Speaker, I rise today in strong support of H.R.
5037, offered by my colleague from Michigan. We owe a tremendous debt
of gratitude not only to the fallen soldier, sailor, airman, or Marine,
but to their families as well. At their darkest hour, their grief does
not need to be exploited by those trying to make a political point.
This intentional disruption of a brief period of time meant to honor a
fallen hero goes against the very fiber of American decency. Free
speech and public protests are a right; however, taunting and
tormenting families at the very moment they bury heir dead is not a
right; it is abhorrent. This bill gives the family members of our
fallen heroes the respect that they are owed, and the peace that they
deserve as they bury their loved ones. I urge my colleagues to vote yes
on this bill, and I hope it is then acted on quickly by the Senate and
signed into law by the President.
Mr. MOORE of Kansas. Mr. Speaker, I rise today in support of H.R.
5037, the Respect for America's Fallen Heroes Act. I read with disgust
the article on the protests that occurred at the military funeral for
Army SSG. Jeremy Doyle, who was killed in Iraq, earlier this year. It
especially saddens me that the individuals who protested at Staff
Sergeant Doyle's funeral were from the Westboro Baptist Church in
Topeka, KS. The church's founder, Rev. Fred Phelps, says that American
soldiers are being killed in Iraq as vengeance from God for protecting
a country that harbors gays.
I find it abhorrent that individuals and groups feel a military
funeral is an appropriate forum to display their beliefs on gay rights.
Losing a family member during military service

[[Page 7374]]

is a very difficult and devastating thing. It is unfortunate that some
individuals and groups add to the anguish and grief of those who have
lost a loved one by protesting outside of the funerals of fallen
soldiers. Our military heroes who make the ultimate sacrifice for our
country deserve our respect and gratitude. I condemn these actions in
the strongest terms possible and I'm proud to support H.R. 5037.
Mr. BUYER. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore. The gentleman from Texas also has another 5
minutes.
Mr. REYES. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Indiana (Mr. Buyer) that the House suspend the rules and
pass the bill, H.R. 5037.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of
those present have voted in the affirmative.
Mr. BUYER. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the
Chair's prior announcement, further proceedings on this question will
be postponed.

____________________

GENERAL LEAVE

Mr. BUYER. Mr. Speaker, I ask that all Members may have 5 legislative
days in which to revise and extend their remarks and to include
extraneous material on H.R. 5037.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Indiana?
There was no objection.

____________________

JACK C. MONTGOMERY DEPARTMENT OF VETERANS AFFAIRS MEDICAL CENTER

Mr. BUYER. Mr. Speaker, I move to suspend the rules and pass the bill
(H.R. 3829) to designate the Department of Veterans Affairs Medical
Center in Muskogee, Oklahoma, as the Jack C. Montgomery Department of
Veterans Affairs Medical Center.
The Clerk read as follows:

H.R. 3829

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

SECTION 1. JACK C. MONTGOMERY DEPARTMENT OF VETERANS AFFAIRS
MEDICAL CENTER.

(a) In General.--The Department of Veterans Affairs medical
center in Muskogee, Oklahoma, shall after the date of the
enactment of this Act be known and designated as the ``Jack
C. Montgomery Department of Veterans Affairs Medical
Center''.
(b) References.--Any reference in any law, regulation, map,
document, record, or other paper of the United States to the
medical center referred to in subsection (a) shall be
considered to be a reference to the Jack C. Montgomery
Department of Veterans Affairs Medical Center.

The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Indiana (Mr. Buyer) and the gentleman from Maine (Mr. Michaud) each
will control 20 minutes.
The Chair recognizes the gentleman from Indiana.
Mr. BUYER. Mr. Speaker, I yield myself such time as I may consume.

{time} 1615

Mr. Speaker, Jack C. Montgomery, a Cherokee from Oklahoma, was one of
five Native Americans who were awarded the highest military honor in
the 20th century, the Medal of Honor, and a first lieutenant with the
45th Infantry Division, the Thunderbirds.
On February 22, 1944, near Padiglione, Italy, Montgomery's rifle
platoon was under fire by three echelons of enemy forces when he
single-handedly attacked all three positions, taking prisoners in the
process. As a result of his valor, Lieutenant Montgomery's actions
demoralized the enemy and inspired his men to defeat the enemy forces.
In addition to being awarded the Medal of Honor, Lieutenant
Montgomery was also awarded the Silver Star, the Bronze Star Medal and
the Purple Heart with an Oak Leaf Cluster. On his release from the Army
after World War II, Mr. Montgomery began a career with the Veterans
Administration in Muskogee, Oklahoma, where he remained in service for
most of his life.
It is appropriate that we name the VA Medical Center in Muskogee for
this American hero who not only served his country in wartime, but also
continued his service to this Nation through his work in the Veterans
Administration.
Mr. Montgomery is survived by his wife, Joyce; and it is our hope to
have this legislation passed by the Senate and signed by the President
in a timely manner. This legislation is cosponsored and supported by
the entire Oklahoma delegation and also has the support of the State's
major veterans service organizations.
Mr. Speaker, I particularly would like to thank my colleague, Mr.
Boren, who represents the Second Congressional District of Oklahoma,
for introducing this most appropriate legislation.
Mr. Speaker, I reserve the balance of my time.
Mr. MICHAUD. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I would like to thank Congressman Dan Boren, who
represents the Second Congressional District of Oklahoma, for his
leadership in introducing H.R. 3829. I would also like to thank
Chairman Buyer and Ranking Member Evans for helping to bring this
legislation to the floor.
H.R. 3829 pays tribute to World War II hero Jack C. Montgomery by
designating the Department of Veterans Affairs Medical Center in
Muskogee, Oklahoma, as the Jack C. Montgomery Department of Veterans
Affairs Medical Center.
Jack Montgomery is a recipient of the Medal of Honor, the highest
award for valor and combat bestowed upon an individual serving in the
armed services. For his distinguished service, he was also recognized
by the Silver Star, the Bronze Star and the Purple Heart with Cluster.
During World War II, Jack Montgomery served as a first lieutenant in
the United States Army's 45th Infantry Division. On February 22, 1944,
in Italy, he fearlessly risked his life above and beyond the call of
duty by single-handedly attacking three strong enemy infantry positions
that threatened the rifle platoons under his command. His fearless,
aggressive and brave action that morning accounted for a total of 11
enemy dead, 32 prisoners and an unknown number wounded. Late that
night, while supporting an adjacent unit, he was seriously wounded by
mortar fragments.
The citation accommodating his Medal of Honor recognized that his
courage and heroism inspired his men to a degree beyond estimation.
Upon his release from the Army, he began a career in the Veterans
Administration, Muskogee, Oklahoma.
It is fitting that Congress designate the Muskogee VA Medical Center
to Jack C. Montgomery, Department of Veterans Affairs Medical Center. I
rise in support of this legislation and urge my colleagues to do the
same.
Mr. Speaker, I yield 5 minutes to the gentleman from Oklahoma, a
gentleman who cares very dearly about veterans and a fellow Blue Dog,
Congressman Dan Boren.
Mr. BOREN. Mr. Speaker, I rise today in support of H.R. 3829. This
bill will designate the Department of Veterans Affairs Medical Center
in my hometown of Muskogee, Oklahoma, as the Jack C. Montgomery
Department of Veterans Affairs Medical Center. Mr. Speaker, I think of
very few other Americans who deserve to have an honor such as this
bestowed upon them, and I am proud to sponsor this bill.
Jack C. Montgomery is a true American hero. His story of service to
his country begins while attending Bacone College in Muskogee. During
this time, he felt the call to serve his country during World War II,
and enlisted in the 45th Division Thunderbirds of the Oklahoma National
Guard.
Shortly thereafter, Lieutenant Montgomery found himself with members
of the 45th near Padiglione, Italy on February 22, 1944. On this day,
Lieutenant Montgomery's rifle platoon came under the fire of three
echelons of enemy

[[Page 7375]]

forces. Under enemy fire, Jack Montgomery single-handedly attacked all
three enemy echelons. As a result of his courage, Lieutenant
Montgomery's actions demoralized the enemy troops and inspired his men
to defeat and capture 32 Axis troops.
Upon returning to the United States, a good Democrat, President
Franklin D. Roosevelt, personally awarded Jack Montgomery the Medal of
Honor, which is the highest honor for valor awarded to members of the
Armed Forces.
Mr. Speaker, Jack Montgomery's distinguished military career goes far
beyond the Medal of Honor. He was also awarded the Silver Star, the
Bronze Star and the Purple Heart with Cluster, to mention only a few of
his distinctions. Following World War II, Jack Montgomery was honorably
released from the Army.
However, I am proud to say that he chose to continue his service to
his country and his fellow veterans by beginning a career with a VA
administration in Muskogee, Oklahoma.
Even following his retirement from the Veterans Administration, Jack
Montgomery chose to continue helping his fellow veterans by
volunteering at the VA Medical Center, also located in Muskogee,
Oklahoma, where he worked for more than 750 hours driving a shuttle to
transport veterans from the parking lot to the hospital.
Mr. Speaker, this VA medical center where the Medal of Honor
recipient, Lieutenant Jack Montgomery, gave his time helping his fellow
veterans is the same facility that this bill seeks to name in his
honor. I find it only fitting that we honor an individual like Jack
Montgomery for his selflessness, both on the battlefield and here at
home in the United States of America.
Mr. Speaker, I encourage my colleagues to join me in supporting H.R.
3829.
Mr. BUYER. Mr. Speaker, I reserve the balance of my time.
Mr. MICHAUD. Mr. Speaker, it is appropriate that we in Congress
recognize the heroism of the men and women who have served our Nation
in the Armed Forces. It is an important and enduring symbolic tribute
to name a VA medical center in honor of this World War II hero.
As we near Memorial Day and our thoughts turn to those who made the
ultimate sacrifice, we in Congress must continue to pay tribute to our
living veterans with both symbols and tangible benefits and services.
We have much work to do, and veterans and their families are counting
on us to act. I know that we are united in this commitment to honor our
veterans. I appreciate the hard work and look forward, as I have over
the last 3\1/2\ years, to work with Chairman Buyer to make sure that we
do all we can to help our veterans and continue to look forward to
working with Chairman Buyer, Chairman Brown and Ranking Member Evans
and other Veterans Affairs Committee members to pass needed health care
and benefit legislation to meet this obligation.
Mr. Speaker, I yield back the balance of my time.
Mr. BUYER. Mr. Speaker, I would like to thank the gentleman from
Maine (Mr. Michaud). He serves as ranking member of the Subcommittee on
Health for the House Veterans Affairs Committee. His heart is right,
and he does his homework.
You have got the right demeanor. I appreciate your leadership.
Mr. Speaker, I urge all Members to give favorable consideration to
H.R. 3829, a bill to honor a true American hero.
I have no further requests for time, and I yield back the balance of
my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Indiana (Mr. Buyer) that the House suspend the rules and
pass the bill, H.R. 3829.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of
those present have voted in the affirmative.
Mr. BUYER. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the
Chair's prior announcement, further proceedings on this question will
be postponed.

____________________

GENERAL LEAVE

Mr. BUYER. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days in which to revise and extend their remarks and
include extraneous matter on H.R. 3829.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Indiana?
There was no objection.

____________________

CONFERENCE REPORT ON H.R. 4297, TAX INCREASE PREVENTION AND
RECONCILIATION ACT OF 2005

Mr. THOMAS submitted the following conference report and statement on
the bill (H.R. 4297) to provide for reconciliation pursuant to section
201(b) of the concurrent resolution on the budget for fiscal year 2006:

Conference Report (H. Rept. 109-455)

The committee of conference on the disagreeing votes of the
two Houses on the amendment of the Senate to the bill (H.R.
4297), to provide for reconciliation pursuant to section
201(b) of the concurrent resolution on the budget for fiscal
year 2006, having met, after full and free conference, have
agreed to recommend and do recommend to their respective
Houses as follows:
That the House recede from its disagreement to the
amendment of the Senate and agree to the same with an
amendment as follows:
In lieu of the matter proposed to be inserted by the Senate
amendment, insert the following:

SECTION 1. SHORT TITLE, ETC.

(a) Short Title.--This Act may be cited as the ``Tax
Increase Prevention and Reconciliation Act of 2005''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--The table of contents for this Act
is as follows:

Sec. 1. Short title, etc.

TITLE I--EXTENSION AND MODIFICATION OF CERTAIN PROVISIONS

Sec. 101. Increased expensing for small business.
Sec. 102. Capital gains and dividends rates.
Sec. 103. Controlled foreign corporations.

TITLE II--OTHER PROVISIONS

Sec. 201. Clarification of taxation of certain settlement funds.
Sec. 202. Modification of active business definition under section 355.
Sec. 203. Veterans' mortgage bonds.
Sec. 204. Capital gains treatment for certain self-created musical
works.
Sec. 205. Vessel tonnage limit.
Sec. 206. Modification of special arbitrage rule for certain funds.
Sec. 207. Amortization of expenses incurred in creating or acquiring
music or music copyrights.
Sec. 208. Modification of effective date of disregard of certain
capital expenditures for purposes of qualified small
issue bonds.
Sec. 209. Modification of treatment of loans to qualified continuing
care facilities.

TITLE III--ALTERNATIVE MINIMUM TAX RELIEF

Sec. 301. Increase in alternative minimum tax exemption amount for
2006.
Sec. 302. Allowance of nonrefundable personal credits against regular
and alternative minimum tax liability.

TITLE IV--CORPORATE ESTIMATED TAX PROVISIONS

Sec. 401. Time for payment of corporate estimated taxes.

TITLE V--REVENUE OFFSET PROVISIONS

Sec. 501. Application of earnings stripping rules to partners which are
corporations.
Sec. 502. Reporting of interest on tax-exempt bonds.
Sec. 503. 5-year amortization of geological and geophysical
expenditures for certain major integrated oil companies.
Sec. 504. Application of FIRPTA to regulated investment companies.
Sec. 505. Treatment of distributions attributable to FIRPTA gains.
Sec. 506. Prevention of avoidance of tax on investments of foreign
persons in United States real property through wash sale
transactions.
Sec. 507. Section 355 not to apply to distributions involving
disqualified investment companies.
Sec. 508. Loan and redemption requirements on pooled financing
requirements.

[[Page 7376]]

Sec. 509. Partial payments required with submission of offers-in-
compromise.
Sec. 510. Increase in age of minor children whose unearned income is
taxed as if parent's income.
Sec. 511. Imposition of withholding on certain payments made by
government entities.
Sec. 512. Conversions to Roth IRAs.
Sec. 513. Repeal of FSC/ETI binding contract relief.
Sec. 514. Only wages attributable to domestic production taken into
account in determining deduction for domestic production.
Sec. 515. Modification of exclusion for citizens living abroad.
Sec. 516. Tax involvement of accommodation parties in tax shelter
transactions.
TITLE I--EXTENSION AND MODIFICATION OF CERTAIN PROVISIONS

SEC. 101. INCREASED EXPENSING FOR SMALL BUSINESS.

Subsections (b)(1), (b)(2), (b)(5), (c)(2), and
(d)(1)(A)(ii) of section 179 (relating to election to expense
certain depreciable business assets) are each amended by
striking ``2008'' and inserting ``2010''.

SEC. 102. CAPITAL GAINS AND DIVIDENDS RATES.

Section 303 of the Jobs and Growth Tax Relief
Reconciliation Act of 2003 is amended by striking ``December
31, 2008'' and inserting ``December 31, 2010''.

SEC. 103. CONTROLLED FOREIGN CORPORATIONS.

(a) Subpart F Exception for Active Financing.--
(1) Exempt insurance income.--Paragraph (10) of section
953(e) (relating to application) is amended--
(A) by striking ``January 1, 2007'' and inserting ``January
1, 2009'', and
(B) by striking ``December 31, 2006'' and inserting
``December 31, 2008''.
(2) Exception to treatment as foreign personal holding
company income.--Paragraph (9) of section 954(h) (relating to
application) is amended by striking ``January 1, 2007'' and
inserting ``January 1, 2009''.
(b) Look-Through Treatment of Payments Between Related
Controlled Foreign Corporations Under the Foreign Personal
Holding Company Rules.--
(1) In general.--Subsection (c) of section 954 (relating to
foreign personal holding company income) is amended by adding
at the end the following new paragraph:
``(6) Look-thru rule for related controlled foreign
corporations.--
``(A) In general.--For purposes of this subsection,
dividends, interest, rents, and royalties received or accrued
from a controlled foreign corporation which is a related
person shall not be treated as foreign personal holding
company income to the extent attributable or properly
allocable (determined under rules similar to the rules of
subparagraphs (C) and (D) of section 904(d)(3)) to income of
the related person which is not subpart F income. For
purposes of this subparagraph, interest shall include
factoring income which is treated as income equivalent to
interest for purposes of paragraph (1)(E). The Secretary
shall prescribe such regulations as may be appropriate to
prevent the abuse of the purposes of this paragraph.
``(B) Application.--Subparagraph (A) shall apply to taxable
years of foreign corporations beginning after December 31,
2005, and before January 1, 2009, and to taxable years of
United States shareholders with or within which such taxable
years of foreign corporations end.''.
(2) Effective date.--The amendment made by this subsection
shall apply to taxable years of foreign corporations
beginning after December 31, 2005, and to taxable years of
United States shareholders with or within which such taxable
years of foreign corporations end.
TITLE II--OTHER PROVISIONS

SEC. 201. CLARIFICATION OF TAXATION OF CERTAIN SETTLEMENT
FUNDS.

(a) In General.--Subsection (g) of section 468B (relating
to clarification of taxation of certain funds) is amended to
read as follows:
``(g) Clarification of Taxation of Certain Funds.--
``(1) In general.--Except as provided in paragraph (2),
nothing in any provision of law shall be construed as
providing that an escrow account, settlement fund, or similar
fund is not subject to current income tax. The Secretary
shall prescribe regulations providing for the taxation of any
such account or fund whether as a grantor trust or otherwise.
``(2) Exemption from tax for certain settlement funds.--An
escrow account, settlement fund, or similar fund shall be
treated as beneficially owned by the United States and shall
be exempt from taxation under this subtitle if--
``(A) it is established pursuant to a consent decree
entered by a judge of a United States District Court,
``(B) it is created for the receipt of settlement payments
as directed by a government entity for the sole purpose of
resolving or satisfying one or more claims asserting
liability under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980,
``(C) the authority and control over the expenditure of
funds therein (including the expenditure of contributions
thereto and any net earnings thereon) is with such government
entity, and
``(D) upon termination, any remaining funds will be
disbursed to such government entity for use in accordance
with applicable law.

For purposes of this paragraph, the term `government entity'
means the United States, any State or political subdivision
thereof, the District of Columbia, any possession of the
United States, and any agency or instrumentality of any of
the foregoing.
``(3) Termination.--Paragraph (2) shall not apply to
accounts and funds established after December 31, 2010.''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to accounts and funds established after the date
of the enactment of this Act.

SEC. 202. MODIFICATION OF ACTIVE BUSINESS DEFINITION UNDER
SECTION 355.

Subsection (b) of section 355 (defining active conduct of a
trade or business) is amended by adding at the end the
following new paragraph:
``(3) Special rule relating to active business
requirement.--
``(A) In general.--In the case of any distribution made
after the date of the enactment of this paragraph and on or
before December 31, 2010, a corporation shall be treated as
meeting the requirement of paragraph (2)(A) if and only if
such corporation is engaged in the active conduct of a trade
or business.
``(B) Affiliated group rule.--For purposes of subparagraph
(A), all members of such corporation's separate affiliated
group shall be treated as one corporation. For purposes of
the preceding sentence, a corporation's separate affiliated
group is the affiliated group which would be determined under
section 1504(a) if such corporation were the common parent
and section 1504(b) did not apply.
``(C) Transition rule.--Subparagraph (A) shall not apply to
any distribution pursuant to a transaction which is--
``(i) made pursuant to an agreement which was binding on
the date of the enactment of this paragraph and at all times
thereafter,
``(ii) described in a ruling request submitted to the
Internal Revenue Service on or before such date, or
``(iii) described on or before such date in a public
announcement or in a filing with the Securities and Exchange
Commission.

The preceding sentence shall not apply if the distributing
corporation elects not to have such sentence apply to
distributions of such corporation. Any such election, once
made, shall be irrevocable.
``(D) Special rule for certain pre-enactment
distributions.--For purposes of determining the continued
qualification under paragraph (2)(A) of distributions made on
or before the date of the enactment of this paragraph as a
result of an acquisition, disposition, or other restructuring
after such date and on or before December 31, 2010, such
distribution shall be treated as made on the date of such
acquisition, disposition, or restructuring for purposes of
applying subparagraphs (A) through (C) of this paragraph.''.

SEC. 203. VETERANS' MORTGAGE BONDS.

(a) Expansion of Definition of Veterans Eligible for State
Home Loan Programs Funded by Qualified Veterans' Mortgage
Bonds.--
(1) In general.--Paragraph (4) of section 143(l) (defining
qualified veteran) is amended to read as follows:
``(4) Qualified veteran.--For purposes of this subsection,
the term `qualified veteran' means--
``(A) in the case of the States of Alaska, Oregon, and
Wisconsin, any veteran--
``(i) who served on active duty, and
``(ii) who applied for the financing before the date 25
years after the last date on which such veteran left active
service, and
``(B) in the case of any other State, any veteran--
``(i) who served on active duty at some time before January
1, 1977, and
``(ii) who applied for the financing before the later of--

``(I) the date 30 years after the last date on which such
veteran left active service, or
``(II) January 31, 1985.''.

(2) Effective date.--The amendments made by this subsection
shall apply to bonds issued on or after the date of the
enactment of this Act.
(b) Revision of State Veterans Limit.--
(1) In general.--Subparagraph (B) of section 143(l)(3)
(relating to volume limitation) is amended--
(A) by redesignating clauses (i) and (ii) as subclauses (I)
and (II), respectively, and moving such clauses 2 ems to the
right,
(B) by amending the matter preceding subclause (I), as
designated by subparagraph (A), to read as follows:
``(B) State veterans limit.--
``(i) In general.--In the case of any State to which clause
(ii) does not apply, the State veterans limit for any
calendar year is the amount equal to--'', and
(C) by adding at the end the following new clauses:
``(ii) Alaska, oregon, and wisconsin.--In the case of the
following States, the State veterans limit for any calendar
year is the amount equal to--

``(I) $25,000,000 for the State of Alaska,
``(II) $25,000,000 for the State of Oregon, and
``(III) $25,000,000 for the State of Wisconsin.

``(iii) Phasein.--In the case of calendar years beginning
before 2010, clause (ii) shall be applied by substituting for
each of the dollar amounts therein an amount equal to the
applicable percentage of such dollar amount. For purposes of
the preceding sentence, the applicable percentage shall be
determined in accordance with the following table:

------------------------------------------------------------------------
``For Calendar Year: Applicable percentage is:
------------------------------------------------------------------------
2006....................................... 20 percent

[[Page 7377]]

2007....................................... 40 percent
2008....................................... 60 percent
2009....................................... 80 percent.
------------------------------------------------------------------------

``(iv) Termination.--The State veterans limit for the
States specified in clause (ii) for any calendar year after
2010 is zero.''.
(2) Effective date.--The amendments made by this subsection
shall apply to allocations of State volume limit after April
5, 2006.

SEC. 204. CAPITAL GAINS TREATMENT FOR CERTAIN SELF-CREATED
MUSICAL WORKS.

(a) In General.--Subsection (b) of section 1221 (relating
to capital asset defined) is amended by redesignating
paragraph (3) as paragraph (4) and by inserting after
paragraph (2) the following new paragraph:
``(3) Sale or exchange of self-created musical works.--At
the election of the taxpayer, paragraphs (1) and (3) of
subsection (a) shall not apply to musical compositions or
copyrights in musical works sold or exchanged before January
1, 2011, by a taxpayer described in subsection (a)(3).''.
(b) Limitation on Charitable Contributions.--Subparagraph
(A) of section 170(e)(1) is amended by inserting
``(determined without regard to section 1221(b)(3))'' after
``long-term capital gain''.
(c) Effective Date.--The amendments made by this section
shall apply to sales and exchanges in taxable years beginning
after the date of the enactment of this Act.

SEC. 205. VESSEL TONNAGE LIMIT.

(a) In General.--Paragraph (4) of section 1355(a) (relating
to qualifying vessel) is amended by inserting ``(6,000, in
the case of taxable years beginning after December 31, 2005,
and ending before January 1, 2011)'' after ``10,000''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2005.

SEC. 206. MODIFICATION OF SPECIAL ARBITRAGE RULE FOR CERTAIN
FUNDS.

In the case of bonds issued after the date of the enactment
of this Act and before August 31, 2009--
(1) the requirement of paragraph (1) of section 648 of the
Deficit Reduction Act of 1984 (98 Stat. 941) shall be treated
as met with respect to the securities or obligations referred
to in such section if such securities or obligations are held
in a fund the annual distributions from which cannot exceed 7
percent of the average fair market value of the assets held
in such fund except to the extent distributions are necessary
to pay debt service on the bond issue, and
(2) paragraph (3) of such section shall be applied by
substituting ``distributions from'' for ``the investment
earnings of'' both places it appears.

SEC. 207. AMORTIZATION OF EXPENSES INCURRED IN CREATING OR
ACQUIRING MUSIC OR MUSIC COPYRIGHTS.

(a) In General.--Section 167(g) (relating to depreciation
under income forecast method) is amended by adding at the end
the following new paragraph:
``(8) Special rules for certain musical works and
copyrights.--
``(A) In general.--If an election is in effect under this
paragraph for any taxable year, then, notwithstanding
paragraph (1), any expense which--
``(i) is paid or incurred by the taxpayer in creating or
acquiring any applicable musical property placed in service
during the taxable year, and
``(ii) is otherwise properly chargeable to capital account,

shall be amortized ratably over the 5-year period beginning
with the month in which the property was placed in service.
The preceding sentence shall not apply to any expense which,
without regard to this paragraph, would not be allowable as a
deduction.
``(B) Exclusive method.--Except as provided in this
paragraph, no depreciation or amortization deduction shall be
allowed with respect to any expense to which subparagraph (A)
applies.
``(C) Applicable musical property.--For purposes of this
paragraph--
``(i) In general.--The term `applicable musical property'
means any musical composition (including any accompanying
words), or any copyright with respect to a musical
composition, which is property to which this subsection
applies without regard to this paragraph.
``(ii) Exceptions.--Such term shall not include any
property--

``(I) with respect to which expenses are treated as
qualified creative expenses to which section 263A(h) applies,
``(II) to which a simplified procedure established under
section 263A(j)(2) applies, or
``(III) which is an amortizable section 197 intangible (as
defined in section 197(c)).

``(D) Election.--An election under this paragraph shall be
made at such time and in such form as the Secretary may
prescribe and shall apply to all applicable musical property
placed in service during the taxable year for which the
election applies.
``(E) Termination.--An election may not be made under this
paragraph for any taxable year beginning after December 31,
2010.''.
(b) Effective Date.--The amendments made by this section
shall apply to expenses paid or incurred with respect to
property placed in service in taxable years beginning after
December 31, 2005.

SEC. 208. MODIFICATION OF EFFECTIVE DATE OF DISREGARD OF
CERTAIN CAPITAL EXPENDITURES FOR PURPOSES OF
QUALIFIED SMALL ISSUE BONDS.

(a) In General.--Section 144(a)(4)(G) is amended by
striking ``September 30, 2009'' and inserting ``December 31,
2006''.
(b) Conforming Amendment.--Section 144(a)(4)(F) is amended
by striking ``September 30, 2009'' and inserting ``December
31, 2006''.

SEC. 209. MODIFICATION OF TREATMENT OF LOANS TO QUALIFIED
CONTINUING CARE FACILITIES.

(a) In General.--Section 7872 is amended by redesignating
subsection (h) as subsection (i) and inserting after
subsection (g) the following new subsection:
``(h) Exception for Loans to Qualified Continuing Care
Facilities.--
``(1) In general.--This section shall not apply for any
calendar year to any below-market loan owed by a facility
which on the last day of such year is a qualified continuing
care facility, if such loan was made pursuant to a continuing
care contract and if the lender (or the lender's spouse)
attains age 62 before the close of such year.
``(2) Continuing care contract.--For purposes of this
section, the term `continuing care contract' means a written
contract between an individual and a qualified continuing
care facility under which--
``(A) the individual or individual's spouse may use a
qualified continuing care facility for their life or lives,
``(B) the individual or individual's spouse will be
provided with housing, as appropriate for the health of such
individual or individual's spouse--
``(i) in an independent living unit (which has additional
available facilities outside such unit for the provision of
meals and other personal care), and
``(ii) in an assisted living facility or a nursing
facility, as is available in the continuing care facility,
and
``(C) the individual or individual's spouse will be
provided assisted living or nursing care as the health of
such individual or individual's spouse requires, and as is
available in the continuing care facility.

The Secretary shall issue guidance which limits such term to
contracts which provide only facilities, care, and services
described in this paragraph.
``(3) Qualified continuing care facility.--
``(A) In general.--For purposes of this section, the term
`qualified continuing care facility' means 1 or more
facilities--
``(i) which are designed to provide services under
continuing care contracts,
``(ii) which include an independent living unit, plus an
assisted living or nursing facility, or both, and
``(iii) substantially all of the independent living unit
residents of which are covered by continuing care contracts.
``(B) Nursing homes excluded.--The term `qualified
continuing care facility' shall not include any facility
which is of a type which is traditionally considered a
nursing home.
``(4) Termination.--This subsection shall not apply to any
calendar year after 2010.''.
(b) Conforming Amendments.--
(1) Section 7872(g) is amended by adding at the end the
following new paragraph:
``(6) Suspension of application.--Paragraph (1) shall not
apply for any calendar year to which subsection (h)
applies.''.
(2) Section 142(d)(2)(B) is amended by striking ``Section
7872(g)'' and inserting ``Subsections (g) and (h) of section
7872''.
(c) Effective Date.--The amendment made by this section
shall apply to calendar years beginning after December 31,
2005, with respect to loans made before, on, or after such
date.
TITLE III--ALTERNATIVE MINIMUM TAX RELIEF

SEC. 301. INCREASE IN ALTERNATIVE MINIMUM TAX EXEMPTION
AMOUNT FOR 2006.

(a) In General.--Section 55(d)(1) (relating to exemption
amount for taxpayers other than corporations) is amended--
(1) by striking ``$58,000'' and all that follows through
``2005'' in subparagraph (A) and inserting ``$62,550 in the
case of taxable years beginning in 2006'', and
(2) by striking ``$40,250'' and all that follows through
``2005'' in subparagraph (B) and inserting ``$42,500 in the
case of taxable years beginning in 2006''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2005.

SEC. 302. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS AGAINST
REGULAR AND ALTERNATIVE MINIMUM TAX LIABILITY.

(a) In General.--Paragraph (2) of section 26(a) is
amended--
(1) by striking ``2005'' in the heading thereof and
inserting ``2006'', and
(2) by striking ``or 2005'' and inserting ``2005, or
2006''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2005.
TITLE IV--CORPORATE ESTIMATED TAX PROVISIONS

SEC. 401. TIME FOR PAYMENT OF CORPORATE ESTIMATED TAXES.

Notwithstanding section 6655 of the Internal Revenue Code
of 1986--
(1) in the case of a corporation with assets of not less
than $1,000,000,000 (determined as of the end of the
preceding taxable year)--
(A) the amount of any required installment of corporate
estimated tax which is otherwise due in July, August, or
September of 2006 shall be 105 percent of such amount,

[[Page 7378]]

(B) the amount of any required installment of corporate
estimated tax which is otherwise due in July, August, or
September of 2012 shall be 106.25 percent of such amount,
(C) the amount of any required installment of corporate
estimated tax which is otherwise due in July, August, or
September of 2013 shall be 100.75 percent of such amount, and
(D) the amount of the next required installment after an
installment referred to in subparagraph (A), (B), or (C)
shall be appropriately reduced to reflect the amount of the
increase by reason of such subparagraph,
(2) 20.5 percent of the amount of any required installment
of corporate estimated tax which is otherwise due in
September 2010 shall not be due until October 1, 2010, and
(3) 27.5 percent of the amount of any required installment
of corporate estimated tax which is otherwise due in
September 2011 shall not be due until October 1, 2011.
TITLE V--REVENUE OFFSET PROVISIONS

SEC. 501. APPLICATION OF EARNINGS STRIPPING RULES TO PARTNERS
WHICH ARE CORPORATIONS.

(a) In General.--Section 163(j) (relating to limitation on
deduction for interest on certain indebtedness) is amended by
redesignating paragraph (8) as paragraph (9) and by inserting
after paragraph (7) the following new paragraph:
``(8) Treatment of corporate partners.--Except to the
extent provided by regulations, in applying this subsection
to a corporation which owns (directly or indirectly) an
interest in a partnership--
``(A) such corporation's distributive share of interest
income paid or accrued to such partnership shall be treated
as interest income paid or accrued to such corporation,
``(B) such corporation's distributive share of interest
paid or accrued by such partnership shall be treated as
interest paid or accrued by such corporation, and
``(C) such corporation's share of the liabilities of such
partnership shall be treated as liabilities of such
corporation.''.
(b) Additional Regulatory Authority.--Section 163(j)(9)
(relating to regulations), as redesignated by subsection (a),
is amended by striking ``and'' at the end of subparagraph
(B), by striking the period at the end of subparagraph (C)
and inserting ``, and'', and by adding at the end the
following new subparagraph:
``(D) regulations providing for the reallocation of shares
of partnership indebtedness, or distributive shares of the
partnership's interest income or interest expense.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning on or after the date
of the enactment of this Act.

SEC. 502. REPORTING OF INTEREST ON TAX-EXEMPT BONDS.

(a) In General.--Section 6049(b)(2) (relating to
exceptions) is amended by striking subparagraph (B) and by
redesignating subparagraphs (C) and (D) as subparagraphs (B)
and (C), respectively.
(b) Conforming Amendment.--Section 6049(b)(2)(C), as
redesignated by subsection (a), is amended by striking
``subparagraph (C)'' and inserting ``subparagraph (B)''.
(c) Effective Date.--The amendments made by this section
shall apply to interest paid after December 31, 2005.

SEC. 503. 5-YEAR AMORTIZATION OF GEOLOGICAL AND GEOPHYSICAL
EXPENDITURES FOR CERTAIN MAJOR INTEGRATED OIL
COMPANIES.

(a) In General.--Section 167(h) (relating to amortization
of geological and geophysical expenditures) is amended by
adding at the end the following new paragraph:
``(5) Special rule for major integrated oil companies.--
``(A) In general.--In the case of a major integrated oil
company, paragraphs (1) and (4) shall be applied by
substituting `5-year' for `24 month'.
``(B) Major integrated oil company.--For purposes of this
paragraph, the term `major integrated oil company' means,
with respect to any taxable year, a producer of crude oil--
``(i) which has an average daily worldwide production of
crude oil of at least 500,000 barrels for the taxable year,
``(ii) which had gross receipts in excess of $1,000,000,000
for its last taxable year ending during calendar year 2005,
and
``(iii) to which subsection (c) of section 613A does not
apply by reason of paragraph (4) of section 613A(d),
determined--

``(I) by substituting `15 percent' for `5 percent' each
place it occurs in paragraph (3) of section 613A(d), and
``(II) without regard to whether subsection (c) of section
613A does not apply by reason of paragraph (2) of section
613A(d).

For purposes of clauses (i) and (ii), all persons treated as
a single employer under subsections (a) and (b) of section 52
shall be treated as 1 person and, in case of a short taxable
year, the rule under section 448(c)(3)(B) shall apply.''.
(b) Effective Date.--The amendment made by this section
shall apply to amounts paid or incurred after the date of the
enactment of this Act.

SEC. 504. APPLICATION OF FIRPTA TO REGULATED INVESTMENT
COMPANIES.

(a) In General.--Subclause (II) of section 897(h)(4)(A)(i)
(defining qualified investment entity) is amended by
inserting ``which is a United States real property holding
corporation or which would be a United States real property
holding corporation if the exceptions provided in subsections
(c)(3) and (h)(2) did not apply to interests in any real
estate investment trust or regulated investment company''
after ``regulated investment company''.
(b) Effective Date.--The amendment made by this section
shall take effect as if included in the provisions of section
411 of the American Jobs Creation Act of 2004 to which it
relates.

SEC. 505. TREATMENT OF DISTRIBUTIONS ATTRIBUTABLE TO FIRPTA
GAINS.

(a) Qualified Investment Entity.--
(1) In general.--Section 897(h)(1) is amended--
(A) by striking ``a nonresident alien individual or a
foreign corporation'' in the first sentence and inserting ``a
nonresident alien individual, a foreign corporation, or other
qualified investment entity'',
(B) by striking ``such nonresident alien individual or
foreign corporation'' in the first sentence and inserting
``such nonresident alien individual, foreign corporation, or
other qualified investment entity'', and
(C) by striking the second sentence and inserting the
following new sentence: ``Notwithstanding the preceding
sentence, any distribution by a qualified investment entity
to a nonresident alien individual or a foreign corporation
with respect to any class of stock which is regularly traded
on an established securities market located in the United
States shall not be treated as gain recognized from the sale
or exchange of a United States real property interest if such
individual or corporation did not own more than 5 percent of
such class of stock at any time during the 1-year period
ending on the date of such distribution.''.
(2) Exception to termination of application of section 897
rules to regulated investment companies.--Clause (ii) of
section 897(h)(4)(A) is amended by adding at the end the
following new sentence: ``Notwithstanding the preceding
sentence, an entity described in clause (i)(II) shall be
treated as a qualified investment entity for purposes of
applying paragraphs (1) and (5) and section 1445 with respect
to any distribution by the entity to a nonresident alien
individual or a foreign corporation which is attributable
directly or indirectly to a distribution to the entity from a
real estate investment trust.''.
(b) Withholding on Distributions Treated as Gain From
United States Real Property Interests.--Section 1445(e)
(relating to special rules for distributions, etc. by
corporations, partnerships, trusts, or estates) is amended by
redesignating paragraph (6) as paragraph (7) and by inserting
after paragraph (5) the following new paragraph:
``(6) Distributions by regulated investment companies and
real estate investment trusts.--If any portion of a
distribution from a qualified investment entity (as defined
in section 897(h)(4)) to a nonresident alien individual or a
foreign corporation is treated under section 897(h)(1) as
gain realized by such individual or corporation from the sale
or exchange of a United States real property interest, the
qualified investment entity shall deduct and withhold under
subsection (a) a tax equal to 35 percent (or, to the extent
provided in regulations, 15 percent (20 percent in the case
of taxable years beginning after December 31, 2010)) of the
amount so treated.''.
(c) Treatment of Certain Distributions as Dividends.--
(1) In general.--Section 852(b)(3) (relating to capital
gains) is amended by adding at the end the following new
subparagraph:
``(E) Certain distributions.--In the case of a distribution
to which section 897 does not apply by reason of the second
sentence of section 897(h)(1), the amount of such
distribution which would be included in computing long-term
capital gains for the shareholder under subparagraph (B) or
(D) (without regard to this subparagraph)--
``(i) shall not be included in computing such shareholder's
long-term capital gains, and
``(ii) shall be included in such shareholder's gross income
as a dividend from the regulated investment company.''.
(2) Conforming amendment.--Section 871(k)(2) (relating to
short-term capital gain dividends) is amended by adding at
the end the following new subparagraph:
``(E) Certain distributions.--In the case of a distribution
to which section 897 does not apply by reason of the second
sentence of section 897(h)(1), the amount which would be
treated as a short-term capital gain dividend to the
shareholder (without regard to this subparagraph)--
``(i) shall not be treated as a short-term capital gain
dividend, and
``(ii) shall be included in such shareholder's gross income
as a dividend from the regulated investment company.''.
(d) Effective Dates.--The amendments made by this section
shall apply to taxable years of qualified investment entities
beginning after December 31, 2005, except that no amount
shall be required to be withheld under section 1441, 1442, or
1445 of the Internal Revenue Code of 1986 with respect to any
distribution before the date of the enactment of this Act if
such amount was not otherwise required to be withheld under
any such section as in effect before such amendments.

SEC. 506. PREVENTION OF AVOIDANCE OF TAX ON INVESTMENTS OF
FOREIGN PERSONS IN UNITED STATES REAL PROPERTY
THROUGH WASH SALE TRANSACTIONS.

(a) In General.--Section 897(h) (relating to special rules
for certain investment entities) is amended by adding at the
end the following new paragraph:

[[Page 7379]]

``(5) Treatment of certain wash sale transactions.--
``(A) In general.--If an interest in a domestically
controlled qualified investment entity is disposed of in an
applicable wash sale transaction, the taxpayer shall, for
purposes of this section, be treated as having gain from the
sale or exchange of a United States real property interest in
an amount equal to the portion of the distribution described
in subparagraph (B) with respect to such interest which, but
for the disposition, would have been treated by the taxpayer
as gain from the sale or exchange of a United States real
property interest under paragraph (1).
``(B) Applicable wash sales transaction.--For purposes of
this paragraph--
``(i) In general.--The term `applicable wash sales
transaction' means any transaction (or series of
transactions) under which a nonresident alien individual,
foreign corporation, or qualified investment entity--

``(I) disposes of an interest in a domestically controlled
qualified investment entity during the 30-day period
preceding the ex-dividend date of a distribution which is to
be made with respect to the interest and any portion of
which, but for the disposition, would have been treated by
the taxpayer as gain from the sale or exchange of a United
States real property interest under paragraph (1), and
``(II) acquires, or enters into a contract or option to
acquire, a substantially identical interest in such entity
during the 61-day period beginning with the 1st day of the
30-day period described in subclause (I).

For purposes of subclause (II), a nonresident alien
individual, foreign corporation, or qualified investment
entity shall be treated as having acquired any interest
acquired by a person related (within the meaning of section
267(b) or 707(b)(1)) to the individual, corporation, or
entity, and any interest which such person has entered into
any contract or option to acquire.
``(ii) Application to substitute dividend and similar
payments.--Subparagraph (A) shall apply to--

``(I) any substitute dividend payment (within the meaning
of section 861), or
``(II) any other similar payment specified in regulations
which the Secretary determines necessary to prevent avoidance
of the purposes of this paragraph.

The portion of any such payment treated by the taxpayer as
gain from the sale or exchange of a United States real
property interest under subparagraph (A) by reason of this
clause shall be equal to the portion of the distribution such
payment is in lieu of which would have been so treated but
for the transaction giving rise to such payment.
``(iii) Exception where distribution actually received.--A
transaction shall not be treated as an applicable wash sales
transaction if the nonresident alien individual, foreign
corporation, or qualified investment entity receives the
distribution described in clause (i)(I) with respect to
either the interest which was disposed of, or acquired, in
the transaction.
``(iv) Exception for certain publicly traded stock.--A
transaction shall not be treated as an applicable wash sales
transaction if it involves the disposition of any class of
stock in a qualified investment entity which is regularly
traded on an established securities market within the United
States but only if the nonresident alien individual, foreign
corporation, or qualified investment entity did not own more
than 5 percent of such class of stock at any time during the
1-year period ending on the date of the distribution
described in clause (i)(I).''.
(b) No Withholding Required.--Section 1445(b) (relating to
exemptions) is amended by adding at the end the following new
paragraph:
``(8) Applicable wash sales transactions.--No person shall
be required to deduct and withhold any amount under
subsection (a) with respect to a disposition which is treated
as a disposition of a United States real property interest
solely by reason of section 897(h)(5).''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2005, except that such amendments shall not apply to any
distribution, or substitute dividend payment, occurring
before the date that is 30 days after the date of the
enactment of this Act.

SEC. 507. SECTION 355 NOT TO APPLY TO DISTRIBUTIONS INVOLVING
DISQUALIFIED INVESTMENT COMPANIES.

(a) In General.--Section 355 (relating to distributions of
stock and securities of a controlled corporation) is amended
by adding at the end the following new subsection:
``(g) Section Not to Apply to Distributions Involving
Disqualified Investment Corporations.--
``(1) In general.--This section (and so much of section 356
as relates to this section) shall not apply to any
distribution which is part of a transaction if--
``(A) either the distributing corporation or controlled
corporation is, immediately after the transaction, a
disqualified investment corporation, and
``(B) any person holds, immediately after the transaction,
a 50-percent or greater interest in any disqualified
investment corporation, but only if such person did not hold
such an interest in such corporation immediately before the
transaction.
``(2) Disqualified investment corporation.--For purposes of
this subsection--
``(A) In general.--The term `disqualified investment
corporation' means any distributing or controlled corporation
if the fair market value of the investment assets of the
corporation is--
``(i) in the case of distributions after the end of the 1-
year period beginning on the date of the enactment of this
subsection, \2/3\ or more of the fair market value of all
assets of the corporation, and
``(ii) in the case of distributions during such 1-year
period, \3/4\ or more of the fair market value of all assets
of the corporation.
``(B) Investment assets.--
``(i) In general.--Except as otherwise provided in this
subparagraph, the term `investment assets' means--

``(I) cash,
``(II) any stock or securities in a corporation,
``(III) any interest in a partnership,
``(IV) any debt instrument or other evidence of
indebtedness,
``(V) any option, forward or futures contract, notional
principal contract, or derivative,
``(VI) foreign currency, or
``(VII) any similar asset.

``(ii) Exception for assets used in active conduct of
certain financial trades or businesses.--Such term shall not
include any asset which is held for use in the active and
regular conduct of--

``(I) a lending or finance business (within the meaning of
section 954(h)(4)),
``(II) a banking business through a bank (as defined in
section 581), a domestic building and loan association
(within the meaning of section 7701(a)(19)), or any similar
institution specified by the Secretary, or
``(III) an insurance business if the conduct of the
business is licensed, authorized, or regulated by an
applicable insurance regulatory body.

This clause shall only apply with respect to any business if
substantially all of the income of the business is derived
from persons who are not related (within the meaning of
section 267(b) or 707(b)(1)) to the person conducting the
business.
``(iii) Exception for securities marked to market.--Such
term shall not include any security (as defined in section
475(c)(2)) which is held by a dealer in securities and to
which section 475(a) applies.
``(iv) Stock or securities in a 20-percent controlled
entity.--

``(I) In general.--Such term shall not include any stock
and securities in, or any asset described in subclause (IV)
or (V) of clause (i) issued by, a corporation which is a 20-
percent controlled entity with respect to the distributing or
controlled corporation.
``(II) Look-thru rule.--The distributing or controlled
corporation shall, for purposes of applying this subsection,
be treated as owning its ratable share of the assets of any
20-percent controlled entity.
``(III) 20-percent controlled entity.--For purposes of this
clause, the term `20-percent controlled entity' means, with
respect to any distributing or controlled corporation, any
corporation with respect to which the distributing or
controlled corporation owns directly or indirectly stock
meeting the requirements of section 1504(a)(2), except that
such section shall be applied by substituting `20 percent'
for `80 percent' and without regard to stock described in
section 1504(a)(4).

``(v) Interests in certain partnerships.--

``(I) In general.--Such term shall not include any interest
in a partnership, or any debt instrument or other evidence of
indebtedness, issued by the partnership, if 1 or more of the
trades or businesses of the partnership are (or, without
regard to the 5-year requirement under subsection (b)(2)(B),
would be) taken into account by the distributing or
controlled corporation, as the case may be, in determining
whether the requirements of subsection (b) are met with
respect to the distribution.

``(II) Look-thru rule.--The distributing or controlled
corporation shall, for purposes of applying this subsection,
be treated as owning its ratable share of the assets of any
partnership described in subclause (I).

``(3) 50-percent or greater interest.--For purposes of this
subsection--
``(A) In general.--The term `50-percent or greater
interest' has the meaning given such term by subsection
(d)(4).
``(B) Attribution rules.--The rules of section 318 shall
apply for purposes of determining ownership of stock for
purposes of this paragraph.
``(4) Transaction.--For purposes of this subsection, the
term `transaction' includes a series of transactions.
``(5) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to carry out, or prevent the
avoidance of, the purposes of this subsection, including
regulations--
``(A) to carry out, or prevent the avoidance of, the
purposes of this subsection in cases involving--
``(i) the use of related persons, intermediaries, pass-thru
entities, options, or other arrangements, and
``(ii) the treatment of assets unrelated to the trade or
business of a corporation as investment assets if, prior to
the distribution, investment assets were used to acquire such
unrelated assets,
``(B) which in appropriate cases exclude from the
application of this subsection a distribution which does not
have the character of a redemption which would be treated as
a sale or exchange under section 302, and
``(C) which modify the application of the attribution rules
applied for purposes of this subsection.''.
(b) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to distributions after the date of the enactment of
this Act.

[[Page 7380]]

(2) Transition rule.--The amendments made by this section
shall not apply to any distribution pursuant to a transaction
which is--
(A) made pursuant to an agreement which was binding on such
date of enactment and at all times thereafter,
(B) described in a ruling request submitted to the Internal
Revenue Service on or before such date, or
(C) described on or before such date in a public
announcement or in a filing with the Securities and Exchange
Commission.

SEC. 508. LOAN AND REDEMPTION REQUIREMENTS ON POOLED
FINANCING REQUIREMENTS.

(a) Strengthened Reasonable Expectation Requirement.--
Subparagraph (A) of section 149(f)(2) (relating to reasonable
expectation requirement) is amended to read as follows:
``(A) In general.--The requirements of this paragraph are
met with respect to an issue if the issuer reasonably expects
that--
``(i) as of the close of the 1-year period beginning on the
date of issuance of the issue, at least 30 percent of the net
proceeds of the issue (as of the close of such period) will
have been used directly or indirectly to make or finance
loans to ultimate borrowers, and
``(ii) as of the close of the 3-year period beginning on
such date of issuance, at least 95 percent of the net
proceeds of the issue (as of the close of such period) will
have been so used.''.
(b) Written Loan Commitment and Redemption Requirements.--
Section 149(f) (relating to treatment of certain pooled
financing bonds) is amended by redesignating paragraphs (4)
and (5) as paragraphs (6) and (7), respectively, and by
inserting after paragraph (3) the following new paragraphs:
``(4) Written loan commitment requirement.--
``(A) In general.--The requirement of this paragraph is met
with respect to an issue if the issuer receives prior to
issuance written loan commitments identifying the ultimate
potential borrowers of at least 30 percent of the net
proceeds of such issue.
``(B) Exception.--Subparagraph (A) shall not apply with
respect to any issuer which--
``(i) is a State (or an integral part of a State) issuing
pooled financing bonds to make or finance loans to
subordinate governmental units of such State, or
``(ii) is a State-created entity providing financing for
water-infrastructure projects through the federally-sponsored
State revolving fund program.
``(5) Redemption requirement.--The requirement of this
paragraph is met if to the extent that less than the
percentage of the proceeds of an issue required to be used
under clause (i) or (ii) of paragraph (2)(A) is used by the
close of the period identified in such clause, the issuer
uses an amount of proceeds equal to the excess of--
``(A) the amount required to be used under such clause,
over
``(B) the amount actually used by the close of such period,

to redeem outstanding bonds within 90 days after the end of
such period.''.
(c) Elimination of Disregard of Pooled Bonds in Determining
Eligibility for Small Issuer Exception to Arbitrage Rebate.--
Section 148(f)(4)(D)(ii) (relating to aggregation of issuers)
is amended by striking subclause (II) and by redesignating
subclauses (III) and (IV) as subclauses (II) and (III),
respectively.
(d) Conforming Amendments.--
(1) Section 149(f)(1) is amended by striking ``paragraphs
(2) and (3)'' and inserting ``paragraphs (2), (3), (4), and
(5)''.
(2) Section 149(f)(7)(B), as redesignated by subsection
(b), is amended by striking ``paragraph (4)(A)'' and
inserting ``paragraph (6)(A)''.
(3) Section 54(l)(2) is amended by striking ``section
149(f)(4)(A)'' and inserting ``section 149(f)(6)(A)''.
(e) Effective Date.--The amendments made by this section
shall apply to bonds issued after the date of the enactment
of this Act.

SEC. 509. PARTIAL PAYMENTS REQUIRED WITH SUBMISSION OF
OFFERS-IN-COMPROMISE.

(a) In General.--Section 7122 (relating to compromises) is
amended by redesignating subsections (c) and (d) as
subsections (d) and (e), respectively, and by inserting after
subsection (b) the following new subsection:
``(c) Rules for Submission of Offers-in-Compromise.--
``(1) Partial payment required with submission.--
``(A) Lump-sum offers.--
``(i) In general.--The submission of any lump-sum offer-in-
compromise shall be accompanied by the payment of 20 percent
of the amount of such offer.
``(ii) Lump-sum offer-in-compromise.--For purposes of this
section, the term `lump-sum offer-in-compromise' means any
offer of payments made in 5 or fewer installments.
``(B) Periodic payment offers.--
``(i) In general.--The submission of any periodic payment
offer-in-compromise shall be accompanied by the payment of
the amount of the first proposed installment.
``(ii) Failure to make installment during pendency of
offer.--Any failure to make an installment (other than the
first installment) due under such offer-in-compromise during
the period such offer is being evaluated by the Secretary may
be treated by the Secretary as a withdrawal of such offer-in-
compromise.
``(2) Rules of application.--
``(A) Use of payment.--The application of any payment made
under this subsection to the assessed tax or other amounts
imposed under this title with respect to such tax may be
specified by the taxpayer.
``(B) Application of user fee.--In the case of any assessed
tax or other amounts imposed under this title with respect to
such tax which is the subject of an offer-in-compromise to
which this subsection applies, such tax or other amounts
shall be reduced by any user fee imposed under this title
with respect to such offer-in-compromise.
``(C) Waiver authority.--The Secretary may issue
regulations waiving any payment required under paragraph (1)
in a manner consistent with the practices established in
accordance with the requirements under subsection (d)(3).''.
(b) Additional Rules Relating to Treatment of Offers.--
(1) Unprocessable offer if payment requirements are not
met.--Paragraph (3) of section 7122(d) (relating to standards
for evaluation of offers), as redesignated by subsection (a),
is amended by striking ``; and'' at the end of subparagraph
(A) and inserting a comma, by striking the period at the end
of subparagraph (B) and inserting ``, and'', and by adding at
the end the following new subparagraph:
``(C) any offer-in-compromise which does not meet the
requirements of subparagraph (A)(i) or (B)(i), as the case
may be, of subsection (c)(1) may be returned to the taxpayer
as unprocessable.''.
(2) Deemed acceptance of offer not rejected within certain
period.--Section 7122, as amended by subsection (a), is
amended by adding at the end the following new subsection:
``(f) Deemed Acceptance of Offer Not Rejected Within
Certain Period.--Any offer-in-compromise submitted under this
section shall be deemed to be accepted by the Secretary if
such offer is not rejected by the Secretary before the date
which is 24 months after the date of the submission of such
offer. For purposes of the preceding sentence, any period
during which any tax liability which is the subject of such
offer-in-compromise is in dispute in any judicial proceeding
shall not be taken into account in determining the expiration
of the 24-month period.''.
(c) Conforming Amendment.--Section 6159(f) is amended by
striking ``section 7122(d)'' and inserting ``section
7122(e)''.
(d) Effective Date.--The amendments made by this section
shall apply to offers-in-compromise submitted on and after
the date which is 60 days after the date of the enactment of
this Act.

SEC. 510. INCREASE IN AGE OF MINOR CHILDREN WHOSE UNEARNED
INCOME IS TAXED AS IF PARENT'S INCOME.

(a) In General.--Section 1(g)(2)(A) (relating to child to
whom subsection applies) is amended by striking ``age 14''
and inserting ``age 18''.
(b) Treatment of Distributions From Qualified Disability
Trusts.--Section 1(g)(4) (relating to net unearned income) is
amended by adding at the end the following new subparagraph:
``(C) Treatment of distributions from qualified disability
trusts.--For purposes of this subsection, in the case of any
child who is a beneficiary of a qualified disability trust
(as defined in section 642(b)(2)(C)(ii)), any amount included
in the income of such child under sections 652 and 662 during
a taxable year shall be considered earned income of such
child for such taxable year.''.
(c) Conforming Amendment.--Section 1(g)(2) is amended by
striking ``and'' at the end of subparagraph (A), by striking
the period at the end of subparagraph (B) and inserting ``,
and'', and by inserting after subparagraph (B) the following
new subparagraph:
``(C) such child does not file a joint return for the
taxable year.''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2005.

SEC. 511. IMPOSITION OF WITHHOLDING ON CERTAIN PAYMENTS MADE
BY GOVERNMENT ENTITIES.

(a) In General.--Section 3402 is amended by adding at the
end the following new subsection:
``(t) Extension of Withholding to Certain Payments Made by
Government Entities.--
``(1) General rule.--The Government of the United States,
every State, every political subdivision thereof, and every
instrumentality of the foregoing (including multi-State
agencies) making any payment to any person providing any
property or services (including any payment made in
connection with a government voucher or certificate program
which functions as a payment for property or services) shall
deduct and withhold from such payment a tax in an amount
equal to 3 percent of such payment.
``(2) Property and services subject to withholding.--
Paragraph (1) shall not apply to any payment--
``(A) except as provided in subparagraph (B), which is
subject to withholding under any other provision of this
chapter or chapter 3,
``(B) which is subject to withholding under section 3406
and from which amounts are being withheld under such section,
``(C) of interest,
``(D) for real property,
``(E) to any governmental entity subject to the
requirements of paragraph (1), any tax-exempt entity, or any
foreign government,
``(F) made pursuant to a classified or confidential
contract described in section 6050M(e)(3),
``(G) made by a political subdivision of a State (or any
instrumentality thereof) which makes

[[Page 7381]]

less than $100,000,000 of such payments annually,
``(H) which is in connection with a public assistance or
public welfare program for which eligibility is determined by
a needs or income test, and
``(I) to any government employee not otherwise excludable
with respect to their services as an employee.
``(3) Coordination with other sections.--For purposes of
sections 3403 and 3404 and for purposes of so much of
subtitle F (except section 7205) as relates to this chapter,
payments to any person for property or services which are
subject to withholding shall be treated as if such payments
were wages paid by an employer to an employee.''.
(b) Effective Date.--The amendment made by this section
shall apply to payments made after December 31, 2010.

SEC. 512. CONVERSIONS TO ROTH IRAS.

(a) Repeal of Income Limitations.--
(1) In general.--Paragraph (3) of section 408A(c) (relating
to limits based on modified adjusted gross income) is amended
by striking subparagraph (B) and redesignating subparagraphs
(C) and (D) as subparagraphs (B) and (C), respectively.
(2) Conforming amendment.--Clause (i) of section
408A(c)(3)(B) (as redesignated by paragraph (1)) is amended
by striking ``except that--'' and all that follows and
inserting ``except that any amount included in gross income
under subsection (d)(3) shall not be taken into account,
and''.
(b) Rollovers to a Roth IRA From an IRA Other Than a Roth
IRA.--
(1) In general.--Clause (iii) of section 408A(d)(3)(A)
(relating to rollovers from an IRA other than a Roth IRA) is
amended to read as follows:
``(iii) unless the taxpayer elects not to have this clause
apply, any amount required to be included in gross income for
any taxable year beginning in 2010 by reason of this
paragraph shall be so included ratably over the 2-taxable-
year period beginning with the first taxable year beginning
in 2011.''.
(2) Conforming amendments.--
(A) Clause (i) of section 408A(d)(3)(E) is amended to read
as follows:
``(i) Acceleration of inclusion.--

``(I) In general.--The amount otherwise required to be
included in gross income for any taxable year beginning in
2010 or the first taxable year in the 2-year period under
subparagraph (A)(iii) shall be increased by the aggregate
distributions from Roth IRAs for such taxable year which are
allocable under paragraph (4) to the portion of such
qualified rollover contribution required to be included in
gross income under subparagraph (A)(i).
``(II) Limitation on aggregate amount included.--The amount
required to be included in gross income for any taxable year
under subparagraph (A)(iii) shall not exceed the aggregate
amount required to be included in gross income under
subparagraph (A)(iii) for all taxable years in the 2-year
period (without regard to subclause (I)) reduced by amounts
included for all preceding taxable years.''.

(B) The heading for section 408A(d)(3)(E) is amended by
striking ``4-year'' and inserting ``2-year''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2009.

SEC. 513. REPEAL OF FSC/ETI BINDING CONTRACT RELIEF.

(a) FSC Provisions.--Paragraph (1) of section 5(c) of the
FSC Repeal and Extraterritorial Income Exclusion Act of 2000
is amended by striking ``which occurs--'' and all that
follows and inserting ``which occurs before January 1,
2002.''.
(b) ETI Provisions.--Section 101 of the American Jobs
Creation Act of 2004 is amended by striking subsection (f).
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.

SEC. 514. ONLY WAGES ATTRIBUTABLE TO DOMESTIC PRODUCTION
TAKEN INTO ACCOUNT IN DETERMINING DEDUCTION FOR
DOMESTIC PRODUCTION.

(a) In General.--Paragraph (2) of section 199(b) (relating
to W-2 wages) is amended to read as follows:
``(2) W-2 wages.--For purposes of this section--
``(A) In general.--The term `W-2 wages' means, with respect
to any person for any taxable year of such person, the sum of
the amounts described in paragraphs (3) and (8) of section
6051(a) paid by such person with respect to employment of
employees by such person during the calendar year ending
during such taxable year.
``(B) Limitation to wages attributable to domestic
production.--Such term shall not include any amount which is
not properly allocable to domestic production gross receipts
for purposes of subsection (c)(1).
``(C) Return requirement.--Such term shall not include any
amount which is not properly included in a return filed with
the Social Security Administration on or before the 60th day
after the due date (including extensions) for such return.''.
(b) Simplification of Rules for Determining W-2 Wages of
Partners and S Corporation Shareholders.--
(1) In general.--Clause (iii) of section 199(d)(1)(A) is
amended to read as follows:
``(iii) each partner or shareholder shall be treated for
purposes of subsection (b) as having W-2 wages for the
taxable year in an amount equal to such person's allocable
share of the W-2 wages of the partnership or S corporation
for the taxable year (as determined under regulations
prescribed by the Secretary).''.
(2) Conforming amendment.--Paragraph (2) of section 199(a)
is amended by striking ``and subsection (d)(1)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.

SEC. 515. MODIFICATION OF EXCLUSION FOR CITIZENS LIVING
ABROAD.

(a) Inflation Adjustment of Foreign Earned Income
Limitation.--Clause (ii) of section 911(b)(2)(D) (relating to
inflation adjustment) is amended--
(1) by striking ``2007'' and inserting ``2005'', and
(2) by striking ``2006'' in subclause (II) and inserting
``2004''.
(b) Modification of Housing Cost Amount.--
(1) Modification of housing cost floor.--Clause (i) of
section 911(c)(1)(B) is amended to read as follows:
``(i) 16 percent of the amount (computed on a daily basis)
in effect under subsection (b)(2)(D) for the calendar year in
which such taxable year begins, multiplied by''.
(2) Maximum amount of exclusion.--
(A) In general.--Subparagraph (A) of section 911(c)(1) is
amended by inserting ``to the extent such expenses do not
exceed the amount determined under paragraph (2)'' after
``the taxable year''.
(B) Limitation.--Subsection (c) of section 911 is amended
by redesignating paragraphs (2) and (3) as paragraphs (3) and
(4), respectively, and by inserting after paragraph (1) the
following new paragraph:
``(2) Limitation.--
``(A) In general.--The amount determined under this
paragraph is an amount equal to the product of--
``(i) 30 percent (adjusted as may be provided under
subparagraph (B)) of the amount (computed on a daily basis)
in effect under subsection (b)(2)(D) for the calendar year in
which the taxable year of the individual begins, multiplied
by
``(ii) the number of days of such taxable year within the
applicable period described in subparagraph (A) or (B) of
subsection (d)(1).
``(B) Regulations.--The Secretary may issue regulations or
other guidance providing for the adjustment of the percentage
under subparagraph (A)(i) on the basis of geographic
differences in housing costs relative to housing costs in the
United States.''.
(C) Conforming amendments.--
(i) Section 911(d)(4) is amended by striking ``and
(c)(1)(B)(ii)'' and inserting ``, (c)(1)(B)(ii), and
(c)(2)(A)(ii)''.
(ii) Section 911(d)(7) is amended by striking ``subsection
(c)(3)'' and inserting ``subsection (c)(4)''.
(c) Rates of Tax Applicable to Nonexcluded Income.--Section
911 (relating to exclusion of certain income of citizens and
residents of the United States living abroad) is amended by
redesignating subsection (f) as subsection (g) and by
inserting after subsection (e) the following new subsection:
``(f) Determination of Tax Liability on Nonexcluded
Amounts.--For purposes of this chapter, if any amount is
excluded from the gross income of a taxpayer under subsection
(a) for any taxable year, then, notwithstanding section 1 or
55--
``(1) the tax imposed by section 1 on the taxpayer for such
taxable year shall be equal to the excess (if any) of--
``(A) the tax which would be imposed by section 1 for the
taxable year if the taxpayer's taxable income were increased
by the amount excluded under subsection (a) for the taxable
year, over
``(B) the tax which would be imposed by section 1 for the
taxable year if the taxpayer's taxable income were equal to
the amount excluded under subsection (a) for the taxable
year, and
``(2) the tentative minimum tax under section 55 for such
taxable year shall be equal to the excess (if any) of--
``(A) the amount which would be such tentative minimum tax
for the taxable year if the taxpayer's taxable excess were
increased by the amount excluded under subsection (a) for the
taxable year, over
``(B) the amount which would be such tentative minimum tax
for the taxable year if the taxpayer's taxable excess were
equal to the amount excluded under subsection (a) for the
taxable year.

For purposes of this subsection, the amount excluded under
subsection (a) shall be reduced by the aggregate amount of
any deductions or exclusions disallowed under subsection
(d)(6) with respect to such excluded amount.''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2005.

SEC. 516. TAX INVOLVEMENT OF ACCOMMODATION PARTIES IN TAX
SHELTER TRANSACTIONS.

(a) Imposition of Excise Tax.--
(1) In general.--Chapter 42 (relating to private
foundations and certain other tax-exempt organizations) is
amended by adding at the end the following new subchapter:

``Subchapter F--Tax Shelter Transactions

``Sec. 4965. Excise tax on certain tax-exempt entities entering into
prohibited tax shelter transactions.

[[Page 7382]]

``SEC. 4965. EXCISE TAX ON CERTAIN TAX-EXEMPT ENTITIES
ENTERING INTO PROHIBITED TAX SHELTER
TRANSACTIONS.

``(a) Being a Party to and Approval of Prohibited
Transactions.--
``(1) Tax-exempt entity.--
``(A) In general.--If a transaction is a prohibited tax
shelter transaction at the time any tax-exempt entity
described in paragraph (1), (2), or (3) of subsection (c)
becomes a party to the transaction, such entity shall pay a
tax for the taxable year in which the entity becomes such a
party and any subsequent taxable year in the amount
determined under subsection (b)(1).
``(B) Post-transaction determination.--If any tax-exempt
entity described in paragraph (1), (2), or (3) of subsection
(c) is a party to a subsequently listed transaction at any
time during a taxable year, such entity shall pay a tax for
such taxable year in the amount determined under subsection
(b)(1).
``(2) Entity manager.--If any entity manager of a tax-
exempt entity approves such entity as (or otherwise causes
such entity to be) a party to a prohibited tax shelter
transaction at any time during the taxable year and knows or
has reason to know that the transaction is a prohibited tax
shelter transaction, such manager shall pay a tax for such
taxable year in the amount determined under subsection
(b)(2).
``(b) Amount of Tax.--
``(1) Entity.--In the case of a tax-exempt entity--
``(A) In general.--Except as provided in subparagraph (B),
the amount of the tax imposed under subsection (a)(1) with
respect to any transaction for a taxable year shall be an
amount equal to the product of the highest rate of tax under
section 11, and the greater of--
``(i) the entity's net income (after taking into account
any tax imposed by this subtitle (other than by this section)
with respect to such transaction) for such taxable year
which--

``(I) in the case of a prohibited tax shelter transaction
(other than a subsequently listed transaction), is
attributable to such transaction, or
``(II) in the case of a subsequently listed transaction, is
attributable to such transaction and which is properly
allocable to the period beginning on the later of the date
such transaction is identified by guidance as a listed
transaction by the Secretary or the first day of the taxable
year, or

``(ii) 75 percent of the proceeds received by the entity
for the taxable year which--

``(I) in the case of a prohibited tax shelter transaction
(other than a subsequently listed transaction), are
attributable to such transaction, or
``(II) in the case of a subsequently listed transaction,
are attributable to such transaction and which are properly
allocable to the period beginning on the later of the date
such transaction is identified by guidance as a listed
transaction by the Secretary or the first day of the taxable
year.

``(B) Increase in tax for certain knowing transactions.--In
the case of a tax-exempt entity which knew, or had reason to
know, a transaction was a prohibited tax shelter transaction
at the time the entity became a party to the transaction, the
amount of the tax imposed under subsection (a)(1)(A) with
respect to any transaction for a taxable year shall be the
greater of--
``(i) 100 percent of the entity's net income (after taking
into account any tax imposed by this subtitle (other than by
this section) with respect to the prohibited tax shelter
transaction) for such taxable year which is attributable to
the prohibited tax shelter transaction, or
``(ii) 75 percent of the proceeds received by the entity
for the taxable year which are attributable to the prohibited
tax shelter transaction.
This subparagraph shall not apply to any prohibited tax
shelter transaction to which a tax-exempt entity became a
party on or before the date of the enactment of this section.
``(2) Entity manager.--In the case of each entity manager,
the amount of the tax imposed under subsection (a)(2) shall
be $20,000 for each approval (or other act causing
participation) described in subsection (a)(2).
``(c) Tax-Exempt Entity.--For purposes of this section, the
term `tax-exempt entity' means an entity which is--
``(1) described in section 501(c) or 501(d),
``(2) described in section 170(c) (other than the United
States),
``(3) an Indian tribal government (within the meaning of
section 7701(a)(40)),
``(4) described in paragraph (1), (2), or (3) of section
4979(e),
``(5) a program described in section 529,
``(6) an eligible deferred compensation plan described in
section 457(b) which is maintained by an employer described
in section 4457(e)(1)(A), or
``(7) an arrangement described in section 4973(a).
``(d) Entity Manager.--For purposes of this section, the
term `entity manager' means--
``(1) in the case of an entity described in paragraph (1),
(2), or (3) of subsection (c)--
``(A) the person with authority or responsibility similar
to that exercised by an officer, director, or trustee of an
organization, and
``(B) with respect to any act, the person having authority
or responsibility with respect to such act, and
``(2) in the case of an entity described in paragraph (4),
(5), (6), or (7) of subsection (c), the person who approves
or otherwise causes the entity to be a party to the
prohibited tax shelter transaction.
``(e) Prohibited Tax Shelter Transaction; Subsequently
Listed Transaction.--For purposes of this section--
``(1) Prohibited tax shelter transaction.--
``(A) In general.--The term `prohibited tax shelter
transaction' means--
``(i) any listed transaction, and
``(ii) any prohibited reportable transaction.
``(B) Listed transaction.--The term `listed transaction'
has the meaning given such term by section 6707A(c)(2).
``(C) Prohibited reportable transaction.--The term
`prohibited reportable transaction' means any confidential
transaction or any transaction with contractual protection
(as defined under regulations prescribed by the Secretary)
which is a reportable transaction (as defined in section
6707A(c)(1)).
``(2) Subsequently listed transaction.--The term
`subsequently listed transaction' means any transaction to
which a tax-exempt entity is a party and which is determined
by the Secretary to be a listed transaction at any time after
the entity has become a party to the transaction. Such term
shall not include a transaction which is a prohibited
reportable transaction at the time the entity became a party
to the transaction.
``(f) Regulatory Authority.--The Secretary is authorized to
promulgate regulations which provide guidance regarding the
determination of the allocation of net income or proceeds of
a tax-exempt entity attributable to a transaction to various
periods, including before and after the listing of the
transaction or the date which is 90 days after the date of
the enactment of this section.
``(g) Coordination With Other Taxes and Penalties.--The tax
imposed by this section is in addition to any other tax,
addition to tax, or penalty imposed under this title.''.
(2) Conforming amendment.--The table of subchapters for
chapter 42 is amended by adding at the end the following new
item:

``Subchapter F. Tax Shelter Transactions.''.

(b) Disclosure Requirements.--
(1) Disclosure by entity to the internal revenue service.--
(A) In general.--Section 6033(a) (relating to organizations
required to file) is amended by redesignating paragraph (2)
as paragraph (3) and by inserting after paragraph (1) the
following new paragraph:
``(2) Being a party to certain reportable transactions.--
Every tax-exempt entity described in section 4965(c) shall
file (in such form and manner and at such time as determined
by the Secretary) a disclosure of--
``(A) such entity's being a party to any prohibited tax
shelter transaction (as defined in section 4965(e)), and
``(B) the identity of any other party to such transaction
which is known by such tax-exempt entity.''.
(B) Conforming amendment.--Section 6033(a)(1) is amended by
striking ``paragraph (2)'' and inserting ``paragraph (3)''.
(2) Disclosure by other taxpayers to the tax-exempt
entity.--Section 6011 (relating to general requirement of
return, statement, or list) is amended by redesignating
subsection (g) as subsection (h) and by inserting after
subsection (f) the following new subsection:
``(g) Disclosure of Reportable Transaction to Tax-Exempt
Entity.--Any taxable party to a prohibited tax shelter
transaction (as defined in section 4965(e)(1)) shall by
statement disclose to any tax-exempt entity (as defined in
section 4965(c)) which is a party to such transaction that
such transaction is such a prohibited tax shelter
transaction.''.
(c) Penalty for Nondisclosure.--
(1) In general.--Section 6652(c) (relating to returns by
exempt organizations and by certain trusts) is amended by
redesignating paragraphs (3) and (4) as paragraphs (4) and
(5), respectively, and by inserting after paragraph (2) the
following new paragraph:
``(3) Disclosure under section 6033(a)(2).--
``(A) Penalty on entities.--In the case of a failure to
file a disclosure required under section 6033(a)(2), there
shall be paid by the tax-exempt entity (the entity manager in
the case of a tax-exempt entity described in paragraph (4),
(5), (6), or (7) of section 4965(c)) $100 for each day during
which such failure continues. The maximum penalty under this
subparagraph on failures with respect to any 1 disclosure
shall not exceed $50,000.
``(B) Written demand.--
``(i) In general.--The Secretary may make a written demand
on any entity or manager subject to penalty under
subparagraph (A) specifying therein a reasonable future date
by which the disclosure shall be filed for purposes of this
subparagraph.
``(ii) Failure to comply with demand.--If any entity or
manager fails to comply with any demand under clause (i) on
or before the date specified in such demand, there shall be
paid by such entity or manager failing to so comply $100 for
each day after the expiration of the time specified in such
demand during which such failure continues. The maximum
penalty imposed under this subparagraph on all entities and
managers for failures with respect to any 1 disclosure shall
not exceed $10,000.
``(C) Definitions.--Any term used in this section which is
also used in section 4965 shall have the meaning given such
term under section 4965.''.
(2) Conforming amendment.--Paragraph (1) of section 6652(c)
is amended by striking ``6033'' each place it appears in the
text and heading thereof and inserting ``6033(a)(1)''.
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section

[[Page 7383]]

shall apply to taxable years ending after the date of the
enactment of this Act, with respect to transactions before,
on, or after such date, except that no tax under section
4965(a) of the Internal Revenue Code of 1986 (as added by
this section) shall apply with respect to income or proceeds
that are properly allocable to any period ending on or before
the date which is 90 days after such date of enactment.
(2) Disclosure.--The amendments made by subsections (b) and
(c) shall apply to disclosures the due date for which are
after the date of the enactment of this Act.
And the Senate agree to the same.

William Thomas,
Jim McCrery,
Dave Camp,
Managers on the Part of the House.

Chuck Grassley,
Jon Kyl,
Managers on the Part of the Senate.

JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE

The managers on the part of the House and the Senate at the
conference on the disagreeing votes of the two Houses on the
amendment of the Senate to the bill (H.R. 4297), to provide
for reconciliation pursuant to section 201(b) of the
concurrent resolution on the budget for fiscal year 2006,
submit the following joint statement to the House and the
Senate in explanation of the effect of the action agreed upon
by the managers and recommended in the accompanying
conference report:
The Senate amendment struck all of the House bill after the
enacting clause and inserted a substitute text.
The House recedes from its disagreement to the amendment of
the Senate with an amendment that is a substitute for the
House bill and the Senate amendment. The differences between
the House bill, the Senate amendment, and the substitute
agreed to in conference are noted below, except for clerical
corrections, conforming changes made necessary by agreements
reached by the conferees, and minor drafting and clarifying
changes.

TITLE I--EXTENSION AND MODIFICATION OF CERTAIN PROVISIONS

A. Allowance of Nonrefundable Personal Credits Against Regular and
Alternative Minimum Tax Liability

(Sec. 101 of the House bill, sec. 107 of the Senate
amendment, and sec. 26 of the Code)

present law

Present law provides for certain nonrefundable personal tax
credits (i.e., the dependent care credit, the credit for the
elderly and disabled, the adoption credit, the child tax
credit, the credit for interest on certain home mortgages,
the HOPE Scholarship and Lifetime Learning credits, the
credit for savers, the credit for certain nonbusiness energy
property, the credit for residential energy efficient
property, and the D.C. first-time homebuyer credit). The
Energy Tax Incentives Act of 2005 enacted, effective for
2006, nonrefundable tax credits for alternative motor
vehicles, and alternative motor vehicle refueling
property.\1\
---------------------------------------------------------------------------
\1\The portion of these credits relating to personal use
property is subject to the same tax liability limitation as
the nonrefundable personal tax credits (other than the
adoption credit, child credit, and saver's credit).
---------------------------------------------------------------------------
For taxable years beginning in 2005, the nonrefundable
personal credits are allowed to the extent of the full amount
of the individual's regular tax and alternative minimum tax.
For taxable years beginning after 2005, the nonrefundable
personal credits (other than the adoption credit, child
credit and saver's credit) are allowed only to the extent
that the individual's regular income tax liability exceeds
the individual's tentative minimum tax, determined without
regard to the minimum tax foreign tax credit. The adoption
credit, child credit, and saver's credit are allowed to the
full extent of the individual's regular tax and alternative
minimum tax.
The alternative minimum tax is the amount by which the
tentative minimum tax exceeds the regular income tax. An
individual's tentative minimum tax is the sum of (1) 26
percent of so much of the taxable excess as does not exceed
$175,000 ($87,500 in the case of a married individual filing
a separate return) and (2) 28 percent of the remaining
taxable excess. The taxable excess is so much of the
alternative minimum taxable income (``AMTI'') as exceeds the
exemption amount. The maximum tax rates on net capital gain
and dividends used in computing the regular tax are used in
computing the tentative minimum tax. AMTI is the individual's
taxable income adjusted to take account of specified
preferences and adjustments.
The exemption amount is: (1) $45,000 ($58,000 for taxable
years beginning before 2006) in the case of married
individuals filing a joint return and surviving spouses; (2)
$33,750 ($40,250 for taxable years beginning before 2006) in
the case of other unmarried individuals; (3) $22,500 ($29,000
for taxable years beginning before 2006) in the case of
married individuals filing a separate return; and (4) $22,500
in the case of an estate or trust. The exemption amount is
phased out by an amount equal to 25 percent of the amount by
which the individual's AMTI exceeds (1) $150,000 in the case
of married individuals filing a joint return and surviving
spouses, (2) $112,500 in the case of other unmarried
individuals, and (3) $75,000 in the case of married
individuals filing separate returns, an estate, or a trust.
These amounts are not indexed for inflation.

House Bill

The House bill extends for one year the present-law
provision allowing nonrefundable personal credits to the full
extent of the individual's regular tax and alternative
minimum tax (through taxable years beginning on or before
December 31, 2006).
Effective date.--The provision applies to taxable years
beginning after December 31, 2005.

senate amendment

The Senate amendment extends for two years the present-law
provision allowing nonrefundable personal credits to the full
extent of the individual's regular tax and alternative
minimum tax (through taxable years beginning on or before
December 31, 2007).
The provision also applies to the personal credits for
alternative motor vehicles, and alternative motor vehicle
refueling property.
Effective date.--The provision applies to taxable years
beginning after December 31, 2005.

conference agreement

The conference agreement includes the House bill provision.

B. Tax Incentives for Business Activities on Indian Reservations

1. Indian employment tax credit (Sec. 102(a) of the House
bill, sec. 115 of the Senate amendment, and sec. 45A of
the Code)

Present Law

In general, a credit against income tax liability is
allowed to employers for the first $20,000 of qualified wages
and qualified employee health insurance costs paid or
incurred by the employer with respect to certain employees
(sec. 45A).\2\ The credit is equal to 20 percent of the
excess of eligible employee qualified wages and health
insurance costs during the current year over the amount of
such wages and costs incurred by the employer during 1993.
The credit is an incremental credit, such that an employer's
current-year qualified wages and qualified employee health
insurance costs (up to $20,000 per employee) are eligible for
the credit only to the extent that the sum of such costs
exceeds the sum of comparable costs paid during 1993. No
deduction is allowed for the portion of the wages equal to
the amount of the credit.
---------------------------------------------------------------------------
\2\All section references are to the Internal Revenue Code of
1986, unless otherwise indicated.
---------------------------------------------------------------------------
Qualified wages means wages paid or incurred by an employer
for services performed by a qualified employee. A qualified
employee means any employee who is an enrolled member of an
Indian tribe or the spouse of an enrolled member of an Indian
tribe, who performs substantially all of the services within
an Indian reservation, and whose principal place of abode
while performing such services is on or near the reservation
in which the services are performed. An ``Indian
reservation'' is a reservation as defined in section 3(d) of
the Indian Financing Act of 1974 or section 4(1) of the
Indian Child Welfare Act of 1978. For purposes of the
preceding sentence, section 3(d) is applied by treating
``former Indian reservations in Oklahoma'' as including only
lands that are (1) within the jurisdictional area of an
Oklahoma Indian tribe as determined by the Secretary of the
Interior, and (2) recognized by such Secretary as an area
eligible for trust land status under 25 C.F.R. Part 151 (as
in effect on August 5, 1997).
An employee is not treated as a qualified employee for any
taxable year of the employer if the total amount of wages
paid or incurred by the employer with respect to such
employee during the taxable year exceeds an amount determined
at an annual rate of $30,000 (which after adjusted for
inflation after 1993 is currently $35,000). In addition, an
employee will not be treated as a qualified employee under
certain specific circumstances, such as where the employee is
related to the employer (in the case of an individual
employer) or to one of the employer's shareholders, partners,
or grantors. Similarly, an employee will not be treated as a
qualified employee where the employee has more than a 5
percent ownership interest in the employer. Finally, an
employee will not be considered a qualified employee to the
extent the employee's services relate to gaming activities or
are performed in a building housing such activities.
The wage credit is available for wages paid or incurred on
or after January 1, 1994, in taxable years that begin before
January 1, 2006.

house bill

The provision extends for one year the present-law
employment credit provision (through taxable years beginning
on or before December 31, 2006).
Effective date.--The provision is effective for taxable
years beginning after December 31, 2005.

Senate Amendment

The Senate amendment extends for two years the present-law
employment credit provision (through taxable years beginning
on or before December 31, 2007).

[[Page 7384]]

Effective date.--Same as the House bill provision.

conference agreement

The conference agreement does not include the House bill
provision or the Senate amendment provision.
2. Accelerated depreciation for business property on Indian
reservations (sec. 102(b) of the House bill, sec. 116 of
the Senate amendment, and sec. 168(j) of the Code)

present law

With respect to certain property used in connection with
the conduct of a trade or business within an Indian
reservation, depreciation deductions under section 168(j) are
determined using the following recovery periods:

Years
3-year property.......................................................2
5-year property.......................................................3
7-year property.......................................................4
10-year property......................................................6
15-year property......................................................9
20-year property.....................................................12
Nonresidential real property.........................................22

``Qualified Indian reservation property'' eligible for
accelerated depreciation includes property which is (1) used
by the taxpayer predominantly in the active conduct of a
trade or business within an Indian reservation, (2) not used
or located outside the reservation on a regular basis, (3)
not acquired (directly or indirectly) by the taxpayer from a
person who is related to the taxpayer (within the meaning of
section 465(b)(3)(C)), and (4) described in the recovery-
period table above. In addition, property is not ``qualified
Indian reservation property'' if it is placed in service for
purposes of conducting gaming activities. Certain ``qualified
infrastructure property'' may be eligible for the accelerated
depreciation even if located outside an Indian reservation,
provided that the purpose of such property is to connect with
qualified infrastructure property located within the
reservation (e.g., roads, power lines, water systems,
railroad spurs, and communications facilities).
An ``Indian reservation'' means a reservation as defined in
section 3(d) of the Indian Financing Act of 1974 or section
4(1) of the Indian Child Welfare Act of 1978. For purposes of
the preceding sentence, section 3(d) is applied by treating
``former Indian reservations in Oklahoma'' as including only
lands that are (1) within the jurisdictional area of an
Oklahoma Indian tribe as determined by the Secretary of the
Interior, and (2) recognized by such Secretary as an area
eligible for trust land status under 25 CFR. Part 151 (as in
effect on August 5, 1997).
The depreciation deduction allowed for regular tax purposes
is also allowed for purposes of the alternative minimum tax.
The accelerated depreciation for Indian reservations is
available with respect to property placed in service on or
after January 1, 1994, and before January 1, 2006.

House Bill

The provision extends for one year the present-law
incentive relating to depreciation of qualified Indian
reservation property (to apply to property placed in service
through December 31, 2006).
Effective date.--The provision applies to property placed
in service after December 31, 2005.

Senate Amendment

The Senate amendment extends for two years the present-law
incentive relating to depreciation of qualified Indian
reservation property (to apply to property placed in service
through December 31, 2007).
Effective date.--The Senate amendment is the same as the
House bill.

Conference Agreement

The conference agreement does not include the House bill
provision or the Senate amendment provision.

C. Work Opportunity Tax Credit and Welfare-To-Work Tax Credit

(Secs. 103 and 104 of the House bill, sec. 109 of the Senate
amendment and secs. 51 and 51A of the Code)

Present Law

Work opportunity tax credit
Targeted groups eligible for the credit
The work opportunity tax credit is available on an elective
basis for employers hiring individuals from one or more of
eight targeted groups. The eight targeted groups are: (1)
certain families eligible to receive benefits under the
Temporary Assistance for Needy Families Program; (2) high-
risk youth; (3) qualified ex-felons; (4) vocational
rehabilitation referrals; (5) qualified summer youth
employees; (6) qualified veterans; (7) families receiving
food stamps; and (8) persons receiving certain Supplemental
Security Income (SSI) benefits.
A high-risk youth is an individual aged 18 but not aged 25
on the hiring date who is certified by a designated local
agency as having a principal place of abode within an
empowerment zone, enterprise community, or renewal community.
The credit is not available if such youth's principal place
of abode ceases to be within an empowerment zone, enterprise
community, or renewal community.
A qualified ex-felon is an individual certified by a
designated local agency as: (1) having been convicted of a
felony under State or Federal law; (2) being a member of an
economically disadvantaged family; and (3) having a hiring
date within one year of release from prison or conviction.
A food stamp recipient is an individual aged 18 but not
aged 25 on the hiring date certified by a designated local
agency as being a member of a family either currently or
recently receiving assistance under an eligible food stamp
program.
Qualified wages
Generally, qualified wages are defined as cash wages paid
by the employer to a member of a targeted group. The
employer's deduction for wages is reduced by the amount of
the credit.
Calculation of the credit
The credit equals 40 percent (25 percent for employment of
400 hours or less) of qualified first-year wages. Generally,
qualified first-year wages are qualified wages (not in excess
of $6,000) attributable to service rendered by a member of a
targeted group during the one-year period beginning with the
day the individual began work for the employer. Therefore,
the maximum credit per employee is $2,400 (40 percent of the
first $6,000 of qualified first-year wages). With respect to
qualified summer youth employees, the maximum credit is
$1,200 (40 percent of the first $3,000 of qualified first-
year wages).
Minimum employment period
No credit is allowed for qualified wages paid to employees
who work less than 120 hours in the first year of employment.
Coordination of the work opportunity tax credit and the
welfare-to-work tax credit
An employer cannot claim the work opportunity tax credit
with respect to wages of any employee on which the employer
claims the welfare-to-work tax credit.
Other rules
The work opportunity tax credit is not allowed for wages
paid to a relative or dependent of the taxpayer. Similarity
wages paid to replacement workers during a strike or lockout
are not eligible for the work opportunity tax credit. Wages
paid to any employee during any period for which the employer
received on-the-job training program payments with respect to
that employee are not eligible for the work opportunity tax
credit. The work opportunity tax credit generally is not
allowed for wages paid to individuals who had previously been
employed by the employer. In addition, many other technical
rules apply.
Expiration
The work opportunity tax credit is not available for
individuals who begin work for an employer after December 31,
2005.
Welfare-to-work tax credit
Targeted group eligible for the credit
The welfare-to-work tax credit is available on an elective
basis to employers of qualified long-term family assistance
recipients. Qualified long-term family assistance recipients
are: (1) members of a family that has received family
assistance for at least 18 consecutive months ending on the
hiring date; (2) members of a family that has received such
family assistance for a total of at least 18 months (whether
or not consecutive) after August 5, 1997 (the date of
enactment of the welfare-to-work tax credit) if they are
hired within 2 years after the date that the 18-month total
is reached; and (3) members of a family who are no longer
eligible for family assistance because of either Federal or
State time limits, if they are hired within 2 years after the
Federal or State time limits made the family ineligible for
family assistance.
Qualified wages
Qualified wages for purposes of the welfare-to-work tax
credit are defined more broadly than the work opportunity tax
credit. Unlike the definition of wages for the work
opportunity tax credit which includes simply cash wages, the
definition of wages for the welfare-to-work tax credit
includes cash wages paid to an employee plus amounts paid by
the employer for: (1) educational assistance excludable under
a section 127 program (or that would be excludable but for
the expiration of sec. 127); (2) health plan coverage for the
employee, but not more than the applicable premium defined
under section 4980B(f)(4); and (3) dependent care assistance
excludable under section 129. The employer's deduction for
wages is reduced by the amount of the credit.
Calculation of the credit
The welfare-to-work tax credit is available on an elective
basis to employers of qualified long-term family assistance
recipients during the first two years of employment. The
maximum credit is 35 percent of the first $10,000 of
qualified first-year wages and 50 percent of the first
$10,000 of qualified second-year wages. Qualified first-year
wages are defined as qualified wages (not in excess of
$10,000) attributable to service rendered by a member of the
targeted group during the one-year period beginning with the
day the individual began work for the employer. Qualified
second-year wages are defined as qualified wages (not in
excess of $10,000) attributable to service rendered by a
member of the targeted group during the one-year period
beginning immediately after the first year of that
individual's employment for the

[[Page 7385]]

employer. The maximum credit is $8,500 per qualified
employee.
Minimum employment period
No credit is allowed for qualified wages paid to a member
of the targeted group unless they work at least 400 hours or
180 days in the first year of employment.
Coordination of the work opportunity tax credit and the
welfare-to-work tax credit
An employer cannot claim the work opportunity tax credit
with respect to wages of any employee on which the employer
claims the welfare-to-work tax credit.
Other rules
The welfare-to-work tax credit incorporates directly or by
reference many of these other rules contained on the work
opportunity tax credit.
Expiration
The welfare-to-work credit is not available for individuals
who begin work for an employer after December 31, 2005.

House Bill

Work opportunity tax credit
The House bill extends the work opportunity credit for one
year (through December 31, 2006). Also, the House bill raises
the maximum age limit for the food stamp recipient category
to include individuals who are at least age 18 but under age
35 on the hiring date.
Effective date.--The provision is effective for wages paid
or incurred to a qualified individual who begins work for an
employer after December 31, 2005, and before January 1, 2007.
Welfare-to-work tax credit
The House bill extends the welfare-to-work tax credit for
one year (through December 31, 2006).
Effective date.--The provision is effective for wages paid
or incurred to a qualified individual who begins work for an
employer after December 31, 2005, and before January 1, 2007.

Senate Amendment

In general
The Senate amendment combines the work opportunity and
welfare-to-work tax credits and extends the combined credit
for one year. The welfare-to-work credit is repealed.
Targeted groups eligible for the combined credit
The combined credit is available on an elective basis for
employers hiring individuals from one or more of all nine
targeted groups. The nine targeted groups are the present-law
eight groups with the addition of the welfare-to-work credit/
long-term family assistance recipient as the ninth targeted
group.
The Senate amendment raises the age limit for the high-risk
youth category to include individuals aged 18 but not aged 40
on the hiring date. The Senate amendment also renames the
high-risk youth category to be the designated community
resident category.
The Senate amendment repeals the requirement that a
qualified ex-felon be an individual certified as a member of
an economically disadvantaged family.
The Senate amendment raises the age limit for the food
stamp recipient category to include individuals aged 18 but
not aged 40 on the hiring date.
Qualified wages
Qualified first-year wages for the eight work opportunity
tax credit categories remain capped at $6,000 ($3,000 for
qualified summer youth employees). No credit is allowed for
second-year wages. In the case of long-term family assistance
recipients, the cap is $10,000 for both qualified first-year
wages and qualified second-year wages. The combined credit
follows the work opportunity tax credit definition of wages
which does not include amounts paid by the employer for: (1)
educational assistance excludable under a section 127 program
(or that would be excludable but for the expiration of sec.
127); (2) health plan coverage for the employee, but not more
than the applicable premium defined under section
4980B(f)(4); and (3) dependent care assistance excludable
under section 129. For all targeted groups, the employer's
deduction for wages is reduced by the amount of the credit.
Calculation of the credit
First-year wages.--For the eight work opportunity tax
credit categories, the credit equals 40 percent (25 percent
for employment of 400 hours or less) of qualified first-year
wages. Generally, qualified first-year wages are qualified
wages (not in excess of $6,000) attributable to service
rendered by a member of a targeted group during the one-year
period beginning with the day the individual began work for
the employer. Therefore, the maximum credit per employee for
members of any of the eight work opportunity tax credit
targeted groups generally is $2,400 (40 percent of the first
$6,000 of qualified first-year wages). With respect to
qualified summer youth employees, the maximum credit remains
$1,200 (40 percent of the first $3,000 of qualified first-
year wages). For the welfare-to-work/long-term family
assistance recipients, the maximum credit equals $4,000 per
employee (40 percent of $10,000 of wages).
Second year wages.--In the case of long-term family
assistance recipients the maximum credit is $5,000 (50
percent of the first $10,000 of qualified second-year wages).
Minimum employment period
No credit is allowed for qualified wages paid to employees
who work less than 120 hours in the first year of employment.
Coordination of the work opportunity tax credit and the
welfare-to-work tax credit
Coordination is no longer necessary once the two credits
are combined.
Effective date.--The provision is effective for wages paid
or incurred to a qualified individual who begins work for an
employer after December 31, 2005, and before January 1, 2007.

Conference Agreement

The conference agreement does not include the House bill
provision or the Senate amendment provision.

D. Deduction for Corporate Donations of Computer Technology and
Equipment

(Sec. 105 of the House bill, sec. 111 of the Senate amendment
and sec. 170 of the Code)

Present Law

In the case of a charitable contribution of inventory or
other ordinary-income or short-term capital gain property,
the amount of the charitable deduction generally is limited
to the taxpayer's basis in the property. In the case of a
charitable contribution of tangible personal property, the
deduction is limited to the taxpayer's basis in such property
if the use by the recipient charitable organization is
unrelated to the organization's tax-exempt purpose. In cases
involving contributions to a private foundation (other than
certain private operating foundations), the amount of the
deduction is limited to the taxpayer's basis in the property.
Under present law, a taxpayer's deduction for charitable
contributions of computer technology and equipment generally
is limited to the taxpayer's basis (typically, cost) in the
property. However, certain corporations may claim a deduction
in excess of basis for a ``qualified computer contribution.''
This enhanced deduction is equal to the lesser of (1) basis
plus one-half of the item's appreciation (i.e., basis plus
one half of fair market value minus basis) or (2) two times
basis. The enhanced deduction for qualified computer
contributions expires for any contribution made during any
taxable year beginning after December 31, 2005.
A qualified computer contribution means a charitable
contribution of any computer technology or equipment, which
meets standards of functionality and suitability as
established by the Secretary of the Treasury. The
contribution must be to certain educational organizations or
public libraries and made not later than three years after
the taxpayer acquired the property or, if the taxpayer
constructed the property, not later than the date
construction of the property is substantially completed. The
original use of the property must be by the donor or the
donee, and in the case of the donee, must be used
substantially for educational purposes related to the
function or purpose of the donee. The property must fit
productively into the donee's education plan. The donee may
not transfer the property in exchange for money, other
property, or services, except for shipping, installation, and
transfer costs. To determine whether property is constructed
by the taxpayer, the rules applicable to qualified research
contributions apply. That is, property is considered
constructed by the taxpayer only if the cost of the parts
used in the construction of the property (other than parts
manufactured by the taxpayer or a related person) does not
exceed 50 percent of the taxpayer's basis in the property.
Contributions may be made to private foundations under
certain conditions.

House Bill

The present-law provision is extended for one year to apply
to contributions made during any taxable year beginning after
December 31, 2005, and before January 1, 2007.
Effective date.--The provision is effective for
contributions made in taxable years beginning after December
31, 2005.

Senate Amendment

Same as House bill.
Effective date.--The provision is effective on the date of
enactment.

Conference Agreement

The conference agreement does not include the House bill
provision or the Senate amendment provision.

E. Availability of Archer Medical Savings Accounts

(Sec. 106 of the House bill and sec. 220 of the Code)

Present Law

Archer medical savings accounts
In general
Within limits, contributions to an Archer medical savings
account (``Archer MSA'') are deductible in determining
adjusted gross income if made by an eligible individual and
are excludable from gross income and wages for employment tax
purposes if made by the employer of an eligible individual.
Earnings on amounts in an Archer MSA are not currently
taxable. Distributions from an Archer MSA for medical
expenses are not includible in gross income. Distributions
not used for

[[Page 7386]]

medical expenses are includible in gross income. In addition,
distributions not used for medical expenses are subject to an
additional 15-percent tax unless the distribution is made
after age 65, death, or disability.
Eligible individuals
Archer MSAs are available to employees covered under an
employer-sponsored high deductible plan of a small employer
and self-employed individuals covered under a high deductible
health plan. An employer is a small employer if it employed,
on average, no more than 50 employees on business days during
either the preceding or the second preceding year. An
individual is not eligible for an Archer MSA if he or she is
covered under any other health plan in addition to the high
deductible plan.
Tax treatment of and limits on contributions
Individual contributions to an Archer MSA are deductible
(within limits) in determining adjusted gross income (i.e.,
``above-the-line''). In addition, employer contributions are
excludable from gross income and wages for employment tax
purposes (within the same limits), except that this exclusion
does not apply to contributions made through a cafeteria
plan. In the case of an employee, contributions can be made
to an Archer MSA either by the individual or by the
individual's employer.
The maximum annual contribution that can be made to an
Archer MSA for a year is 65 percent of the deductible under
the high deductible plan in the case of individual coverage
and 75 percent of the deductible in the case of family
coverage.
Definition of high deductible plan
A high deductible plan is a health plan with an annual
deductible of at least $1,800 and no more than $2,700 in the
case of individual coverage and at least $3,650 and no more
than $5,450 in the case of family coverage (for 2006). In
addition, the maximum out-of-pocket expenses with respect to
allowed costs (including the deductible) must be no more than
$3,650 in the case of individual coverage and no more than
$6,650 in the case of family coverage (for 2006). A plan does
not fail to qualify as a high deductible plan merely because
it does not have a deductible for preventive care as required
by State law. A plan does not qualify as a high deductible
health plan if substantially all of the coverage under the
plan is for certain permitted coverage. In the case of a
self-insured plan, the plan must in fact be insurance (e.g.,
there must be appropriate risk shifting) and not merely a
reimbursement arrangement.
Cap on taxpayers utilizing Archer MSAs and expiration of
pilot program
The number of taxpayers benefiting annually from an Archer
MSA contribution is limited to a threshold level (generally
750,000 taxpayers). The number of Archer MSAs established has
not exceeded the threshold level.
After 2005, no new contributions may be made to Archer MSAs
except by or on behalf of individuals who previously made (or
had made on their behalf) Archer MSA contributions and
employees who are employed by a participating employer.
Trustees of Archer MSAs are generally required to make
reports to the Treasury by August 1 regarding Archer MSAs
established by July 1 of that year. If the threshold level is
reached in a year, the Secretary is required to make and
publish such determination by October 1 of such year.
Health savings accounts
Health savings accounts (``HSAs'') were enacted by the
Medicare Prescription Drug, Improvement, and Modernization
Act of 2003. Like Archer MSAs, an HSA is a tax-exempt trust
or custodial account to which tax-deductible contributions
may be made by individuals with a high deductible health
plan. HSAs provide tax benefits similar to, but more
favorable than, those provide by Archer MSAs. HSAs were
established on a permanent basis.

House Bill

The House bill extends for one year the present-law Archer
MSA provisions (through December 31, 2006).
The report required by Archer MSA trustees is treated as
timely filed if made before the close of the 90-day period
beginning on the date of enactment. The determination and
publication whether the threshold level has been exceeded is
treated as timely if made before the close of the 120-day
period beginning on the date of enactment.
Effective date.--The provision is effective on the date of
enactment.

Senate Amendment

No provision.

Conference Agreement

The conference agreement does not include the House bill
provision.

F. Fifteen-Year Straight-Line Cost Recovery for Qualified Leasehold
Improvements and Qualified Restaurant Improvements

(Sec. 107 and sec. 108 of the House bill, sec. 117 of the
Senate amendment, and sec. 168 of the Code)

Present Law

In general
A taxpayer generally must capitalize the cost of property
used in a trade or business and recover such cost over time
through annual deductions for depreciation or amortization.
Tangible property generally is depreciated under the modified
accelerated cost recovery system (``MACRS''), which
determines depreciation by applying specific recovery
periods, placed-in-service conventions, and depreciation
methods to the cost of various types of depreciable property
(sec. 168). The cost of nonresidential real property is
recovered using the straight-line method of depreciation and
a recovery period of 39 years. Nonresidential real property
is subject to the mid-month placed-in-service convention.
Under the mid-month convention, the depreciation allowance
for the first year property is placed in service is based on
the number of months the property was in service, and
property placed in service at any time during a month is
treated as having been placed in service in the middle of the
month.
Depreciation of leasehold improvements
Generally, depreciation allowances for improvements made on
leased property are determined under MACRS, even if the MACRS
recovery period assigned to the property is longer than the
term of the lease. This rule applies regardless of whether
the lessor or the lessee places the leasehold improvements in
service. If a leasehold improvement constitutes an addition
or improvement to nonresidential real property already placed
in service, the improvement generally is depreciated using
the straight-line method over a 39-year recovery period,
beginning in the month the addition or improvement was placed
in service. However, exceptions exist for certain qualified
leasehold improvements and certain qualified restaurant
property.
Qualified leasehold improvement property
Section 168(e)(3)(E)(iv) provides a statutory 15-year
recovery period for qualified leasehold improvement property
placed in service before January 1, 2006. Qualified leasehold
improvement property is recovered using the straight-line
method. Leasehold improvements placed in service in 2006 and
later will be subject to the general rules described above.
Qualified leasehold improvement property is any improvement
to an interior portion of a building that is nonresidential
real property, provided certain requirements are met. The
improvement must be made under or pursuant to a lease either
by the lessee (or sublessee), or by the lessor, of that
portion of the building to be occupied exclusively by the
lessee (or sublessee). The improvement must be placed in
service more than three years after the date the building was
first placed in service. Qualified leasehold improvement
property does not include any improvement for which the
expenditure is attributable to the enlargement of the
building, any elevator or escalator, any structural component
benefiting a common area, or the internal structural
framework of the building. However, if a lessor makes an
improvement that qualifies as qualified leasehold improvement
property, such improvement does not qualify as qualified
leasehold improvement property to any subsequent owner of
such improvement. An exception to the rule applies in the
case of death and certain transfers of property that qualify
for non-recognition treatment.
Qualified restaurant property
Section 168(e)(3)(E)(v) provides a statutory 15-year
recovery period for qualified restaurant property placed in
service before January 1, 2006. For purposes of the
provision, qualified restaurant property means any
improvement to a building if such improvement is placed in
service more than three years after the date such building
was first placed in service and more than 50 percent of the
building's square footage is devoted to the preparation of,
and seating for on-premises consumption of, prepared meals.
Qualified restaurant property is recovered using the
straight-line method.

House Bill

Under the House bill, the present-law provisions relating
to qualified leasehold improvement property and qualified
restaurant improvement property are extended for one year
(through December 31, 2006).
Effective date.--The House bill applies to property placed
in service after December 31, 2005.

Senate Amendment

Under the Senate amendment, the present-law provisions are
extended for two years (through December 31, 2007).
Effective date.--The Senate amendment applies to property
placed in service after December 31, 2005.

Conference Agreement

The conference agreement does not include the House bill
provision or the Senate amendment provision.

G. Taxable Income Limit on Percentage Depletion for Oil and Natural Gas
Produced From Marginal Properties

(Sec. 109 of the House bill and sec. 613A(c)(6)(H) of the
Code)

Present Law

The Code permits taxpayers to recover their investments in
oil and gas wells through depletion deductions. Two methods
of depletion are currently allowable under the Code: (1) the
cost depletion method, and (2) the percentage depletion
method. Under

[[Page 7387]]

the cost depletion method, the taxpayer deducts that portion
of the adjusted basis of the depletable property which is
equal to the ratio of units sold from that property during
the taxable year to the number of units remaining as of the
end of taxable year plus the number of units sold during the
taxable year. Thus, the amount recovered under cost depletion
may never exceed the taxpayer's basis in the property.
The Code generally limits the percentage depletion method
for oil and gas properties to independent producers and
royalty owners. Generally, under the percentage depletion
method, 15 percent of the taxpayer's gross income from an
oil- or gas-producing property is allowed as a deduction in
each taxable year. The amount deducted generally may not
exceed 100 percent of the taxable income from that property
in any year. For marginal production, the 100-percent taxable
income limitation has been suspended for taxable years
beginning after December 31, 1997, and before January 1,
2006.
Marginal production is defined as domestic crude oil and
natural gas production from stripper well property or from
property substantially all of the production from which
during the calendar year is heavy oil. Stripper well property
is property from which the average daily production is 15
barrel equivalents or less, determined by dividing the
average daily production of domestic crude oil and domestic
natural gas from producing wells on the property for the
calendar year by the number of wells. Heavy oil is domestic
crude oil with a weighted average gravity of 20 degrees API
or less (corrected to 60 degrees Fahrenheit).

House Bill

The provision extends for one year the present-law taxable
income limitation suspension provision for marginal
production (through taxable years beginning on or before
December 31, 2006).
Effective date.--The provision applies to taxable years
beginning after December 31, 2005.

Senate Amendment

No provision.

Conference Agreement

The conference agreement does not include the House bill
provision.

H. Tax Incentives for Investment in the District of Columbia

(Sec. 110 of the House bill, sec. 114 of the Senate amendment
and secs. 1400, 1400A, 1400B, and 1400C of the Code)

Present Law

In general
The Taxpayer Relief Act of 1997 designated certain
economically depressed census tracts within the District of
Columbia as the District of Columbia Enterprise Zone (the
``D.C. Zone''), within which businesses and individual
residents are eligible for special tax incentives. The census
tracts that compose the D.C. Zone are (1) all census tracts
that presently are part of the D.C. enterprise community
designated under section 1391 (i.e., portions of Anacostia,
Mt. Pleasant, Chinatown, and the easternmost part of the
District), and (2) all additional census tracts within the
District of Columbia where the poverty rate is not less than
20 percent. The D.C. Zone designation remains in effect for
the period from January 1, 1998, through December 31, 2005.
In general, the tax incentives available in connection with
the D.C. Zone are a 20-percent wage credit, an additional
$35,000 of section 179 expensing for qualified zone property,
expanded tax-exempt financing for certain zone facilities,
and a zero-percent capital gains rate from the sale of
certain qualified D.C. zone assets.
Wage credit
A 20-percent wage credit is available to employers for the
first $15,000 of qualified wages paid to each employee (i.e.,
a maximum credit of $3,000 with respect to each qualified
employee) who (1) is a resident of the D.C. Zone, and (2)
performs substantially all employment services within the
D.C. Zone in a trade or business of the employer.
Wages paid to a qualified employee who earns more than
$15,000 are eligible for the wage credit (although only the
first $15,000 of wages is eligible for the credit). The wage
credit is available with respect to a qualified full-time or
part-time employee (employed for at least 90 days),
regardless of the number of other employees who work for the
employer. In general, any taxable business carrying out
activities in the D.C. Zone may claim the wage credit,
regardless of whether the employer meets the definition of a
``D.C. Zone business.''\3\
---------------------------------------------------------------------------
\3\However, the wage credit is not available for wages paid
in connection with certain business activities described in
section 144(c)(6)(B) or certain farming activities. In
addition, wages are not eligible for the wage credit if paid
to (1) a person who owns more than five percent of the stock
(or capital or profits interests) of the employer, (2)
certain relatives of the employer, or (3) if the employer is
a corporation or partnership, certain relatives of a person
who owns more than 50 percent of the business.
---------------------------------------------------------------------------
An employer's deduction otherwise allowed for wages paid is
reduced by the amount of wage credit claimed for that taxable
year.\4\ Wages are not to be taken into account for purposes
of the wage credit if taken into account in determining the
employer's work opportunity tax credit under section 51 or
the welfare-to-work credit under section 51A.\5\ In addition,
the $15,000 cap is reduced by any wages taken into account in
computing the work opportunity tax credit or the welfare-to-
work credit.\6\ The wage credit may be used to offset up to
25 percent of alternative minimum tax liability.\7\
---------------------------------------------------------------------------
\4\Sec. 280C(a).
\5\Secs. 1400H(a), 1396(c)(3)(A) and 51A(d)(2).
\6\Secs. 1400H(a), 1396(c)(3)(B) and 51A(d)(2).
\7\Sec. 38(c)(2).
---------------------------------------------------------------------------
Section 179 expensing
In general, a D.C. Zone business is allowed an additional
$35,000 of section 179 expensing for qualifying property
placed in service by a D.C. Zone business.\8\ The section 179
expensing allowed to a taxpayer is phased out by the amount
by which 50 percent of the cost of qualified zone property
placed in service during the year by the taxpayer exceeds
$200,000 ($400,000 for taxable years beginning after 2002 and
before 2008). The term ``qualified zone property'' is defined
as depreciable tangible property (including buildings),
provided that (1) the property is acquired by the taxpayer
(from an unrelated party) after the designation took effect,
(2) the original use of the property in the D.C. Zone
commences with the taxpayer, and (3) substantially all of the
use of the property is in the D.C. Zone in the active conduct
of a trade or business by the taxpayer.\9\ Special rules are
provided in the case of property that is substantially
renovated by the taxpayer.
---------------------------------------------------------------------------
\8\Sec. 1397A.
\9\Sec. 1397D.
---------------------------------------------------------------------------
Tax-exempt financing
A qualified D.C. Zone business is permitted to borrow
proceeds from tax-exempt qualified enterprise zone facility
bonds (as defined in section 1394) issued by the District of
Columbia.\10\ Such bonds are subject to the District of
Columbia's annual private activity bond volume limitation.
Generally, qualified enterprise zone facility bonds for the
District of Columbia are bonds 95 percent or more of the net
proceeds of which are used to finance certain facilities
within the D.C. Zone. The aggregate face amount of all
outstanding qualified enterprise zone facility bonds per
qualified D.C. Zone business may not exceed $15 million and
may be issued only while the D.C. Zone designation is in
effect.
---------------------------------------------------------------------------
\10\Sec. 1400A.
---------------------------------------------------------------------------
Zero-percent capital gains
A zero-percent capital gains rate applies to capital gains
from the sale of certain qualified D.C. Zone assets held for
more than five years.\11\ In general, a qualified ``D.C. Zone
asset'' means stock or partnership interests held in, or
tangible property held by, a D.C. Zone business. For purposes
of the zero-percent capital gains rate, the D.C. Enterprise
Zone is defined to include all census tracts within the
District of Columbia where the poverty rate is not less than
10 percent.
---------------------------------------------------------------------------
\11\Sec. 1400B.
---------------------------------------------------------------------------
In general, gain eligible for the zero-percent tax rate
means gain from the sale or exchange of a qualified D.C. Zone
asset that is (1) a capital asset or property used in the
trade or business as defined in section 1231(b), and (2)
acquired before January 1, 2006. Gain that is attributable to
real property, or to intangible assets, qualifies for the
zero-percent rate, provided that such real property or
intangible asset is an integral part of a qualified D.C. Zone
business.\12\ However, no gain attributable to periods before
January 1, 1998, and after December 31, 2010, is qualified
capital gain.
---------------------------------------------------------------------------
\12\However, sole proprietorships and other taxpayers selling
assets directly cannot claim the zero-percent rate on capital
gain from the sale of any intangible property (i.e., the
integrally related test does not apply).
---------------------------------------------------------------------------
District of Columbia homebuyer tax credit
First-time homebuyers of a principal residence in the
District of Columbia are eligible for a nonrefundable tax
credit of up to $5,000 of the amount of the purchase price.
The $5,000 maximum credit applies both to individuals and
married couples. Married individuals filing separately can
claim a maximum credit of $2,500 each. The credit phases out
for individual taxpayers with adjusted gross income between
$70,000 and $90,000 ($110,000-$130,000 for joint filers). For
purposes of eligibility, ``first-time homebuyer'' means any
individual if such individual did not have a present
ownership interest in a principal residence in the District
of Columbia in the one-year period ending on the date of the
purchase of the residence to which the credit applies. The
credit is scheduled to expire for residences purchased after
December 31, 2005.\13\
---------------------------------------------------------------------------
\13\Sec. 1400C(i).
---------------------------------------------------------------------------

house bill

The provision extends the designation of the D.C. Zone for
one year (through December 31, 2006), thus extending the wage
credit and section 179 expensing for one year.
The provision extends the tax-exempt financing authority
for one year, applying to bonds issued during the period
beginning on January 1, 1998, and ending on December 31,
2006.
The provision extends the zero-percent capital gains rate
applicable to capital gains from the sale of certain
qualified D.C. Zone assets for one year.

[[Page 7388]]

The provision extends the first-time homebuyer credit for
one year, through December 31, 2006.
Effective date.--The amendment generally is effective on
January 1, 2006, except the provision relating to bonds is
effective for obligations issued after the date of enactment.

senate amendment

The Senate amendment is the same as the House bill.
Effective date.--The provision is effective on the date of
enactment.

conference agreement

The conference agreement does not include the House bill
provision or the Senate amendment provision.

I. Possession Tax Credit With Respect to American Samoa

(Sec. 111 of the House bill and sec. 936 of the Code)

Present Law

In general
Certain domestic corporations with business operations in
the U.S. possessions are eligible for the possession tax
credit.\14\ This credit offsets the U.S. tax imposed on
certain income related to operations in the U.S.
possessions.\15\ For purposes of the section 936 credit,
possessions include, among other places, American Samoa.
Income eligible for the section 936 credit includes non-U.S.
source income from (1) the active conduct of a trade or
business within a U.S. possession, (2) the sale or exchange
of substantially all of the assets that were used in such a
trade or business, or (3) certain possessions investments.
The section 936 credit expires for taxable years beginning
after December 31, 2005.
---------------------------------------------------------------------------
\14\Secs. 27(b), 936.
\15\Domestic corporations with activities in Puerto Rico are
eligible for the seciton 30A economic activity credit. That
credit is calculated under the rules set forth in section
936.
---------------------------------------------------------------------------
To qualify for the possession tax credit for a taxable
year, a domestic corporation must satisfy two conditions.
First, the corporation must derive at least 80 percent of its
gross income for the three-year period immediately preceding
the close of the taxable year from sources within a
possession. Second, the corporation must derive at least 75
percent of its gross income for that same period from the
active conduct of a possession business. A domestic
corporation that has elected the possession tax credit and
that satisfies these two conditions for a taxable year
generally is entitled to a credit against the U.S. tax
attributable to the taxpayer's income that is eligible for
the section 936 credit.
The possession tax credit applies only to a corporation
that qualifies as an existing credit claimant. The
determination of whether a corporation is an existing credit
claimant is made separately for each possession. The
possession tax credit is computed separately for each
possession with respect to which the corporation is an
existing credit claimant, and the credit is subject to either
an economic activity-based limitation or an income-based
limit.
Qualification as existing credit claimant
A corporation is an existing credit claimant with respect
to a possession if (1) the corporation was engaged in the
active conduct of a trade or business within the possession
on October 13, 1995, and (2) the corporation elected the
benefits of the possession tax credit in an election in
effect for its taxable year that included October 13,
1995.\16\ A corporation that adds a substantial new line of
business (other than in a qualifying acquisition of all the
assets of a trade or business of an existing credit claimant)
ceases to be an existing credit claimant as of the close of
the taxable year ending before the date on which that new
line of business is added.
---------------------------------------------------------------------------
\16\A corporation will qualify as an existing credit claimant
if it acquired all the assets of a trade or business of a
corporation that (1) actively conducted that trade or
business in a possession on October 13, 1995, and (2) had
elected the benefits of the possession tax credit in an
election for the taxable year that includes October 13, 1995.
---------------------------------------------------------------------------
Economic activity-based limit
Under the economic activity-based limit, the amount of the
credit determined under the rules described above may not
exceed an amount equal to the sum of (1) 60 percent of the
taxpayer's qualifying possession wage and fringe benefit
expenses, (2) 15 percent of depreciation allowances with
respect to short-life qualifying tangible property, plus 40
percent of depreciation allowances with respect to medium-
life qualifying tangible property, plus 65 percent of
depreciation allowances with respect to long-life tangible
property, and (3) in certain cases, a portion of the
taxpayer's possession income taxes.
Income-based limit
As an alternative to the economic activity-based limit, a
taxpayer may elect to apply a limit equal to the applicable
percentage of the credit that would otherwise be allowable
with respect to possession business income; the applicable
percentage currently is 40 percent.
Repeal and phase out
In 1996, the section 936 credit was repealed for new
claimants for taxable years beginning after 1995 and was
phased out for existing credit claimants over a period
including taxable years beginning before 2006. The amount of
the available credit during the phaseout period generally is
reduced by special limitation rules. These phaseout period
limitation rules do not apply to the credit available to
existing credit claimants for income from activities in Guam,
American Samoa, and the Northern Mariana Islands. The section
936 credit is repealed for all possessions, including Guam,
American Samoa, and the Northern Mariana Islands, for all
taxable years beginning after 2005.

house bill

The House bill extends for one year the present-law section
936 credit as applied to American Samoa; it thus allows
existing credit claimants to claim the credit for income from
activities in American Samoa in taxable years beginning on or
before December 31, 2006.
Effective date.--The provision is effective for taxable
years beginning after December 31, 2005.

Senate Amendment

No provision.

Conference Agreement

The conference agreement does not include the House bill
provision.

J. Parity in the Application of Certain Limits to Mental Health
Benefits

(Sec. 112 of the House bill and sec. 9812 of the Code)

Present Law\17\

The Code, the Employee Retirement Income Security Act of
1974 (``ERISA'') and the Public Health Service Act (``PHSA'')
contain provisions under which group health plans that
provide both medical and surgical benefits and mental health
benefits cannot impose aggregate lifetime or annual dollar
limits on mental health benefits that are not imposed on
substantially all medical and surgical benefits (``mental
health parity requirements''). In the case of a group health
plan which provides benefits for mental health, the mental
health parity requirements do not affect the terms and
conditions (including cost sharing, limits on numbers of
visits or days of coverage, and requirements relating to
medical necessity) relating to the amount, duration, or scope
of mental health benefits under the plan, except as
specifically provided in regard to parity in the imposition
of aggregate lifetime limits and annual limits.
---------------------------------------------------------------------------
\17\This description of present law refers to the law in
effect at the time the bill passed the House of
Representatives, which was before the enactment of Pub. L.
No. 109-151, which extended the mental health parity
requirements of the Code, ERISA, and the PHSA through
December 31, 2006.
---------------------------------------------------------------------------
The Code imposes an excise tax on group health plans which
fail to meet the mental health parity requirements. The
excise tax is equal to $100 per day during the period of
noncompliance and is generally imposed on the employer
sponsoring the plan if the plan fails to meet the
requirements. The maximum tax that can be imposed during a
taxable year cannot exceed the lesser of 10 percent of the
employer's group health plan expenses for the prior year or
$500,000. No tax is imposed if the Secretary determines that
the employer did not know, and in exercising reasonable
diligence would not have known, that the failure existed.
The mental health parity requirements do not apply to group
health plans of small employers nor do they apply if their
application results in an increase in the cost under a group
health plan of at least one percent. Further, the mental
health parity requirements do not require group health plans
to provide mental health benefits.
The Code, ERISA and PHSA mental health parity requirements
are scheduled to expire with respect to benefits for services
furnished after December 31, 2005.

house bill

The House bill extends for one year the present-law Code
excise tax for failure to comply with the mental health
parity requirements (through December 31, 2006).
Effective date.--The provision is effective on the date of
enactment.

senate amendment

No provision.

Conference Agreement

The conference agreement does not include the House bill
provision.

K. Research Credit

(Sec. 113 of the House bill, sec. 108 of the Senate
amendment, and sec. 41 of the Code)

present law

General rule
Prior to January 1, 2006, a taxpayer could claim a research
credit equal to 20 percent of the amount by which the
taxpayer's qualified research expenses for a taxable year
exceeded its base amount for that year.\18\ Thus, the
research credit was generally available with respect to
incremental increases in qualified research.
---------------------------------------------------------------------------
\18\Sec. 41.
---------------------------------------------------------------------------
A 20-percent research tax credit was also available with
respect to the excess of (1) 100 percent of corporate cash
expenses (including grants or contributions) paid for basic
research conducted by universities (and certain nonprofit
scientific research organizations) over (2) the sum of (a)
the greater of

[[Page 7389]]

two minimum basic research floors plus (b) an amount
reflecting any decrease in nonresearch giving to universities
by the corporation as compared to such giving during a fixed-
base period, as adjusted for inflation. This separate credit
computation was commonly referred to as the university basic
research credit (see sec. 41(e)).
Finally, a research credit was available for a taxpayer's
expenditures on research undertaken by an energy research
consortium. This separate credit computation was commonly
referred to as the energy research credit. Unlike the other
research credits, the energy research credit applied to all
qualified expenditures, not just those in excess of a base
amount.
The research credit, including the university basic
research credit and the energy research credit, expired on
December 31, 2005.\19\
---------------------------------------------------------------------------
\19\The research tax credit initially was enacted in the
Economic Recovery Tax Act of 1981 as a credit equal to 25
percent of the excess of qualified research expenses incurred
in the current taxable year over the average of qualified
research expenses incurred in the prior three taxable years.
The research tax credit was modified in the Tax Reform Act of
1986, which (1) extended the credit through December 31,
1988, (2) reduced the credit rate to 20 percent, (3)
tightened the definition of qualified research expenses
eligible for the credit, and (4) enacted the separate
university basic credit.
The Technical and Miscellaneous Revenue Act of 1988 (``1988
Act'') extended the research tax credit for one additional
year, through December 31, 1989. The 1988 Act also reduced
the deduction allowed under section 174 (or any other
section) for qualified research expenses by an amount equal
to 50 percent of the research tax credit determined for the
year.
The Omnibus Budget Reconciliation Act of 1989 (``1989 Act'')
effectively extended the research credit for nine months (by
prorating qualified expenses incurred before January 1,
1991). The 1989 Act also modified the method for calculating
a taxpayer's base amount (i.e., by substituting the present-
law method which uses a fixed-base percentage for the prior-
law moving base which was calculated by reference to the
taxpayer's average research expenses incurred ion the
preceding three taxable years). The 1989 Act further reduced
the deduction allowed under section 174 (or any other
section) for qualified research expenses by an amount equal
to 100 percent of the research tax credit determined for the
year.
The Omnibus Budget Reconciliation Act of 1990 extended the
research tax credit through December 31, 1991 (and repealed
the special rule to prorate qualified expenses incurred
before January 1, 1991).
The Tax Extension Act of 1991 extended the research tax
credit for six months (i.e., for qualified expenses incurred
through June 30, 1992).
The Omnibus Budget Reconciliation Act of 1993 (``1993 Act'')
extended the research tax credit for three years--i.e.,
retroactively from July 1, 1992 through June 30, 1995. The
1993 Act also provided a special rule for start-up firms, so
that the fixed-base ratio of such firms eventually will be
computed by reference to their actual research experience.
Although the research tax credit expired during the period
July 1, 1995, through June 30, 1996, the Small Business Job
Protection Act of 1996 (``1996 Act'') extended the credit for
the period July 1, 1996, through May 31, 1997 (with a special
11-month extension for taxpayers that elect to be subject to
the alternative incremental research credit regime). In
addition, the 1996 Act expanded the definition of start-up
firms under section 41(c)(3)(B)(i), enacted a special rule
for certain research consortia payments under section
41(b)(3)(C), and provided that taxpayers may elect an
alternative research credit regime (under which the taxpayer
is assigned a three-tiered fixed-base percentage that is
lower than the fixed-base percentage otherwise applicable and
the credit rate likewise is reduced) for the taxpayer's first
taxable year beginning after June 30, 1996, and before July
1, 1997.
The Taxpayer Relief Act of 1997 (``1997 Act'') extended the
research credit for 13 months--i.e, generally for the period
June 1, 1997, through June 30, 1998. The 1997 Act also
provided that taxpayers are permitted to elect the
alternative incremental research credit regime for any
taxable year beginning after June 30, 1996 (and such election
will apply to that taxable year and all subsequent taxable
years unless revoked with the consent of the Secretary of the
Treasury). The Tax and Trade Relief Extension Act of 1998
extended the research credit for 12 months, i.e., through
June 30, 1999.
The Ticket to Work and Work Incentive Improvement Act of 1999
extended the research credit for five years, through June 30,
2004, increased the rates of credit under the alternative
incremental research credit regime, and expanded the
definition of research to include research undertaken in
Puerto Rico and possessions of the United States.
The Working Families Tax Relief Act of 224 extended the
research credit through December 31, 2005.
The Energy Tax Incentives Act of 2005 added the energy
research credit.
---------------------------------------------------------------------------
Computation of allowable credit
Except for energy research payments and certain university
basic research payments made by corporations, the research
tax credit applied only to the extent that the taxpayer's
qualified research expenses for the current taxable year
exceeded its base amount. The base amount for the current
year generally was computed by multiplying the taxpayer's
fixed-base percentage by the average amount of the taxpayer's
gross receipts for the four preceding years. If a taxpayer
both incurred qualified research expenses and had gross
receipts during each of at least three years from 1984
through 1988, then its fixed-base percentage was the ratio
that its total qualified research expenses for the 1984-1988
period bore to its total gross receipts for that period
(subject to a maximum fixed-base percentage of 16 percent).
All other taxpayers (so-called start-up firms) were assigned
a fixed-base percentage of three percent.\20\
---------------------------------------------------------------------------
\20\The Small Business Job Protection Act of 1996 expanded
the definition of start-up firms under section 41(c)(3)(B)(i)
to include any firm if the first taxable year in which such
firm had both gross receipts and qualified research expenses
began after 1983. A special rule (enacted in 1993) was
designed to gradually recompute a start-up firm's fixed-base
percentage based on its actual research experience. Under
this special rule, a start-up firm would be assigned a fixed-
base percentage of three percent for each of its first five
taxable years after 1993 in which it incurs qualified
research expenses. In the event that the research credit is
extended beyond its expiration date, a start-up date, a
start-up firm's fixed-base percentage for its sixth through
tenth taxable years after 1993 in which it incurs qualified
research expenses will be a phased-in ratio based on its
actual research experience. For all subsequent taxable years,
the taxpayer's fixed-base percentage will be its actual ratio
of qualified research expenses to gross receipts for any five
years selected by the taxpayer from its fifth through tenth
taxable years after 1993 (sec. 41(c)(3)(B)).
---------------------------------------------------------------------------
In computing the credit, a taxpayer's base amount could not
be less than 50 percent of its current-year qualified
research expenses.
To prevent artificial increases in research expenditures by
shifting expenditures among commonly controlled or otherwise
related entities, a special aggregation rule provided that
all members of the same controlled group of corporations were
treated as a single taxpayer (sec. 41(f)(1)). Under
regulations prescribed by the Secretary, special rules
applied for computing the credit when a major portion of a
trade or business (or unit thereof) changed hands, under
which qualified research expenses and gross receipts for
periods prior to the change of ownership of a trade or
business were treated as transferred with the trade or
business that gave rise to those expenses and receipts for
purposes of recomputing a taxpayer's fixed-base percentage
(sec. 41(f)(3)).
Alternative incremental research credit regime
Taxpayers were allowed to elect an alternative incremental
research credit regime.\21\ If a taxpayer elected to be
subject to this alternative regime, the taxpayer was assigned
a three-tiered fixed-base percentage (that was lower than the
fixed-base percentage otherwise applicable) and the credit
rate likewise was reduced. Under the alternative incremental
credit regime, a credit rate of 2.65 percent applied to the
extent that a taxpayer's current-year research expenses
exceeded a base amount computed by using a fixed-base
percentage of one percent (i.e., the base amount equaled one
percent of the taxpayer's average gross receipts for the four
preceding years) but did not exceed a base amount computed by
using a fixed-base percentage of 1.5 percent. A credit rate
of 3.2 percent applied to the extent that a taxpayer's
current-year research expenses exceeded a base amount
computed by using a fixed-base percentage of 1.5 percent but
did not exceed a base amount computed by using a fixed-base
percentage of two percent. A credit rate of 3.75 percent
applied to the extent that a taxpayer's current-year research
expenses exceeded a base amount computed by using a fixed-
base percentage of two percent. An election to be subject to
this alternative incremental credit regime could be made for
any taxable year beginning after June 30, 1996, and such an
election applied to that taxable year and all subsequent
years unless revoked with the consent of the Secretary of the
Treasury.
---------------------------------------------------------------------------
\21\Sec. 41(c)(4).
---------------------------------------------------------------------------
Eligible expenses
Qualified research expenses eligible for the research tax
credit consisted of: (1) in-house expenses of the taxpayer
for wages and supplies attributable to qualified research;
(2) certain time-sharing costs for computer use in qualified
research; and (3) 65 percent of amounts paid or incurred by
the taxpayer to certain other persons for qualified research
conducted on the taxpayer's behalf (so-called contract
research expenses).\22\ Notwithstanding the limitation for
contract research expenses, qualified research expenses
included 100 percent of amounts paid or incurred by the
taxpayer to an eligible small business, university, or
Federal laboratory for qualified energy research.
---------------------------------------------------------------------------
\22\Under a special rule enacted as part of the Small
Business Job Protection Act of 1996, 75 percent of amounts
paid to a research consortium for qualified research were
treated as qualified research expenses eligible for the
research credit (rather than 65 percent under the general
rule under section 41(b)(3) governing contract research
expenses) if (1) such research consortium was a tax-exempt
organization that is described in section 501(c)(3) (other
than a private foundation) or section 501(c)(6) and was
organized and operated primarily to conduct scientific
research, and (2) such qualified research was conducted by
the consortium on behalf of the taxpayer and one or more
persons not related to the taxpayer. Sec. 41(b)(3)(C).
---------------------------------------------------------------------------
To be eligible for the credit, the research did not only
have to satisfy the requirements of present-law section 174
(described below) but also had to be undertaken for the
purpose of discovering information that is technological in
nature, the application of which was intended to be useful in
the development of a new or improved business component of
the taxpayer, and substantially all of the activities of
which had to constitute elements of a process of
experimentation for functional aspects, performance,
reliability, or quality of a business component. Research did
not qualify for the credit if substantially all of the
activities related to style, taste, cosmetic, or seasonal
design factors (sec. 41(d)(3)). In addition, research did not
qualify for the credit: (1) if conducted after the beginning
of commercial production of the

[[Page 7390]]

business component; (2) if related to the adaptation of an
existing business component to a particular customer's
requirements; (3) if related to the duplication of an
existing business component from a physical examination of
the component itself or certain other information; or (4) if
related to certain efficiency surveys, management function or
technique, market research, market testing, or market
development, routine data collection or routine quality
control (sec. 41(d)(4)). Research did not qualify for the
credit if it was conducted outside the United States, Puerto
Rico, or any U.S. possession.
Relation to deduction
Under section 174, taxpayers may elect to deduct currently
the amount of certain research or experimental expenditures
paid or incurred in connection with a trade or business,
notwithstanding the general rule that business expenses to
develop or create an asset that has a useful life extending
beyond the current year must be capitalized.\23\ While the
research credit was in effect, however, deductions allowed to
a taxpayer under section 174 (or any other section) were
reduced by an amount equal to 100 percent of the taxpayer's
research tax credit determined for the taxable year (sec.
280C(c)). Taxpayers could alternatively elect to claim a
reduced research tax credit amount (13 percent) under section
41 in lieu of reducing deductions otherwise allowed (sec.
280C(c)(3)).
---------------------------------------------------------------------------
\23\Taxpayers may elect 10-year amortization of certain
research expenditures allowable as a deduction under section
174(a). Secs. 174(f)(2) and 59(e).
---------------------------------------------------------------------------

House Bill

The provision extends for one year and modifies the
present-law research credit provision (for amounts paid or
incurred through December 31, 2006).
The provision increases the rates of the alternative
incremental credit: (1) a credit rate of three percent
(rather than 2.65 percent) applies to the extent that a
taxpayer's current-year research expenses exceed a base
amount computed by using a fixed-base percentage of one
percent (i.e., the base amount equals one percent of the
taxpayer's average gross receipts for the four preceding
years) but do not exceed a base amount computed by using a
fixed-base percentage of 1.5 percent; (2) a credit rate of
four percent (rather than 3.2 percent) applies to the extent
that a taxpayer's current-year research expenses exceed a
base amount computed by using a fixed-base percentage of 1.5
percent but do not exceed a base amount computed by using a
fixed-base percentage of two percent; and (3) a credit rate
of 5 percent (rather than 3.75 percent) applies to the extent
that a taxpayer's current-year research expenses exceed a
base amount computed by using a fixed-base percentage of two
percent.
The provision also creates, at the election of the
taxpayer, an alternative simplified credit for qualified
research expenses. The alternative simplified research is
equal to 12 percent of qualified research expenses that
exceed 50 percent of the average qualified research expenses
for the three preceding taxable years. The rate is reduced to
6 percent if a taxpayer has no qualified research expenses in
any one of the three preceding taxable years.
An election to use the alternative simplified credit
applies to all succeeding taxable years unless revoked with
the consent of the Secretary. An election to use the
alternative simplified credit may not be made for any taxable
year for which an election to use the alternative incremental
credit is in effect. A special transition rule applies which
permits a taxpayer to elect to use the alternative simplified
credit in lieu of the alternative incremental credit if such
election is made during the taxable year which includes the
date of enactment of the provision. The transition rule only
applies to the taxable year which includes the date of
enactment.
Effective date.--The extension of the research credit
applies to amounts paid or incurred after December 31, 2005.
The modification of the alternative incremental credit and
the creation of the alternative simplified credit are
effective for taxable years ending after date of enactment.

Senate Amendment

The Senate amendment generally follows the House bill but
provides for a two-year extension of the modified research
credit. It also adds a provision that broadens the research
credit as it applies to research consortia. Under the Senate
amendment, a 20 percent credit would be available for a
taxpayer's expenditures on research carried out by any
research consortium, rather than being limited to research
carried out by an energy research consortium.
Effective date.--The Senate amendment applies to amounts
paid or incurred after December 31, 2005.

Conference Agreement

The conference agreement does not include the House bill
provision or the Senate amendment provision.

L. Qualified Zone Academy Bonds

(Sec. 114 of the House bill, sec. 110 of the Senate amendment
and sec. 1397E of the Code)

Present Law

Tax-exempt bonds
Interest on State and local governmental bonds generally is
excluded from gross income for Federal income tax purposes if
the proceeds of the bonds are used to finance direct
activities of these governmental units or if the bonds are
repaid with revenues of these governmental units. Activities
that can be financed with these tax-exempt bonds include the
financing of public schools (sec. 103).
Qualified zone academy bonds
As an alternative to interest-bearing tax-exempt bonds,
States and local governments are given the authority to issue
``qualified zone academy bonds'' (sec. 1397E). A total of
$400 million of qualified zone academy bonds may be issued
annually in calendar years 1998 through 2005. The $400
million aggregate bond cap is allocated each year to the
States according to their respective populations of
individuals below the poverty line. Each State, in turn,
allocates the credit authority to qualified zone academies
within such State.
Financial institutions that hold qualified zone academy
bonds are entitled to a nonrefundable tax credit in an amount
equal to a credit rate multiplied by the face amount of the
bond. A taxpayer holding a qualified zone academy bond on the
credit allowance date is entitled to a credit. The credit is
includable in gross income (as if it were a taxable interest
payment on the bond), and may be claimed against regular
income tax and AMT liability.
The Treasury Department sets the credit rate at a rate
estimated to allow issuance of qualified zone academy bonds
without discount and without interest cost to the issuer. The
maximum term of the bond is determined by the Treasury
Department, so that the present value of the obligation to
repay the bond is 50 percent of the face value of the bond.
``Qualified zone academy bonds'' are defined as any bond
issued by a State or local government, provided that: (1) at
least 95 percent of the proceeds are used for the purpose of
renovating, providing equipment to, developing course
materials for use at, or training teachers and other school
personnel in a ``qualified zone academy'' (``qualified zone
academy property'') and (2) private entities have promised to
contribute to the qualified zone academy certain equipment,
technical assistance or training, employee services, or other
property or services with a value equal to at least 10
percent of the bond proceeds.
A school is a ``qualified zone academy'' if: (1) the school
is a public school that provides education and training below
the college level, (2) the school operates a special academic
program in cooperation with businesses to enhance the
academic curriculum and increase graduation and employment
rates, and (3) either (a) the school is located in an
empowerment zone or enterprise community designated under the
Code or (b) it is reasonably expected that at least 35
percent of the students at the school will be eligible for
free or reduced-cost lunches under the school lunch program
established under the National School Lunch Act.
Arbitrage restrictions on tax-exempt bonds
To prevent States and local governments from issuing more
tax-exempt bonds than is necessary for the activity being
financed or from issuing such bonds earlier than needed for
the purpose of the borrowing, the Code includes arbitrage
restrictions limiting the ability to profit from investment
of tax-exempt bond proceeds. In general, arbitrage profits
may be earned only during specified periods (e.g., defined
``temporary periods'' before funds are needed for the purpose
of the borrowing) or on specified types of investments (e.g.,
``reasonably required reserve or replacement funds'').
Subject to limited exceptions, profits that are earned during
these periods or on such investments must be rebated to the
Federal Government. Governmental bonds are subject to less
restrictive arbitrage rules than most private activity bonds.
The arbitrage rules do not apply to qualified zone academy
bonds.

House Bill

The House bill extends for one year the present-law
provision relating to qualified zone academy bonds (through
December 31, 2006).
Effective date.--The provision is effective for bonds
issued after December 31, 2005.

Senate Amendment

The Senate amendment extends for two years the present-law
provision relating to qualified zone academy bonds (through
December 31, 2007).
In addition, the Senate amendment imposes the arbitrage
requirements of section 148 that apply to tax-exempt bonds to
qualified zone academy bonds. Principles under section 148
and the regulations thereunder shall apply for purposes of
determining the yield restriction and arbitrage rebate
requirements applicable to qualified zone academy bonds. For
example, for arbitrage purposes, the yield on an issue of
qualified zone academy bonds is computed by taking into
account all payments of interest, if any, on such bonds,
i.e., whether the bonds are issued at par, premium, or
discount. However, for purposes of determining yield, the
amount of the credit allowed to a taxpayer holding

[[Page 7391]]

qualified zone academy bonds is not treated as interest,
although such credit amount is treated as interest income to
the taxpayer.
The provision imposes new spending requirements for
qualified zone academy bonds. An issuer of qualified zone
academy bonds must reasonably expect to and actually spend 95
percent or more of the proceeds of such bonds on qualified
zone academy property within the five-year period that begins
on the date of issuance. To the extent less than 95 percent
of the proceeds are used to finance qualified zone academy
property during the five-year spending period, bonds will
continue to qualify as qualified zone academy bonds if
unspent proceeds are used within 90 days from the end of such
five-year period to redeem any ``nonqualified bonds.'' For
these purposes, the amount of nonqualified bonds is to be
determined in the same manner as Treasury regulations under
section 142. In addition, the provision provides that the
five-year spending period may be extended by the Secretary
upon the issuer's request if reasonable cause for such
extension is established.
Under the provision, qualified private business
contributions must be in the form of cash or cash
equivalents, rather than property or services as permitted
under present law. The provision also requires an equal
amount of principal is to be paid by the issuer during each
calendar year that the issue is outstanding.
Under the provision, issuers of qualified zone academy
bonds are required to report issuance to the IRS in a manner
similar to that required for tax-exempt bonds.
Effective date.--The provision is effective for bonds
issued after December 31, 2005.

Conference Agreement

The conference agreement does not include the House bill
provision or the Senate amendment provision.

M. Above-the-Line Deduction for Certain Expenses of Elementary and
Secondary School Teachers

(Sec. 115 of the House bill, sec. 112 of the Senate amendment
and sec. 62 of the Code)

Present Law

In general, ordinary and necessary business expenses are
deductible (sec. 162). However, in general, unreimbursed
employee business expenses are deductible only as an itemized
deduction and only to the extent that the individual's total
miscellaneous deductions (including employee business
expenses) exceed two percent of adjusted gross income. An
individual's otherwise allowable itemized deductions may be
further limited by the overall limitation on itemized
deductions, which reduces itemized deductions for taxpayers
with adjusted gross income in excess of $145,950 (for 2005).
In addition, miscellaneous itemized deductions are not
allowable under the alternative minimum tax.
Certain expenses of eligible educators are allowed an
above-the-line deduction. Specifically, for taxable years
beginning prior to January 1, 2006, an above-the-line
deduction is allowed for up to $250 annually of expenses paid
or incurred by an eligible educator for books, supplies
(other than nonathletic supplies for courses of instruction
in health or physical education), computer equipment
(including related software and services) and other
equipment, and supplementary materials used by the eligible
educator in the classroom. To be eligible for this deduction,
the expenses must be otherwise deductible under 162 as a
trade or business expense. A deduction is allowed only to the
extent the amount of expenses exceeds the amount excludable
from income under section 135 (relating to education savings
bonds), 529(c)(1) (relating to qualified tuition programs),
and section 530(d)(2) (relating to Coverdell education
savings accounts).
An eligible educator is a kindergarten through grade 12
teacher, instructor, counselor, principal, or aide in a
school for at least 900 hours during a school year. A school
means any school which provides elementary education or
secondary education, as determined under State law.
The above-the-line deduction for eligible educators is not
allowed for taxable years beginning after December 31, 2005.

House Bill

The present-law provision is extended for one year, through
December 31, 2006.
Effective date.--The provision is effective for expenses
paid or incurred in taxable years beginning after December
31, 2005.

Senate Amendment

The present-law provision is extended for two years,
through December 31, 2007.
Effective date.--The provision is effective for expenses
paid or incurred in taxable years beginning after December
31, 2005.

Conference Agreement

The conference agreement does not include the House bill
provision or the Senate amendment provision.

N. Above-the-Line Deduction for Higher Education Expenses

(Sec. 116 of the House bill, sec. 103 of the Senate amendment
and sec. 222 of the Code)

Present Law

An individual is allowed an above-the-line deduction for
qualified tuition and related expenses for higher education
paid by the individual during the taxable year. Qualified
tuition and related expenses include tuition and fees
required for the enrollment or attendance of the taxpayer,
the taxpayer's spouse, or any dependent of the taxpayer with
respect to whom the taxpayer may claim a personal exemption,
at an eligible institution of higher education for courses of
instruction of such individual at such institution. Charges
and fees associated with meals, lodging, insurance,
transportation, and similar personal, living, or family
expenses are not eligible for the deduction. The expenses of
education involving sports, games, or hobbies are not
qualified tuition and related expenses unless this education
is part of the student's degree program.
The amount of qualified tuition and related expenses must
be reduced by certain scholarships, educational assistance
allowances, and other amounts paid for the benefit of such
individual, and by the amount of such expenses taken into
account for purposes of determining any exclusion from gross
income of: (1) income from certain United States Savings
Bonds used to pay higher education tuition and fees; and (2)
income from a Coverdell education savings account.
Additionally, such expenses must be reduced by the earnings
portion (but not the return of principal) of distributions
from a qualified tuition program if an exclusion under
section 529 is claimed with respect to expenses eligible for
exclusion under section 222. No deduction is allowed for any
expense for which a deduction is otherwise allowed or with
respect to an individual for whom a Hope credit or Lifetime
Learning credit is elected for such taxable year.
The expenses must be in connection with enrollment at an
institution of higher education during the taxable year, or
with an academic term beginning during the taxable year or
during the first three months of the next taxable year. The
deduction is not available for tuition and related expenses
paid for elementary or secondary education.
For taxable years beginning in 2004 and 2005, the maximum
deduction is $4,000 for an individual whose adjusted gross
income for the taxable year does not exceed $65,000 ($130,000
in the case of a joint return), or $2,000 for other
individuals whose adjusted gross income does not exceed
$80,000 ($160,000 in the case of a joint return). No
deduction is allowed for an individual whose adjusted gross
income exceeds the relevant adjusted gross income
limitations, for a married individual who does not file a
joint return, or for an individual with respect to whom a
personal exemption deduction may be claimed by another
taxpayer for the taxable year. The deduction is not available
for taxable years beginning after December 31, 2005.

House Bill

The provision extends the tuition deduction for one year,
through December 31, 2006.
Effective date.--The provision is effective for taxable
years beginning after December 31, 2005.

Senate Amendment

The provision extends the tuition deduction for four years,
through December 31, 2009.
Effective date.--The provision is effective for taxable
years beginning after December 31, 2005.

Conference Agreement

The conference agreement does not include the House
provision or the Senate amendment provision.

O. Deduction of State and Local General Sales Taxes

(Sec. 117 of the House bill, sec. 105 of the Senate
amendment, and sec. 164 of the Code)

Present Law

For purposes of determining regular tax liability, an
itemized deduction is permitted for certain State and local
taxes paid, including individual income taxes, real property
taxes, and personal property taxes. The itemized deduction is
not permitted for purposes of determining a taxpayer's
alternative minimum taxable income. For taxable years
beginning in 2004 and 2005, at the election of the taxpayer,
an itemized deduction may be taken for State and local
general sales taxes in lieu of the itemized deduction
provided under present law for State and local income taxes.
As is the case for State and local income taxes, the itemized
deduction for State and local general sales taxes is not
permitted for purposes of determining a taxpayer's
alternative minimum taxable income. Taxpayers have two
options with respect to the determination of the sales tax
deduction amount. Taxpayers may deduct the total amount of
general State and local sales taxes paid by accumulating
receipts showing general sales taxes paid. Alternatively,
taxpayers may use tables created by the Secretary of the
Treasury that show the allowable deduction. The tables are
based on average consumption by taxpayers on a State-by-State
basis taking into account filing status, number of
dependents, adjusted gross income and rates of State and
local general sales taxation. Taxpayers who use the tables
created by the Secretary may, in addition to the table
amounts, deduct eligible general sales taxes paid with
respect to the purchase of motor vehicles, boats and other
items specified by the Secretary. Sales taxes for items that
may be added to the tables are not reflected in the tables
themselves.

[[Page 7392]]

The term ``general sales tax'' means a tax imposed at one
rate with respect to the sale at retail of a broad range of
classes of items. However, in the case of items of food,
clothing, medical supplies, and motor vehicles, the fact that
the tax does not apply with respect to some or all of such
items is not taken into account in determining whether the
tax applies with respect to a broad range of classes of
items, and the fact that the rate of tax applicable with
respect to some or all of such items is lower than the
general rate of tax is not taken into account in determining
whether the tax is imposed at one rate. Except in the case of
a lower rate of tax applicable with respect to food,
clothing, medical supplies, or motor vehicles, no deduction
is allowed for any general sales tax imposed with respect to
an item at a rate other than the general rate of tax.
However, in the case of motor vehicles, if the rate of tax
exceeds the general rate, such excess shall be disregarded
and the general rate is treated as the rate of tax.
A compensating use tax with respect to an item is treated
as a general sales tax, provided such tax is complimentary to
a general sales tax and a deduction for sales taxes is
allowable with respect to items sold at retail in the taxing
jurisdiction that are similar to such item.

House Bill

The present-law provision allowing taxpayers to elect to
deduct State and local sales taxes in lieu of State and local
income taxes is extended for one year (through December 31,
2006).
Effective date.--The provision applies to taxable years
beginning after December 31, 2005.

Senate Amendment

The present-law provision allowing taxpayers to elect to
deduct State and local sales taxes in lieu of State and local
income taxes is extended for two years (through December 31,
2007).
Effective date.--The provision applies to taxable years
beginning after December 31, 2005.

Conference Agreement

The conference agreement does not include the House bill
provision or the Senate amendment provision.

P. Extension and Expansion to Petroleum Products of Expensing for
Environmental Remediation Costs

(Sec. 201 of the House bill, sec. 113 of the Senate
amendment, and sec. 198 of the Code)

Present Law

Present law allows a deduction for ordinary and necessary
expenses paid or incurred in carrying on any trade or
business.\24\ Treasury regulations provide that the cost of
incidental repairs that neither materially add to the value
of property nor appreciably prolong its life, but keep it in
an ordinarily efficient operating condition, may be deducted
currently as a business expense. Section 263(a)(1) limits the
scope of section 162 by prohibiting a current deduction for
certain capital expenditures. Treasury regulations define
``capital expenditures'' as amounts paid or incurred to
materially add to the value, or substantially prolong the
useful life, of property owned by the taxpayer, or to adapt
property to a new or different use. Amounts paid for repairs
and maintenance do not constitute capital expenditures. The
determination of whether an expense is deductible or
capitalizable is based on the facts and circumstances of each
case.
---------------------------------------------------------------------------
\24\Sec. 162.
---------------------------------------------------------------------------
Taxpayers may elect to treat certain environmental
remediation expenditures that would otherwise be chargeable
to capital account as deductible in the year paid or
incurred.\25\ The deduction applies for both regular and
alternative minimum tax purposes. The expenditure must be
incurred in connection with the abatement or control of
hazardous substances at a qualified contaminated site. In
general, any expenditure for the acquisition of depreciable
property used in connection with the abatement or control of
hazardous substances at a qualified contaminated site does
not constitute a qualified environmental remediation
expenditure. However, depreciation deductions allowable for
such property, which would otherwise be allocated to the site
under the principles set forth in Commissioner v. Idaho Power
Co.\26\ and section 263A, are treated as qualified
environmental remediation expenditures.
---------------------------------------------------------------------------
\25\Sec. 198.
\26\418 U.S. 1 (1974).
---------------------------------------------------------------------------
A ``qualified contaminated site'' (a so-called
``brownfield'') generally is any property that is held for
use in a trade or business, for the production of income, or
as inventory and is certified by the appropriate State
environmental agency to be an area at or on which there has
been a release (or threat of release) or disposal of a
hazardous substance. Both urban and rural property may
qualify. However, sites that are identified on the national
priorities list under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980
(``CERCLA'')\27\ cannot qualify as targeted areas. Hazardous
substances generally are defined by reference to sections
101(14) and 102 of CERCLA, subject to additional limitations
applicable to asbestos and similar substances within
buildings, certain naturally occurring substances such as
radon, and certain other substances released into drinking
water supplies due to deterioration through ordinary use.
Petroleum products generally are not regarded as hazardous
substances for purposes of section 198 (except for purposes
of determining qualified environmental remediation
expenditures in the ``Gulf Opportunity Zone'' under section
1400N(g), as described below).\28\
---------------------------------------------------------------------------
\27\Pub. L. No. 96-510 (1980).
\28\Section 101(14) of CERCLA specifically excludes
``petroleum, including crude oil or any fraction thereof
which is not otherwise specifically listed or designated as a
hazardous substance under subparagraphs (A) through (F) of
this paragraph,'' from the definition of ``hazardous
substance.''
---------------------------------------------------------------------------
In the case of property to which a qualified environmental
remediation expenditure otherwise would have been
capitalized, any deduction allowed under section 198 is
treated as a depreciation deduction and the property is
treated as section 1245 property. Thus, deductions for
qualified environmental remediation expenditures are subject
to recapture as ordinary income upon a sale or other
disposition of the property. In addition, sections 280B
(demolition of structures) and 468 (special rules for mining
and solid waste reclamation and closing costs) do not apply
to amounts that are treated as expenses under this provision.
Eligible expenditures are those paid or incurred before
January 1, 2006.
Under section 1400N(g), the above provisions apply to
expenditures paid or incurred to abate contamination at
qualified contaminated sites in the Gulf Opportunity Zone
(defined as that portion of the Hurricane Katrina Disaster
Area determined by the President to warrant individual or
individual and public assistance from the Federal Government
under the Robert T. Stafford Disaster Relief and Emergency
Assistance Act by reason of Hurricane Katrina) before January
1, 2008; in addition, within the Gulf Opportunity Zone
section 1400N(g) broadens the definition of hazardous
substance to include petroleum products (defined by reference
to section 4612(a)(3)).

House Bill

The House bill extends for two years the present-law
provisions relating to environmental remediation expenditures
(through December 31, 2007).
In addition, the provision expands the definition of
hazardous substance to include petroleum products. Under the
provision, petroleum products are defined by reference to
section 4612(a)(3), and thus include crude oil, crude oil
condensates and natural gasoline.\29\
---------------------------------------------------------------------------
\29\The present law exceptions for sites on the national
priorities list under CERCLA, and for substances with respect
to which a removal or remediation is not permitted under
section 104 of CERCLA by reason of subsection (a)(3) thereof,
would continue to apply to all hazardous substances
(including petroleum products).
---------------------------------------------------------------------------
Effective date.--The provision applies to expenditures paid
or incurred after December 31, 2005.

Senate Amendment

The Senate amendment modifies the House bill to provide for
only a one-year extension of the present-law provisions
relating to environmental remediation expenditures (through
December 31, 2006). The Senate amendment follows the House
bill in expanding the definition of hazardous substances to
include petroleum products.
Effective date.--The provision applies to expenditures paid
or incurred after December 31, 2005.

Conference Agreement

The conference agreement does not include the House bill
provision or the Senate amendment provision.

Q. Controlled Foreign Corporations

1. Subpart F exception for active financing (Sec. 202(a) of
the House bill and secs. 953 and 954 of the Code)

Present Law

Under the subpart F rules, 10-percent U.S. shareholders of
a controlled foreign corporation (``CFC'') are subject to
U.S. tax currently on certain income earned by the CFC,
whether or not such income is distributed to the
shareholders. The income subject to current inclusion under
the subpart F rules includes, among other things, insurance
income and foreign base company income. Foreign base company
income includes, among other things, foreign personal holding
company income and foreign base company services income
(i.e., income derived from services performed for or on
behalf of a related person outside the country in which the
CFC is organized).
Foreign personal holding company income generally consists
of the following: (1) dividends, interest, royalties, rents,
and annuities; (2) net gains from the sale or exchange of (a)
property that gives rise to the preceding types of income,
(b) property that does not give rise to income, and (c)
interests in trusts, partnerships, and REMICs; (3) net gains
from commodities transactions; (4) net gains from certain
foreign currency transactions; (5) income that is equivalent
to interest; (6) income from notional principal contracts;
(7) payments in lieu of dividends;

[[Page 7393]]

and (8) amounts received under personal service contracts.
Insurance income subject to current inclusion under the
subpart F rules includes any income of a CFC attributable to
the issuing or reinsuring of any insurance or annuity
contract in connection with risks located in a country other
than the CFC's country of organization. Subpart F insurance
income also includes income attributable to an insurance
contract in connection with risks located within the CFC's
country of organization, as the result of an arrangement
under which another corporation receives a substantially
equal amount of consideration for insurance of other country
risks. Investment income of a CFC that is allocable to any
insurance or annuity contract related to risks located
outside the CFC's country of organization is taxable as
subpart F insurance income.\30\
---------------------------------------------------------------------------
\30\Prop. Treas. Reg. sec. 1.953-1(a).
---------------------------------------------------------------------------
Temporary exceptions from foreign personal holding company
income, foreign base company services income, and insurance
income apply for subpart F purposes for certain income that
is derived in the active conduct of a banking, financing, or
similar business, or in the conduct of an insurance business
(so-called ``active financing income'').\31\
---------------------------------------------------------------------------
\31\Temporary exceptions from the subpart F provisions for
certain active financing income applied only for taxable
years beginning in 1998. Those exceptions were modified and
extended for one year, applicable only for taxable years
beginning in 1999. The Tax Relief Extension Act of 1999 (Pub.
L. No. 106-170) clarified and extended the temporary
exceptions for two years, applicable only for taxable years
beginning after 1999 and before 2002. The Job Creation and
Worker Assistance Act of 2002 (Pub. L. No. 107-147) modified
and extended the temporary exceptions for five years, for
taxable years beginning after 2001 and before 2007.
---------------------------------------------------------------------------
With respect to income derived in the active conduct of a
banking, financing, or similar business, a CFC is required to
be predominantly engaged in such business and to conduct
substantial activity with respect to such business in order
to qualify for the exceptions. In addition, certain nexus
requirements apply, which provide that income derived by a
CFC or a qualified business unit (``QBU'') of a CFC from
transactions with customers is eligible for the exceptions
if, among other things, substantially all of the activities
in connection with such transactions are conducted directly
by the CFC or QBU in its home country, and such income is
treated as earned by the CFC or QBU in its home country for
purposes of such country's tax laws. Moreover, the exceptions
apply to income derived from certain cross border
transactions, provided that certain requirements are met.
Additional exceptions from foreign personal holding company
income apply for certain income derived by a securities
dealer within the meaning of section 475 and for gain from
the sale of active financing assets.
In the case of insurance, in addition to a temporary
exception from foreign personal holding company income for
certain income of a qualifying insurance company with respect
to risks located within the CFC's country of creation or
organization, certain temporary exceptions from insurance
income and from foreign personal holding company income apply
for certain income of a qualifying branch of a qualifying
insurance company with respect to risks located within the
home country of the branch, provided certain requirements are
met under each of the exceptions. Further, additional
temporary exceptions from insurance income and from foreign
personal holding company income apply for certain income of
certain CFCs or branches with respect to risks located in a
country other than the United States, provided that the
requirements for these exceptions are met.
In the case of a life insurance or annuity contract,
reserves for such contracts are determined as follows for
purposes of these provisions. The reserves equal the greater
of: (1) the net surrender value of the contract (as defined
in section 807(e)(1)(A)), including in the case of pension
plan contracts; or (2) the amount determined by applying the
tax reserve method that would apply if the qualifying life
insurance company were subject to tax under Subchapter L of
the Code, with the following modifications. First, there is
substituted for the applicable Federal interest rate an
interest rate determined for the functional currency of the
qualifying insurance company's home country, calculated
(except as provided by the Treasury Secretary in order to
address insufficient data and similar problems) in the same
manner as the mid-term applicable Federal interest rate
(within the meaning of section 1274(d)). Second, there is
substituted for the prevailing State assumed rate the highest
assumed interest rate permitted to be used for purposes of
determining statement reserves in the foreign country for the
contract. Third, in lieu of U.S. mortality and morbidity
tables, mortality and morbidity tables are applied that
reasonably reflect the current mortality and morbidity risks
in the foreign country. Fourth, the Treasury Secretary may
provide that the interest rate and mortality and morbidity
tables of a qualifying insurance company may be used for one
or more of its branches when appropriate. In no event may the
reserve for any contract at any time exceed the foreign
statement reserve for the contract, reduced by any
catastrophe, equalization, or deficiency reserve or any
similar reserve.
Present law permits a taxpayer in certain circumstances,
subject to approval by the IRS through the ruling process or
in published guidance, to establish that the reserve of a
life insurance company for life insurance and annuity
contracts is the amount taken into account in determining the
foreign statement reserve for the contract (reduced by
catastrophe, equalization, or deficiency reserve or any
similar reserve). IRS approval is to be based on whether the
method, the interest rate, the mortality and morbidity
assumptions, and any other factors taken into account in
determining foreign statement reserves (taken together or
separately) provide an appropriate means of measuring income
for Federal income tax purposes. In seeking a ruling, the
taxpayer is required to provide the IRS with necessary and
appropriate information as to the method, interest rate,
mortality and morbidity assumptions and other assumptions
under the foreign reserve rules so that a comparison can be
made to the reserve amount determined by applying the tax
reserve method that would apply if the qualifying insurance
company were subject to tax under Subchapter L of the Code
(with the modifications provided under present law for
purposes of these exceptions). The IRS also may issue
published guidance indicating its approval. Present law
continues to apply with respect to reserves for any life
insurance or annuity contract for which the IRS has not
approved the use of the foreign statement reserve. An IRS
ruling request under this provision is subject to the
present-law provisions relating to IRS user fees.

house bill

The House bill extends for two years (for taxable years
beginning before 2009) the present-law temporary exceptions
from subpart F foreign personal holding company income,
foreign base company services income, and insurance income
for certain income that is derived in the active conduct of a
banking, financing, or similar business, or in the conduct of
an insurance business.
Effective date.--The provision is effective for taxable
years of foreign corporations beginning after December 31,
2006, and before January 1, 2009, and for taxable years of
U.S. shareholders with or within which such taxable years of
such foreign corporations end.

senate amendment

No provision.

conference agreement

The conference agreement includes the House bill provision.
2. Look-through treatment of payments between related
controlled foreign corporations under foreign personal
holding company income rules (sec. 202(b) of the House
bill and sec. 954(c) of the Code)

present law

In general, the rules of subpart F (secs. 951-964) require
U.S. shareholders with a
10 percent or greater interest in a controlled foreign
corporation (``CFC'') to include certain income of the CFC
(referred to as ``subpart F income'') on a current basis for
U.S. tax purposes, regardless of whether the income is
distributed to the shareholders.
Subpart F income includes foreign base company income. One
category of foreign base company income is foreign personal
holding company income. For subpart F purposes, foreign
personal holding company income generally includes dividends,
interest, rents, and royalties, among other types of income.
However, foreign personal holding company income does not
include dividends and interest received by a CFC from a
related corporation organized and operating in the same
foreign country in which the CFC is organized, or rents and
royalties received by a CFC from a related corporation for
the use of property within the country in which the CFC is
organized. Interest, rent, and royalty payments do not
qualify for this exclusion to the extent that such payments
reduce the subpart F income of the payor.

house bill

Under the House bill, for taxable years beginning after
2005 and before 2009, dividends, interest,\32\ rents, and
royalties received by one CFC from a related CFC are not
treated as foreign personal holding company income to the
extent attributable or properly allocable to non-subpart-F
income of the payor. For this purpose, a related CFC is a CFC
that controls or is controlled by the other CFC, or a CFC
that is controlled by the same person or persons that control
the other CFC. Ownership of more than 50 percent of the CFC's
stock (by vote or value) constitutes control for these
purposes. The bill provides that the Secretary shall
prescribe such regulations as are appropriate to prevent the
abuse of the purposes of this provision.
---------------------------------------------------------------------------
\32\Interest for this purpose includes factoring income which
is treated as equivalent to interest under sec. 954(c)(1)(E).
---------------------------------------------------------------------------
The provision in the House bill is effective for taxable
years of foreign corporations beginning after December 31,
2005, but before January 1, 2009, and for taxable years of
U.S. shareholders with or within which such taxable years of
such foreign corporations end.

[[Page 7394]]

senate amendment

No provision.

conference agreement

The conference agreement includes the House bill provision.

R. Reduced Rates for Capital Gains and Dividends of Individuals

(Sec. 203 of the House bill and sec. 1(h) of the Code)

present law

Capital gains
In general
In general, gain or loss reflected in the value of an asset
is not recognized for income tax purposes until a taxpayer
disposes of the asset. On the sale or exchange of a capital
asset, any gain generally is included in income. Any net
capital gain of an individual is generally taxed at maximum
rates lower than the rates applicable to ordinary income. Net
capital gain is the excess of the net long-term capital gain
for the taxable year over the net short-term capital loss for
the year. Gain or loss is treated as long-term if the asset
is held for more than one year.
Capital losses generally are deductible in full against
capital gains. In addition, individual taxpayers may deduct
capital losses against up to $3,000 of ordinary income in
each year. Any remaining unused capital losses may be carried
forward indefinitely to another taxable year.
A capital asset generally means any property except (1)
inventory, stock in trade, or property held primarily for
sale to customers in the ordinary course of the taxpayer's
trade or business, (2) depreciable or real property used in
the taxpayer's trade or business, (3) specified literary or
artistic property, (4) business accounts or notes receivable,
(5) certain U.S. publications, (6) certain commodity
derivative financial instruments, (7) hedging transactions,
and (8) business supplies. In addition, the net gain from the
disposition of certain property used in the taxpayer's trade
or business is treated as long-term capital gain. Gain from
the disposition of depreciable personal property is not
treated as capital gain to the extent of all previous
depreciation allowances. Gain from the disposition of
depreciable real property is generally not treated as capital
gain to the extent of the depreciation allowances in excess
of the allowances that would have been available under the
straight-line method of depreciation.
Tax rates before 2009
Under present law, for taxable years beginning before
January 1, 2009, the maximum rate of tax on the adjusted net
capital gain of an individual is 15 percent. Any adjusted net
capital gain which otherwise would be taxed at a 10- or 15-
percent rate is taxed at a 5-percent rate (zero for taxable
years beginning after 2007). These rates apply for purposes
of both the regular tax and the alternative minimum tax.
Under present law, the ``adjusted net capital gain'' of an
individual is the net capital gain reduced (but not below
zero) by the sum of the 28-percent rate gain and the
unrecaptured section 1250 gain. The net capital gain is
reduced by the amount of gain that the individual treats as
investment income for purposes of determining the investment
interest limitation under section 163(d).
The term ``28-percent rate gain'' means the amount of net
gain attributable to long-term capital gains and losses from
the sale or exchange of collectibles (as defined in section
408(m) without regard to paragraph (3) thereof), an amount of
gain equal to the amount of gain excluded from gross income
under section 1202 (relating to certain small business
stock), the net short-term capital loss for the taxable year,
and any long-term capital loss carryover to the taxable year.
``Unrecaptured section 1250 gain'' means any long-term
capital gain from the sale or exchange of section 1250
property (i.e., depreciable real estate) held more than one
year to the extent of the gain that would have been treated
as ordinary income if section 1250 applied to all
depreciation, reduced by the net loss (if any) attributable
to the items taken into account in computing 28-percent rate
gain. The amount of unrecaptured section 1250 gain (before
the reduction for the net loss) attributable to the
disposition of property to which section 1231 (relating to
certain property used in a trade or business) applies may not
exceed the net section 1231 gain for the year.
An individual's unrecaptured section 1250 gain is taxed at
a maximum rate of 25 percent, and the 28-percent rate gain is
taxed at a maximum rate of 28 percent. Any amount of
unrecaptured section 1250 gain or 28-percent rate gain
otherwise taxed at a 10- or 15-percent rate is taxed at the
otherwise applicable rate.
Tax rates after 2008
For taxable years beginning after December 31, 2008, the
maximum rate of tax on the adjusted net capital gain of an
individual is 20 percent. Any adjusted net capital gain which
otherwise would be taxed at a 10- or 15-percent rate is taxed
at a 10-percent rate.
In addition, any gain from the sale or exchange of property
held more than five years that would otherwise have been
taxed at the 10-percent rate is taxed at an 8-percent rate.
Any gain from the sale or exchange of property held more than
five years and the holding period for which began after
December 31, 2000, that would otherwise have been taxed at a
20-percent rate is taxed at an 18-percent rate.
The tax rates on 28-percent gain and unrecaptured section
1250 gain are the same as for taxable years beginning before
2009.
Dividends
In general
A dividend is the distribution of property made by a
corporation to its shareholders out of its after-tax earnings
and profits.
Tax rates before 2009
Under present law, dividends received by an individual from
domestic corporations and qualified foreign corporations are
taxed at the same rates that apply to capital gains. This
treatment applies for purposes of both the regular tax and
the alternative minimum tax. Thus, for taxable years
beginning before 2009, dividends received by an individual
are taxed at rates of five (zero for taxable years beginning
after 2007) and 15 percent.
If a shareholder does not hold a share of stock for more
than 60 days during the 121-day period beginning 60 days
before the ex-dividend date (as measured under section
246(c)), dividends received on the stock are not eligible for
the reduced rates. Also, the reduced rates are not available
for dividends to the extent that the taxpayer is obligated to
make related payments with respect to positions in
substantially similar or related property.
Qualified dividend income includes otherwise qualified
dividends received from qualified foreign corporations. The
term ``qualified foreign corporation'' includes a foreign
corporation that is eligible for the benefits of a
comprehensive income tax treaty with the United States which
the Treasury Department determines to be satisfactory and
which includes an exchange of information program. In
addition, a foreign corporation is treated as a qualified
foreign corporation with respect to any dividend paid by the
corporation with respect to stock that is readily tradable on
an established securities market in the United States.
Dividends received from a corporation that is a passive
foreign investment company (as defined in section 1297) in
either the taxable year of the distribution, or the preceding
taxable year, are not qualified dividends.
Special rules apply in determining a taxpayer's foreign tax
credit limitation under section 904 in the case of qualified
dividend income. For these purposes, rules similar to the
rules of section 904(b)(2)(B) concerning adjustments to the
foreign tax credit limitation to reflect any capital gain
rate differential will apply to any qualified dividend
income.
If a taxpayer receives an extraordinary dividend (within
the meaning of section 1059(c)) eligible for the reduced
rates with respect to any share of stock, any loss on the
sale of the stock is treated as a long-term capital loss to
the extent of the dividend.
A dividend is treated as investment income for purposes of
determining the amount of deductible investment interest only
if the taxpayer elects to treat the dividend as not eligible
for the reduced rates.
The amount of dividends qualifying for reduced rates that
may be paid by a regulated investment company (``RIC'') for
any taxable year in which the qualified dividend income
received by the RIC is less than 95 percent of its gross
income (as specially computed) may not exceed the sum of (i)
the qualified dividend income of the RIC for the taxable year
and (ii) the amount of earnings and profits accumulated in a
non-RIC taxable year that were distributed by the RIC during
the taxable year.
The amount of dividends qualifying for reduced rates that
may be paid by a real estate investment trust (``REIT'') for
any taxable year may not exceed the sum of (i) the qualified
dividend income of the REIT for the taxable year, (ii) an
amount equal to the excess of the income subject to the taxes
imposed by section 857(b)(1) and the regulations prescribed
under section 337(d) for the preceding taxable year over the
amount of these taxes for the preceding taxable year, and
(iii) the amount of earnings and profits accumulated in a
non-REIT taxable year that were distributed by the REIT
during the taxable year.
The reduced rates do not apply to dividends received from
an organization that was exempt from tax under section 501 or
was a tax-exempt farmers' cooperative in either the taxable
year of the distribution or the preceding taxable year;
dividends received from a mutual savings bank that received a
deduction under section 591; or deductible dividends paid on
employer securities.\33\
---------------------------------------------------------------------------
\33\In addition, for taxable years beginning before 2009,
amounts treated as ordinary income on the disposition of
certain preferred stock (sec. 306) are treated as dividends
for purposes of applying the reduced rates; the tax rate for
the accumulated earnings tax (sec. 531) and the personal
holding company tax (sec. 541) is reduced to 15 percent; and
the collapsible corporation rules (sec. 341) are repealed.
---------------------------------------------------------------------------
Tax rates after 2008
For taxable years beginning after 2008, dividends received
by an individual are taxed at ordinary income tax rates.

[[Page 7395]]

House Bill

The House bill extends for two years the present-law
provisions relating to lower capital gain and dividend tax
rates (through taxable years beginning on or before December
31, 2010).
Effective date.--The provision applies to taxable years
beginning after December 31, 2008.

Senate Amendment

No provision.

Conference Agreement

The conference agreement includes the House bill provision.

S. Credit for Elective Deferrals and IRA Contributions (the ``Saver's
Credit'')

(Sec. 204 of the House bill, sec. 102 of the Senate
amendment, and sec. 25B of the Code)

Present Law

Present law provides a temporary nonrefundable tax credit
for eligible taxpayers for qualified retirement savings
contributions, referred to as the ``saver's credit.'' The
maximum annual contribution eligible for the credit is
$2,000. The credit rate depends on the adjusted gross income
(``AGI'') of the taxpayer. Taxpayers filing joint returns
with AGI of $50,000 or less, head of household returns of
$37,500 or less, and single returns of $25,000 or less are
eligible for the credit. The AGI limits applicable to single
taxpayers apply to married taxpayers filing separate returns.
The credit is in addition to any deduction or exclusion that
would otherwise apply with respect to the contribution. The
credit offsets minimum tax liability as well as regular tax
liability. The credit is available to individuals who are 18
or over, other than individuals who are full-time students or
claimed as a dependent on another taxpayer's return.
The credit is available with respect to: (1) elective
deferrals to a qualified cash or deferred arrangement (a
``section 401(k) plan''), a tax-sheltered annuity (a
``section 403(b)'' annuity), an eligible deferred
compensation arrangement of a State or local government (a
``governmental section 457 plan''), a SIMPLE plan, or a
simplified employee pension (``SEP''); (2) contributions to a
traditional or Roth IRA; and (3) voluntary after-tax employee
contributions to a tax-sheltered annuity or qualified
retirement plan.
The amount of any contribution eligible for the credit is
generally reduced by distributions received by the taxpayer
(or by the taxpayer's spouse if the taxpayer filed a joint
return with the spouse) from any plan or IRA to which
eligible contributions can be made during the taxable year
for which the credit is claimed, the two taxable years prior
to the year the credit is claimed, and during the period
after the end of the taxable year for which the credit is
claimed and prior to the due date for filing the taxpayer's
return for the year. Distributions that are rolled over to
another retirement plan do not affect the credit.
The credit rates based on AGI are provided below.

TABLE 1.--CREDIT RATES FOR SAVER'S CREDIT
----------------------------------------------------------------------------------------------------------------
Heads of Credit rate
Joint filers households All other filers (percent)
----------------------------------------------------------------------------------------------------------------
$0-$30,000............................................. $0-$22,500 $0-$15,000 50
30,001-32,500.................................................. 22,501-24,375 15,001-16,250 20
32,501--50,000................................................. 24,376-37,500 16,251-25,000 10
Over $50,000................................................... Over $37,500 Over $25,000 0
----------------------------------------------------------------------------------------------------------------

The credit does not apply to taxable years beginning after
December 31, 2006.\34\
---------------------------------------------------------------------------
\34\The saver's credit was enacted as part of the Economic
Growth and Tax Relief Reconciliation Act of 2001
(``EGTRRA''), Pub. L. No. 107-16. The provisions of EGTRRA
generally do not apply for years beginning after December 31,
2010.
---------------------------------------------------------------------------

House Bill

The House bill extends the saver's credit for two years,
through December 31, 2008.
Effective date.--The provision is effective on the date of
enactment.

Senate Amendment

The Senate amendment extends the saver's credit for three
years, through December 31, 2009.
Effective date.--The provision is effective on the date of
enactment.

Conference Agreement

The conference agreement does not include the House bill
provision or the Senate amendment provision.

T. Extension of Increased Expensing for Small Business

(Sec. 205 of the House bill, sec. 101 of the Senate
amendment, and sec. 179 of the Code)

present law

In lieu of depreciation, a taxpayer with a sufficiently
small amount of annual investment may elect to deduct (or
``expense'') such costs. Present law provides that the
maximum amount a taxpayer may expense, for taxable years
beginning in 2003 through 2007, is $100,000 of the cost of
qualifying property placed in service for the taxable
year.\35\ In general, qualifying property is defined as
depreciable tangible personal property that is purchased for
use in the active conduct of a trade or business. Off-the-
shelf computer software placed in service in taxable years
beginning before 2008 is treated as qualifying property. The
$100,000 amount is reduced (but not below zero) by the amount
by which the cost of qualifying property placed in service
during the taxable year exceeds $400,000. The $100,000 and
$400,000 amounts are indexed for inflation for taxable years
beginning after 2003 and before 2008.
---------------------------------------------------------------------------
\35\Additional section 179 incentives are provided with
respect to a qualified property used by a business in the New
York Liberty Zone (sec. 1400L(f)), an empowerment zone (sec.
1397A), or a renewal community (sec. 1400J).
---------------------------------------------------------------------------
The amount eligible to be expensed for a taxable year may
not exceed the taxable income for a taxable year that is
derived from the active conduct of a trade or business
(determined without regard to this provision). Any amount
that is not allowed as a deduction because of the taxable
income limitation may be carried forward to succeeding
taxable years (subject to similar limitations). No general
business credit under section 38 is allowed with respect to
any amount for which a deduction is allowed under section
179. An expensing election is made under rules prescribed by
the Secretary.\36\
---------------------------------------------------------------------------
\36\Sec. 179(c)(1). Under Treas. Reg. sec. 179-5, applicable
to property placed in service in taxable years beginning
after 2002 and before 2008, a taxpayer is permitted to make
or revoke an election under section 179 without the consent
of the Commissioner on an amended Federal tax return for that
taxable year. This amended return must be filed within the
time prescribed by law for filing an amended return for the
taxable year. T.D. 9209, July 12, 2005.
---------------------------------------------------------------------------
For taxable years beginning in 2008 and thereafter (or
before 2003), the following rules apply. A taxpayer with a
sufficiently small amount of annual investment may elect to
deduct up to $25,000 of the cost of qualifying property
placed in service for the taxable year. The $25,000 amount is
reduced (but not below zero) by the amount by which the cost
of qualifying property placed in service during the taxable
year exceeds $200,000. The $25,000 and $200,000 amounts are
not indexed. In general, qualifying property is defined as
depreciable tangible personal property that is purchased for
use in the active conduct of a trade or business (not
including off-the-shelf computer software). An expensing
election may be revoked only with consent of the
Commissioner.\37\
---------------------------------------------------------------------------
\37\Sec. 179(c)(2).
---------------------------------------------------------------------------

house bill

The provision extends for two years the increased amount
that a taxpayer may deduct and the other section 179 rules
applicable in taxable years beginning before 2008. Thus,
under the provision, these present-law rules continue in
effect for taxable years beginning after 2007 and before
2010.
Effective date.--The provision is effective for taxable
years beginning after 2007 and before 2010.

senate amendment

The Senate amendment provision is the same as the House
bill.

conference agreement

The conference agreement includes the provision in the
House bill and the Senate amendment.

U. Extend and Increase Alternative Minimum Tax Exemption Amount for
Individuals

(Sec. 106 of the Senate amendment and sec. 55 of the Code)

present law

Present law imposes an alternative minimum tax. The
alternative minimum tax is the amount by which the tentative
minimum tax exceeds the regular income tax. An individual's
tentative minimum tax is the sum of (1) 26 percent of so much
of the taxable excess as does not exceed $175,000 ($87,500 in
the case of a married individual filing a separate return)
and (2) 28 percent of the remaining taxable excess. The
taxable excess is so much of the alternative minimum taxable
income (``AMTI'') as exceeds the exemption amount. The
maximum tax rates on net capital gain and dividends used in
computing the regular tax are used in computing the tentative
minimum tax. AMTI is the individual's taxable income adjusted
to take account of specified preferences and adjustments.
The exemption amount is: (1) $45,000 ($58,000 for taxable
years beginning before 2006) in the case of married
individuals filing a joint return and surviving spouses; (2)
$33,750 ($40,250 for taxable years beginning before 2006) in
the case of unmarried individuals other than surviving
spouses; (3) $22,500

[[Page 7396]]

($29,000 for taxable years beginning before 2006) in the case
of married individuals filing a separate return; and (4)
$22,500 in the case of estates and trusts. The exemption
amount is phased out by an amount equal to 25 percent of the
amount by which the individual's AMTI exceeds (1) $150,000 in
the case of married individuals filing a joint return and
surviving spouses, (2) $112,500 in the case of unmarried
individuals other than surviving spouses, and (3) $75,000 in
the case of married individuals filing separate returns,
estates, and trusts. These amounts are not indexed for
inflation.

house bill

No provision.

senate amendment

Under the Senate amendment, for taxable years beginning in
2006, the exemption amounts are increased to: (1) $62,550 in
the case of married individuals filing a joint return and
surviving spouses; (2) $42,500 in the case of unmarried
individuals other than surviving spouses; and (3) $31,275 in
the case of married individuals filing a separate return.
Effective date.--The provision applies to taxable years
beginning after December 31, 2005.

conference agreement

The conference agreement includes the provision in the
Senate amendment.

V. Extension and Modification of the New Markets Tax Credit

(Sec. 204 of the Senate amendment and sec. 45D of the Code)

present law

Section 45D provides a new markets tax credit for qualified
equity investments made to acquire stock in a corporation, or
a capital interest in a partnership, that is a qualified
community development entity (``CDE'').\38\ The amount of the
credit allowable to the investor (either the original
purchaser or a subsequent holder) is (1) a five-percent
credit for the year in which the equity interest is purchased
from the CDE and for each of the following two years, and (2)
a six-percent credit for each of the following four years.
The credit is determined by applying the applicable
percentage (five or six percent) to the amount paid to the
CDE for the investment at its original issue, and is
available for a taxable year to the taxpayer who holds the
qualified equity investment on the date of the initial
investment or on the respective anniversary date that occurs
during the taxable year. The credit is recaptured if at any
time during the seven-year period that begins on the date of
the original issue of the investment the entity ceases to be
a qualified CDE, the proceeds of the investment cease to be
used as required, or the equity investment is redeemed.
---------------------------------------------------------------------------
\38\Section 45D was added by section 121(a) of the Community
Renewal Tax Relief Act of 2000, P.L. No. 106-554 (December
21, 2000).
---------------------------------------------------------------------------
A qualified CDE is any domestic corporation or partnership:
(1) whose primary mission is serving or providing investment
capital for low-income communities or low-income persons; (2)
that maintains accountability to residents of low-income
communities by their representation on any governing board of
or any advisory board to the CDE; and (3) that is certified
by the Secretary as being a qualified CDE. A qualified equity
investment means stock (other than nonqualified preferred
stock) in a corporation or a capital interest in a
partnership that is acquired directly from a CDE for cash,
and includes an investment of a subsequent purchaser if such
investment was a qualified equity investment in the hands of
the prior holder. Substantially all of the investment
proceeds must be used by the CDE to make qualified low-income
community investments. For this purpose, qualified low-income
community investments include: (1) capital or equity
investments in, or loans to, qualified active low-income
community businesses; (2) certain financial counseling and
other services to businesses and residents in low-income
communities; (3) the purchase from another CDE of any loan
made by such entity that is a qualified low-income community
investment; or (4) an equity investment in, or loan to,
another CDE.
A ``low-income community'' is a population census tract
with either (1) a poverty rate of at least 20 percent or (2)
median family income which does not exceed 80 percent of the
greater of metropolitan area median family income or
statewide median family income (for a non-metropolitan census
tract, does not exceed 80 percent of statewide median family
income). In the case of a population census tract located
within a high migration rural county, low-income is defined
by reference to 85 percent (rather than 80 percent) of
statewide median family income. For this purpose, a high
migration rural county is any county that, during the 20-year
period ending with the year in which the most recent census
was conducted, has a net out-migration of inhabitants from
the county of at least 10 percent of the population of the
county at the beginning of such period.
The Secretary has the authority to designate ``targeted
populations'' as low-income communities for purposes of the
new markets tax credit. For this purpose, a ``targeted
population'' is defined by reference to section 103(20) of
the Riegle Community Development and Regulatory Improvement
Act of 1994 (12 U.S.C. 4702(20)) to mean individuals, or an
identifiable group of individuals, including an Indian tribe,
who (A) are low-income persons; or (B) otherwise lack
adequate access to loans or equity investments. Under such
Act, ``low-income'' means (1) for a targeted population
within a metropolitan area, less than 80 percent of the area
median family income; and (2) for a targeted population
within a non-metropolitan area, less than the greater of 80
percent of the area median family income or 80 percent of the
statewide non-metropolitan area median family
income.\39\Under such Act, a targeted population is not
required to be within any census tract. In addition, a
population census tract with a population of less than 2,000
is treated as a low-income community for purposes of the
credit if such tract is within an empowerment zone, the
designation of which is in effect under section 1391, and is
contiguous to one or more low-income communities.
---------------------------------------------------------------------------
\39\12. U.S.C. 4702(17) (defines ``low-income'' for purposes
of 12 U.S.C. 4702(20)).
---------------------------------------------------------------------------
A qualified active low-income community business is defined
as a business that satisfies, with respect to a taxable year,
the following requirements: (1) at least 50 percent of the
total gross income of the business is derived from the active
conduct of trade or business activities in any low-income
community; (2) a substantial portion of the tangible property
of such business is used in a low-income community; (3) a
substantial portion of the services performed for such
business by its employees is performed in a low-income
community; and (4) less than five percent of the average of
the aggregate unadjusted bases of the property of such
business is attributable to certain financial property or to
certain collectibles.
The maximum annual amount of qualified equity investments
is capped at $2.0 billion per year for calendar years 2004
and 2005, and at $3.5 billion per year for calendar years
2006 and 2007.

house bill

No provision.

senate amendment

The provision extends through 2008 the $3.5 billion maximum
annual amount of qualified equity investments. The provision
also requires that the Secretary prescribe regulations to
ensure that non-metropolitan counties receive a proportional
allocation of qualified equity investments.
Effective date.--The provision is effective on the date of
enactment.

conference agreement

The conference agreement does not include the Senate
amendment provision.

W. Phasedown of Credit for Electric Vehicles

(Sec. 118 of the Senate amendment and sec. 30 of the Code)

Present Law

A 10-percent tax credit is provided for the cost of a
qualified electric vehicle, up to a maximum credit of $4,000.
A qualified electric vehicle generally is a motor vehicle
that is powered primarily by an electric motor drawing
current from rechargeable batteries, fuel cells, or other
portable sources of electrical current. The full amount of
the credit is available for purchases prior to 2006. The
credit is reduced to 25 percent of the otherwise allowable
amount for purchases in 2006, and is unavailable for
purchases after December 31, 2006.

House Bill

No provision.

Senate Amendment

Under the Senate amendment, the full amount of the credit
for qualified electric vehicles is available for purchases
prior to 2006. As under present law, the credit is
unavailable for purchases after December 31, 2006.
Effective date.--The provision is effective for property
placed in service after December 31, 2005.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.

X. Application of EGTRRA Sunset to Title II of the Senate Amendment

(Sec. 231 of the Senate amendment)

Present Law

[[Page 7397]]

1. It does not produce a change in outlays or revenues;
2. It produces an outlay increase or revenue decrease when
the instructed committee is not in compliance with its
instructions;
3. It is outside of the jurisdiction of the committee that
submitted the title or provision for inclusion in the
reconciliation measure;
4. It produces a change in outlays or revenues which is
merely incidental to the nonbudgetary components of the
provision;
5. It would increase the deficit for a fiscal year beyond
those covered by the reconciliation measure; and
6. It recommends changes in Social Security.
The Economic Growth and Tax Relief Reconciliation Act of
2001 (EGTRRA) contains sunset provisions to ensure compliance
with the Budget Act. Under title IX of EGTRRA, the provisions
of, and amendments made by that Act that are in effect on
September 30, 2011, shall cease to apply as of the close of
September 30, 2011, except that all provisions of, and
amendments made by, the Act generally do not apply for
taxable, plan or limitation years beginning after December
31, 2010. With respect to the estate, gift, and generation-
skipping provisions of the Act, the provisions do not apply
to estates of decedents dying, gifts made, or generation-
skipping transfers, after December 31, 2010. The Code and the
Employee Retirement Income Security Act of 1974 are applied
to such years, estates, gifts and transfers after December
31, 2010, as if the provisions of and amendments made by the
Act had never been enacted.

House Bill

No provision.

Senate Amendment

Sunset of provisions
To ensure compliance with the Budget Act, the Senate
amendment provides that all provisions of, and amendments
made by title II of the Senate amendment shall be subject to
the sunset provisions of EGTRRA to the same extent and in the
same manner as the provision of such Act to which the Senate
amendment provision relates.
Effective date.--The provision is effective on the date of
enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.

TITLE II--OTHER PROVISONS

A. Taxation of Certain Settlement Funds

(Sec. 301 of the House bill and sec. 468B of the Code)

Present Law

Present law provides that if a taxpayer makes a payment to
a designated settlement fund pursuant to a court order, the
deduction timing rules that require economic performance
generally are deemed to be met as the payments are made by
the taxpayer to the fund. A designated settlement fund means
a fund which: is established pursuant to a court order;
extinguishes completely the taxpayer's tort liability arising
out of personal injury, death or property damage; is
administered by persons a majority of whom are independent of
the taxpayer; and under the terms of the fund the taxpayer
(or any related person) may not hold any beneficial interest
in the income or corpus of the fund.
Generally, a designated or qualified settlement fund is
taxed as a separate entity at the maximum trust rate on its
modified income. Modified income is generally gross income
less deductions for administrative costs and other incidental
expenses incurred in connection with the operation of the
settlement fund.
The cleanup of hazardous waste sites is sometimes funded by
environmental ``settlement funds'' or escrow accounts. These
escrow accounts are established in consent decrees between
the Environmental Protection Agency (``EPA'') and the
settling parties under the jurisdiction of a Federal district
court. The EPA uses these accounts to resolve claims against
private parties under Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (``CERCLA'').
Present law provides that nothing in any provision of law
is to be construed as providing that an escrow account,
settlement fund, or similar fund is not subject to current
income tax.

House Bill

The provision provides that certain settlement funds
established in consent decrees for the sole purpose of
resolving claims under CERCLA are to be treated as
beneficially owned by the United States government and
therefore not subject to Federal income tax.
To qualify the settlement fund must be: (1) established
pursuant to a consent decree entered by a judge of a United
States District Court; (2) created for the receipt of
settlement payments for the sole purpose of resolving claims
under CERCLA; (3) controlled (in terms of expenditures of
contributions and earnings thereon) by the government or an
agency or instrumentality thereof; and (4) upon termination,
any remaining funds will be disbursed to such government
entity and used in accordance with applicable law. For
purposes of the provision, a government entity means the
United States, any State of political subdivision thereof,
the District of Columbia, any possession of the United
States, and any agency or instrumentality of the foregoing.
The provision does not apply to accounts or funds
established after December 31, 2010.
Effective date.--The provision is effective for accounts
and funds established after the date of enactment.

Senate Amendment

No provision.

Conference Agreement

The conference agreement includes the House bill provision.

B. Modifications to Rules Relating to Taxation of Distributions of
Stock and Securities of a Controlled Corporation

(Sec. 302 of the House bill, sec. 467 of the Senate amendment
and sec. 355 of the Code)

Present Law

A corporation generally is required to recognize gain on
the distribution of property (including stock of a
subsidiary) to its shareholders as if the corporation had
sold such property for its fair market value. In addition,
the shareholders receiving the distributed property are
ordinarily treated as receiving a dividend of the value of
the distribution (to the extent of the distributing
corporation's earnings and profits), or capital gain in the
case of a stock buyback that significantly reduces the
shareholder's interest in the parent corporation.
An exception to these rules applies if the distribution of
the stock of a controlled corporation satisfies the
requirements of section 355 of the Code. If all the
requirements are satisfied, there is no tax to the
distributing corporation or to the shareholders on the
distribution.
One requirement to qualify for tax-free treatment under
section 355 is that both the distributing corporation and the
controlled corporation must be engaged immediately after the
distribution in the active conduct of a trade or business
that has been conducted for at least five years and was not
acquired in a taxable transaction during that period (the
``active business test'').\40\ For this purpose, a
corporation is engaged in the active conduct of a trade or
business only if (1) the corporation is directly engaged in
the active conduct of a trade or business, or (2) the
corporation is not directly engaged in an active business,
but substantially all its assets consist of stock and
securities of one or more corporations that it controls that
are engaged in the active conduct of a trade or business.\41\
---------------------------------------------------------------------------
\40\Section 355(b).
\41\Section 355(b)(2)(A). The IRS takes the position that the
statutory test requires that at least 90 percent of the fair
market value of the corporation's gross assets consist of
stock and securities of a controlled corporation that is
engaged in the active conduct of a trade or business. Rev.
Proc. 96-30, sec. 4.03(5), 1996-1 C.B. 696; Rev. Proc. 77-37,
sec. 3.04, 1977-2 C.B. 568.
---------------------------------------------------------------------------
In determining whether a corporation is directly engaged in
an active trade or business that satisfies the requirement,
old IRS guidelines for advance ruling purposes required that
the value of the gross assets of the trade or business being
relied on must ordinarily constitute at least five percent of
the total fair market value of the gross assets of the
corporation directly conducting the trade or business.\42\
More recently, the IRS has suspended this specific rule in
connection with its general administrative practice of moving
IRS resources away from advance rulings on factual aspects of
section 355 transactions in general.\43\
---------------------------------------------------------------------------
\42\Rev. Proc. 2003-3, sec. 4.01(30), 2003-1 I.R.B. 113.
\43\Rev. Proc. 2003-48, 2003-29 I.R.B. 86.
---------------------------------------------------------------------------
If the distributing or controlled corporation is not
directly engaged in an active trade or business, then the IRS
takes the position that the ``substantially all'' test as
applied to that corporation requires that at least 90 percent
of the fair market value of the corporation's gross assets
consist of stock and securities of a controlled corporation
that is engaged in the active conduct of a trade or
business.\44\
---------------------------------------------------------------------------
\44\Rev. Proc. 96-30, sec. 4.03(5), 1996-1 C.B. 696; Rev.
Proc. 77-37, sec. 3.04, 1977-2 C.B. 568.
---------------------------------------------------------------------------
In determining whether assets are part of a five-year
qualifying active business, assets acquired more recently
than five years prior to the distribution, in a taxable
transaction, are permitted to qualify as five-year ``active
business'' assets if they are considered to have been
acquired as part of an expansion of an existing business that
does so qualify.\45\
---------------------------------------------------------------------------
\45\Treas. Reg. sec. 1.355-3(b)(ii).
---------------------------------------------------------------------------
When a corporation holds an interest in a partnership, IRS
revenue rulings have allowed an active business of the
partnership to count as an active business of a corporate
partner in certain circumstances. One such case involved a
situation in which the corporation owned at least 20 percent
of the partnership, was actively engaged in management of the
partnership, and the partnership itself had an active
business.\46\
---------------------------------------------------------------------------
\46\Rev. Rul. 92-17, 1002-1 C.B. 142; see also, Rev. Rul.
2002-49, 2002-2 C.B. 50.
---------------------------------------------------------------------------
In addition to its active business requirements, section
355 does not apply to any transaction that is a ``device''
for the distribution of earnings and profits to a shareholder
without the payment of tax on a dividend. A transaction is
ordinarily not considered a ``device'' to avoid dividend tax
if the

[[Page 7398]]

distribution would have been treated by the shareholder as a
redemption that was a sale or exchange of its stock, rather
than as a dividend, if section 355 had not applied.\47\
---------------------------------------------------------------------------
\47\Treas. Reg. sec. 1.355-2(d)(5)(iv).
---------------------------------------------------------------------------

House Bill

Under the House bill provision, the active business test is
determined by reference to the relevant affiliated group. For
the distributing corporation, the relevant affiliated group
consists of the distributing corporation as the common parent
and all corporations affiliated with the distributing
corporation through stock ownership described in section
1504(a)(1)(B) (regardless of whether the corporations are
includible corporations under section 1504(b)), immediately
after the distribution. The relevant affiliated group for a
controlled corporation is determined in a similar manner
(with the controlled corporation as the common parent).
Effective date.--The provision applies to distributions
after the date of enactment and before December 31, 2010,
with three exceptions. The provision does not apply to
distributions (1) made pursuant to an agreement which is
binding on the date of enactment and at all times thereafter,
(2) described in a ruling request submitted to the IRS on or
before the date of enactment, or (3) described on or before
the date of enactment in a public announcement or in a filing
with the Securities and Exchange Commission. The distributing
corporation may irrevocably elect not to have the exceptions
described above apply.
The provision also applies, solely for the purpose of
determining whether, after the date of enactment, there is
continuing qualification under the requirements of section
355(b)(2)(A) of distributions made before such date, as a
result of an acquisition, disposition, or other restructuring
after such date and before December 31, 2010.\48\
---------------------------------------------------------------------------
\48\For example, a holding company taxpayer that had
distributed a controlled corporation in a spin-off prior to
the date of enactment, in which spin-off the taxpayer
satisfied the ``substantially all'' active business stock
test of present law section 355(b)(2)(A) immediately after
the distribution, would not be deemed to have failed to
satisfy any requirement that it continue that same qualified
structure for any period of time after the distribution,
solely because of a restructuring that occurs after the date
of enactment and before January 1, 2010, and that would
satisfy the requirements of new section 355(b)(2)(A).
---------------------------------------------------------------------------

Senate Amendment

The Senate amendment provision is the same as the House
bill with respect to the House bill provision described
above, except for the date on which that provision
sunsets.\49\
---------------------------------------------------------------------------
\49\See ``Effective date'' for the Senate Amendment, infra.
---------------------------------------------------------------------------
In addition, the Senate amendment contains another
provision that denies section 355 treatment if either the
distributing or distributed corporation is a disqualified
investment corporation immediately after the transaction
(including any series of related transactions) and any person
that did not hold 50 percent or more of the voting power or
value of stock of such distributing or controlled corporation
immediately before the transaction does hold such a 50
percent or greater interest immediately after such
transaction. The attribution rules of section 318 apply for
purposes of this determination.
A disqualified investment corporation is any distributing
or controlled corporation if the fair market value of the
investment assets of the corporation is 75 percent or more of
the fair market value of all assets of the corporation.
Except as otherwise provided, the term ``investment assets''
for this purpose means (i) cash, (ii) any stock or securities
in a corporation, (iii) any interest in a partnership, (iv)
any debt instrument or other evidence of indebtedness; (v)
any option, forward or futures contract, notional principal
contract, or derivative; (vi) foreign currency, or (vii) any
similar asset.
The term ``investment assets'' does not include any asset
which is held for use in the active and regular conduct of
(i) a lending or finance business (as defined in section
954(h)(4)); (ii) a banking business through a bank (as
defined in section 581), a domestic building and loan
association (within the meaning of section 7701(a)(19), or
any similar institution specified by the Secretary; or (iii)
an insurance business if the conduct of the business is
licensed, authorized, or regulated by an applicable insurance
regulatory body. These exceptions only apply with respect to
any business if substantially all the income of the business
is derived from persons who are not related (within the
meaning of section 267(b) or 707(b)(1) to the person
conducting the business.
The term ``investment assets'' also does not include any
security (as defined in section 475(c)(2)) which is held by a
dealer in securities and to which section 475(a) applies.
The term ``investment assets'' also does not include any
stock or securities in, or any debt instrument, evidence of
indebtedness, option, forward or futures contract, notional
principal contract, or derivative issued by, a corporation
which is a 25-percent controlled entity with respect to the
distributing or controlled corporation. Instead, the
distributing or controlled corporation is treated as owning
its ratable share of the assets of any 25-percent controlled
entity.
The term 25-percent controlled entity means any corporation
with respect to which the corporation in question
(distributing or controlled) owns directly or indirectly
stock possessing at least 25 percent of voting power and
value, excluding stock that is not entitled to vote, is
limited and preferred as to dividends and does not
participate in corporate growth to any significant extent,
has redemption and liquidation rights which do not exceed the
issue price of such stock (except for a reasonable redemption
or liquidation premium), and is not convertible into another
class of stock.
The term ``investment assets'' also does not include any
interest in a partnership, or any debt instrument or other
evidence of indebtedness issued by the partnership, if one or
more trades or businesses of the partnership are, (or without
regard to the 5-year requirement of section 355(b)(2)(B),
would be) taken into account by the distributing or
controlled corporation, as the case may be, in determining
whether the active business test of section 355 is met by
such corporation.
The Treasury department shall provide regulations as may be
necessary to carry out, or prevent the avoidance of, the
purposes of the provision, including regulations in cases
involving related persons, intermediaries, pass-through
entities, or other arrangements; and the treatment of assets
unrelated to the trade or business of a corporation as
investment assets if, prior to the distribution, investment
assets were used to acquire such assets. Regulations may also
in appropriate cases exclude from the application of the
provision a distribution which does not have the character of
a redemption and which would be treated as a sale or exchange
under section 302, and may modify the application of the
attribution rules.
Effective date.--The effective date of the first provision
of the Senate amendment generally is the same as the
effective date of the identical provision of the House bill,
except that the Senate amendment provision sunsets for
distributions (and for acquisitions, dispositions, or other
restructurings as relating to continuing qualification of
pre-effective date distributions) after December 31, 2009,
rather than for distributions (and for acquisitions,
dispositions, or other restructurings as relating to
continuing qualification of pre-effective date distributions)
on or after December 31, 2010.
The second provision of the Senate amendment is effective
for distributions after the date of enactment, except in
transactions which are (i) made pursuant to an agreement
which was binding on such date of enactment and at all times
thereafter; (ii) described in a ruling request submitted to
the Intetnal Revenue Service on or before such date, or (iii)
described on or before such date in a public announcement or
in a filing with the Securities and Exchange Commission.

Conference Agreement

The conference agreement includes the House bill and the
Senate amendment with modifications.
With respect to the provision that applies the active
business test by reference to the relevant affiliated group,
the conference agreement provision is the same as the House
bill and the Senate amendment except for the date on which
the conference agreement provision sunsets.\50\
---------------------------------------------------------------------------
\50\See ``Effective date'' of the conference agreement
provision, infra.
---------------------------------------------------------------------------
With respect to the provision that affects transactions
involving disqualified investment corporations, the
conference agreement reduces the percentage of investment
assets of a corporation that will cause such corporation to
be a disqualified investment corporation, from 75 percent
(three-quarters) to two-thirds of the fair market value of
the corporation's assets, for distributions occurring after
one year after the date of enactment.
The conference agreement also reduces from 25 percent to 20
percent the percentage stock ownership in a corporation that
will cause such ownership to be disregarded as an investment
asset itself, instead requiring ``look-through'' to the
ratable share of the underlying assets of such corporation
attributable to such stock ownership.
The conferees wish to clarify that the disqualified
investment corporation provision applies when a person
directly or indirectly holds 50 percent of either the vote or
the value of a company immediately following a distribution,
and such person did not hold such 50 percent interest
directly or indirectly prior to the distribution. As one
example, the provision applies if a person that held 50
percent or more of the vote, but not of the value, of a
distributing corporation immediately prior to a transaction
in which a controlled corporation that was 100 percent owned
by that distributing corporation is distributed, directly or
indirectly holds 50 percent of the value of either the
distributing or controlled corporation immediately following
such transaction.
The conferees further wish to clarify that the enumeration
in subsection 355(g)(5)(A) through (C) of specific situations
that Treasury regulations may address is not intended to
restrict or limit any other situations that Treasury may
address under the general authority of new section 355(g)(5)
to carry out, or prevent the avoidance of, the purposes of

[[Page 7399]]

the disqualified investment corporation provision.
Effective date.--The starting effective date of the
provision that applies the active business test by reference
to the relevant affiliated group is the same as that of the
House bill and the Senate amendment provisions. The
conference agreement changes the date on which the provision
sunsets so that the provision does not apply for
distributions (or for acquisitions, dispositions, or other
restructurings as relating to continuing qualification of
pre-effective date distributions) occurring after December
31, 2010.
The effective date of the provision that affects
transactions involving disqualified investment corporations
is the same as that of the Senate amendment provision, except
for the conference agreement reduction in the amount of
investment assets of a corporation that will cause it to be a
disqualified investment corporation, from three-quarters to
two thirds of the fair market value of all assets of the
corporation. The two-thirds test applies for distributions
occurring after one year after the date of enactment.

C. Qualified Veteran's Mortgage Bonds

(Sec. 303 of the House bill and sec. 143 of the Code)

Present Law

Private activity bonds are bonds that nominally are issued
by States or local governments, but the proceeds of which are
used (directly or indirectly) by a private person and payment
of which is derived from funds of such private person. The
exclusion from income for State and local bonds does not
apply to private activity bonds, unless the bonds are issued
for certain permitted purposes (``qualified private activity
bonds''). The definition of a qualified private activity bond
includes both qualified mortgage bonds and qualified
veterans' mortgage bonds.
Qualified veterans' mortgage bonds are private activity
bonds the proceeds of which are used to make mortgage loans
to certain veterans. Authority to issue qualified veterans'
mortgage bonds is limited to States that had issued such
bonds before June 22, 1984. Qualified veterans' mortgage
bonds are not subject to the State volume limitations
generally applicable to private activity bonds. Instead,
annual issuance in each State is subject to a State volume
limitation based on the volume of such bonds issued by the
State before June 22, 1984. The five States eligible to issue
these bonds are Alaska, California, Oregon, Texas, and
Wisconsin. Loans financed with qualified veterans' mortgage
bonds can be made only with respect to principal residences
and can not be made to acquire or replace existing mortgages.
Mortgage loans made with the proceeds of these bonds can be
made only to veterans who served on active duty before 1977
and who applied for the financing before the date 30 years
after the last date on which such veteran left active service
(the ``eligibility period'').
Qualified mortgage bonds are issued to make mortgage loans
to qualified mortgagors for owner-occupied residences. The
Code imposes several limitations on qualified mortgage bonds,
including income limitations for homebuyers and purchase
price limitations for the home financed with bond proceeds.
In addition, qualified mortgage bonds generally cannot be
used to finance a mortgage for a homebuyer who had an
ownership interest in a principal residence in the three
years preceding the execution of the mortgage (the ``first-
time homebuyer'' requirement).

House Bill

The House bill repeals the requirement that veterans
receiving loans financed with qualified veterans' mortgage
bonds must have served before 1977. It also reduces the
eligibility period to 25 years (rather than 30 years)
following release from the military service. The bill
provides new State volume limits for these bonds for the five
eligible States. In 2010, the new annual limit on the total
volume of veterans' bonds is $25 million for Alaska, $66.25
million for California, $25 million for Oregon, $53.75
million for Texas, and $25 million for Wisconsin. These
volume limits are phased-in over the four-year period
immediately preceding 2010 by allowing the applicable
percentage of the 2010 volume limits. The following table
provides those percentages.
Calendar Year: Applicable Percentage is:
2006.................................................................20
2007.................................................................40
2008.................................................................60
2009.................................................................80

The volume limits are zero for 2011 and each year
thereafter. Unused allocation cannot be carried forward to
subsequent years.
Effective date.--The provision generally applies to bonds
issued after December 31, 2005. The provision expanding the
definition of eligible veterans applies to financing provided
after date of enactment.

Senate Amendment

No provision.

Conference Agreement

The conference agreement includes the House bill with the
following modifications. The conference agreement does not
amend present law as it relates to qualified veterans'
mortgage bonds issued by the States of California and Texas.
In the case of qualified veterans' mortgage bonds issued by
the States of Alaska, Oregon, and Wisconsin, (1) the
requirement that veterans must have served before 1977 is
repealed and (2) the eligibility period for applying for a
loan following release from the military service is reduced
from 30 years to 25 years.
In addition, the annual issuance of qualified veterans'
mortgage bonds in the States of Alaska, Oregon and Wisconsin
is subject to new State volume limitations which are phased
in between the years 2006 and 2010. The State volume limit in
these States for any calendar year after 2010 is zero.
Effective date.--The provision expanding the definition of
eligible veterans applies to bonds issued on or after date of
enactment. The provision amending State volume limitations
applies to allocations of volume limitation made after April
5, 2006.

D. Capital Gains Treatment for Certain Self-Created Musical Works

(Sec. 304 of the House bill and sec. 1221 of the Code)

present law

Capital gains
The maximum tax rate on the net capital gain income of an
individual is 15 percent for taxable years beginning in 2006.
By contrast, the maximum tax rate on an individual's ordinary
income is 35 percent. The reduced 15-percent rate generally
is available for gain from the sale or exchange of a capital
asset for which the taxpayer has satisfied a holding-period
requirement. Capital assets generally include all property
held by a taxpayer with certain specified exclusions.
An exclusion from the definition of a capital asset applies
to inventory property or property held by a taxpayer
primarily for sale to customers in the ordinary course of the
taxpayer's trade or business. Another exclusion from capital
asset status applies to copyrights, literary, musical, or
artistic compositions, letters or memoranda, or similar
property held by a taxpayer whose personal efforts created
the property (or held by a taxpayer whose basis in the
property is determined by reference to the basis of the
taxpayer whose personal efforts created the property).
Consequently, when a taxpayer that owns copyrights in, for
example, books, songs, or paintings that the taxpayer created
(or when a taxpayer to which the copyrights have been
transferred by the works' creator in a substituted basis
transaction) sells the copyrights, gain from the sale is
treated as ordinary income, not capital gain.
Charitable contributions
A taxpayer generally is allowed a deduction for the fair
market value of property contributed to a charity. If a
taxpayer makes a contribution of property that would have
generated ordinary income (or short-term capital gain), the
taxpayer's charitable contribution deduction generally is
limited to the property's adjusted basis.

House Bill

The House bill provides that at the election of a taxpayer,
the sale or exchange before January 1, 2011 of musical
compositions or copyrights in musical works created by the
taxpayer's personal efforts (or having a basis determined by
reference to the basis in the hands of the taxpayer whose
personal efforts created the compositions or copyrights) is
treated as the sale or exchange of a capital asset. The House
bill provision does not change the present law limitation on
a taxpayer's charitable deduction for the contribution of
those compositions or copyrights.
Effective date.--The provision is effective for sales or
exchanges in taxable years beginning after the date of
enactment.

Senate Amendment

No provision.

Conference Agreement

The conference agreement includes the House bill provision.

E. Decrease Minimum Vessel Tonnage Limit to 6,000 Deadweight Tons

(Sec. 305 of the House bill and sec. 1355 of the Code)

Present Law

The United States employs a ``worldwide'' tax system, under
which domestic corporations generally are taxed on all
income, including income from shipping operations, whether
derived in the United States or abroad. In order to mitigate
double taxation, a foreign tax credit for income taxes paid
to foreign countries is provided to reduce or eliminate the
U.S. tax owed on such income, subject to certain limitations.
Generally, the United States taxes foreign corporations
only on income that has a sufficient nexus to the United
States. Thus, a foreign corporation is generally subject to
U.S. tax only on income, including income from shipping
operations, which is ``effectively connected'' with the
conduct of a trade or business in the United States (sec.
882). Such ``effectively connected income'' generally is
taxed in the same manner and at the same rates as the income
of a U.S. corporation.
The United States imposes a four percent tax on the amount
of a foreign corporation's U.S. source gross transportation
income (sec. 887). Transportation income includes income

[[Page 7400]]

from the use (or hiring or leasing for use) of a vessel and
income from services directly related to the use of a vessel.
Fifty percent of the transportation income attributable to
transportation that either begins or ends (but not both) in
the United States is treated as U.S. source gross
transportation income. The tax does not apply, however, to
U.S. source gross transportation income that is treated as
income effectively connected with the conduct of a U.S. trade
or business. U.S. source gross transportation income is not
treated as effectively connected income unless (1) the
taxpayer has a fixed place of business in the United States
involved in earning the income, and (2) substantially all the
income is attributable to regularly scheduled transportation.
The tax imposed by section 882 or 887 on income from
shipping operations may be limited by an applicable U.S.
income tax treaty or by an exemption of a foreign
corporation's international shipping operations income in
instances where a foreign country grants an equivalent
exemption (sec. 883).
Notwithstanding the general rules described above, the
American Jobs Creation Act of 2004 (``AJCA'')\51\ generally
allows corporations that are qualifying vessel operators\52\
to elect a ``tonnage tax'' in lieu of the corporate income
tax on taxable income from certain shipping activities.
Accordingly, an electing corporation's gross income does not
include its income from qualifying shipping activities (and
items of loss, deduction, or credit are disallowed with
respect to such excluded income), and electing corporations
are only subject to tax on these activities at the maximum
corporate income tax rate on their notional shipping income,
which is based on the net tonnage of the corporation's
qualifying vessels.\53\ No deductions are allowed against the
notional shipping income of an electing corporation, and no
credit is allowed against the notional tax imposed under the
tonnage tax regime. In addition, special deferral rules apply
to the gain on the sale of a qualifying vessel, if such
vessel is replaced during a limited replacement period.
---------------------------------------------------------------------------
\51\Pub. L. No. 108-357, sec. 248. The tonnage tax regime is
effective for taxable years beginning after the date of
enactment of AJCA (October 22, 2004).
\52\Generally, a qualifying vessel operator is a corporation
that (1) operates one or more qualifying vessels and (2)
meets certain requirements with respect to its shipping
activities.
\53\An electing corporation's notional shipping income for
the taxable year is the product of the following amounts for
each of the qualifying vessels it operates: (1) the daily
notional shipping income from the operation of the qualifying
vessel, and (2) the number of days during the taxable year
that the electing corporation operated such vessel as a
qualifying vessel in the United States foreign trade. The
daily notional shipping income from the operation of a
qualifying vessel is (1) 40 cents for each 100 tons of so
much of the net tonnage of the vessel as does not exceed
25,000 net tons, and (2) 20 cents for each 100 tons of so
much of the net tonnage of the vessel as exceeds 25,000 net
tons. ``United States foreign trade'' means the
transportation of goods or passengers between a place in the
United States and a foreign place or between foreign places.
The temporary use in the United States domestic trade (i.e.,
the transportation of goods or passengers between places in
the United States) of any qualifying vessel or the temporary
ceasing to use a qualifying vessel may be disregarded, under
special rules.
---------------------------------------------------------------------------
Generally, a ``qualifying vessel'' is defined as a self-
propelled (or a combination of self-propelled and non-self-
propelled) U.S.-flag vessel of not less than 10,000
deadweight tons\54\ that is used exclusively in the U.S.
foreign trade.
---------------------------------------------------------------------------
\54\Deadweight measures the lifting capacity of a ship
expressed in long tons (2,240 lbs.), including cargo, crew,
and consumables such as fuel, lube oil, drinking water, and
stores. It is the difference between the number of tons of
water a vessel displaces without such items on board and the
number of tons it displaces when fully loaded.
---------------------------------------------------------------------------

House Bill

The House bill expands the definition of ``qualifying
vessel'' to include self-propelled (or a combination of self-
propelled and non-self-propelled) U.S. flag vessels of not
less than 6,000 deadweight tons used exclusively in the
United States foreign trade. The modified definition applies
for taxable years beginning after December 31, 2005 and
ending before January 1, 2011.
Effective date.--The provision applies to taxable years
beginning after December 31, 2005 and ending before January
1, 2011.

Senate Amendment

No provision.

Conference Agreement

The conference agreement includes the provision in the
House bill.

F. Modification of Special Arbitrage Rule for Certain Funds

(Sec. 306 of the House bill and sec. 307 of the Senate
amendment)

Present Law

In general, present-law tax-exempt bond arbitrage
restrictions provide that interest on a State or local
government bond is not eligible for tax-exemption if the
proceeds are invested, directly or indirectly, in materially
higher yielding investments or if the debt service on the
bond is secured by or paid from (directly or indirectly) such
investments. An exception to the arbitrage restrictions,
enacted in 1984, provides that the pledge of income from
investments in the Texas Permanent University Fund (the
``Fund'') as security for a limited amount of tax-exempt
bonds will not cause interest on those bonds to be taxable.
The terms of this exception are limited to State
constitutional or statutory restrictions continuously in
effect since October 9, 1969. In addition, the exception only
applies to an amount of tax-exempt bonds that does not exceed
20 percent of the value of the Fund.
The Fund consists of certain State lands that were set
aside for the benefit of higher education, the income from
mineral rights to these lands, and certain other earnings on
Fund assets. The Texas constitution directs that monies held
in the Fund are to be invested in interest-bearing
obligations and other securities. Income from the Fund is
apportioned between two university systems operated by the
State. Tax-exempt bonds issued by the university systems to
finance buildings and other permanent improvements were
secured by and payable from the income of the Fund.
Prior to 1999, the constitution did not permit the
expenditure or mortgage of the Fund for any purpose. In 1999,
the State constitutional rules governing the Fund were
modified with regard to the manner in which amounts in the
Fund are distributed for the benefit of the two university
systems. The State constitutional amendments allow for the
possibility that in the event investment earnings are less
than annual debt service on the bonds some of the debt
service could be considered as having been paid with the Fund
corpus. The 1984 exception refers only to bonds secured by
investment earnings on securities or obligations held by the
Fund. Despite the constitutional amendments, the IRS has
agreed to continue to apply the 1984 exception to the Fund
through August 31, 2007, if clarifying legislation is
introduced in the 109th Congress prior to August 31, 2005.
Clarifying legislation was introduced in the 109th Congress
on May 26, 2005.\55\
---------------------------------------------------------------------------
\55\H.R. 2661.
---------------------------------------------------------------------------

House Bill

The provision codifies and extends the IRS agreement until
August 31, 2009. The 1984 exception is conformed to the State
constitutional amendments to permit its continued
applicability to bonds of the two university systems. The
limitation on the aggregate amount of bonds which may benefit
from the exception is not modified, and remains at 20 percent
of the value of the Fund. The provision sunsets August 31,
2009.
Effective date.--The provision is effective for bonds
issued after the date of enactment and before August 31,
2009.

Senate Amendment

The Senate amendment follows the House bill provision, and
also increases the amount of bonds that may benefit from the
exception to 30 percent of the value of the Fund.
Effective date.--The Senate amendment is the same as the
House bill.

Conference Agreement

The conference agreement includes the House bill provision.

G. Amortization of Expenses Incurred in Creating or Acquiring Music or
Music Copyrights

(Sec. 468 of the Senate amendment and secs. 167(g) and 263A
of the Code)

Present Law

A taxpayer is allowed to recover, through annual
depreciation deductions, the cost of certain property used in
a trade or business or for the production of income. Section
167(g) provides that the cost of motion picture films, sound
recordings, copyrights, books, patents, and other property
specified in regulations is eligible to be recovered using
the income forecast method of depreciation.
Under the income forecast method, the depreciation
deduction with respect to eligible property for a taxable
year is determined by multiplying the adjusted basis of the
property by a fraction, the numerator of which is the income
generated by the property during the year, and the
denominator of which is the total forecasted or estimated
income expected to be generated prior to the close of the
tenth taxable year after the year the property was placed in
service. Any costs that are not recovered by the end of the
tenth taxable year after the property was placed in service
may be taken into account as depreciation in such year.
The adjusted basis of property that may be taken into
account under the income forecast method includes only
amounts that satisfy the economic performance standard of
section 461(h) (except in the case of certain participations
and residuals). In addition, taxpayers that claim
depreciation deductions under the income forecast method are
required to pay (or receive) interest based on a
recalculation of depreciation under a ``look-back'' method.
The ``look-back'' method is applied in any ``recomputation
year'' by (1) comparing depreciation deductions that had been
claimed in prior periods to depreciation deductions that
would have been claimed had the taxpayer used actual, rather
than estimated, total income from the property; (2)
determining the hypothetical overpayment or underpayment of
tax based on this recalculated depreciation; and (3) applying
the overpayment rate of section 6621 of the Code. Except

[[Page 7401]]

as provided in Treasury regulations, a ``recomputation year''
is the third and tenth taxable year after the taxable year
the property was placed in service, unless the actual income
from the property for each taxable year ending with or before
the close of such years was within 10 percent of the
estimated income from the property for such years.
A special rule is provided under Treasury guidance in the
case of certain authors and other taxpayers, with respect to
their capitalization of costs under section 263A and with
respect to the recovery or amortization of such costs.
Specifically, IRS Notice 88-62 (1988-1 C.B. 548) provides an
elective safe harbor under which eligible taxpayers
capitalize qualified created costs incurred during the
taxable year and amortize 50 percent of the costs in the
taxable year incurred, and 25 percent in each of the two
successive taxable years. Under the Notice, qualified
creative costs generally are those incurred by a self-
employed individual in the production of creative properties
(such as films, sound recordings, musical and dance
compositions including accompanying words, and other similar
properties), provided the personal efforts of the individual
predominantly create the properties. An eligible taxpayer is
an individual, and also a corporation or partnership,
substantially all of which is owned by one qualified employee
owner (an individual and family members).

House Bill

No provision.

Senate Amendment

The Senate amendment provides that if any expense is paid
or incurred by the taxpayer in creating or acquiring any
musical composition (including accompanying words) or any
copyright with respect to a musical composition that is
required to be capitalized, then the income forecast method
does not apply to such expenses, but rather, the expenses are
amortized over a five-year period. The five-year period is
the period beginning with the month in which the composition
or copyright was acquired (or if created, the five-taxable-
year period beginning with the taxable year in which the
expenses were paid or incurred).
The provision does not apply to certain expenses. The
expenses to which it does not apply are expenses: (1) that
are qualified creative expenses under section 263A(h); (2) to
which a simplified procedure established under section
263A(j)(2) applies; (3) that are an amortizable section 197
intangible; or (4) that, without regard to this provision,
would not be allowable as a deduction.
Effective date.--The provision is effective for expenses
paid or incurred after December 31, 2005, in taxable years
ending after that date.

Conference Agreement

The conference agreement includes the Senate amendment
provision with the following modifications. Under the
conference agreement, the five-year amortization period is
elective for the taxable year. Thus, a taxpayer that places
in service any musical composition or copyright with respect
to a musical composition in a taxable year may elect to apply
the provision with respect to all musical compositions and
musical composition copyrights placed in service in that
taxable year. An eligible taxpayer that does not make the
election may recover the costs under any method allowable
under present law, including the income forecast method.
Under the conference agreement, the election may be made
for any taxable year which begins before January 1, 2011.
In addition, the conference agreement provides that the
five-year amortization period begins in the month the
property is placed in service.
Effective date.--The conference agreement is effective for
expenses paid or incurred with respect to property placed in
service in taxable years beginning after December 31, 2005
and before January 1, 2011.

TITLE III--CHARITABLE PROVISIONS

A. Charitable Giving Incentives

1. Charitable deduction for nonitemizers; floor on
deductions for itemizers (Sec. 201 of the Senate amendment
and secs. 63 and 170 of the Code)

Present Law

In computing taxable income, an individual taxpayer who
itemizes deductions generally is allowed to deduct the amount
of cash and up to the fair market value of property
contributed to a charity described in section 501(c)(3), to
certain veterans' organizations, fraternal societies, and
cemetery companies,\56\ or to a Federal, State, or local
governmental entity for exclusively public purposes.\57\ The
deduction also is allowed for purposes of calculating
alternative minimum taxable income.
---------------------------------------------------------------------------
\56\Secs. 170(c)(3)-(5).
\57\Sec. 170(c)(1).
---------------------------------------------------------------------------
The amount of the deduction allowable for a taxable year
with respect to a charitable contribution of property may be
reduced depending on the type of property contributed, the
type of charitable organization to which the property is
contributed, and the income of the taxpayer.\58\
---------------------------------------------------------------------------
\58\Secs. 170(b) and (e).
---------------------------------------------------------------------------
A taxpayer who takes the standard deduction (i.e., who does
not itemize deductions) may not take a separate deduction for
charitable contributions.\59\
---------------------------------------------------------------------------
\59\Sec. 170(a). The Economic Recovery Tax Act of 1981
adopted a temporary provision that permitted individual
taxpayers who did not itemize income tax deductions to claim
a deduction from gross income for a specified percentage of
their charitable contributions. The maximum deduction was $25
for 1982 and 1983, $75 for 1984, 50 percent of the amount of
the contribution for 1985, and 100 percent of the amount of
the contribution for 1986. The nonitemizer deduction
terminated for contributions made after 1986.
---------------------------------------------------------------------------
A payment to a charity (regardless of whether it is termed
a ``contribution'') in exchange for which the donor receives
an economic benefit is not deductible, except to the extent
that the donor can demonstrate that the payment exceeds the
fair market value of the benefit received from the charity.
To facilitate distinguishing charitable contributions from
purchases of goods or services from charities, present law
provides that no charitable contribution deduction is allowed
for a separate contribution of $250 or more unless the donor
obtains a contemporaneous written acknowledgement of the
contribution from the charity indicating whether the charity
provided any good or service (and an estimate of the value of
any such good or service) to the taxpayer in consideration
for the contribution.\60\ In addition, present law requires
that any charity that receives a contribution exceeding $75
made partly as a gift and partly as consideration for goods
or services furnished by the charity (a ``quid pro quo''
contribution) is required to inform the contributor in
writing of an estimate of the value of the goods or services
furnished by the charity and that only the portion exceeding
the value of the goods or services is deductible as a
charitable contribution.\61\
---------------------------------------------------------------------------
\60\Sec. 170(f)(8).
\61\Sec. 6115.
---------------------------------------------------------------------------
Under present law, total deductible contributions of an
individual taxpayer to public charities, private operating
foundations, and certain types of private nonoperating
foundations may not exceed 50 percent of the taxpayer's
contribution base, which is the taxpayer's adjusted gross
income for a taxable year (disregarding any net operating
loss carryback). To the extent a taxpayer has not exceeded
the 50-percent limitation, (1) contributions of capital gain
property to public charities generally may be deducted up to
30 percent of the taxpayer's contribution base, (2)
contributions of cash to private foundations and certain
other charitable organizations generally may be deducted up
to 30 percent of the taxpayer's contribution base, and (3)
contributions of capital gain property to private foundations
and certain other charitable organizations generally may be
deducted up to 20 percent of the taxpayer's contribution
base.
Contributions by individuals in excess of the 50-percent,
30-percent, and 20-percent limit may be carried over and
deducted over the next five taxable years, subject to the
relevant percentage limitations on the deduction in each of
those years.
In addition to the percentage limitations imposed
specifically on charitable contributions, present law imposes
a reduction on most itemized deductions, including charitable
contribution deductions, for taxpayers with adjusted gross
income in excess of a threshold amount, which is indexed
annually for inflation. The threshold amount for 2006 is
$150,500 ($77,250 for married individuals filing separate
returns). For those deductions that are subject to the limit,
the total amount of itemized deductions is reduced by three
percent of adjusted gross income over the threshold amount,
but not by more than 80 percent of itemized deductions
subject to the limit. Beginning in 2006, the overall
limitation on itemized deductions phases out for all
taxpayers. The overall limitation on itemized deductions is
reduced by one-third in taxable years beginning in 2006 and
2007, and by two-thirds in taxable years beginning in 2008
and 2009. The overall limitation on itemized deductions is
eliminated for taxable years beginning after December 31,
2009; however, this elimination of the limitation sunsets on
December 31, 2010.

House Bill

No provision.

Senate Amendment

Deduction for nonitemizers
In the case of an individual taxpayer who does not itemize
deductions, the provision allows a ``direct charitable
deduction'' from adjusted gross income for charitable
contributions paid in cash during the taxable year. This
deduction is allowed in addition to the standard deduction.
The direct charitable deduction is the amount of the
deduction allowable under section 170(a) for the taxable year
for cash contributions (determined without regard to any
carryover). The amount deductible under the provision is
subject to the rules normally governing charitable
contribution deductions, such as the substantiation
requirements. In addition, the amount of the deduction is
available only to the extent that the otherwise allowable
direct charitable deduction exceeds the floor on charitable
contributions, described below (i.e., $210 ($420 in the case
of a joint return)). The deduction is allowed in computing
alternative minimum taxable income.
The provision does not change the present-law rules
regarding the carryover of charitable contributions to or
from a taxable

[[Page 7402]]

year, including a taxable year in which the taxpayer is
allowed the direct contribution deduction.
Floor on itemized deductions
Under the provision, the amount of an individual's
charitable contribution deduction (cash and noncash) is
subject to a floor. The floor is $210 ($420 in the case of a
joint return). In the case of an individual who elects to
itemize deductions, the floor applies to the deduction
otherwise allowed under section 170 for all contributions. In
the case of an individual who does not elect to itemize
deductions, the floor applies in determining the amount of
the direct charitable deduction. The provision does not
otherwise change the present-law rules pertaining to
charitable contributions.
Effective date.--The provision is effective for
contributions made in taxable years beginning after December
31, 2005, and before January 1, 2008.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
2. Tax-free distributions from individual retirement plans
for charitable purposes (Sec. 202 of the Senate amendment
and secs. 408, 6034, 6104, and 6652 of the Code)

Present Law

In general
If an amount withdrawn from a traditional individual
retirement arrangement (``IRA'') or a Roth IRA is donated to
a charitable organization, the rules relating to the tax
treatment of withdrawals from IRAs apply to the amount
withdrawn and the charitable contribution is subject to the
normally applicable limitations on deductibility of such
contributions.
Charitable contributions
In computing taxable income, an individual taxpayer who
itemizes deductions generally is allowed to deduct the amount
of cash and up to the fair market value of property
contributed to a charity described in section 501(c)(3), to
certain veterans' organizations, fraternal societies, and
cemetery companies,\62\ or to a Federal, State, or local
governmental entity for exclusively public purposes.\63\ The
deduction also is allowed for purposes of calculating
alternative minimum taxable income.
---------------------------------------------------------------------------
\62\Secs. 170(c)(3)-(5).
\63\Sec. 170(c)(1).
---------------------------------------------------------------------------
The amount of the deduction allowable for a taxable year
with respect to a charitable contribution of property may be
reduced depending on the type of property contributed, the
type of charitable organization to which the property is
contributed, and the income of the taxpayer.\64\
---------------------------------------------------------------------------
\64\Secs. 170(b) and (e).
---------------------------------------------------------------------------
A taxpayer who takes the standard deduction (i.e., who does
not itemize deductions) may not take a separate deduction for
charitable contributions.\65\
---------------------------------------------------------------------------
\65\Sec. 170(a).
---------------------------------------------------------------------------
A payment to a charity (regardless of whether it is termed
a ``contribution'') in exchange for which the donor receives
an economic benefit is not deductible, except to the extent
that the donor can demonstrate, among other things, that the
payment exceeds the fair market value of the benefit received
from the charity. To facilitate distinguishing charitable
contributions from purchases of goods or services from
charities, present law provides that no charitable
contribution deduction is allowed for a separate contribution
of $250 or more unless the donor obtains a contemporaneous
written acknowledgement of the contribution from the charity
indicating whether the charity provided any good or service
(and an estimate of the value of any such good or service) to
the taxpayer in consideration for the contribution.\66\ In
addition, present law requires that any charity that receives
a contribution exceeding $75 made partly as a gift and partly
as consideration for goods or services furnished by the
charity (a ``quid pro quo'' contribution) is required to
inform the contributor in writing of an estimate of the value
of the goods or services furnished by the charity and that
only the portion exceeding the value of the goods or services
may be deductible as a charitable contribution.\67\
---------------------------------------------------------------------------
\66\Sec. 170(f)(8).
\67\Sec. 6115.
---------------------------------------------------------------------------
Under present law, total deductible contributions of an
individual taxpayer to public charities, private operating
foundations, and certain types of private nonoperating
foundations may not exceed 50 percent of the taxpayer's
contribution base, which is the taxpayer's adjusted gross
income for a taxable year (disregarding any net operating
loss carryback). To the extent a taxpayer has not exceeded
the 50-percent limitation, (1) contributions of capital gain
property to public charities generally may be deducted up to
30 percent of the taxpayer's contribution base, (2)
contributions of cash to private foundations and certain
other charitable organizations generally may be deducted up
to 30 percent of the taxpayer's contribution base, and (3)
contributions of capital gain property to private foundations
and certain other charitable organizations generally may be
deducted up to 20 percent of the taxpayer's contribution
base.
Contributions by individuals in excess of the 50-percent,
30-percent, and 20-percent limits may be carried over and
deducted over the next five taxable years, subject to the
relevant percentage limitations on the deduction in each of
those years.
In addition to the percentage limitations imposed
specifically on charitable contributions, present law imposes
a reduction on most itemized deductions, including charitable
contribution deductions, for taxpayers with adjusted gross
income in excess of a threshold amount, which is indexed
annually for inflation. The threshold amount for 2006 is
$150,500 ($75,250 for married individuals filing separate
returns). For those deductions that are subject to the limit,
the total amount of itemized deductions is reduced by three
percent of adjusted gross income over the threshold amount,
but not by more than 80 percent of itemized deductions
subject to the limit. Beginning in 2006, the overall
limitation on itemized deductions phases-out for all
taxpayers. The overall limitation on itemized deductions is
reduced by one-third in taxable years beginning in 2006 and
2007, and by two-thirds in taxable years beginning in 2008
and 2009. The overall limitation on itemized deductions is
eliminated for taxable years beginning after December 31,
2009; however, this elimination of the limitation sunsets on
December 31, 2010.
In general, a charitable deduction is not allowed for
income, estate, or gift tax purposes if the donor transfers
an interest in property to a charity (e.g., a remainder)
while also either retaining an interest in that property
(e.g., an income interest) or transferring an interest in
that property to a noncharity for less than full and adequate
consideration.\68\ Exceptions to this general rule are
provided for, among other interests, remainder interests in
charitable remainder annuity trusts, charitable remainder
unitrusts, and pooled income funds, and present interests in
the form of a guaranteed annuity or a fixed percentage of the
annual value of the property.\69\ For such interests, a
charitable deduction is allowed to the extent of the present
value of the interest designated for a charitable
organization.
---------------------------------------------------------------------------
\68\Secs. 170(f), 2055(e)(2), and 2522(c)(2).
\69\Sec. 170(f)(2).
---------------------------------------------------------------------------
IRA rules
Within limits, individuals may make deductible and
nondeductible contributions to a traditional IRA. Amounts in
a traditional IRA are includible in income when withdrawn
(except to the extent the withdrawal represents a return of
nondeductible contributions). Individuals also may make
nondeductible contributions to a Roth IRA. Qualified
withdrawals from a Roth IRA are excludable from gross income.
Withdrawals from a Roth IRA that are not qualified
withdrawals are includible in gross income to the extent
attributable to earnings. Includible amounts withdrawn from a
traditional IRA or a Roth IRA before attainment of age 59\1/
2\ are subject to an additional 10-percent early withdrawal
tax, unless an exception applies. Under present law, minimum
distributions are required to be made from tax-favored
retirement arrangements, including IRAs. Minimum required
distributions from a traditional IRA must generally begin by
the April 1 of the calendar year following the year in which
the IRA owner attains age 70\1/2\.\70\
---------------------------------------------------------------------------
\70\Minimum distribution rules also apply in the case of
distributions after the death of a traditional or Roth IRA
owner.
---------------------------------------------------------------------------
If an individual has made nondeductible contributions to a
traditional IRA, a portion of each distribution from an IRA
is nontaxable until the total amount of nondeductible
contributions has been received. In general, the amount of a
distribution that is nontaxable is determined by multiplying
the amount of the distribution by the ratio of the remaining
nondeductible contributions to the account balance. In making
the calculation, all traditional IRAs of an individual are
treated as a single IRA, all distributions during any taxable
year are treated as a single distribution, and the value of
the contract, income on the contract, and investment in the
contract are computed as of the close of the calendar year.
In the case of a distribution from a Roth IRA that is not a
qualified distribution, in determining the portion of the
distribution attributable to earnings, contributions and
distributions are deemed to be distributed in the following
order: (1) regular Roth IRA contributions; (2) taxable
conversion contributions;\71\ (3) nontaxable conversion
contributions; and (4) earnings. In determining the amount of
taxable distributions from a Roth IRA, all Roth IRA
distributions in the same taxable year are treated as a
single distribution, all regular Roth IRA contributions for a
year are treated as a single contribution, and all conversion
contributions during the year are treated as a single
contribution.
---------------------------------------------------------------------------
\71\Conversion contributions refer to conversions of amounts
in a traditional IRA to a Roth IRA.
---------------------------------------------------------------------------
Distributions from an IRA (other than a Roth IRA) are
generally subject to withholding unless the individual elects
not to have withholding apply.\72\ Elections not to have
withholding apply are to be made in the

[[Page 7403]]

time and manner prescribed by the Secretary.
---------------------------------------------------------------------------
\72\Sec. 3405.
---------------------------------------------------------------------------
Split-interest trust filing requirements
Split-interest trusts, including charitable remainder
annuity trusts, charitable remainder unitrusts, and pooled
income funds, are required to file an annual information
return (Form 1041A).\73\ Trusts that are not split-interest
trusts but that claim a charitable deduction for amounts
permanently set aside for a charitable purpose\74\ also are
required to file Form 1041A. The returns are required to be
made publicly available.\75\ A trust that is required to
distribute all trust net income currently to trust
beneficiaries in a taxable year is exempt from this return
requirement for such taxable year. A failure to file the
required return may result in a penalty on the trust of $10 a
day for as long as the failure continues, up to a maximum of
$5,000 per return.
---------------------------------------------------------------------------
\73\Sec. 6034. This requirement applies to all split-interest
trusts described in section 4947(a)(2).
\74\Sec. 642(c).
\75\Sec. 6104(b).
---------------------------------------------------------------------------
In addition, split-interest trusts are required to file
annually Form 5227.\76\ Form 5227 requires disclosure of
information regarding a trust's noncharitable beneficiaries.
The penalty for failure to file this return is calculated
based on the amount of tax owed. A split-interest trust
generally is not subject to tax and therefore, in general, a
penalty may not be imposed for the failure to file Form 5227.
Form 5227 is not required to be made publicly available.
---------------------------------------------------------------------------
\76\Sec. 6011; Treas. Reg. sec. 53.6011-1(d).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

Qualified charitable distributions from IRAs
The provision provides an exclusion from gross income for
otherwise taxable IRA distributions from a traditional or a
Roth IRA in the case of qualified charitable
distributions.\77\ Special rules apply in determining the
amount of an IRA distribution that is otherwise taxable. The
present-law rules regarding taxation of IRA distributions and
the deduction of charitable contributions continue to apply
to distributions from an IRA that are not qualified
charitable distributions. Qualified charitable distributions
are taken into account for purposes of the minimum
distribution rules applicable to traditional IRAs to the same
extent the distribution would have been taken into account
under such rules had the distribution not been directly
distributed under the provision. An IRA does not fail to
qualify as an IRA merely because qualified charitable
distributions have been made from the IRA. It is intended
that the Secretary will prescribe rules under which IRA
owners are deemed to elect out of withholding if they
designate that a distribution is intended to be a qualified
charitable distribution.
---------------------------------------------------------------------------
\77\The provision does not apply to distributions from
employer-sponsored retirements plans, including SIMPLE IRAs
and simplified employee pensions (``SEPs'').
---------------------------------------------------------------------------
A qualified charitable distribution is any distribution
from an IRA that is made after December 31, 2005, and before
January 1, 2008, directly by the IRA trustee either to (1) an
organization to which deductible contributions can be made (a
``direct distribution'') or (2) a ``split-interest entity.''
A split-interest entity means a charitable remainder annuity
trust or charitable remainder unitrust (together referred to
as a ``charitable remainder trust''), a pooled income fund,
or a charitable gift annuity. Direct distributions are
eligible for the exclusion only if made on or after the date
the IRA owner attains age 70\1/2\. Distributions to a split
interest entity are eligible for the exclusion only if made
on or after the date the IRA owner attains age 59\1/2\. In
the case of distributions to split-interest distributions, no
person may hold an income interest in the amounts in the
split-interest entity attributable to the charitable
distribution other than the IRA owner, the IRA owner's
spouse, or a charitable organization.
The exclusion applies to direct distributions only if a
charitable contribution deduction for the entire distribution
otherwise would be allowable (under present law), determined
without regard to the generally applicable percentage
limitations. Thus, for example, if the deductible amount is
reduced because of a benefit received in exchange, or if a
deduction is not allowable because the donor did not obtain
sufficient substantiation, the exclusion is not available
with respect to any part of the IRA distribution. Similarly,
the exclusion applies in the case of a distribution directly
to a split-interest entity only if a charitable contribution
deduction for the entire present value of the charitable
interest (for example, a remainder interest) otherwise would
be allowable, determined without regard to the generally
applicable percentage limitations.
If the IRA owner has any IRA that includes nondeductible
contributions, a special rule applies in determining the
portion of a distribution that is includible in gross income
(but for the provision) and thus is eligible for qualified
charitable distribution treatment. Under the special rule,
the distribution is treated as consisting of income first, up
to the aggregate amount that would be includible in gross
income (but for the provision) if the aggregate balance of
all IRAs having the same owner were distributed during the
same year. In determining the amount of subsequent IRA
distributions includible in income, proper adjustments are to
be made to reflect the amount treated as a qualified
charitable distribution under the special rule.
Special rules apply for distributions to split-interest
entities. For distributions to charitable remainder trusts,
the provision provides that subsequent distributions from the
charitable remainder trust are treated as ordinary income in
the hands of the beneficiary, notwithstanding how such
amounts normally are treated under section 664(b). In
addition, for a charitable remainder trust to be eligible to
receive qualified charitable distributions, the charitable
remainder trust has to be funded exclusively by such
distributions. For example, an IRA owner may not make
qualified charitable distributions to an existing charitable
remainder trust any part of which was funded with assets that
were not qualified charitable distributions.
Under the provision, a pooled income fund is eligible to
receive qualified charitable distributions only if the fund
accounts separately for amounts attributable to such
distributions. In addition, all distributions from the pooled
income fund that are attributable to qualified charitable
distributions are treated as ordinary income to the
beneficiary. Qualified charitable distributions to a pooled
income fund are not includible in the fund's gross income.
In determining the amount includible in gross income by
reason of a payment from a charitable gift annuity purchased
with a qualified charitable distribution from an IRA, the
portion of the distribution from the IRA used to purchase the
annuity is not an investment in the annuity contract.
Any amount excluded from gross income by reason of the
provision is not taken into account in determining the
deduction for charitable contributions under section 170.
Qualified charitable distribution examples
The following examples illustrate the determination of the
portion of an IRA distribution that is a qualified charitable
distribution and the application of the special rules for a
qualified charitable distribution to a split-interest entity.
In each example, it is assumed that the requirements for
qualified charitable distribution treatment are otherwise met
(e.g., the applicable age requirement and the requirement
that contributions are otherwise deductible) and that no
other IRA distributions occur during the year.
Example 1.--Individual A has a traditional IRA with a
balance of $100,000, consisting solely of deductible
contributions and earnings. Individual A has no other IRA.
The entire IRA balance is distributed in a direct
distribution to a charitable organization. Under present law,
the entire distribution of $100,000 would be includible in
Individual A's income. Accordingly, under the provision, the
entire distribution of $100,000 is a qualified charitable
distribution. As a result, no amount is included in
Individual A's income as a result of the distribution and the
distribution is not taken into account in determining the
amount of Individual A's charitable deduction for the year.
Example 2.--The facts are the same as in Example 1, except
that the entire IRA balance of $100,000 is distributed to a
charitable remainder unitrust, which contains no other assets
and which must be funded exclusively by qualified charitable
distributions. Under the terms of the trust, Individual A is
entitled to receive five percent of the net fair market value
of the trust assets each year. As explained in Example 1, the
entire $100,000 distribution is a qualified charitable
distribution, no amount is included in Individual A's income
as a result of the distribution, and the distribution is not
taken into account in determining the amount of Individual
A's charitable deduction for the year. In addition, under a
special rule in the provision for charitable remainder
trusts, any distribution from the charitable remainder
unitrust to Individual A is includible in gross income as
ordinary income, regardless of the character of the
distribution under the usual rules for the taxation of
distributions from such a trust.
Example 3.--Individual B has a traditional IRA with a
balance of $100,000, consisting of $20,000 of nondeductible
contributions and $80,000 of deductible contributions and
earnings. Individual B has no other IRA. In a direct
distribution to a charitable organization, $80,000 is
distributed from the IRA. Under present law, a portion of the
distribution from the IRA would be treated as a nontaxable
return of nondeductible contributions. The nontaxable portion
of the distribution would be $16,000, determined by
multiplying the amount of the distribution ($80,000) by the
ratio of the nondeductible contributions to the account
balance ($20,000/$100,000). Accordingly, under present law,
$64,000 of the distribution ($80,000 minus $16,000) would be
includible in Individual B's income.
Under the provision, notwithstanding the present-law tax
treatment of IRA distributions, the distribution is treated
as consisting of income first, up to the total

[[Page 7404]]

amount that would be includible in gross income (but for the
provision) if all amounts were distributed from all IRAs
otherwise taken into account in determining the amount of IRA
distributions. The total amount that would be includible in
income if all amounts were distributed from the IRA is
$80,000. Accordingly, under the provision, the entire $80,000
distributed to the charitable organization is treated as
includible in income (before application of the provision)
and is a qualified charitable distribution. As a result, no
amount is included in Individual B's income as a result of
the distribution and the distribution is not taken into
account in determining the amount of Individual B's
charitable deduction for the year. In addition, for purposes
of determining the tax treatment of other distributions from
the IRA, $20,000 of the amount remaining in the IRA is
treated as Individual B's nondeductible contributions (i.e.,
not subject to tax upon distribution).
Split-interest trust filing requirements
The provision increases the penalty on split-interest
trusts for failure to file a return and for failure to
include any of the information required to be shown on such
return and to show the correct information. The penalty is
$20 for each day the failure continues up to $10,000 for any
one return. In the case of a split-interest trust with gross
income in excess of $250,000, the penalty is $100 for each
day the failure continues up to a maximum of $50,000. In
addition, if a person (meaning any officer, director,
trustee, employee, or other individual who is under a duty to
file the return or include required information)\78\
knowingly failed to file the return or include required
information, then that person is personally liable for such a
penalty, which would be imposed in addition to the penalty
that is paid by the organization. Information regarding
beneficiaries that are not charitable organizations as
described in section 170(c) is exempt from the requirement to
make information publicly available. In addition, the
provision repeals the present-law exception to the filing
requirement for split-interest trusts that are required in a
taxable year to distribute all net income currently to
beneficiaries. Such exception remains available to trusts
other than split-interest trusts that are otherwise subject
to the filing requirement.
---------------------------------------------------------------------------
\78\Sec. 6652(c)(4)(C).
---------------------------------------------------------------------------
Effective date
The provision relating to qualified charitable
distributions is effective for distributions made in taxable
years beginning after December 31, 2005, and before January
1, 2008. The provision relating to information returns of
split-interest trusts is effective for returns for taxable
years beginning after December 31, 2005.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
3. Charitable deduction for contributions of food inventory
(sec. 203 of the Senate amendment and sec. 170 of the
Code)

Present Law

Under present law, a taxpayer's deduction for charitable
contributions of inventory generally is limited to the
taxpayer's basis (typically, cost) in the inventory, or if
less the fair market value of the inventory.
For certain contributions of inventory, C corporations may
claim an enhanced deduction equal to the lesser of (1) basis
plus one-half of the item's appreciation (i.e., basis plus
one half of fair market value in excess of basis) or (2) two
times basis (sec. 170(e)(3)). In general, a C corporation's
charitable contribution deductions for a year may not exceed
10 percent of the corporation's taxable income (sec.
170(b)(2)). To be eligible for the enhanced deduction, the
contributed property generally must be inventory of the
taxpayer, contributed to a charitable organization described
in section 501(c)(3) (except for private nonoperating
foundations), and the donee must (1) use the property
consistent with the donee's exempt purpose solely for the
care of the ill, the needy, or infants, (2) not transfer the
property in exchange for money, other property, or services,
and (3) provide the taxpayer a written statement that the
donee's use of the property will be consistent with such
requirements. In the case of contributed property subject to
the Federal Food, Drug, and Cosmetic Act, the property must
satisfy the applicable requirements of such Act on the date
of transfer and for 180 days prior to the transfer.
A donor making a charitable contribution of inventory must
make a corresponding adjustment to the cost of goods sold by
decreasing the cost of goods sold by the lesser of the fair
market value of the property or the donor's basis with
respect to the inventory (Treas. Reg. sec. 1.170A-4A(c)(3)).
Accordingly, if the allowable charitable deduction for
inventory is the fair market value of the inventory, the
donor reduces its cost of goods sold by such value, with the
result that the difference between the fair market value and
the donor's basis may still be recovered by the donor other
than as a charitable contribution.
To use the enhanced deduction, the taxpayer must establish
that the fair market value of the donated item exceeds basis.
The valuation of food inventory has been the subject of
disputes between taxpayers and the IRS.\79\
---------------------------------------------------------------------------
\79\Lucky Stores Inc. v. Commissioner, 105 T.C. 420 (1995)
(holding that the value of surplus bread inventory donated to
charity was the full retail price of the bread rather than
half the retail price, as the IRS asserted).
---------------------------------------------------------------------------
Under the Katrina Emergency Tax Relief Act of 2005, any
taxpayer, whether or not a C corporation, engaged in a trade
or business is eligible to claim the enhanced deduction for
certain donations made after August 28, 2005, and before
January 1, 2006, of food inventory. For taxpayers other than
C corporations, the total deduction for donations of food
inventory in a taxable year generally may not exceed 10
percent of the taxpayer's net income for such taxable year
from all sole proprietorships, S corporations, or
partnerships (or other entity that is not a C corporation)
from which contributions of ``apparently wholesome food'' are
made. ``Apparently wholesome food'' is defined as food
intended for human consumption that meets all quality and
labeling standards imposed by Federal, State, and local laws
and regulations even though the food may not be readily
marketable due to appearance, age, freshness, grade, size,
surplus, or other conditions.

House Bill

No provision.

Senate Amendment

Extension of Katrina Emergency Tax Relief Act of 2005
The provision extends the provision enacted as part of the
Katrina Emergency Tax Relief Act of 2005. As under such Act,
under the provision, any taxpayer, whether or not a C
corporation, engaged in a trade or business is eligible to
claim the enhanced deduction for donations of food inventory.
For taxpayers other than C corporations, the total deduction
for donations of food inventory in a taxable year generally
may not exceed 10 percent of the taxpayer's net income for
such taxable year from all sole proprietorships, S
corporations, or partnerships (or other non C corporation)
from which contributions of apparently wholesome food are
made. For example, as under the Katrina Emergency Tax Relief
Act of 2005, if a taxpayer is a sole proprietor, a
shareholder in an S corporation, and a partner in a
partnership, and each business makes charitable contributions
of food inventory, the taxpayer's deduction for donations of
food inventory is limited to 10 percent of the taxpayer's net
income from the sole proprietorship and the taxpayer's
interests in the S corporation and partnership. However, if
only the sole proprietorship and the S corporation made
charitable contributions of food inventory, the taxpayer's
deduction would be limited to 10 percent of the net income
from the trade or business of the sole proprietorship and the
taxpayer's interest in the S corporation, but not the
taxpayer's interest in the partnership.\80\
---------------------------------------------------------------------------
\80\The 10 percent limitation does not affect the application
of the generally applicable percentage limitations. For
example, if 10 percent of a sole proprietor's net income from
the proprietor's trade or business was greater than 50
percent of the proprietor's contribution base, the available
deduction for the taxable year (with respect to contributions
to public charities) would be 50 percent of the proprietor's
contribution base. Consistent with present law, such
contributions may be carried forward because they exceed the
50 percent limitation. Contributions of food inventory by a
taxpayer that is not a C corporation that exceed the 10
percent limitation but not the 50 percent limitation could
not be carried forward.
---------------------------------------------------------------------------
Under the provision, the enhanced deduction for food is
available only for food that qualifies as ``apparently
wholesome food.'' ``Apparently wholesome food'' is defined as
it is defined under the Katrina Emergency Tax Relief Act of
2005.
Modifications to enhanced deduction for food inventory
Under the provision, for purposes of calculating the
enhanced deduction, taxpayers that do not account for
inventories under section 471 and that are not required to
capitalize indirect costs under section 263A are able to
elect to treat the basis of the contributed food as being
equal to 25 percent of the food's fair market value.\81\
---------------------------------------------------------------------------
\81\This includes, for example, taxpayers who are eligible
for administrative relief under Revenue Procedures 2002-28
and 2001-10.
---------------------------------------------------------------------------
The provision changes the amount of the enhanced deduction
for eligible contributions of food inventory to the lesser of
fair market value or twice the taxpayer's basis in the
inventory. For example, a taxpayer who makes an eligible
donation of food that has a fair market value of $10 and a
basis of $4 could take a deduction of $8 (twice basis). If
the taxpayer's basis is $6 instead of $4, then the deduction
would be $10 (fair market value). By contrast, under present
law, a C corporation's deduction in the first example would
be $7 (fair market value less half the appreciation) and in
the second example would be $8. (Except for contributions
made after August 28, 2005, and before January 1, 2006,
taxpayers other than C corporations generally could take a
deduction for a contribution of food inventory only for the
$4 basis in either example.)
The provision provides that the fair market value of
donated apparently wholesome

[[Page 7405]]

food that cannot or will not be sold solely due to internal
standards of the taxpayer or lack of market is determined
without regard to such internal standards or lack of market
and by taking into account the price at which the same or
substantially the same food items (as to both type and
quality) are sold by the taxpayer at the time of the
contribution or, if not so sold at such time, in the recent
past.
Effective date.--The provision is effective for
contributions made in taxable years beginning after December
31, 2005, and before January 1, 2008.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
4. Basis adjustment to stock of S corporation contributing
property (Sec. 204 of the Senate amendment and sec. 1367
of the Code)

Present Law

Under present law, if an S corporation contributes money or
other property to a charity, each shareholder takes into
account the shareholder's pro rata share of the contribution
in determining its own income tax liability.\82\ A
shareholder of an S corporation reduces the basis in the
stock of the S corporation by the amount of the charitable
contribution that flows through to the shareholder.\83\
---------------------------------------------------------------------------
\82\Sec. 1366(a)(1)(A).
\83\Sec. 1367(a)(2)(B).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

The provision provides that the amount of a shareholder's
basis reduction in the stock of an S corporation by reason of
a charitable contribution made by the corporation will be
equal to the shareholder's pro rata share of the adjusted
basis of the contributed property.\84\
---------------------------------------------------------------------------
\84\See Rev. Rul. 96-11 (1996-1 C.B. 140) for a rule reaching
a similar result in the case of charitable contributions made
by a partnership.
---------------------------------------------------------------------------
Thus, for example, assume an S corporation with one
individual shareholder makes a charitable contribution of
stock with a basis of $200 and a fair market value of $500.
The shareholder will be treated as having made a $500
charitable contribution (or a lesser amount if the special
rules of section 170(e) apply), and will reduce the basis of
the S corporation stock by $200.\85\
---------------------------------------------------------------------------
\85\This example assumes that basis of the S corporation
stock (before reduction) is at least $200.
---------------------------------------------------------------------------
Effective date.--The provision applies to contributions
made in taxable years beginning after December 31, 2005, and
before January 1, 2008.

conference agreement

The conference agreement does not include the Senate
amendment provision.
5. Charitable deduction for contributions of book inventory
(Sec. 205 of the Senate amendment and sec. 170 of the
Code)

present law

Under present law, a taxpayer's deduction for charitable
contributions of inventory generally is limited to the
taxpayer's basis (typically, cost) in the inventory, or if
less the fair market value of the inventory.
For certain contributions of inventory, C corporations may
claim an enhanced deduction equal to the lesser of (1) basis
plus one-half of the item's appreciation (i.e., basis plus
one half of fair market value in excess of basis) or (2) two
times basis (sec. 170(e)(3)). In general, a C corporation's
charitable contribution deductions for a year may not exceed
10 percent of the corporation's taxable income (sec.
170(b)(2)). To be eligible for the enhanced deduction, the
contributed property generally must be inventory of the
taxpayer, contributed to a charitable organization described
in section 501(c)(3) (except for private nonoperating
foundations), and the donee must (1) use the property
consistent with the donee's exempt purpose solely for the
care of the ill, the needy, or infants, (2) not transfer the
property in exchange for money, other property, or services,
and (3) provide the taxpayer a written statement that the
donee's use of the property will be consistent with such
requirements. In the case of contributed property subject to
the Federal Food, Drug, and Cosmetic Act, the property must
satisfy the applicable requirements of such Act on the date
of transfer and for 180 days prior to the transfer.
A donor making a charitable contribution of inventory must
make a corresponding adjustment to the cost of goods sold by
decreasing the cost of goods sold by the lesser of the fair
market value of the property or the donor's basis with
respect to the inventory (Treas. Reg. sec. 1.170A-4A(c)(3)).
Accordingly, if the allowable charitable deduction for
inventory is the fair market value of the inventory, the
donor reduces its cost of goods sold by such value, with the
result that the difference between the fair market value and
the donor's basis may still be recovered by the donor other
than as a charitable contribution.
To use the enhanced deduction, the taxpayer must establish
that the fair market value of the donated item exceeds basis.
The Katrina Emergency Tax Relief Act of 2005 extended the
present-law enhanced deduction for C corporations to certain
qualified book contributions made after August 28, 2005, and
before January 1, 2006. For such purposes, a qualified book
contribution means a charitable contribution of books to a
public school that provides elementary education or secondary
education (kindergarten through grade 12) and that is an
educational organization that normally maintains a regular
faculty and curriculum and normally has a regularly enrolled
body of pupils or students in attendance at the place where
its educational activities are regularly carried on. The
enhanced deduction under the Katrina Emergency Tax Relief Act
of 2005 is not allowed unless the donee organization
certifies in writing that the contributed books are suitable,
in terms of currency, content, and quantity, for use in the
donee's educational programs and that the donee will use the
books in such educational programs.

house bill

No provision.

senate amendment

The provision modifies the present-law enhanced deduction
for C corporations so that it is equal to the lesser of fair
market value or twice the taxpayer's basis in the case of
qualified book contributions. The provision provides that the
fair market value for this purpose is determined by reference
to a bona fide published market price for the book. Under the
provision, a bona fide published market price of a book is a
price of a book, determined using the same printing and same
edition, published within seven years preceding the
contribution, determined as a result of an arm's length
transaction, and for which the book was customarily sold. For
example, a publisher's listed retail price for a book would
not meet the standard if the publisher could not demonstrate
to the satisfaction of the Secretary that the price was one
at which the book was customarily sold and was the result of
an arm's length transaction. If a publisher entered into a
contract with a local school district to sell newly published
textbooks six years prior to making a qualified book
contribution of such textbooks, the publisher could use as a
bona fide published market price, the price at which such
books regularly were sold to the school district under the
contract. By contrast, if a publisher listed in a catalogue
or elsewhere a ``suggested retail price,'' but books were not
in fact customarily sold at such price, the publisher could
not use the ``suggested retail price'' to determine the fair
market value of the book for purposes of the enhanced
deduction. Thus, in general, a bona fide published market
price must be independently verifiable by reference to actual
sales within the seven-year period preceding the
contribution, and not to a publisher's own price list.
As an illustration of the mechanics of calculating the
enhanced deduction under the provision, a C corporation that
made a qualified book contribution with a bona fide published
market price of $10 and a basis of $4 could take a deduction
of $8 (twice basis). If the taxpayer's basis is $6 instead of
$4, then the deduction is $10. Also, in such latter case, if
the book's bona fide published market price was $5 at the
time of the contribution but was $10 five years before the
contribution, then the deduction is $10.
A qualified book contribution means a charitable
contribution of books to: (1) an educational organization
that normally maintains a regular faculty and curriculum and
normally has a regularly enrolled body of pupils or students
in attendance at the place where its educational activities
are regularly carried on; (2) a public library; or (3) an
organization described in section 501(c)(3) (except for
private nonoperating foundations), that is organized
primarily to make books available to the general public at no
cost or to operate a literacy program. The donee must: (1)
use the property consistent with the donee's exempt purpose;
(2) not transfer the property in exchange for money, other
property, or services; and (3) provide the taxpayer a written
statement that the donee's use of the property will be
consistent with such requirements and also that the books are
suitable, in terms of currency, content, and quantity, for
use in the donee's educational programs and that the donee
will use the books in such educational programs.
Effective date.--The provision is effective for
contributions made in taxable years beginning after December
31, 2005, and before January 1, 2008.

conference agreement

The conference agreement does not include the Senate
amendment provision.
6. Modify tax treatment of certain payments to controlling
exempt organizations and public disclosure of information
relating to UBIT (Sec. 206 of the Senate amendment and
secs. 512, 6011, 6104, and new sec. 6720C of the Code)

present law

Payments to controlling exempt organizations
In general, interest, rents, royalties, and annuities are
excluded from the unrelated business income of tax-exempt
organizations. However, section 512(b)(13) generally treats
otherwise excluded rent, royalty, annuity, and interest
income as unrelated business income if such income is
received from

[[Page 7406]]

a taxable or tax-exempt subsidiary that is 50 percent
controlled by the parent tax-exempt organization. In the case
of a stock subsidiary, ``control'' means ownership by vote or
value of more than 50 percent of the stock. In the case of a
partnership or other entity, control means ownership of more
than 50 percent of the profits, capital or beneficial
interests. In addition, present law applies the constructive
ownership rules of section 318 for purposes of section
512(b)(13). Thus, a parent exempt organization is deemed to
control any subsidiary in which it holds more than 50 percent
of the voting power or value, directly (as in the case of a
first-tier subsidiary) or indirectly (as in the case of a
second-tier subsidiary).
Under present law, interest, rent, annuity, or royalty
payments made by a controlled entity to a tax-exempt
organization are includable in the latter organization's
unrelated business income and are subject to the unrelated
business income tax to the extent the payment reduces the net
unrelated income (or increases any net unrelated loss) of the
controlled entity (determined as if the entity were tax
exempt).
The Taxpayer Relief Act of 1997 (the ``1997 Act'') made
several modifications to the control requirement of section
512(b)(13). In order to provide transitional relief, the
changes made by the 1997 Act do not apply to any payment
received or accrued during the first two taxable years
beginning on or after the date of enactment of the 1997
Act (August 5, 1997) if such payment is received or
accrued pursuant to a binding written contract in effect
on June 8, 1997, and at all times thereafter before such
payment (but not pursuant to any contract provision that
permits optional accelerated payments).
Public disclosure of returns
In general, an organization described in section 501(c) or
(d) is required to make available for public inspection a
copy of its annual information return (Form 990) and
exemption application materials.\86\ A penalty may be imposed
on any person who does not make an organization's annual
returns or exemption application materials available for
public inspection. The penalty amount is $20 for each day
during which a failure occurs. If more than one person fails
to comply, each person is jointly and severally liable for
the full amount of the penalty. The maximum penalty that may
be imposed on all persons for any one annual return is
$10,000. There is no maximum penalty amount for failing to
make exemption application materials available for public
inspection. Any person who willfully fails to comply with the
public inspection requirements is subject to an additional
penalty of $5,000.\87\
---------------------------------------------------------------------------
\86\Sec. 6104(d).
\87\Sec. 6685.
---------------------------------------------------------------------------
These requirements do not apply to an organization's annual
return for unrelated business income tax (generally Form 990-
T).\88\
---------------------------------------------------------------------------
\88\Treas. Reg. sec. 301.6104(d)-1(b)(4)(ii).
---------------------------------------------------------------------------

house bill

No provision.

senate amendment

Payments to controlling exempt organizations
The provision provides that the general rule of section
512(b)(13), which includes interest, rent, annuity, or
royalty payments made by a controlled entity to a tax-exempt
organization in the latter organization's unrelated business
income to the extent the payment reduces the net unrelated
income (or increases any net unrelated loss) of the
controlled entity, applies only to the portion of payments
received or accrued in a taxable year that exceed the amount
of the specified payment that would have been paid or accrued
if such payment had been determined under the principles of
section 482. Thus, if a payment of rent by a controlled
subsidiary to its tax-exempt parent organization exceeds fair
market value, the excess amount of such payment over fair
market value (as determined in accordance with section 482)
is included in the parent organization's unrelated business
income, to the extent that such excess reduced the net
unrelated income (or increased any net unrelated loss) of the
controlled entity (determined as if the entity were tax
exempt). In addition, the provision imposes a 20-percent
penalty on the larger of such excess determined without
regard to any amendment or supplement to a return of tax, or
such excess determined with regard to all such amendments and
supplements.
The provision provides that if modifications to section
512(b)(13) made by the 1997 Act did not apply to a contract
because of the transitional relief provided by the 1997 Act,
then such modifications also do not apply to amounts received
or accrued under such contract before January 1, 2001.
Require public availability of unrelated business income tax
returns
The provision extends the present-law public inspection and
disclosure requirements and penalties applicable to the Form
990 to the unrelated business income tax return (Form 990-T)
of organizations described in section 501(c)(3). The
provision provides that certain information may be withheld
by the organization from public disclosure and inspection if
public availability would adversely affect the organization,
similar to the information that may be withheld under present
law with respect to applications for tax exemption and the
Form 990 (e.g., information relating to a trade secret,
patent, process, style of work, or apparatus of the
organization, if the Secretary determines that public
disclosure of such information would adversely affect the
organization).
Require a UBIT certification for certain large charitable
organizations
Under the provision, a charitable organization that has
annual total gross income and receipts (including, e.g.,
contributions and grants, program service revenue, investment
income, and revenues from an unrelated trade or business or
other sources) or gross assets of at least $10 million on the
last day of the taxable year must include with its Form 990
and Form 990-T filings (if any) a statement by an independent
auditor or an independent counsel that (1) contains a
certification that the information contained in the return
has been reviewed by the auditor or counsel and, to the best
of his or her knowledge, is accurate; (2) to the best of the
auditor's or counsel's knowledge, the allocation of expenses
between the exempt and the unrelated business income
activities of the organization comply with the requirements
set forth by the Secretary under section 512; and (3)
indicates whether the auditor or counsel has provided a tax
opinion to the organization regarding the classification of
any trade or business of the organization as an unrelated
trade or business or the treatment of any income as unrelated
business taxable income and a description of any material
facts with respect to any such opinion.
Failure to file the required statement results in a
penalty, imposed on the organization, of one half of one
percent (0.5 percent) of the organization's total gross
revenues for the taxable year, excluding revenues from
contributions and grants. No penalty is imposed with respect
to any failure that is due to reasonable cause.
Effective date.--The provision related to payments to
controlling organizations applies to payments received or
accrued after December 31, 2000. The public availability
requirements of the provision apply to returns filed after
the date of enactment. The certification requirement applies
to returns for taxable years beginning after the date of
enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
7. Encourage contributions of real property made for
conservation purposes (Sec. 207 of the Senate amendment
and sec. 170 of the Code)

Present Law

Charitable contributions generally
In general, a deduction is permitted for charitable
contributions, subject to certain limitations that depend on
the type of taxpayer, the property contributed, and the donee
organization. The amount of deduction generally equals the
fair market value of the contributed property on the date of
the contribution. Charitable deductions are provided for
income, estate, and gift tax purposes.\89\
---------------------------------------------------------------------------
\89\Secs. 170, 2055, and 2522, respectively.
---------------------------------------------------------------------------
In general, in any taxable year, charitable contributions
by a corporation are not deductible to the extent the
aggregate contributions exceed 10 percent of the
corporation's taxable income computed without regard to net
operating or capital loss carrybacks. For individuals, the
amount deductible is a percentage of the taxpayer's
contribution base, which is the taxpayer's adjusted gross
income computed without regard to any net operating loss
carryback. The applicable percentage of the contribution base
varies depending on the type of donee organization and
property contributed. Cash contributions of an individual
taxpayer to public charities, private operating foundations,
and certain types of private nonoperating foundations may not
exceed 50 percent of the taxpayer's contribution base. Cash
contributions to private foundations and certain other
organizations generally may be deducted up to 30 percent of
the taxpayer's contribution base.
In general, a charitable deduction is not allowed for
income, estate, or gift tax purposes if the donor transfers
an interest in property to a charity while also either
retaining an interest in that property or transferring an
interest in that property to a noncharity for less than full
and adequate consideration. Exceptions to this general rule
are provided for, among other interests, remainder interests
in charitable remainder annuity trusts, charitable remainder
unitrusts, and pooled income funds, present interests in the
form of a guaranteed annuity or a fixed percentage of the
annual value of the property, and qualified conservation
contributions.
Capital gain property
Capital gain property means any capital asset or property
used in the taxpayer's trade or business the sale of which at
its fair market value, at the time of contribution, would
have resulted in gain that would have been long-term capital
gain. Contributions

[[Page 7407]]

of capital gain property to a qualified charity are
deductible at fair market value within certain limitations.
Contributions of capital gain property to charitable
organizations described in section 170(b)(1)(A) (e.g., public
charities, private foundations other than private non-
operating foundations, and certain governmental units)
generally are deductible up to 30 percent of the taxpayer's
contribution base. An individual may elect, however, to bring
all these contributions of capital gain property for a
taxable year within the 50-percent limitation category by
reducing the amount of the contribution deduction by the
amount of the appreciation in the capital gain property.
Contributions of capital gain property to charitable
organizations described in section 170(b)(1)(B) (e.g.,
private non-operating foundations) are deductible up to 20
percent of the taxpayer's contribution base.
For purposes of determining whether a taxpayer's aggregate
charitable contributions in a taxable year exceed the
applicable percentage limitation, contributions of capital
gain property are taken into account after other charitable
contributions. Contributions of capital gain property that
exceed the percentage limitation may be carried forward for
five years.
Qualified conservation contributions
Qualified conservation contributions are not subject to the
``partial interest'' rule, which generally bars deductions
for charitable contributions of partial interests in
property. A qualified conservation contribution is a
contribution of a qualified real property interest to a
qualified organization exclusively for conservation purposes.
A qualified real property interest is defined as: (1) the
entire interest of the donor other than a qualified mineral
interest; (2) a remainder interest; or (3) a restriction
(granted in perpetuity) on the use that may be made of the
real property. Qualified organizations include certain
governmental units, public charities that meet certain public
support tests, and certain supporting organizations.
Conservation purposes include: (1) the preservation of land
areas for outdoor recreation by, or for the education of, the
general public; (2) the protection of a relatively natural
habitat of fish, wildlife, or plants, or similar ecosystem;
(3) the preservation of open space (including farmland and
forest land) where such preservation will yield a significant
public benefit and is either for the scenic enjoyment of the
general public or pursuant to a clearly delineated Federal,
State, or local governmental conservation policy; and (4) the
preservation of an historically important land area or a
certified historic structure.
Qualified conservation contributions of capital gain
property are subject to the same limitations and carryover
rules of other charitable contributions of capital gain
property.

House Bill

No provision.

Senate Amendment

In general
Under the provision, the 30-percent contribution base
limitation on contributions of capital gain property by
individuals does not apply to qualified conservation
contributions (as defined under present law). Instead,
individuals may deduct the fair market value of any qualified
conservation contribution to an organization described in
section 170(b)(1)(A) to the extent of the excess of 50
percent of the contribution base over the amount of all other
allowable charitable contributions. These contributions are
not taken into account in determining the amount of other
allowable charitable contributions.
Individuals are allowed to carryover any qualified
conservation contributions that exceed the 50-percent
limitation for up to 15 years.
For example, assume an individual with a contribution base
of $100 makes a qualified conservation contribution of
property with a fair market value of $80 and makes other
charitable contributions subject to the 50-percent limitation
of $60. The individual is allowed a deduction of $50 in the
current taxable year for the non-conservation contributions
(50 percent of the $100 contribution base) and is allowed to
carryover the excess $10 for up to 5 years. No current
deduction is allowed for the qualified conservation
contribution, but the entire $80 qualified conservation
contribution may be carried forward for up to 15 years.
Farmers and ranchers
Individuals
In the case of an individual who is a qualified farmer or
rancher for the taxable year in which the contribution is
made, a qualified conservation contribution is allowable up
to 100 percent of the excess of the taxpayer's contribution
base over the amount of all other allowable charitable
contributions.
In the above example, if the individual is a qualified
farmer or rancher, in addition to the $50 deduction for non-
conservation contributions, an additional $50 for the
qualified conservation contribution is allowed and $30 may be
carried forward for up to 15 years as a contribution subject
to the 100-percent limitation.
Corporations
In the case of a corporation (other than a publicly traded
corporation) that is a qualified farmer or rancher for the
taxable year in which the contribution is made, any qualified
conservation contribution is allowable up to 100 percent of
the excess of the corporation's taxable income (as computed
under section 170(b)(2)) over the amount of all other
allowable charitable contributions. Any excess may be carried
forward for up to 15 years as a contribution subject to the
100-percent limitation.
Definition
A qualified farmer or rancher means a taxpayer whose gross
income from the trade of business of farming (within the
meaning of section 2032A(e)(5)) is greater than 50 percent of
the taxpayer's gross income for the taxable year.
Effective date.--The provision applies to contributions
made in taxable years beginning after December 31, 2005, and
before January 1, 2008.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
8. Enhanced deduction for charitable contributions of
literary, musical, artistic, and scholarly compositions
(sec. 208 of the Senate amendment and sec. 170 of the
Code)

Present Law

In the case of a charitable contribution of inventory or
other ordinary-income or short-term capital gain property,
the amount of the deduction generally is limited to the
taxpayer's basis in the property.\90\ In the case of a
charitable contribution of tangible personal property, the
deduction is limited to the taxpayer's basis in such property
if the use by the recipient charitable organization is
unrelated to the organization's tax-exempt purpose. In cases
involving contributions of tangible personal property to a
private foundation (other than certain private
foundations),\91\ the amount of the deduction is limited to
the taxpayer's basis in the property.
---------------------------------------------------------------------------
\90\Sec. 170(e)(1).
\91\Sec. 170(e)(1)(B)(ii).
---------------------------------------------------------------------------
Under present law, charitable contributions of literary,
musical, and artistic compositions created or prepared by the
donor are considered ordinary income property and a
taxpayer's deduction of such property is limited to the
taxpayer's basis (typically, cost) in the property. A
charitable contribution of a literary, musical, or artistic
composition by a person other than the person who created or
prepared the work generally is eligible for a fair market
value deduction if the donee organization's use of the
property is related to such organization's exempt purposes.
To be eligible for the deduction, the contribution must be
of an undivided portion of the donor's entire interest in the
property.\92\ For purposes of the charitable income tax
deduction, the copyright and the work in which the copyright
is embodied are not treated as separate property interests.
Accordingly, if a donor owns a work of art and the copyright
to the work of art, a gift of the artwork without the
copyright or the copyright without the artwork will
constitute a gift of a ``partial interest'' and will not
qualify for the income tax charitable deduction.
---------------------------------------------------------------------------
\92\Sec. 170(f)(3).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

The provision provides that a deduction for ``qualified
artistic charitable contributions'' generally is increased
from the value under present law (generally, basis) to the
fair market value of the property contributed, measured at
the time of the contribution. However, the amount of the
increase of the deduction provided by the provision may not
exceed the amount of the donor's adjusted gross income for
the taxable year attributable to: (1) income from the sale or
use of property created by the personal efforts of the donor
that is of the same type as the donated property; and (2)
income from teaching, lecturing, performing, or similar
activities with respect to such property. In addition, the
increase to the present-law deduction provided by the
provision may not be carried over and deducted in other
taxable years.
The provision defines a qualified artistic charitable
contribution to mean a charitable contribution of any
literary, musical, artistic, or scholarly composition, or
similar property, or the copyright thereon (or both) that
meets certain requirements. First, the contributed property
must have been created by the personal efforts of the donor
at least 18 months prior to the date of contribution. Second,
the donor must obtain a qualified appraisal of the
contributed property, a copy of which is required to be
attached to the donor's income tax return for the taxable
year in which such contribution is made. The appraisal must
include evidence of the extent (if any) to which property
created by the personal efforts of the taxpayer and of the
same type as the donated property is or has been owned,
maintained, and displayed by certain charitable organizations
and sold to or exchanged by persons other than the taxpayer,

[[Page 7408]]

donee, or any related person. Third, the contribution must be
made to a public charity or to certain limited types of
private foundations (i.e., an organization described in
section 170(b)(1)(A)). Finally, the use of donated property
by the recipient organization must be related to the
organization's charitable purpose or function, and the donor
must receive a written statement from the organization
verifying such use.
Under the provision, the tangible property and the
copyright on such property are treated as separate properties
for purposes of the ``partial interest'' rule; thus, a gift
of artwork without the copyright or a copyright without the
artwork does not constitute a gift of a partial interest and
is deductible. Contributions of letters, memoranda, or
similar property that are written, prepared, or produced by
or for an individual while the individual is an officer or
employee of any person (including a government agency or
instrumentality) do not qualify for a fair market value
deduction unless the contributed property is entirely
personal.
Effective date.--The deduction for qualified artistic
charitable contributions applies to contributions made after
December 31, 2005, and before January 1, 2008.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
9. Mileage reimbursements to charitable volunteers excluded
from gross income (sec. 209 of the Senate amendment and
new sec. 139B of the Code)

Present Law

In general, an itemized deduction is permitted for
charitable contributions, subject to certain limitations that
depend on the type of taxpayer, the property contributed, and
the donee organization. Unreimbursed out-of-pocket
expenditures made incident to providing donated services to a
qualified charitable organization--such as out-of-pocket
transportation expenses necessarily incurred in performing
donated services--may qualify as a charitable
contribution.\93\ No charitable contribution deduction is
allowed for traveling expenses (including expenses for meals
and lodging) while away from home, whether paid directly or
by reimbursement, unless there is no significant element of
personal pleasure, recreation, or vacation in such
travel.\94\
---------------------------------------------------------------------------
\93\Treas. Reg. sec. 1.170A-1(g).
\94\Sec. 170(j).
---------------------------------------------------------------------------
In determining the amount treated as a charitable
contribution where a taxpayer operates a vehicle to provide
donated services to a charity, the taxpayer either may deduct
actual out-of-pocket expenditures or, in the case of a
passenger automobile, may use the charitable standard mileage
rate. The charitable standard mileage rate is set by statute
at 14 cents per mile.\95\ The taxpayer may also deduct (under
either computation method), any parking fees and tolls
incurred in rendering the services, but may not deduct any
amount (regardless of the computation method used) for
general repair or maintenance expenses, depreciation,
insurance, registration fees, etc. Regardless of the
computation method used, the taxpayer must keep reliable
written records of expenses incurred. For example, where a
taxpayer uses the charitable standard mileage rate to
determine a deduction, the IRS has stated that the taxpayer
generally must maintain records of miles driven, time, place
(or use), and purpose of the mileage. If the charitable
standard mileage rate is not used to determine the deduction,
the taxpayer generally must maintain reliable written records
of actual expenses incurred.
---------------------------------------------------------------------------
\95\Sec. 170(i).
---------------------------------------------------------------------------
In lieu of actual operating expenses, an optional standard
mileage rate may be used in computing the deductible costs of
business use of an automobile. The business standard mileage
rate is determined by the IRS and updated periodically. For
business use occurring on or after January 1, 2006, the
business standard mileage rate specified by the IRS is 44.5
cents per mile.
The standard mileage rate for charitable purposes is lower
than the standard business rate because the charitable rate
covers only the out-of-pocket operating expenses (including
gasoline and oil) directly related to the use of the
automobile in performing the donated services that a taxpayer
may deduct as a charitable contribution. The charitable rate
does not include costs that are not deductible as a
charitable contribution such as general repair or maintenance
expenses, depreciation, insurance, and registration fees.
Such costs are, however, included in computing the business
standard mileage rate.
Volunteer drivers who are reimbursed for mileage expenses
have taxable income to the extent the reimbursement exceeds
deductible travel expenses. Employees who are reimbursed for
mileage expenses under a qualified arrangement that pays a
mileage allowance in lieu of reimbursing actual expenses
generally have taxable income to the extent the reimbursement
exceeds the amount of the business standard mileage rate
multiplied by the actual business miles.
Under section 6041, information reporting generally is
required with respect to payments of $600 or more in any
taxable year.
Under the Katrina Emergency Tax Relief Act of 2005,
reimbursement by an organization described in section 170(c)
(including public charities and private foundations) to a
volunteer for the costs of using a passenger automobile in
providing donated services to charity solely for the
provision of relief related to Hurricane Katrina is
excludable from the gross income of the volunteer up to an
amount that does not exceed the business standard mileage
rate prescribed for business use (as periodically adjusted),
provided that recordkeeping requirements applicable to
deductible business expenses are satisfied. The Katrina
Emergency Tax Relief Act of 2005 does not permit a volunteer
to claim a deduction or credit with respect to such amounts
excluded. The provision applies for purposes of use of a
passenger automobile during the period beginning on August
25, 2005, and ending on December 31, 2006.

House Bill

No provision.

Senate Amendment

The provision extends the provision enacted as part of the
Katrina Emergency Tax Relief Act of 2005. Under the
provision, reimbursement by an organization described in
section 170(c) (including public charities and private
foundations) to a volunteer for the costs of using a
passenger automobile in providing donated services to charity
is excludable from the gross income of the volunteer up to an
amount that does not exceed the business standard mileage
rate prescribed for business use (as periodically adjusted),
provided that recordkeeping requirements applicable to
deductible business expenses are satisfied. Unlike the
provision enacted as part of the Katrina Emergency Tax Relief
Act of 2005, the provision is not limited to use solely for
the provision of relief related to Hurricane Katrina. The
provision does not permit a volunteer to claim a deduction or
credit with respect to amounts excluded under the provision.
Information reporting required by section 6041 is not
required with respect to reimbursements excluded under the
provision.
Effective date.--The provision applies for taxable years
beginning after December 31, 2005, and beginning before
January 1, 2008.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
10. Alternative percentage limitation for corporate
charitable contributions to the mathematics and science
partnership program (sec. 210 of the Senate amendment and
sec. 170 of the Code)

Present Law

Under present law, a corporation is allowed to deduct
charitable contributions up to 10 percent of the
corporation's modified taxable income for the year. For this
purpose, taxable income is determined without regard to (1)
the charitable contributions deduction, (2) any net operating
loss carryback, (3) deductions for dividends received, and
(4) any capital loss carryback for the taxable year.\96\ Any
charitable contribution by a corporation that is not
currently deductible because of the percentage limitation may
be carried forward for up to five taxable years.
---------------------------------------------------------------------------
\96\Sec. 170(b)(2).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

Under the provision, the corporate percentage limitation is
applied separately to eligible mathematics and science
contributions and to all other charitable contributions. In
addition, the applicable percentage limitation for purposes
of eligible mathematics and science contributions is 15
percent; the applicable percentage limitation for all other
corporate charitable contributions remains 10 percent.
In general, an eligible mathematics and science
contribution is a charitable contribution (other than a
contribution of used equipment) to a qualified partnership
for the purpose of an activity described in section 2202(c)
of the Elementary and Secondary Education Act of 1965. Such
activities include, for example, creating opportunities for
enhanced and ongoing professional development of mathematics
and science teachers and promoting strong teaching skills for
mathematics and science teachers and teacher educators. A
qualified partnership is an eligible partnership within the
meaning of section 2201(b)(1) of the Elementary and Secondary
Education Act of 1965, but only to the extent that such
partnership does not include a person other than a person
described in section 170(b)(1)(A) (describing organizations
to which individuals may make charitable contributions
deductible up to 50 percent of such individual's contribution
base).
Effective date.--The provision applies for contributions
made in taxable years beginning after December 31, 2005, and
beginning before January 1, 2007.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.

[[Page 7409]]

B. Reforming Charitable Organizations

1. Tax involvement of accommodation parties in tax-shelter
transactions (Sec. 211 of the Senate amendment and secs.
6011, 6033, 6652, and new sec. 4965 of the Code)

Present Law

Disclosure of listed and other reportable transactions by
taxpayers
Present law provides that a taxpayer that participates in a
reportable transaction (including a listed transaction) and
that is required to file a tax return must attach to its
return a disclosure statement in the form prescribed by the
Secretary.\97\ For this purpose, the term taxpayer includes
any person, including an individual, trust, estate,
partnership, association, company, or corporation.\98\
---------------------------------------------------------------------------
\97\Treas. Reg. sec. 1.6011-4(a).
\98\Sec. 7701(a)(1); Treas. Reg. sec. 1.6011-4(c)(1).
---------------------------------------------------------------------------
Under present Treasury regulations, a reportable
transaction includes a listed transaction and five other
categories of transactions: (1) confidential transactions,
which are transactions offered to a taxpayer under conditions
of confidentiality and for which the taxpayer has paid an
advisor a minimum fee; (2) transactions with contractual
protection, which include transactions for which the taxpayer
or a related party has the right to a full or partial refund
of fees if all or part of the intended tax consequences from
the transaction are not sustained, or for which fees are
contingent on the taxpayer's realization of tax benefits from
the transaction; (3) loss transactions, which are
transactions resulting in the taxpayer claiming a loss under
section 165 that exceeds certain thresholds, depending upon
the type of taxpayer; (4) transactions with a significant
book-tax difference; and (5) transactions involving a brief
asset holding period.\99\ A listed transaction means a
reportable transaction which is the same as, or substantially
similar to, a transaction specifically identified by the
Secretary as a tax avoidance transaction for purposes of
section 6011 (relating to the filing of returns and
statements), and identified by notice, regulation, or other
form of published guidance as a listed transaction.\100\ The
fact that a transaction is a reportable transaction does not
affect the legal determination of whether the taxpayer's
treatment of the transaction is proper.\101\ Present law
authorizes the Secretary to define a reportable transaction
on the basis of such transaction being of a type which the
Secretary determines as having a potential for tax avoidance
or evasion.\102\
---------------------------------------------------------------------------
\99\Treas. Reg. sec. 1.6011-4(b). In Notice 2006-6 (January
6, 2006), the Service indicated that it was removing
transactions with a significant book-tax difference from the
categories of reportable transactions.
\100\Sec. 6707A(c)(2); Treas. Reg. sec. 1.6011-4(b)(2).
\101\Treas. Reg. sec. 1.6011-4(a).
\102\Sec. 6707A(c)(1).
---------------------------------------------------------------------------
Treasury regulations provide guidance regarding the
determination of when a taxpayer participates in a
transaction for these purposes.\103\ A taxpayer has
participated in a listed transaction if the taxpayer's tax
return reflects tax consequences or a tax strategy described
in the published guidance that lists the transaction, or if
the taxpayer knows or has reason to know that the taxpayer's
tax benefits are derived directly or indirectly from tax
consequences of a tax strategy described in published
guidance that lists a transaction. A taxpayer has
participated in a confidential transaction if the taxpayer's
tax return reflects a tax benefit from the transaction and
the taxpayer's disclosure of the tax treatment or tax
structure of the transaction is limited under conditions of
confidentiality. A taxpayer has participated in a transaction
with contractual protection if the taxpayer's tax return
reflects a tax benefit from the transaction, and the taxpayer
has the right to the full or partial refund of fees or the
fees are contingent.
---------------------------------------------------------------------------
\103\Treas. Reg. sec. 1.6011-4(c)(3).
---------------------------------------------------------------------------
Present law provides a penalty for any person who fails to
include on any return or statement any required information
with respect to a reportable transaction.\104\ The penalty
applies without regard to whether the transaction ultimately
results in an understatement of tax, and applies in addition
to any other penalty that may be imposed.
---------------------------------------------------------------------------
\104\Sec. 6707A.
---------------------------------------------------------------------------
The penalty for failing to disclose a reportable
transaction is $10,000 in the case of a natural person and
$50,000 in any other case. The amount is increased to
$100,000 and $200,000, respectively, if the failure is with
respect to a listed transaction. The penalty cannot be waived
with respect to a listed transaction. As to reportable
transactions, the IRS Commissioner may rescind all or a
portion of the penalty if rescission would promote compliance
with the tax laws and effective tax administration.
Disclosure of listed and other reportable transactions by
material advisors
Present law requires each material advisor with respect to
any reportable transaction (including any listed transaction)
to timely file an information return with the Secretary (in
such form and manner as the Secretary may prescribe).\105\
The information return must include (1) information
identifying and describing the transaction, (2) information
describing any potential tax benefits expected to result from
the transaction, and (3) such other information as the
Secretary may prescribe. The return must be filed by the date
specified by the Secretary.
---------------------------------------------------------------------------
\105\Sec. 6707(a), as added by the American Jobs Creation Act
of 2004, Pub. L. No. 108-357, sec. 816(a).
---------------------------------------------------------------------------
A ``material advisor'' means any person (1) who provides
material aid, assistance, or advice with respect to
organizing, managing, promoting, selling, implementing,
insuring, or carrying out any reportable transaction, and (2)
who directly or indirectly derives gross income in excess of
$250,000 ($50,000 in the case of a reportable transaction
substantially all of the tax benefits from which are provided
to natural persons) or such other amount as may be prescribed
by the Secretary for such advice or assistance.\106\
---------------------------------------------------------------------------
\106\Sec. 6707(b)(1).
---------------------------------------------------------------------------
The Secretary may prescribe regulations which provide (1)
that only one material advisor is required to file an
information return in cases in which two or more material
advisors would otherwise be required to file information
returns with respect to a particular reportable transaction,
(2) exemptions from the requirements of this section, and (3)
other rules as may be necessary or appropriate to carry out
the purposes of this section.\107\
---------------------------------------------------------------------------
\107\Sec. 6707(c).
---------------------------------------------------------------------------
Present law imposes a penalty on any material advisor who
fails to timely file an information return, or who files a
false or incomplete information return, with respect to a
reportable transaction (including a listed transaction).\108\
The amount of the penalty is $50,000. If the penalty is with
respect to a listed transaction, the amount of the penalty is
increased to the greater of (1) $200,000, or (2) 50 percent
of the gross income derived by such person with respect to
aid, assistance, or advice which is provided with respect to
the transaction before the date the information return that
includes the transaction is filed. An intentional failure or
act by a material advisor with respect to the requirement to
disclose a listed transaction increases the penalty to 75
percent of the gross income derived from the transaction.
---------------------------------------------------------------------------
\108\Sec. 6707(b).
---------------------------------------------------------------------------
The penalty cannot be waived with respect to a listed
transaction. As to reportable transactions, the IRS
Commissioner can rescind all or a portion of the penalty if
rescission would promote compliance with the tax laws and
effective tax administration.

House Bill

No provision.

Senate Amendment

In general
In general, under the provision, certain tax-exempt
entities are subject to penalties for being a party to a
prohibited tax shelter transaction. A prohibited tax shelter
transaction is a transaction that the Secretary determines is
a listed transaction (as defined in section 6707A(c)(2)) or a
prohibited transaction. A prohibited reportable transaction
is a confidential transaction or a transaction with
contractual protection (as defined by the Secretary in
regulations) which is a reportable transaction as defined in
sec. 6707A(c)(1). Under the provision, a tax-exempt entity is
an entity that is described in section 501(c), 501(d), or
170(c) (not including the United States), Indian tribal
governments, and tax qualified pension plans, individual
retirement arrangements (``IRAs''), and similar tax-favored
savings arrangements (such as Coverdell education savings
accounts, health savings accounts, and qualified tuition
plans).
Entity level tax
Under the provision, if a tax-exempt entity is a party at
any time to a transaction during a taxable year and knows or
has reason to know that the transaction is a prohibited tax
shelter transaction, the entity is subject to a tax for such
year equal to the greater of (1) 100 percent of the entity's
net income (after taking into account any tax imposed with
respect to the transaction) for such year that is
attributable to the transaction or (2) 75 percent of the
proceeds received by the entity that are attributable to the
transaction.
In addition, if a transaction is not a listed transaction
at the time a tax-exempt entity enters into the transaction
(and is not otherwise a prohibited tax shelter transaction),
but the transaction subsequently is determined by the
Secretary to be a listed transaction (a ``subsequently listed
transaction''), the entity must pay each taxable year an
excise tax at the highest unrelated business taxable income
rate times the greater of (1) the entity's net income (after
taking into account any tax imposed) that is attributable to
the subsequently listed transaction and that is properly
allocable to the period beginning on the later of the date
such transaction is listed by the Secretary or the first day
of the taxable year or (2) 75 percent of the proceeds
received by the entity that are attributable to the
subsequently listed transaction and that are properly
allocable to the period beginning on the later of the date
such transaction is listed by the Secretary or the first day
of the taxable year. The Secretary has the authority to
promulgate regulations that provide guidance regarding the
determination of the allocation of net income of a tax-exempt
entity that is attributable to a transaction to various
periods, including before and after the listing of

[[Page 7410]]

the transaction or the date which is 90 days after the date
of enactment of the provision.
The entity level tax does not apply if the entity's
participation is not willful and is due to reasonable cause,
except that the willful and reasonable cause exception does
not apply to the tax imposed for subsequently listed
transactions. The entity level taxes do not apply to tax
qualified pension plans, IRAs, and similar tax-favored
savings arrangements (such as Coverdell education savings
accounts, health savings accounts, and qualified tuition
plans).
Disclosure of participation in prohibited tax shelter
transactions
The provision requires that a taxable party to a prohibited
tax shelter transaction disclose to the tax-exempt entity
that the transaction is a prohibited tax shelter transaction.
Failure to make such disclosure is subject to the present-law
penalty for failure to include reportable transaction
information under section 6707A. Thus, the penalty is $10,000
in the case of a natural person or $50,000 in any other case,
except that if the transaction is a listed transaction, the
penalty is $100,000 in the case of a natural person and
$200,000 in any other case.\109\
---------------------------------------------------------------------------
\109\The IRS Commissioner may rescind all or any portion of
any such penalty if the violation is with respect to a
prohibited tax shelter transaction other than a listed
transaction and doing so would promote compliance with the
requirements of the Code and effective tax administration.
See sec. 6707A(d).
---------------------------------------------------------------------------
The provision requires disclosure by a tax-exempt entity to
the IRS of each participation in a prohibited tax shelter
transaction and disclosure of other known parties to the
transaction. The penalty for failure to disclose is imposed
on the entity (or entity manager, in the case of qualified
pension plans and similar tax favored retirement
arrangements) at $100 per day the failure continues, not to
exceed $50,000. If any person fails to comply with a demand
on the tax-exempt entity by the Secretary for disclosure,
such person or persons shall pay a penalty of $100 per day
(beginning on the date of the failure to comply) not to
exceed $10,000 per prohibited tax shelter transaction. As
under present-law section 6652, no penalty is imposed with
respect to any failure if it is shown that the failure is due
to reasonable cause.
Penalty on entity managers
A tax of $20,000 is imposed on an entity manager that
approves or otherwise causes a tax-exempt entity to be a
party to a prohibited tax shelter transaction at any time
during the taxable year, knowing or with reason to know that
the transaction is a prohibited tax shelter transaction. An
entity manager is defined as a person with authority or
responsibility similar to that exercised by an officer,
director, or trustee of an organization, except: (1) in the
case of an entity described in section 501(c)(3) or (c)(4)
(other than a private foundation), an entity manager is an
organization manager as defined in section 4958(f)(2); and
(2) in the case of a private foundation, an entity manager is
a foundation manager as defined in section 4946(b). The
reasonable cause (or no willful participation) exception
applies to this tax.
Effective date.--The provision generally is effective for
transactions after the date of enactment, except that no tax
applies with respect to income that is properly allocable to
any period on or before the date that is 90 days after the
date of enactment. The disclosure provisions apply to
disclosures the due date for which are after the date of
enactment.

Conference Agreement

The conference agreement includes the Senate amendment
provision, with modifications.
The conference agreement does not include the provision
that the entity level or entity manager tax does not apply if
the entity's participation is not willful and is due to
reasonable cause.
In addition, the conference agreement adds a tax in the
event that a tax-exempt entity becomes a party to a
prohibited tax shelter transaction without knowing or having
reason to know that the transaction is a prohibited tax
shelter transaction. In that case, the tax-exempt entity is
subject to a tax in the taxable year the entity becomes a
party and any subsequent taxable year of the highest
unrelated business taxable income rate times the greater of
(1) the entity's net income (after taking into account any
tax imposed with respect to the transaction) for such year
that is attributable to the transaction or (2) 75 percent of
the proceeds received by the entity that are attributable to
the transaction for such year.\110\
---------------------------------------------------------------------------
\110\The conference agreement clarifies that in all cases the
75 percent of proceeds received by the entity that are
attributable to the transaction are with respect to the
taxable year.
---------------------------------------------------------------------------
The conference agreement clarifies that the entity level
tax rate that applies if the entity knows or has reason to
know that a transaction is a prohibited tax shelter
transaction does not apply to subsequently listed
transactions.
The conference agreement modifies the definition of an
entity manager to provide that: (1) in the case of tax
qualified pension plans, IRAs, and similar tax-favored
savings arrangements (such as Coverdell education savings
accounts, health savings accounts, and qualified tuition
plans) an entity manager is the person that approves or
otherwise causes the entity to be a party to a prohibited tax
shelter transaction, and (2) in all other cases the entity
manager is the person with authority or responsibility
similar to that exercised by an officer, director, or trustee
of an organization, and with respect to any act, the person
having authority or responsibility with respect to such act.
In the case of a qualified pension plan, IRA, or similar
tax-favored savings arrangement (such as a Coverdell
education savings account, health savings account, or
qualified tuition plan), the conferees intend that, in
general, a person who decides that assets of the plan, IRA,
or other savings arrangement are to be invested in a
prohibited tax shelter transaction is the entity manager
under the provision. Except in the case of a fully self-
directed plan or other savings arrangement with respect to
which a participant or beneficiary decides to invest in the
prohibited tax shelter transaction, a participant or
beneficiary generally is not an entity manager under the
provision. Thus, for example, a participant or beneficiary is
not an entity manager merely by reason of choosing among pre-
selected investment options (as is typically the case if a
qualified retirement plan provides for participant-directed
investments).\111\ Similarly, if an individual has an IRA and
may choose among various mutual funds offered by the IRA
trustee, but has no control over the investments held in the
mutual funds, the individual is not an entity manager under
the provision.
---------------------------------------------------------------------------
\111\Depending on the circumstances, the person who is
responsible for determining the pre-selected investment
options may be an entity manager under the provision.
---------------------------------------------------------------------------
Under the provision, certain taxes are imposed if the
entity or entity manager knows or has reason to know that a
transaction is a prohibited tax shelter transaction. In
general, the conferees intend that in order for an entity or
entity manager to have reason to know that a transaction is a
prohibited tax shelter transaction, the entity or entity
manager must have knowledge of sufficient facts that would
lead a reasonable person to conclude that the transaction is
a prohibited tax shelter transaction. If there is justifiable
reliance on a reasoned written opinion of legal counsel
(including in-house counsel) or of an independent accountant
with expertise in tax matters, after making full disclosure
of relevant facts about a transaction to such counsel or
accountant, that a transaction is not a prohibited tax
shelter transaction, then absent knowledge of facts not
considered in the reasoned written opinion that would lead a
reasonable person to conclude that the transaction is a
prohibited tax shelter transaction, the reason to know
standard is not met.
Not obtaining a reasoned written opinion of legal counsel
does not alone indicate whether a person has reason to know.
However, if a transaction is extraordinary for the entity,
promises a return for the organization that is exceptional
considering the amount invested by, the participation of, or
the absence of risk to the organization, or the transaction
is of significant size, either in an absolute sense or
relative to the receipts of the entity, then, in general, the
presence of such factors may indicate that the entity or
entity manager has a responsibility to inquire further about
whether a transaction is a prohibited tax shelter
transaction, or, absent such inquiry, that the reason to know
standard is satisfied. For example, if a tax-exempt entity's
investment in a transaction is $1,000, and the entity is
promised or expects to receive $10,000 in the near term, in
general, the rate of return would be considered exceptional
and the entity should make inquiries with respect to the
transaction. As another example, if a tax-exempt entity's
expected income from a transaction is greater than five
percent of the entity's annual receipts, or is in excess of
$1,000,000, and the entity fails to make appropriate
inquiries with respect to its participation in such
transaction, such failure is a factor tending to show that
the reason to know standard is met. Appropriate inquiries
need not involve obtaining a reasoned written opinion. In
general, if a transaction does not present the factors
described above and the organization is small (measured by
receipts and assets) and described in section 501(c)(3), it
is expected that the reason to know standard will not be met.
In general, the conferees intend that in determining
whether a tax-exempt entity is a ``party'' to a prohibited
tax shelter transaction all the facts and circumstances
should be taken into account. Absence of a written agreement
is not determinative. Certain indirect involvement in a
prohibited tax shelter transaction would not result in an
entity being considered a party to the transaction. For
example, investment by a tax-exempt entity in a mutual fund
that in turn invests in or participates in a prohibited tax
shelter transaction does not, in general, make the tax-exempt
entity a party to such transaction, absent facts or
circumstances that indicate that the purpose of the tax
exempt entity's investment in the mutual fund was
specifically to participate in such a transaction. However,
whether a tax-exempt entity is a party to such a transaction
will be informed by whether the entity or entity manager knew
or had reason to know that an investment of the entity would
be used in a

[[Page 7411]]

prohibited tax shelter transaction. Presence of such
knowledge or reason to know may indicate that the purpose of
the investment was to participate in the prohibited tax
shelter transaction and that the tax-exempt entity is a party
to such transaction.
The conference agreement clarifies that a subsequently
listed transaction means any transaction to which a tax-
exempt entity is a party and which is determined by the
Secretary to be a listed transaction at any time after the
entity has ``become a party to'' the transaction, and not, as
under the Senate amendment, when the entity ``entered into''
the transaction. The conference agreement provides that a
subsequently listed transaction does not include a
transaction that is a prohibited reportable transaction. The
conference agreement provides that the Secretary has the
authority to allocate proceeds as well as income of a tax-
exempt entity to various periods. The conference agreement
also provides that the disclosure by tax-exempt entities to
the Internal Revenue Service required under the provision is
based on an entity's being a party to a prohibited tax
shelter transaction and not, as under the Senate amendment,
on an entity's ``participation'' in a prohibited tax shelter
transaction. The conference agreement further provides that
the Secretary may make a demand for disclosure on any entity
manager subject to the tax, as well as on any tax exempt
entity, and also provides that such managers and entities and
not, as under the Senate amendment, ``persons'' are subject
to the penalty for failure to comply with the demand.
Effective date.--In general, the provision is effective for
taxable years ending after the date of enactment, with
respect to transactions before, on, or after such date,
except that no tax shall apply with respect to income or
proceeds that are properly allocable to any period ending on
or before the date that is 90 days after the date of
enactment. The tax on certain knowing transactions does not
apply to any prohibited tax shelter transaction to which a
tax-exempt entity became a party on or before the date of
enactment. The disclosure provisions apply to disclosures the
due date for which are after the date of enactment.
2. Apply an excise tax to acquisitions of interests in
insurance contracts in which certain exempt organizations
hold interests (sec. 212 of the Senate amendment and new
secs. 4966 and 6050V of the Code)

Present Law

Amounts received under a life insurance contract
Amounts received under a life insurance contract paid by
reason of the death of the insured are not includible in
gross income for Federal tax purposes.\112\ No Federal income
tax generally is imposed on a policyholder with respect to
the earnings under a life insurance contract (inside
buildup).\113\
---------------------------------------------------------------------------
\112\Sec. 101(a).
\113\This favorable tax treatment is available only if a life
insurance contract meets certain requirements designed to
limit the investment character of the contract. Sec. 7702.
---------------------------------------------------------------------------
Distributions from a life insurance contract (other than a
modified endowment contract) that are made prior to the death
of the insured generally are includible in income to the
extent that the amounts distributed exceed the taxpayer's
investment in the contract (i.e., basis). Such distributions
generally are treated first as a tax-free recovery of basis,
and then as income.\114\
---------------------------------------------------------------------------
\114\Sec. 72(e). In the case of a modified endowment
contract, however, in general, distributions are treated as
income first, loans are treated as distributions (i.e.,
income rather than basis recovery first), and an additional
10-percent tax is imposed on the income portion of
distributions made before age 59\1/2\ and in certain other
circumstances. Secs. 72(e) and (v). A modified endowment
contract is a life insurance contract that does not meet a
statutory ``7-pay'' test, i.e., generally is funded more
rapidly than seven annual level premiums. Sec. 7702A.
---------------------------------------------------------------------------
Transfers for value
A limitation on the exclusion for amounts received under a
life insurance contract is provided in the case of transfers
for value. If a life insurance contract (or an interest in
the contract) is transferred for valuable consideration, the
amount excluded from income by reason of the death of the
insured is limited to the actual value of the consideration
plus the premiums and other amounts subsequently paid by the
acquiror of the contract.\115\
---------------------------------------------------------------------------
\115\Section 101(a)(2). The transfer-for-value rule does not
apply, however, in the case of a transfer in which the life
insurance contract (or interest in the contract) transferred
has a basis in the hands of the transferee that is determined
by reference to the transferor's basis. Similarly, the
transfer-for-value rule generally does not apply if the
transfer is between certain parties (specifically, if the
transfer is to the insured, a partner of the insured, a
partnership in which the insured is a partner, or a
corporation in which the insured is a shareholder or
officer).
---------------------------------------------------------------------------
Tax treatment of charitable organizations and donors
Present law generally provides tax-exempt status for
charitable, educational and certain other organizations, no
part of the net earnings of which inures to the benefit of
any private shareholder or individual, and which meet certain
other requirements.\116\ Governmental entities, including
some educational organizations, are exempt from tax on income
under other tax rules providing that gross income does not
include income derived from the exercise of any essential
governmental function and accruing to a State or any
political subdivision thereof.\117\
---------------------------------------------------------------------------
\116\Section 501(c)(3).
\117\Section 115.
---------------------------------------------------------------------------
In computing taxable income, a taxpayer who itemizes
deductions generally is allowed to deduct the amount of cash
and the fair market value of property contributed to an
organization described in section 501(c)(3) or to a Federal,
State, or local governmental entity for exclusively public
purposes.\118\
---------------------------------------------------------------------------
\118\Section 170.
---------------------------------------------------------------------------
State-law insurable interest rules
State laws generally provide that the owner of a life
insurance contract must have an insurable interest in the
insured person when the life insurance contract is issued.
State laws vary as to the insurable interest of a charitable
organization in the life of any individual. Some State laws
provide that a charitable organization meeting the
requirements of section 501(c)(3) of the Code is treated as
having an insurable interest in the life of any donor,\119\
or, in other States, in the life of any individual who
consents (whether or not the individual is a donor).\120\
Other States' insurable interest rules permit the purchase of
a life insurance contract even though the person paying the
consideration has no insurable interest in the life of the
person insured if a charitable, benevolent, educational or
religious institution is designated irrevocably as the
beneficiary.\121\
---------------------------------------------------------------------------
\119\See, e.g., Mass. Gen. Laws Ann. ch. 175, sec. 123A(2)
(West 2005); Iowa Code Ann. sec. 511.39 (West 2004) (``a
person who, when purchasing a life insurance policy, makes a
donation to the charitable organization or makes the
charitable organization the beneficiary of all or a part of
the proceeds of the policy . . . ).
\120\See, e.g., Cal. Ins. Code sec. 10110.1(f) (West 2005);
40 Pa. Cons. Stat. Ann. sec. 40-512 (2004); Fla. Stat. Ann.
sec. 27.404 (2) (2004); Mich. Comp. Laws Ann. sec. 500.2212
(West 2004).
\121\Or. Rev. Stat. sec. 743.030 (2003); Del. Code Ann. Tit.
18, sec. 2705(a) (2004).
---------------------------------------------------------------------------
Transactions involving charities and non-charities acquiring
life insurance
Recently, there has been an increase in transactions
involving the acquisition of life insurance contracts using
arrangements in which both exempt organizations, primarily
charities, and private investors have an interest in the
contract.\122\ The exempt organization has an insurable
interest in the insured individuals, either because they are
donors, because they consent, or otherwise under applicable
State insurable interest rules. Private investors provide
capital used to fund the purchase of the life insurance
contracts, sometimes together with annuity contracts. Both
the private investors and the charity have an interest in the
contracts, directly or indirectly, through the use of trusts,
partnerships, or other arrangements for sharing the rights to
the contracts. Both the charity and the private investors
receive cash amounts in connection with the investment in the
contracts while the life insurance is in force or as the
insured individuals die.
---------------------------------------------------------------------------
\122\Davis, Wendy, ``Death-Pool Donations,'' Trusts and
Estates, May 2004, 55; Francis, Theo, ``Tax May Thwart
Investment Plans Enlisting Charities,'' Wall St. J., Feb. 8,
2005, A-10.
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

The provision imposes an excise tax, equal to 100 percent
of the acquisition costs, on the taxable acquisition of any
interest in an applicable insurance contract. An applicable
insurance contract is any life insurance, annuity or
endowment contract in which both an applicable exempt
organization and any person that is not an applicable exempt
organization have, directly or indirectly, held an interest
in the contract (whether or not the interests are held at the
same time).
An applicable exempt organization is any organization
described in section 170(c), 168(h)(2)(A)(iv), 2055(a), or
2522(a). Thus, for example, an applicable exempt organization
generally includes an organization that is exempt from
Federal income tax by reason of being described in section
501(c)(3) (including one organized outside the United
States), a government or political subdivision of a
government, and an Indian tribal government.
A taxable acquisition is the acquisition of any direct or
indirect interest in an applicable insurance contract by an
applicable exempt organization, or by any other person if the
interest in the contract in that person's hands is not
described in the specific exceptions to ``applicable
insurance contract.''
Under the provision, acquisition costs mean the direct or
indirect costs (including premiums, commissions, fees,
charges, or other amounts) of acquiring or maintaining an
interest in an applicable insurance contract. Except as
provided in regulations, if acquisition costs of any taxable
acquisition are paid or incurred in more than one calendar
year, the excise tax under the provision is imposed each time
such costs are paid or incurred. In the case of an
acquisition of an interest in an entity that directly or
indirectly holds an interest in an applicable insurance
contract, acquisition costs are intended to include the
amount of money or value of property (including an applicable
insurance contract) contributed to an entity or

[[Page 7412]]

otherwise transferred or paid to acquire or increase an
interest in the entity, that directly or indirectly holds an
interest in an applicable insurance contract.
For example, acquisition costs include (1) each premium,
commission, or fee with respect to the contract, (2) each
amount paid or incurred to acquire or increase an interest in
the contract, (3) each amount paid or incurred to acquire or
increase an interest in an entity (such as a partnership,
trust, corporation, or other type of entity or arrangement)
that has a direct or indirect interest in the contract, and
(4) if the contract is contributed to an entity, the greater
of the value of the contract or the total amount of premiums,
commissions, and fees paid or incurred to acquire and
maintain the insurance contract. It is intended that, under
regulatory authority provided as necessary to carry out the
purposes of the provision, any other similar or economically
equivalent amount paid or incurred is to be treated as
acquisition costs.
Under the provision, an interest in an applicable insurance
contract includes any right with respect to the contract,
whether as an owner, beneficiary, or otherwise. An indirect
interest in a contract includes an interest in an entity
that, directly or indirectly, holds an interest in the
contract. In the case of a section 1035 exchange of an
applicable insurance contract, any interest in any of the
contracts involved in the exchange is treated as an interest
in all such contracts. An increase in an interest in an
applicable insurance contract is treated as a separate
acquisition, for purposes of application of the excise tax
under the provision.
If an interest of an applicable exempt organization exists
solely because the organization holds, as part of a
diversified investment strategy, a de minimis interest in an
entity which directly or indirectly holds an interest in the
contract, such interest is not taken into account for
purposes of the provision. For example, if an applicable
exempt organization owns a de minimis amount of stock in a
corporation which in turn owns life insurance contracts
covering key employees, the excise tax under the provision
does not apply because the stock ownership is not treated as
an indirect interest in this circumstance. It is intended
that Treasury regulations provide guidance as to the
application of this rule so that it does not permit
circumvention of the provision.
Except as provided in regulations, if a person acquires an
interest in a contract before the contract is treated as an
applicable insurance contract, the acquisition is treated as
a taxable acquisition of an interest in applicable insurance
contract as of the date the contract becomes an applicable
insurance contract.
It is intended that an interest in an applicable insurance
contract includes, for example, (1) a right with respect to
the applicable insurance contract pursuant to a side contract
or other similar arrangement, (2) an interest as a trust
beneficiary in distributions from or income of a trust
holding an interest in a contract, and (3) a right to
distributions, guaranteed payments, or income of a
partnership that holds an interest in a contract. It is not
intended that a right with respect to the contract include
typical rights of issuers of applicable insurance contracts.
Exceptions to the term ``applicable insurance contract''
apply under the provision. First, the term does not apply if
each person (other than an applicable exempt organization)
with a direct or indirect interest in the contract has an
insurable interest in the insured independent of any interest
of the exempt organization in the contract. Second, the term
does not apply if the sole interest in the contract of each
person other than the applicable exempt organization is as a
named beneficiary. Third, the term does not apply if the sole
interest in the contract of each person other than the
applicable exempt organization is either (1) as a beneficiary
of a trust holding an interest in the contract, but only if
the person's designation as such a beneficiary was made
without consideration and solely on a purely gratuitous
basis, or (2) as a trustee who holds an interest in the
contract in a fiduciary capacity solely for the benefit of
applicable exempt organizations or of persons otherwise
meeting one of the first two exceptions.
An exception to the term ``applicable insurance contract''
also is provided under the provision in certain cases in
which a person other than an applicable exempt organization
has an interest solely as a lender\123\ with respect to the
contract, and the contract covers only one individual who is
an officer, director, or employee of the applicable exempt
organization with an interest in the contract, provided other
requirements are met. This exception applies only if the
number of insured persons under loans by such lenders with
respect to such contracts does not exceed the greater of: (1)
the lesser of five percent of the total officers, directors,
and employees of the organization or 20, or (2) five. Under
this exception, the aggregate amount of indebtedness with
respect to 1 or more contracts covering a single individual
may not exceed $50,000.
---------------------------------------------------------------------------
\123\For this purpose, an interest as a lender includes a
security interest in the insurance contract to which the loan
relates.
---------------------------------------------------------------------------
In addition, Treasury regulatory authority is provided to
except certain contracts from treatment as applicable
insurance contracts. Contracts may be excepted based on
specific factors including (1) whether the transaction is at
arms' length, (2) whether the economic benefits to the
applicable exempt organization substantially exceed the
economic benefits to all other persons with an interest in
the contract (determined without regard to whether, or the
extent to which, such organization has paid or contributed
with respect to the contract), and (3) the likelihood of
abuse.
The application of the exceptions can be illustrated as
follows. Assume that an individual acquires a life insurance
contract in which the individual is the insured person, and
the named beneficiaries are the individual's son and a
university that is an organization described in section
170(c). The contract is not an applicable insurance contract
because the first exception applies. That is, because both
the individual and his son have an insurable interest in the
individual, all persons holding any interest in the contract
(other than applicable exempt organizations) have an
insurable interest in the insured independent of any interest
of an applicable exempt organization in the contract. The
second exception also applies in this situation.
As another example, assume that the three named
beneficiaries are the insured's son, an unrelated friend, and
a charity. The contract is not an applicable insurance
contract because the second exception applies. That is, each
beneficiary's sole interest is as a named beneficiary. In
addition, the first exception also applies in this situation.
As a further example, assume that the insured individual
creates an irrevocable trust for the benefit of the insured's
descendants, and that the trustee of the trust uses trust
funds to purchase a life insurance policy on the insured's
life, and the trust is both the owner and beneficiary of the
insurance policy. The insured individual's naming of his or
her descendants as trust beneficiaries is a gratuitous act,
done without consideration. As a result, the contract is not
an applicable insurance contract under the third exception.
No Federal income tax deduction is permitted for the excise
tax payable under the provision, as provided under the rule
of Code section 275(a)(6). The amount of the excise tax
payable under the provision is not included in the investment
in the contract for purposes of section 72.
Treasury regulatory authority is provided to carry out the
purposes of the provision. This includes authority to provide
appropriate rules in the case in which a person acquires an
interest before a contract is treated as an applicable
insurance contract. This also includes authority to prevent,
in cases the Treasury Secretary determines appropriate, the
imposition of more than one tax if the same interest is
acquired more than once (otherwise, the tax under the
provision applies to each acquisition). Treasury regulatory
authority is also provided to prevent avoidance of the
provision, including through the use of intermediaries.
The provision provides reporting rules requiring an
applicable exempt organization or other person that makes a
taxable acquisition of an applicable insurance contract to
file a return containing required information and such other
information as is prescribed by the Treasury Secretary. Under
these rules, a statement is required to be furnished to each
person whose taxpayer identification information is required
to be reported on the return. Penalties apply for failure to
file the return or furnish the statement, including, in the
case of intentional disregard of the return filing
requirement, a penalty equal to the amount of the excise tax
that has not been paid with respect to the items required to
be included on the return.
Effective date.--The provision is effective for contracts
issued after May 3, 2005.
The application of the effective date with respect to prior
acquisitions of interests may be illustrated as follows.
Assume that an exempt organization and a person that is not
an exempt organization described in section 170(c) form a
partnership before May 3, 2005. After May 3, 2005, the
partnership acquires an interest in a life insurance contract
that is issued after May 3, 2005. The acquisition by the
partnership of the interest in the contract is treated as a
taxable acquisition under the provision by each of the
partners (i.e., the exempt organization and the other
person).
The provision also requires reporting of existing life
insurance, endowment and annuity contracts issued on or
before that date, in which an applicable exempt organization
holds an interest on that date and which would be treated as
an applicable insurance contract under the provision. This
reporting is required within one year after the date of
enactment.

conference agreement

The conference agreement does not include the Senate
amendment provision.

[[Page 7413]]

3. Increase the amounts of excise taxes imposed on public
charities, social welfare organizations, and private
foundations (sec. 213 of the Senate amendment and secs.
4941, 4942, 4943, 4944, 4945, and 4958 of the Code)

present law

Public charities and social welfare organizations
The Code imposes excise taxes on excess benefit
transactions between disqualified persons (as defined in
section 4958(f)) and charitable organizations (other than
private foundations) or social welfare organizations (as
described in section 501(c)(4)).\124\An excess benefit
transaction generally is a transaction in which an economic
benefit is provided by a charitable or social welfare
organization directly or indirectly to or for the use of a
disqualified person, if the value of the economic benefit
provided exceeds the value of the consideration (including
the performance of services) received for providing such
benefit.
---------------------------------------------------------------------------
\124\Sec. 4958. The excess benefit transaction tax is
commonly referred to as ``intermediate sanctions,'' because
it imposes penalties generally considered to be less punitive
than revocation of the organization's exempt status.
---------------------------------------------------------------------------
The excess benefit tax is imposed on the disqualified
person and, in certain cases, on the organization manager,
but is not imposed on the exempt organization. An initial tax
of 25 percent of the excess benefit amount is imposed on the
disqualified person that receives the excess benefit. An
additional tax on the disqualified person of 200 percent of
the excess benefit applies if the violation is not corrected.
A tax of 10 percent of the excess benefit (not to exceed
$10,000 with respect to any excess benefit transaction) is
imposed on an organization manager that knowingly
participated in the excess benefit transaction, if the
manager's participation was willful and not due to reasonable
cause, and if the initial tax was imposed on the disqualified
person.\125\If more than one person is liable for the tax on
disqualified persons or on management, all such persons are
jointly and severally liable for the tax.\126\
---------------------------------------------------------------------------
\125\Sec. 4958(d)(2). Taxes imposed may be abated if certain
conditions are met. Secs. 4961 and 4962.
\126\Sec. 4958(d)(1).
---------------------------------------------------------------------------
Private foundations
Self-dealing by private foundations
Excise taxes are imposed on acts of self-dealing between a
disqualified person (as defined in section 4946) and a
private foundation.\127\ In general, self-dealing
transactions are any direct or indirect: (1) sale or
exchange, or leasing, of property between a private
foundation and a disqualified person; (2) lending of money or
other extension of credit between a private foundation and a
disqualified person; (3) the furnishing of goods, services,
or facilities between a private foundation and a disqualified
person; (4) the payment of compensation (or payment or
reimbursement of expenses) by a private foundation to a
disqualified person; (5) the transfer to, or use by or for
the benefit of, a disqualified person of the income or assets
of the private foundation; and (6) certain payments of money
or property to a government official.\128\ Certain exceptions
apply.\129\
---------------------------------------------------------------------------
\127\Sec. 4941.
\128\Sec. 4941(d)(1).
\129\See sec. 4941(d)(2).
---------------------------------------------------------------------------
An initial tax of five percent of the amount involved with
respect to an act of self-dealing is imposed on any
disqualified person (other than a foundation manager acting
only as such) who participates in the act of self-dealing. If
such a tax is imposed, a 2.5-percent tax of the amount
involved is imposed on a foundation manager who participated
in the act of self-dealing knowing it was such an act (and
such participation was not willful and was due to reasonable
cause) up to $10,000 per act. Such initial taxes may not be
abated.\130\ Such initial taxes are imposed for each year in
the taxable period, which begins on the date the act of self-
dealing occurs and ends on the earliest of the date of
mailing of a notice of deficiency for the tax, the date on
which the tax is assessed, or the date on which correction of
the act of self-dealing is completed. A government official
(as defined in section 4946(c)) is subject to such initial
tax only if the official participates in the act of self-
dealing knowing it is such an act. If the act of self-dealing
is not corrected, a tax of 200 percent of the amount involved
is imposed on the disqualified person and a tax of 50 percent
of the amount involved (up to $10,000 per act) is imposed on
a foundation manager who refused to agree to correcting the
act of self-dealing. Such additional taxes are subject to
abatement.\131\
---------------------------------------------------------------------------
\130\Sec. 4962(b).
\131\Sec. 4961.
---------------------------------------------------------------------------
Tax on failure to distribute income
Private nonoperating foundations are required to pay out a
minimum amount each year as qualifying distributions. In
general, a qualifying distribution is an amount paid to
accomplish one or more of the organization's exempt purposes,
including reasonable and necessary administrative
expenses.\132\ Failure to pay out the minimum results in an
initial excise tax on the foundation of 15 percent of the
undistributed amount. An additional tax of 100 percent of the
undistributed amount applies if an initial tax is imposed and
the required distributions have not been made by the end of
the applicable taxable period.\133\ A foundation may include
as a qualifying distribution the salaries, occupancy
expenses, travel costs, and other reasonable and necessary
administrative expenses that the foundation incurs in
operating a grant program. A qualifying distribution also
includes any amount paid to acquire an asset used (or held
for use) directly in carrying out one or more of the
organization's exempt purposes and certain amounts set-aside
for exempt purposes.\134\ Private operating foundations are
not subject to the payout requirements.
---------------------------------------------------------------------------
\132\Sec. 4942(g)(1)(A).
\133\Sec. 4942(a) and (b). Taxes imposed may be abated if
certain conditions are met. Secs. 4961 and 4962.
\134\Sec. 4942(g)(1)(B) and 4942(g)(2). In general, an
organization is permitted to adjust the distributable amount
in those cases where distributions during the five preceding
years have exceeded the payout requirements. Sec. 4942(i).
---------------------------------------------------------------------------
Tax on excess business holdings
Private foundations are subject to tax on excess business
holdings.\135\ In general, a private foundation is permitted
to hold 20 percent of the voting stock in a corporation,
reduced by the amount of voting stock held by all
disqualified persons (as defined in section 4946). If it is
established that no disqualified person has effective control
of the corporation, a private foundation and disqualified
persons together may own up to 35 percent of the voting stock
of a corporation. A private foundation shall not be treated
as having excess business holdings in any corporation if it
owns (together with certain other related private
foundations) not more than two percent of the voting stock
and not more than two percent in value of all outstanding
shares of all classes of stock in that corporation. Similar
rules apply with respect to holdings in a partnership
(``profits interest'' is substituted for ``voting stock'' and
``capital interest'' for ``nonvoting stock'') and to other
unincorporated enterprises (by substituting ``beneficial
interest'' for ``voting stock''). Private foundations are not
permitted to have holdings in a proprietorship. Foundations
generally have a five-year period to dispose of excess
business holdings (acquired other than by purchase) without
being subject to tax.\136\ This five-year period may be
extended an additional five years in limited
circumstances.\137\
---------------------------------------------------------------------------
\135\Sec. 4943. Taxes imposed may be abated if certain
conditions are met. Secs. 4961 and 4962.
\136\Sec. 4943(c)(6).
\137\Sec. 4943(c)(7).
---------------------------------------------------------------------------
The initial tax is equal to five percent of the value of
the excess business holdings held during the foundation's
applicable taxable year. An additional tax is imposed if an
initial tax is imposed and at the close of the applicable
taxable period, the foundation continues to hold excess
business holdings. The amount of the additional tax is equal
to 200 percent of such holdings.
Tax on jeopardizing investments
Private foundations and foundation managers are subject to
tax on investments that jeopardize the foundation's
charitable purpose.\138\ In general, an initial tax of five
percent of the amount of the investment applies to the
foundation and to foundation managers who participated in the
making of the investment knowing that it jeopardized the
carrying out of the foundation's exempt purposes. The initial
tax on foundation managers may not exceed $5,000 per
investment. If the investment is not removed from jeopardy
(e.g., sold or otherwise disposed of), an additional tax of
25 percent of the amount of the investment is imposed on the
foundation and five percent of the amount of the investment
on a foundation manager who refused to agree to removing the
investment from jeopardy. The additional tax on foundation
managers may not exceed $10,000 per investment. An
investment, the primary purpose of which is to accomplish a
charitable purpose and no significant purpose of which is the
production of income or the appreciation of property, is not
considered a jeopardizing investment.\139\
---------------------------------------------------------------------------
\138\Sec. 4944. Taxes imposed may be abated if certain
conditions are met. Secs. 4961 and 4962.
\139\Sec. 4944(c).
---------------------------------------------------------------------------
Tax on taxable expenditures
Certain expenditures of private foundations are subject to
tax.\140\ In general, taxable expenditures are expenses: (1)
for lobbying; (2) to influence the outcome of a public
election or carry on a voter registration drive (unless
certain requirements are met); (3) as a grant to an
individual for travel, study, or similar purposes unless made
pursuant to procedures approved by the Secretary; (4) as a
grant to an organization that is not a public charity or
exempt operating foundation unless the foundation exercises
expenditure responsibility\141\ with respect to the grant; or
(5) for any non-charitable purpose. For each taxable
expenditure, a tax is

[[Page 7414]]

imposed on the foundation of 10 percent of the amount of the
expenditure, and an additional tax of 100 percent is imposed
on the foundation if the expenditure is not corrected. A tax
of 2.5 percent of the expenditure (up to $5,000) also is
imposed on a foundation manager who agrees to making a
taxable expenditure knowing that it is a taxable expenditure.
An additional tax of 50 percent of the amount of the
expenditure (up to $10,000) is imposed on a foundation
manager who refuses to agree to correction of such
expenditure.
---------------------------------------------------------------------------
\140\Sec. 4945. Taxes imposed may be abated if certain
conditions are met. Secs. 4961 and 4962.
\141\In general, expenditure responsibility requires that a
foundation make all reasonable efforts and establish
reasonable procedures to ensure that the grant is spent
solely for the purpose for which it was made, to obtain
reports from the grantee on the expenditure of the grant, and
to make reports to the Secretary regarding such expenditures.
Sec. 4945(h).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

Self-dealing and excess benefit transaction initial taxes and
dollar limitations
For acts of self-dealing other than the payment of
compensation by a private foundation to a disqualified
person, the provision increases the initial tax on the self-
dealer from five percent of the amount involved to 10 percent
of the amount involved. For acts of self-dealing regarding
the payment of compensation by a private foundation to a
disqualified person, the provision increases the initial tax
on the self-dealer from five percent of the amount involved
(none of which is subject to abatement) to 25 percent of the
amount involved (15 percent of which is subject to
abatement). The provision increases the initial tax on
foundation managers from 2.5 percent of the amount involved
to five percent of the amount involved and increases the
dollar limitation on the amount of the initial and additional
taxes on foundation managers per act of self-dealing from
$10,000 per act to $20,000 per act. Similarly, the provision
doubles the dollar limitation on organization managers of
public charities and social welfare organizations for
participation in excess benefit transactions from $10,000 per
transaction to $20,000 per transaction.
Failure to distribute income, excess business holdings,
jeopardizing investments, and taxable expenditures
The provision doubles the amounts of the initial taxes and
the dollar limitations on foundation managers with respect to
the private foundation excise taxes on the failure to
distribute income, excess business holdings, jeopardizing
investments, and taxable expenditures.
Specifically, for the failure to distribute income, the
initial tax on the foundation is increased from 15 percent of
the undistributed amount to 30 percent of the undistributed
amount.
For excess business holdings, the initial tax on excess
business holdings is increased from five percent of the value
of such holdings to 10 percent of such value.
For jeopardizing investments, the initial tax of five
percent of the amount of the investment that is imposed on
the foundation and on foundation managers is increased to 10
percent of the amount of the investment. The dollar
limitation on the initial tax on foundation managers of
$5,000 per investment is increased to $10,000 and the dollar
limitation on the additional tax on foundation managers of
$10,000 per investment is increased to $20,000.
For taxable expenditures, the initial tax on the foundation
is increased from 10 percent of the amount of the expenditure
to 20 percent, the initial tax on the foundation manager is
increased from 2.5 percent of the amount of the expenditure
to five percent, the dollar limitation on the initial tax on
foundation managers is increased from $5,000 to $10,000, and
the dollar limitation on the additional tax on foundation
managers is increased from $10,000 to $20,000.
Effective date.--The provision is effective for taxable
years beginning after the date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
4. Reform rules for charitable contributions of easements on
buildings in registered historic districts (Sec. 214 of
the Senate amendment and sec. 170 of the Code)

Present Law

In general
Present law provides special rules that apply to charitable
deductions of qualified conservation contributions, which
include conservation easements and facade easements.\142\
Qualified conservation contributions are not subject to the
``partial interest'' rule, which generally bars deductions
for charitable contributions of partial interests in
property.\143\ Accordingly, qualified conservation
contributions are contributions of partial interests that are
eligible for a fair market value charitable deduction.
---------------------------------------------------------------------------
\142\Sec. 170(h).
\143\Sec. 170(f)(3).
---------------------------------------------------------------------------
A qualified conservation contribution is a contribution of
a qualified real property interest to a qualified
organization exclusively for conservation purposes. A
qualified real property interest is defined as: (1) the
entire interest of the donor other than a qualified mineral
interest; (2) a remainder interest; or (3) a restriction
(granted in perpetuity) on the use that may be made of the
real property.\144\ Qualified organizations include certain
governmental units, public charities that meet certain public
support tests, and certain supporting organizations.
---------------------------------------------------------------------------
\144\Charitable contributions of interests that constitute
the taxpayer's entire interest in the property are not
regarded as qualified real property interests within the
meaning of section 170(h), but instead are subject to the
general rules applicable to charitable contributions of
entire interests of the taxpayer (i.e., generally are
deductible at fair market value, without regard to
satisfaction of the requirements of section 170(h)).
---------------------------------------------------------------------------
Conservation purposes include: (1) the preservation of land
areas for outdoor recreation by, or for the education of, the
general public; (2) the protection of a relatively natural
habitat of fish, wildlife, or plants, or similar ecosystem;
(3) the preservation of open space (including farmland and
forest land) where such preservation will yield a significant
public benefit and is either for the scenic enjoyment of the
general public or pursuant to a clearly delineated Federal,
State, or local governmental conservation policy; and (4) the
preservation of an historically important land area or a
certified historic structure.\145\
---------------------------------------------------------------------------
\145\Sec. 170(h)(4)(A).
---------------------------------------------------------------------------
In general, no deduction is available if the property may
be put to a use that is inconsistent with the conservation
purpose of the gift.\146\ A contribution is not deductible if
it accomplishes a permitted conservation purpose while also
destroying other significant conservation interests.\147\
---------------------------------------------------------------------------
\146\Treas. Reg. sec. 1.170A-14(e)(2).
\147\Treas. Reg. sec. 1.170A-14(e)(2).
---------------------------------------------------------------------------
Taxpayers are required to obtain a qualified appraisal for
donated property with a value of $5,000 or more, and to
attach an appraisal summary to the tax return.\148\ Under
Treasury regulations, a qualified appraisal means an
appraisal document that, among other things: (1) relates to
an appraisal that is made not earlier than 60 days prior to
the date of contribution of the appraised property and not
later than the due date (including extensions) of the return
on which a deduction is first claimed under section 170;\149\
(2) is prepared, signed, and dated by a qualified appraiser;
(3) includes (a) a description of the property appraised; (b)
the fair market value of such property on the date of
contribution and the specific basis for the valuation; (c) a
statement that such appraisal was prepared for income tax
purposes; (d) the qualifications of the qualified appraiser;
and (e) the signature and taxpayer identification number of
such appraiser; and (4) does not involve an appraisal fee
that violates certain prescribed rules.\150\
---------------------------------------------------------------------------
\148\Sec. 170(f)(11)(C).
\149\In the case of a deduction first claimed or reported on
an amended return, the deadline is the date on which the
amended return is filed.
\150\Treas. Reg. sec. 1.170A-13(c)(3).
---------------------------------------------------------------------------
Valuation
The value of a conservation restriction granted in
perpetuity generally is determined under the ``before and
after approach.'' Such approach provides that the fair market
value of the restriction is equal to the difference (if any)
between the fair market value of the property the restriction
encumbers before the restriction is granted and the fair
market value of the encumbered property after the restriction
is granted.\151\
---------------------------------------------------------------------------
\151\Treas. Reg. sec. 1.170A-14(h)(3).
---------------------------------------------------------------------------
If the granting of a perpetual restriction has the effect
of increasing the value of any other property owned by the
donor or a related person, the amount of the charitable
deduction for the conservation contribution is to be reduced
by the amount of the increase in the value of the other
property.\152\ In addition, the donor is to reduce the amount
of the charitable deduction by the amount of financial or
economic benefits that the donor or a related person receives
or can reasonably be expected to receive as a result of the
contribution.\153\ If such benefits are greater than those
that will inure to the general public from the transfer, no
deduction is allowed.\154\ In those instances where the grant
of a conservation restriction has no material effect on the
value of the property, or serves to enhance, rather than
reduce, the value of the property, no deduction is
allowed.\155\
---------------------------------------------------------------------------
\152\Treas. Reg. sec. 1.170A-14(h)(3)(i).
\153\Id.
\154\Id.
\155\Treas. Reg. sec. 1.170A-14(h)(3)(ii).
---------------------------------------------------------------------------
Preservation of a certified historic structure
A certified historic structure means any building,
structure, or land which is (i) listed in the National
Register, or (ii) located in a registered historic district
(as defined in section 47(c)(3)(B)) and is certified by the
Secretary of the Interior to the Secretary of the Treasury as
being of historic significance to the district.\156\ For this
purpose, a structure means any structure, whether or not it
is depreciable, and, accordingly, easements on private
residences may qualify.\157\ If restrictions to preserve a
building or land area within a registered historic district
permit future development on the site, a deduction will be
allowed only if the terms of the restrictions require that
such development conform with appropriate local, State, or
Federal standards for construction or rehabilitation within
the district.\158\
---------------------------------------------------------------------------
\156\Sec. 170(h)(4)(B).
\157\Treas. Reg. sec. 1.170A-14(d)(5)(iii).
\158\Treas. Reg. sec. 1.170A-14(d)(5)(i).
---------------------------------------------------------------------------
The IRS and the courts have held that a facade easement may
constitute a qualifying

[[Page 7415]]

conservation contribution.\159\ In general, a facade easement
is a restriction the purpose of which is to preserve certain
architectural, historic, and cultural features of the facade,
or front, of a building. The terms of a facade easement might
permit the property owner to make alterations to the facade
of the structure if the owner obtains consent from the
qualified organization that holds the easement.
---------------------------------------------------------------------------
\159\Hillborn v. Commissioner, 85 T.C. 677 (1985) (holding
the fair market value of a facade donation generally is
determined by applying the ``before and after'' valuation
approach); Richmond v. U.S., 699 F. Supp. 578 (E.D. La.
1988); Priv. Ltr. Rul. 199933029 (May 24, 1999) (ruling that
a preservation and conservation easement relating to the
facade and certain interior portions of a fraternity house
was a qualified conservation contribution).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

The provision revises the rules for qualified conservation
contributions with respect to property for which a charitable
deduction is allowable under section 170(h)(4)(B)(ii) by
reason of a property's location in a registered historic
district. Under the provision, a charitable deduction is not
allowable with respect to a structure or land area located in
such a district (by reason of the structure or land area's
location in such a district). A charitable deduction is
allowable with respect to buildings (as is the case under
present law) but the qualified real property interest that
relates to the exterior of the building must preserve the
entire exterior of the building, including the space above
the building, the sides, the rear, and the front of the
building. In addition, such qualified real property interest
must provide that no portion of the exterior of the building
may be changed in a manner inconsistent with the historical
character of such exterior.
For any contribution relating to a registered historic
district made after the date of enactment of the provision,
taxpayers must include with the return for the taxable year
of the contribution a qualified appraisal of the qualified
real property interest (irrespective of the claimed value of
such interest) and attach the appraisal with the taxpayer's
return, photographs of the entire exterior of the building,
and descriptions of all current restrictions on development
of the building, including, for example, zoning laws,
ordinances, neighborhood association rules, restrictive
covenants, and other similar restrictions. Failure to obtain
and attach an appraisal or to include the required
information results in disallowance of the deduction. In
addition, the donor and the donee must enter into a written
agreement certifying, under penalty of perjury, that the
donee is a qualified organization, with a purpose of
environmental protection, land conservation, open space
preservation, or historic preservation, and that the donee
has the resources to manage and enforce the restriction and a
commitment to do so.
Taxpayers claiming a deduction for a qualified conservation
contribution with respect to the exterior of a building
located in a registered historic district in excess of the
greater of three percent of the fair market value of the
underlying property or $10,000 must pay a $500 fee to the
Internal Revenue Service or the deduction is not allowed.
Amounts paid are required to be dedicated to Internal Revenue
Service enforcement of qualified conservation contributions.
Effective date.--The provision relating to deductions for
contributions relating to structures and land areas is
effective for contributions made after the date of enactment.
The limitation on the amount that may be deducted and the
filing fee is effective for contributions made 180 days after
the date of enactment. The rest of the provision is effective
for contributions made after November 15, 2005.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
5. Reform rules relating to charitable contributions of
taxidermy and recapture tax benefit on property not used
for an exempt use (secs. 215 and 216 of the Senate
amendment and secs. 170, 6050L, and new sec. 6720B of the
Code)

Present Law

Deductibility of charitable contributions
In general
In computing taxable income, a taxpayer who itemizes
deductions generally is allowed to deduct the amount of cash
and the fair market value of property contributed to an
organization described in section 501(c)(3) or to a Federal,
State, or local governmental entity.\160\ The amount of the
deduction allowable for a taxable year with respect to a
charitable contribution of property may be reduced or limited
depending on the type of property contributed, the type of
charitable organization to which the property is contributed,
and the income of the taxpayer.\161\ In general, more
generous charitable contribution deduction rules apply to
gifts made to public charities than to gifts made to private
foundations. Within certain limitations, donors also are
entitled to deduct their contributions to section 501(c)(3)
organizations for Federal estate and gift tax purposes. By
contrast, contributions to nongovernmental, non-charitable
tax-exempt organizations generally are not deductible by the
donor,\162\ though such organizations are eligible for the
exemption from Federal income tax with respect to such
donations.
---------------------------------------------------------------------------
\160\The deduction also is allowed for purposes of
calculating alternative minimum taxable income.
\161\Secs. 170(b) and (e).
\162\Exceptions to the general rule of non-deductibility
include certain gifts made to a veterans' organization or to
a domestic fraternal society. In addition, contributions to
certain nonprofit cemetery companies are deductible for
Federal income tax purposes, but generally are not deductible
for Federal estate and gift tax purposes. Secs. 170(c)(3),
170(c)(4), 170(c)(5), 2055(a)(3), 2055(a)(4),
2106(a)(2)(A)(iii), 2522(a)(3), and 2522(a)(4).
---------------------------------------------------------------------------
Contributions of property
The amount of the deduction for charitable contributions of
capital gain property generally equals the fair market value
of the contributed property on the date of the contribution.
Capital gain property means any capital asset, or property
used in the taxpayer's trade or business, the sale of which
at its fair market value, at the time of contribution, would
have resulted in gain that would have been long-term capital
gain. Contributions of capital gain property are subject to
different percentage limitations (i.e., limitations based on
the donor's income) than other contributions of property.
For certain contributions of property, the deductible
amount is reduced from the fair market value of the
contributed property by the amount of any gain, generally
resulting in a deduction equal to the taxpayer's basis. This
rule applies to contributions of: (1) ordinary income
property, e.g., property that, at the time of contribution,
would not have resulted in long-term capital gain if the
property was sold by the taxpayer on the contribution
date;\163\ (2) tangible personal property that is used by the
donee in a manner unrelated to the donee's exempt (or
governmental) purpose; and (3) property to or for the use of
a private foundation (other than a foundation defined in
section 170(b)(1)(E)).
---------------------------------------------------------------------------
\163\For certain contributions of inventory, C corporations
may claim an enhanced deduction equal to the lesser of (1)
basis plus one-half of the item's appreciation (i.e., basis
plus one half of fair market value in excess of basis) or (2)
two times basis. Sec. 170(e)(3), 170(e)(4), 170(e)(6).
---------------------------------------------------------------------------
Charitable contributions of taxidermy are subject to the
tangible personal property rule (number (2) above). For
example, for appreciated taxidermy, if the property is used
to further the donee's exempt purpose, the deduction is fair
market value. But if the property is not used to further the
donee's exempt purpose, the deduction is the donor's basis.
If the taxidermy is depreciated, i.e., the value is less than
the taxpayer's basis in such property, taxpayers generally
deduct the fair market value of such contributions,
regardless of whether the property is used for exempt or
unrelated purposes by the donee.
Substantiation
No charitable deduction is allowed for any contribution of
$250 or more unless the taxpayer substantiates the
contribution by a contemporaneous written acknowledgement of
the contribution by the donee organization.\164\ Such
acknowledgement must include the amount of cash and a
description (but not value) of any property other than cash
contributed, whether the donee provided any goods or services
in consideration for the contribution (and a good faith
estimate of the value of any such goods or services).
---------------------------------------------------------------------------
\164\Sec. 170(f)(8).
---------------------------------------------------------------------------
In general, if the total charitable deduction claimed for
non-cash property is more than $500, the taxpayer must attach
a completed Form 8283 (Noncash Charitable Contributions) to
the taxpayer's return or the deduction is not allowed.\165\ C
corporations (other than personal service corporations and
closely-held corporations) are required to file Form 8283
only if the deduction claimed is more than $5,000.
Information required on the Form 8283 includes, among other
things, a description of the property, the appraised fair
market value (if an appraisal is required), the donor's basis
in the property, how the donor acquired the property, a
declaration by the appraiser regarding the appraiser's
general qualifications, an acknowledgement by the donee that
it is eligible to receive deductible contributions, and an
indication by the donee whether the property is intended for
an unrelated use.
---------------------------------------------------------------------------
\165\Sec. 170(f)(11).
---------------------------------------------------------------------------
Taxpayers are required to obtain a qualified appraisal for
donated property with a value of more than $5,000, and to
attach an appraisal summary to the tax return.\166\ Under
Treasury regulations, a qualified appraisal means an
appraisal document that, among other things: (1) relates to
an appraisal that is made not earlier than 60 days prior to
the date of contribution of the appraised property and not
later than the due date (including extensions) of the return
on which a deduction is first claimed under section 170;\167\
(2) is prepared, signed, and dated by a qualified appraiser;
(3) includes (a) a description of the property appraised; (b)
the fair market value of such property on the

[[Page 7416]]

date of contribution and the specific basis for the
valuation; (c) a statement that such appraisal was prepared
for income tax purposes; (d) the qualifications of the
qualified appraiser; and (e) the signature and taxpayer
identification number of such appraiser; and (4) does not
involve an appraisal fee that violates certain prescribed
rules.\168\ In the case of contributions of art valued at
more than $20,000 and other contributions of more than
$500,000, taxpayers are required to attach the appraisal to
the tax return. Taxpayers may request a Statement of Value
from the Internal Revenue Service in order to substantiate
the value of art with an appraised value of $50,000 or more
for income, estate, or gift tax purposes.\169\ The fee for
such a Statement is $2,500 for one, two, or three items or
art plus $250 for each additional item.
---------------------------------------------------------------------------
\166\Id.
\167\In the case of a deduction first claimed or reported on
an amended return, the deadline is the date on which the
amended return is filed.
\168\Treas. Reg. sec. 1.170A-13(c)(3). Sec. 170(f)(11)(E).
\169\Rev. Proc. 96-15, 1996-1 C.B. 627.
---------------------------------------------------------------------------
If a donee organization sells, exchanges, or otherwise
disposes of contributed property with a claimed value of more
than $5,000 (other than publicly traded securities) within
two years of the property's receipt, the donee is required to
file a return (Form 8282) with the Secretary, and to furnish
a copy of the return to the donor, showing the name, address,
and taxpayer identification number of the donor, a
description of the property, the date of the contribution,
the amount received on the disposition, and the date of the
disposition.\170\
---------------------------------------------------------------------------
\170\Sec. 6050L(a)(1).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

Contributions of taxidermy
For contributions of taxidermy property with a claimed
value of more than $500, the individual must include with the
individual's return a photograph of the taxidermy and
comparable sales data for similar items. It is intended that
valuation must be based on comparable sales and that a
deduction is not allowable if sufficient comparable sales are
not provided.
For claims of more than $5,000, the taxpayer must notify
the IRS of the deduction and include with the taxpayer's
return a statement of value from the IRS, similar to that
available under present law for items of art, or a request
for such a statement and a fee of $500. The provision defines
taxidermy property as a mounted work of art which contains
any part of a dead animal.
It is intended that for purposes of the charitable
contribution deduction, a taxpayer may not include in the
taxpayer's basis of the contributed taxidermy any costs
attributable to travel.
Recapture of tax benefit upon subsequent disposition of
tangible personal property intended for an exempt use
In general, the provision recovers the tax benefit for
charitable contributions of tangible personal property with
respect to which a fair market value deduction is claimed and
which is not used for exempt purposes. The provision applies
to appreciated tangible personal property that is identified
by the donee organization as for a use related to the purpose
or function constituting the donee's basis for tax exemption,
and for which a deduction of more than $5,000 is claimed
(``applicable property'').\171\
---------------------------------------------------------------------------
\171\Present law rules continue to apply to any contribution
of exempt use property for which a deduction of $5,000 or
less is claimed.
---------------------------------------------------------------------------
Under the provision, if a donee organization disposes of
applicable property within three years of the contribution of
the property, the donor is subject to an adjustment of the
tax benefit. If the disposition occurs in the tax year of the
donor in which the contribution is made, the donor's
deduction generally is basis and not fair market value.\172\
If the disposition occurs in a subsequent year, the donor
must include as ordinary income for its taxable year in which
the disposition occurs an amount equal to the excess (if any)
of (i) the amount of the deduction previously claimed by the
donor as a charitable contribution with respect to such
property, over (ii) the donor's basis in such property at the
time of the contribution.
---------------------------------------------------------------------------
\172\The disposition proceeds are regarded as relevant to a
determination of fair market value.
---------------------------------------------------------------------------
There is no adjustment of the tax benefit if the donee
organization makes a certification to the Secretary, by
written statement signed under penalties of perjury by an
officer of the organization. The statement must either (1)
certify that the use of the property by the donee was related
to the purpose or function constituting the basis for the
donee's exemption, and describe how the property was used and
how such use furthered such purpose or function; or (2) state
the intended use of the property by the donee at the time of
the contribution and certify that such use became impossible
or infeasible to implement. The organization must furnish a
copy of the certification to the donor.
A penalty of $10,000 applies to a person that identifies
applicable property as having a use that is related to a
purpose or function constituting the basis for the donee's
exemption knowing that it is not intended for such a
use.\173\
---------------------------------------------------------------------------
\173\Other present-law penalties also may apply, such as the
penalty for aiding and abetting the understatement of tax
liability under section 6701.
---------------------------------------------------------------------------
Reporting of exempt use property contributions
The provision modifies the present-law information return
requirements that apply upon the disposition of contributed
property by a charitable organization (Form 8282, sec.
6050L). The return requirement is extended to dispositions
made within three years after receipt (from two years). The
donee organization also must provide, in addition to the
information already required to be provided on the return, a
description of the donee's use of the property, a statement
of whether use of the property was related to the purpose or
function constituting the basis for the donee's exemption,
and, if applicable, a certification of any such use
(described above).
Effective date.--With respect to contributions of taxidermy
property, the provision is effective for contributions made
after November 15, 2005. With respect to exempt use property
generally, the provision is effective for contributions made
and returns filed after June 1, 2006.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
6. Limit charitable deduction for contributions of clothing
and household items and modify recordkeeping and
substantiation requirements for certain charitable
contributions (secs. 217 and 218 of the Senate amendment
and sec. 170 of the Code)

Present Law

[[Page 7417]]

Substantiation
A donor who claims a deduction for a charitable
contribution must maintain reliable written records regarding
the contribution, regardless of the value or amount of such
contribution. For a contribution of money, the donor
generally must maintain one of the following: (1) a cancelled
check; (2) a receipt (or a letter or other written
communication) from the donee showing the name of the donee
organization, the date of the contribution, and the amount of
the contribution; or (3) in the absence of a cancelled check
or a receipt, other reliable written records showing the name
of the donee, the date of the contribution, and the amount of
the contribution. For a contribution of property other than
money, the donor generally must maintain a receipt from the
donee organization showing the name of the donee, the date
and location of the contribution, and a detailed description
(but not the value) of the property.\178\ A donor of property
other than money need not obtain a receipt, however, if
circumstances make obtaining a receipt impracticable. Under
such circumstances, the donor must maintain reliable written
records regarding the contribution. The required content of
such a record varies depending upon factors such as the type
and value of property contributed.\179\
---------------------------------------------------------------------------
\178\Treas. Reg. sec. 1.170A-13(a).
\179\Treas. Reg. sec. 1.170A-13(b).
---------------------------------------------------------------------------
In addition to the foregoing recordkeeping requirements,
substantiation requirements apply in the case of charitable
contributions with a value of $250 or more. No charitable
deduction is allowed for any contribution of $250 or more
unless the taxpayer substantiates the contribution by a
contemporaneous written acknowledgement of the contribution
by the donee organization. Such acknowledgement must include
the amount of cash and a description (but not value) of any
property other than cash contributed, whether the donee
provided any goods or services in consideration for the
contribution, and a good faith estimate of the value of any
such goods or services.\180\ In general, if the total
charitable deduction claimed for non-cash property is more
than $500, the taxpayer must attach a completed Form 8283
(Noncash Charitable Contributions) to the taxpayer's return
or the deduction is not allowed.\181\ In general, taxpayers
are required to obtain a qualified appraisal for donated
property with a value of more than $5,000, and to attach an
appraisal summary to the tax return.
---------------------------------------------------------------------------
\180\Sec. 170(f)(8).
\181\Sec. 170(f)(11).
---------------------------------------------------------------------------

House Bill

Senate Amendment

General rule relating to clothing and household items
The provision requires the Secretary to prepare and publish
an itemized list of clothing and household items and to
assign an amount to each item on the list. The assigned
amount is treated as the fair market value of the item for
purposes of the charitable contribution deduction and is
based on an assumption that the item is in good used
condition or better. Any deduction for a charitable
contribution of each such item may not exceed the item's
assigned amount. Any deduction for an item not in good used
condition or better may not exceed 20 percent of the item's
assigned amount. Any deduction for an item that is not
functional with respect to the use for which it was designed
is not allowed. The list must be published by the Secretary
at least once each calendar year and is applicable to
contributions of clothing and household items made while the
list is effective. The Secretary has discretion to determine
the effective dates for each published list. The list should
be prepared in consultation with donee organizations that
accept charitable contributions of clothing and household
items. In assigning amounts to particular items, the
Secretary should take into account the sales price of such
contributed item when sold by the donee organizations,
whether through an exempt program of such organizations or
otherwise. If an item of clothing or household item is not
included on the list published by the Secretary, present law
rules apply to the contribution of the item.
The provision does not apply to contributions for which the
donor has obtained a qualified appraisal. The provision also
does not apply to contributions for which a deduction of more
than $500 is claimed if (1) the donee sells the contributed
item before the earlier of the due date (including
extensions) for filing the return of tax for the taxable year
of the donor in which the contribution was made or the date
such return was filed; (2) the donee reports the sales price
of the contributed item to the donor; and (3) the amount
claimed as a deduction with respect to the contributed item
does not exceed the amount of the sales price reported to the
donor.
The provision does not apply to contributions by C
corporations. The provision applies to new and used items.
Household items include furniture, furnishings, electronics,
appliances, linens, and other similar items. Food, paintings,
antiques, and other objects of art, jewelry and gems, and
collections are excluded from the provision.
Substantiation
Clothing and household items
As under present law, for contributions with a claimed
value of $250 or more, the taxpayer must obtain
contemporaneous substantiation from the donee organization,
which must include a description of the property contributed.
The provision provides that, as part of such substantiation,
the taxpayer obtain an indication of the condition of the
item(s), a description of the type of item, and either a copy
of the published list or instructions as to how to find such
list.
Under present law, if a taxpayer claims that the total
value of charitable contributions of noncash property is more
than $500, the taxpayer must include with the taxpayer's
return a description of the property contributed and such
other information as the Secretary may require in order to
claim a charitable deduction (sec. 170(f)(11)(B)). This
requirement presently is satisfied through completion by the
taxpayer of the Form 8283 and attachment of the form to the
taxpayer's return. The provision requires that the donor
include the information about the contribution that is
contained in the contemporaneous substantiation obtained from
the donee organization (for gifts of $250 or more) as part of
such requirement.
Contributions of cash
In addition, in the case of a charitable contribution of
money, regardless of the amount, applicable recordkeeping
requirements are satisfied under the provision only if the
donor maintains a cancelled check or a receipt (or a letter
or other written communication) from the donee showing the
name of the donee organization, the date of the contribution,
and the amount of the contribution. The recordkeeping
requirements may not be satisfied by maintaining other
written records.
Effective date.--The provision relating to clothing and
household items is effective for contributions made after
December 31, 2006. The provision relating to substantiation
more generally is effective for contributions made in taxable
years beginning after the date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
7. Contributions of fractional interests in tangible personal
property (sec. 219 of the Senate amendment and sec. 170
of the Code)

Present Law

In general, a charitable deduction is not allowable for a
contribution of a partial interest in property, such as an
income interest, a remainder interest, or a right to use
property.\182\ A gift of an undivided portion of a donor's
entire interest in property generally is not treated as a
nondeductible gift of a partial interest in property.\183\
For this purpose, an undivided portion of a donor's entire
interest in property must consist of a fraction or percentage
of each and every substantial interest or right owned by the
donor in such property and must extend over the entire term
of the donor's interest in such property.\184\ A gift
generally is treated as a gift of an undivided portion of a
donor's entire interest in property if the donee is given the
right, as a tenant in common with the donor, to possession,
dominion, and control of the property for a portion of each
year appropriate to its interest in such property.\185\
---------------------------------------------------------------------------
\182\Secs. 170(f)(3)(A) (income tax), 2055(e)(2) (estate
tax), and 2522(c)(2) (gift tax).
\183\Sec. 170(f)(3)(B)(ii).
\184\Treas. Reg. sec. 1.170A-7(b)(1).
\185\Treas. Reg. sec. 1.170A-7(b)(1).
---------------------------------------------------------------------------
Consistent with these requirements, a charitable
contribution deduction generally is not allowable for a
contribution of a future interest in tangible personal
property.\186\ For this purpose, a future interest is one
``in which a donor purports to give tangible personal
property to a charitable organization, but has an
understanding, arrangement, agreement, etc., whether written
or oral, with the charitable organization which has the
effect of reserving to, or retaining in, such donor a right
to the use, possession, or enjoyment of the property.''\187\
Treasury regulations provide that section 170(a)(3), which
generally denies a deduction for a contribution of a future
interest in tangible personal property, ``[has] no
application in respect of a transfer of an undivided present
interest in property. For example, a contribution of an
undivided one-quarter interest in a painting with respect to
which the donee is entitled to possession during three months
of each year shall be treated as made upon the receipt by the
donee of a formally executed and acknowledged deed of gift.
However, the period of initial possession by the donee may
not be deferred in time for more than one year.''\188\
---------------------------------------------------------------------------
\186\Sec. 170(a)(3).
\187\Treas. Reg. sec. 1.170A-5(a)(4).
\188\Treas. Reg. sec. 1.170A-5(a)(2).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

Require consistent valuation of fractional interests in the
same item of property
In general, under present law and the provision a donor may
take a deduction for a charitable contribution of a
fractional interest in tangible personal property (such as an

[[Page 7418]]

artwork), provided the donor satisfies the requirements for
deductibility (including the requirements concerning
contributions of partial interests and future interests in
property), and in subsequent years make additional charitable
contributions of interests in the same property.\189\ Under
the provision, a donor's charitable deduction for the initial
contribution of a fractional interest in an item of tangible
personal property (or collection of such items) shall be
determined as under current law (e.g., based upon the fair
market value of the artwork at the time of the contribution
of the fractional interest and considering whether the use of
the artwork will be related to the donee's exempt purposes).
For purposes of determining the deductible amount of each
additional contribution of an interest (whether or not a
fractional interest) in the same item of property, under the
provision, the fair market value of the item shall be the
lesser of: (1) the value used for purposes of determining the
charitable deduction for the initial fractional contribution;
or (2) the fair market value of the item at the time of the
subsequent contribution. This portion of the provision
applies for income, gift, and estate tax purposes.
---------------------------------------------------------------------------
\189\See, e.g., Winokur v. Commissioner, 90 T.C. 733 (1988).
---------------------------------------------------------------------------
Require actual possession by the donee
The provision provides for recapture of the income tax
charitable deduction or gift tax charitable deduction under
certain circumstances. Specifically, if, during any one-year
period following a contribution of a fractional interest in
an item of tangible personal property, the donee fails to
take actual possession of the item for a period of time
corresponding substantially to the donee's then-existing
percentage interest in the item, then the donee's charitable
deduction for all previous contributions of interests in the
item shall be recaptured (plus interest).
Under the provision, the Secretary of the Treasury is
authorized to promulgate rules to prevent the circumvention
of the provision by, for example, engaging in a transaction
in which a donor first transfers one or more items of
tangible personal property to a separate entity in exchange
for ownership interests in the entity, and subsequently makes
charitable contributions of such ownership interests.
Effective date.--The provision is applicable for
contributions, bequests, and gifts made after the date of
enactment.

conference agreement

The conference agreement does not include the Senate
amendment provision.
8. Provisions relating to substantial and gross overstatement
of valuations of property (Sec. 220 of the Senate
amendment and secs. 6662 and 6664 of the Code)

present law

Taxpayer penalties
Present law imposes accuracy-related penalties on a
taxpayer in cases involving a substantial valuation
misstatement or gross valuation misstatement relating to an
underpayment of income tax.\190\ For this purpose, a
substantial valuation misstatement generally means a value
claimed that is at least twice (200 percent or more) the
amount determined to be the correct value, and a gross
valuation misstatement generally means a value claimed that
is at least four times (400 percent or more) the amount
determined to be the correct value.
---------------------------------------------------------------------------
\190\Sec. 6662(b)(3) and (h).
---------------------------------------------------------------------------
The penalty is 20 percent of the underpayment of tax
resulting from a substantial valuation misstatement and rises
to 40 percent for a gross valuation misstatement. No penalty
is imposed unless the portion of the underpayment
attributable to the valuation misstatement exceeds $5,000
($10,000 in the case of a corporation other than an S
corporation or a personal holding company). Under present
law, no penalty is imposed with respect to any portion of the
understatement attributable to any item if (1) the treatment
of the item on the return is or was supported by substantial
authority, or (2) facts relevant to the tax treatment of the
item were adequately disclosed on the return or on a
statement attached to the return and there is a reasonable
basis for the tax treatment. Special rules apply to tax
shelters.
In addition, the accuracy-related penalty does not apply if
a taxpayer shows there was reasonable cause for an
underpayment and the taxpayer acted in good faith.\191\
---------------------------------------------------------------------------
\191\Sec. 6664(c).
---------------------------------------------------------------------------
Penalty for aiding and abetting understatement of tax
A penalty is imposed on a person who: (1) aids or assists
in or advises with respect to a tax return or other document;
(2) knows (or has reason to believe) that such document will
be used in connection with a material tax matter; and (3)
knows that this would result in an understatement of tax of
another person. In general, the amount of the penalty is
$1,000. If the document relates to the tax return of a
corporation, the amount of the penalty is $10,000.
Qualified appraisals
Present law requires a taxpayer to obtain a qualified
appraisal for donated property with a value of more than
$5,000, and to attach an appraisal summary to the tax
return.\192\ Treasury Regulations state that a qualified
appraisal means an appraisal document that, among other
things: (1) relates to an appraisal that is made not earlier
than 60 days prior to the date of contribution of the
appraised property and not later than the due date (including
extensions) of the return on which a deduction is first
claimed under section 170; (2) is prepared, signed, and dated
by a qualified appraiser; (3) includes (a) a description of
the property appraised; (b) the fair market value of such
property on the date of contribution and the specific basis
for the valuation; (c) a statement that such appraisal was
prepared for income tax purposes; (d) the qualifications of
the qualified appraiser; and (e) the signature and taxpayer
identification number of such appraiser; and (4) does not
involve an appraisal fee that violates certain prescribed
rules.\193\
---------------------------------------------------------------------------
\192\Sec. 170(f)(11).
\193\Treas. Reg. sec. 1.170A-13(c)(3).
---------------------------------------------------------------------------
Qualified appraisers
Treasury Regulations define a qualified appraiser as a
person who holds himself or herself out to the public as an
appraiser or performs appraisals on a regular basis, is
qualified to make appraisals of the type of property being
valued (as determined by the appraiser's background,
experience, education and membership, if any, in professional
appraisal associations), is independent, and understands that
an intentionally false or fraudulent overstatement of the
value of the appraised property may subject the appraiser to
civil penalties.\194\
---------------------------------------------------------------------------
\194\Treas. Reg. sec. 1.170A-13(c)(5)(i).
---------------------------------------------------------------------------
Appraiser oversight
The Secretary is authorized to regulate the practice of
representatives of persons before the Department of the
Treasury (``Department'').\195\ After notice and hearing, the
Secretary is authorized to suspend or disbar from practice
before the Department or the Internal Revenue Service
(``IRS'') a representative who is incompetent, who is
disreputable, who violates the rules regulating practice
before the Department or the IRS, or who (with intent to
defraud) willfully and knowingly misleads or threatens the
person being represented (or a person who may be
represented).
---------------------------------------------------------------------------
\195\31 U.S.C. sec. 330.
---------------------------------------------------------------------------
The Secretary also is authorized to bar from appearing
before the Department or the IRS, for the purpose of offering
opinion evidence on the value of property or other assets,
any individual against whom a civil penalty for aiding and
abetting the understatement of tax has been assessed. Thus,
an appraiser who aids or assists in the preparation or
presentation of an appraisal will be subject to disciplinary
action if the appraiser knows that the appraisal will be used
in connection with the tax laws and will result in an
understatement of the tax liability of another person. The
Secretary has authority to provide that the appraisals of an
appraiser who has been disciplined have no probative effect
in any administrative proceeding before the Department or the
IRS.

house bill

No provision.

senate amendment

Taxpayer penalties
The provision lowers the thresholds for imposing accuracy-
related penalties on a taxpayer who claims a deduction for
donated property for which a qualified appraisal is required.
Under the provision, a substantial valuation misstatement
exists when the claimed value of donated property is 150
percent or more of the amount determined to be the correct
value. A gross valuation misstatement occurs when the claimed
value of donated property is 200 percent or more the amount
determined to be the correct value. Under the provision, the
reasonable cause exception to the accuracy-related penalty
does not apply in the case of gross valuation misstatements.
Appraiser oversight
Appraiser penalties
The provision establishes a civil penalty on any person who
prepares an appraisal that is to be used to support a tax
position if such appraisal results in a substantial or gross
valuation misstatement. The penalty is equal to the greater
of $1,000 or 10 percent of the understatement of tax
resulting from a substantial or gross valuation misstatement,
up to a maximum of 125 percent of the gross income derived
from the appraisal. Under the provision, the penalty does not
apply if the appraiser establishes that it was ``more likely
than not'' that the appraisal was correct.
Disciplinary proceeding
The provision eliminates the requirement that the Secretary
assess against an appraiser the civil penalty for aiding and
abetting the understatement of tax before such appraiser may
be subject to disciplinary action. Thus, the Secretary is
authorized to discipline appraisers after notice and hearing.
Disciplinary action may include, but is

[[Page 7419]]

not limited to, suspending or barring an appraiser from:
preparing or presenting appraisals on the value of property
or other assets to the Department or the IRS; appearing
before the Department or the IRS for the purpose of offering
opinion evidence on the value of property or other assets;
and providing that the appraisals of an appraiser who have
been disciplined have no probative effect in any
administrative proceeding before the Department or the IRS.
Qualified appraisers
The provision defines a qualified appraiser as an
individual who (1) has earned an appraisal designation from a
recognized professional appraiser organization or has
otherwise met minimum education and experience requirements
to be determined by the IRS in regulations; (2) regularly
performs appraisals for which he or she receives
compensation; (3) can demonstrate verifiable education and
experience in valuing the type of property for which the
appraisal is being performed; (4) has not been prohibited
from practicing before the IRS by the Secretary at any time
during the three years preceding the conduct of the
appraisal; and (5) is not excluded from being a qualified
appraiser under applicable Treasury regulations.
Qualified appraisals
The provision defines a qualified appraisal as an appraisal
of property prepared by a qualified appraiser (as defined by
the provision) in accordance with generally accepted
appraisal standards and any regulations or other guidance
prescribed by the Secretary.
Effective date
The provision amending the accuracy-related penalty applies
to returns filed after the date of enactment. The provision
establishing a civil penalty that may be imposed on any
person who prepares an appraisal that is to be used to
support a tax position if such appraisal results in a
substantial or gross valuation misstatement applies to
appraisals prepared with respect to returns or submissions
filed after the date of enactment. The provisions relating to
appraiser oversight apply to appraisals prepared with respect
to returns or submissions filed after the date of enactment.
With respect to any contribution of a qualified real property
interest which is a restriction with respect to the exterior
of a building described in section 170(h)(4)(C)(ii)
(currently designated section 170(h)(4)(B)(ii), relating to
certain property located in a registered historic district
and certified as being of historic significance to the
district), and any appraisal with respect to such
contribution, the provision generally applies to returns
filed after December 16, 2004.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
9. Establish additional exemption standards for credit
counseling organizations (Sec. 221 of the Senate
amendment and secs. 501 and 513 of the Code)

Present Law

Under present law, a credit counseling organization may be
exempt as a charitable or educational organization described
in section 501(c)(3), or as a social welfare organization
described in section 501(c)(4). The IRS has issued two
revenue rulings holding that certain credit counseling
organizations are exempt as charitable or educational
organizations or as social welfare organizations.
In Revenue Ruling 65-299,\196\ an organization whose
purpose was to assist families and individuals with financial
problems, and help reduce the incidence of personal
bankruptcy, was determined to be a social welfare
organization described in section 501(c)(4). The organization
counseled people in financial difficulties, advised
applicants on payment of debts, and negotiated with creditors
and set up debt repayment plans. The organization did not
restrict its services to the poor, made no charge for
counseling services, and made a nominal charge for certain
services to cover postage and supplies. For financial
support, the organization relied on voluntary contributions
from local businesses, lending agencies, and labor unions.
---------------------------------------------------------------------------
\196\Rev. Rul. 65-299, 1965-2 C.B. 165.
---------------------------------------------------------------------------
In Revenue Ruling 69-441,\197\ the IRS ruled an
organization was a charitable or educational organization
exempt under section 501(c)(3) by virtue of aiding low-income
people who had financial problems and providing education to
the public. The organization in that ruling had two
functions: (1) educating the public on personal money
management, such as budgeting, buying practices, and the
sound use of consumer credit through the use of films,
speakers, and publications; and (2) providing individual
counseling to low-income individuals and families without
charge. As part of its counseling activities, the
organization established debt management plans for clients
who required such services, at no charge to the clients.\198\
The organization was supported by contributions primarily
from creditors, and its board of directors was comprised of
representatives from religious organizations, civic groups,
labor unions, business groups, and educational institutions.
---------------------------------------------------------------------------
\197\Rev. Rul. 65-441, 1969-2 C.B. 115.
\198\Debt management plans are debt payment arrangements,
including debt consolidation arrangements, entered into by a
debtor and one or more of the debtor's creditors, generally
structured to reduce the amount of a debtor's regular ongoing
payment by modifying the interest rate, minimum payment,
maturity or other terms of the debt. Such plans frequently
are promoted as a means for a debtor to restructure debt
without filing for bankruptcy.
---------------------------------------------------------------------------
In 1976, the IRS denied exempt status to an organization,
Consumer Credit Counseling Service of Alabama, whose
activities were distinguishable from those in Revenue Ruling
69-441 in that (1) it did not restrict its services to the
poor, and (2) it charged a nominal fee for its debt
management plans.\199\ The organization provided free
information to the general public through the use of
speakers, films, and publications on the subjects of
budgeting, buying practices, and the use of consumer credit.
It also provided counseling to debt-distressed individuals,
not necessarily poor or low-income, and provided debt
management plans at the cost of $10 per month, which was
waived in cases of financial hardship. Its debt management
activities were a relatively small part of its overall
activities. The district court determined the organization
qualified as charitable and educational within section
501(c)(3), finding the debt management plans to be an
integral part of the agency's counseling function, and that
its debt management activities were incidental to its
principal functions, as only approximately 12 percent of the
counselors' time was applied to such programs and the charge
for the service was nominal. The court also considered the
facts that the agency was publicly supported, and that it had
a board dominated by members of the general public, as
factors indicating a charitable operation.\200\
---------------------------------------------------------------------------
\199\Consumer Credit Counseling Services of Alabama, Inc. v.
U.S., 44 A.F.T.R. 2d (RIA) 5122 (D.D.C. 1978). The case
involved 24 agencies throughout the United States.
\200\See also, Credit Counseling Centers of Oklahoma, Inc. v.
U.S., 45 A.F.T.R. 2d (RIA) 1401 (D.D.C. 1979) (holding the
same on virtually identical facts).
---------------------------------------------------------------------------
A recent estimate shows the number of credit counseling
organizations increased from approximately 200 in 1990 to
over 1,000 in 2002.\201\ During the period from 1994 to late
2003, 1,215 credit counseling organizations applied to the
IRS for tax exempt status under section 501(c)(3), including
810 during 2000 to 2003.\202\ The IRS has recognized more
than 850 credit counseling organizations as tax exempt under
section 501c)((3).\203\ Few credit counseling organizations
have sought section 501(c)(4) status, and the IRS reports it
has not seen any significant increase in the number or
activity of such organizations operating as social welfare
organizations.\204\ As of late 2003, there were 872 active
tax-exempt credit counseling agencies operating in the United
States.\205\
---------------------------------------------------------------------------
\201\Opening Statement of The Honorable Max Sandlin, Hearing
on Non-Profit Credit Counseling Organizations, House Ways and
Means Committee, Subcommittee on Oversight (November 20,
2003).
\202\United States Senate Permanent Subcommittee on
Investigations, Committee on Governmental Affairs,
Profiteering in a Non-Profit Industry: Abusive Practices in
Credit Counseling, Report Prepared by the Majority & Minority
Staffs of the Permanent Subcommittee on Investigations and
Released in Conjunction with the Permanent Subcommittee
Investigations' Hearing on March 24, 2004, p. 3 (citing
letter dated December 18, 2003, to the Subcommittee from IRS
Commissioner Everson).
\203\Testimony of Commissioner Mark Everson before the House
Ways and Means Committee, Subcommittee on Oversight (November
20, 2003).
\204\Testimony of Commissioner Mark Everson before the House
Ways and Means Committee, Subcommittee on Oversight (November
20, 2003).
\205\United States Senate Permanent Subcommittee on
Investigations, Committee on Governmental Affairs,
Profiteering in a Non-Profit Industry: Abusive Practices in
Credit Counseling, Report Prepared by the Majority & Minority
Staffs of the Permanent Subcommittee on Investigations and
Released in Conjunction with the Permanent Subcommittee
Investigations' Hearing on March 24, 2004, p. 3 (citing
letter dated December 18, 2003 to the Subcommittee from IRS
Commissioner Everson).
---------------------------------------------------------------------------
A credit counseling organization described in section
501(c)(3) is exempt from certain Federal and State consumer
protection laws that provide exemptions for organizations
described therein.\206\ Some believe that these exclusions
from Federal and State regulation may be a primary motivation
for the recent increase in the number of organizations
seeking and obtaining exempt status under section
501(c)(3).\207\Such regulatory exemptions generally are not
available for social welfare organizations described in
section 501(c)(4).
---------------------------------------------------------------------------
\206\E.g., The Credit Repair Organizations Act, 15 U.S.C.
section 1679 et seq., effective April 1, 1997 (imposing
restrictions on credit repair organizations that are enforced
by the Federal Trade Commission, including forbidding the
making of untrue or misleading statements and forbidding
advance payments; section 501(c)(3) organizations are
explicitly exempt from such regulation). Testimony of
Commissioner Mark Everson before the House Ways and Means
Committee, Subcommittee on Oversight (November 20, 2003)
(California's consumer protections laws that impose strict
standards on credit service organizations and the credit
repair industry do not apply to nonprofit organizations that
have received a final determination from the IRS that they
are exempt from tax under section 501(c)(3) and are not
private foundations).
\207\Testimony of Commissioner Mark Everson before the House
Ways and Means Committee, Subcommittee on Oversight (November
20, 2003).
---------------------------------------------------------------------------
Congress recently conducted hearings investigating the
activities of credit counseling organizations under various
consumer

[[Page 7420]]

protection laws,\208\such as the Federal Trade Commission
Act.\209\ In addition, the IRS has commenced a broad
examination and compliance program with respect to the credit
counseling industry, pursuant to which the IRS has initiated
audits of 50 credit counseling organizations, including nine
of the 15 largest in terms of gross receipts.\210\
---------------------------------------------------------------------------
\208\United States Senate Permanent Subcommittee on
Investigations, Committee on Governmental Affairs,
Profiteering in a Non-Profit Industry: Abusive Practices in
Credit Counseling, Report Prepared by the Majority & Minority
Staffs of the Permanent Subcommittee on Investigations and
Released in Conjunction with the Permanent Subcommittee
Investigations' Hearing on March 24, 2004.
\209\15 U.S.C. sec. 45(a) (prohibiting unfair and deceptive
acts or practices in or affecting commerce; although the
Federal Trade Commission generally lacks jurisdiction to
enforce consumer protection laws against bona fide nonprofit
organizations, it may assert jurisdiction over a nonprofit,
including a credit counseling organization, if it
demonstrates the organization is organized to carry on
business for profit, is a mere instrumentality of a for-
profit entity, or operates through a common enterprise with
one or more for-profit entities).
\210\United States Senate Permanent Subcommittee on
Investigations, Committee on Governmental Affairs,
Profiteering in a Non-Profit Industry: Abusive Practices in
Credit Counseling, Report Prepared by the Majority & Minority
Staffs of the Permanent Subcommittee on Investigations and
Released in Conjunction with the Permanent Subcommittee
Investigations' Hearing on March 24, 2004, p. 31.
---------------------------------------------------------------------------
Under the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005, an individual generally may not be a
debtor in bankruptcy unless such individual has, within 180
days of filing a petition for bankruptcy, received from an
approved nonprofit budget and credit counseling agency an
individual or group briefing that outlines the opportunities
for available credit counseling and assists the individual in
performing a related budget analysis.\211\The clerk of the
court must maintain a publicly available list of nonprofit
budget and credit counseling agencies approved by the U.S.
Trustee (or bankruptcy administrator). In general, the U.S.
Trustee (or bankruptcy administrator) shall only approve an
agency that demonstrates that it will provide qualified
counselors, maintain adequate provision for safekeeping and
payment of client funds, provide adequate counseling with
respect to client credit problems, and deal responsibly and
effectively with other matters relating to the quality,
effectiveness, and financial security of the services it
provides. The minimum qualifications for approval of such an
agency include: (1) in general, having an independent board
of directors; (2) charging no more than a reasonable fee, and
providing services without regard to ability to pay; (3)
adequate provision for safekeeping and payment of client
funds; (4) provision of full disclosures to clients; (5)
provision of adequate counseling with respect to a client's
credit problems; (6) trained counselors who receive no
commissions or bonuses based on the outcome of the counseling
services; (7) experience and background in providing credit
counseling; and (8) adequate financial resources to provide
continuing support services for budgeting plans over the life
of any repayment plan. An individual debtor must file with
the court a certificate from the approved nonprofit budget
and credit counseling agency that provided the required
services describing the services provided, and a copy of the
debt management plan, if any, developed through the
agency.\212\
---------------------------------------------------------------------------
\211\This requirement does not apply in certain
circumstances, such as: (1) in general, where a debtor
resides in a district for which the U.S. Trustee has
determined that the approved counseling agencies for such
district are not reasonably able to provide adequate services
to additional individuals; (2) where exigent circumstances
merit a waiver, the individual seeking bankruptcy protection
files an appropriate certification with the court, and the
certification is acceptable to the court; and (3) in general,
where a court determines, after notice and hearing, that the
individual is unable to complete the requirement because of
incapacity, disability, or active military duty in a military
combat zone.
\212\The Act also requires that, prior to discharge of
indebtedness under chapter 7 or chapter 13, a debtor complete
an approved instructional course concerning personal
financial management, which course need not be conducted by a
nonprofit agency.
---------------------------------------------------------------------------

house bill

No provision.

Senate Amendment

Requirements for exempt status of credit counseling
organizations
Under the provision, an organization that provides credit
counseling services as a substantial purpose of the
organization (``credit counseling organization'') is eligible
for exemption from Federal income tax only as a charitable or
educational organization under section 501(c)(3) or as a
social welfare organization under section 501(c)(4), and only
if (in addition to present-law requirements) the credit
counseling organization is organized and operated in
accordance with the following:
1. The organization provides credit counseling services
tailored to the specific needs and circumstances of the
consumer;
2. The organization makes no loans to debtors and does not
negotiate the making of loans on behalf of debtors;
3. The organization generally does not promote, or charge
any separate fee for any service for the purpose of improving
any consumer's credit record, credit history, or credit
rating;
4. The organization does not refuse to provide credit
counseling services to a consumer due to inability of the
consumer to pay, the ineligibility of the consumer for debt
management plan enrollment, or the unwillingness of a
consumer to enroll in a debt management plan;
5. The organization establishes and implements a fee policy
to require that any fees charged to a consumer for its
services are reasonable, and prohibits charging any fee based
in whole or in part on a percentage of the consumer's debt,
the consumer's payments to be made pursuant to a debt
management plan, or on the projected or actual savings to the
consumer resulting from enrolling in a debt management plan;
6. The organization at all times has a board of directors
or other governing body (a) that is controlled by persons who
represent the broad interests of the public, such as public
officials acting in their capacities as such, persons having
special knowledge or expertise in credit or financial
education, and community leaders; (b) not more than 20
percent of the voting power of which is vested in persons who
are employed by the organization or who will benefit
financially, directly or indirectly, from the organization's
activities (other than through the receipt of reasonable
directors' fees or the repayment of consumer debt to
creditors other than the credit counseling organization or
its affiliates) and (c) not more than 49 percent of the
voting power of which is vested in persons who are employed
by the organization or who will benefit financially, directly
or indirectly, from the organization's activities (other than
through the receipt of reasonable directors' fees);
7. The organization receives no amount for providing
referrals to others for financial services (including debt
management services) or credit counseling services to be
provided to consumers, and pays no amount to others for
obtaining referrals of consumers; and
8. The organization does not own more than 35 percent of
the total combined voting power of a corporation (or profits
or beneficial interest in the case of a partnership or trust
or estate) that is in the business of lending money,
repairing credit, or providing debt management plan services,
payment processing, and similar services.
The Secretary may require any credit counseling
organization to submit such information as the Secretary
requires to verify that such organization meets the
requirements of the provision.
Additional requirements for charitable and educational
organizations
Under the provision, a credit counseling organization is
described in section 501(c)(3) only if, in addition to
satisfying the above requirements, the organization is
organized and operated such that the organization (1) charges
no fees (other than nominal fees) for debt management plan
services and waives any fees if the consumer is unable to pay
such fees; (2) does not solicit contributions from consumers
during the initial counseling process or while the consumer
is receiving services from the organization; (3) normally
limits debt management plan services (in the aggregate) to 25
percent of the organization's total activities (determined by
taking into account time, resources, source of revenues or
effort expended by the organization, and any other measures
prescribed by the Secretary).\213\
---------------------------------------------------------------------------
\213\If, under any such measure, the organization's debt
management plan services exceed 25 percent of the
organization's total activities, the organization is treated
as exceeding the 25-percent limit. For example, an
organization that devotes 30 percent of its total staff time
to debt management plan services is regarded as exceeding the
25-percent limit, even if the organization devotes less than
15 percent of its total financial resources to debt
management plan services.
---------------------------------------------------------------------------
Additional requirements for social welfare organizations
Under the provision, a credit counseling organization is
described in section 501(c)(4) only if, in addition to
satisfying the above requirements applicable to such
organizations, it is organized and operated such that the
organization charges no fees (other than nominal fees) for
its credit counseling services, and waives any fees if the
consumer is unable to pay such fees. In addition, a credit
counseling organization shall not be treated as an
organization described in section 501(c)(4) unless such
organization notifies the Secretary, in such manner as the
Secretary may by regulations prescribe, that it is applying
for recognition as a credit counseling organization.
Debt management plan services treated as an unrelated trade
or business
Under the provision, debt management plan services are
treated as an unrelated trade or business for purposes of the
tax on income from an unrelated trade or business to the
extent such services are not substantially related to the
provision of credit counseling services to a consumer or are
provided by an organization that is not a credit counseling
organization.

[[Page 7421]]

Definitions
Credit counseling services
Credit counseling services are (a) the provision of
educational information to the general public on budgeting,
personal finance, financial literacy, saving and spending
practices, and the sound use of consumer credit; (b) the
assisting of individuals and families with financial problems
by providing them with counseling; or (c) any combination of
such activities.
Debt management plan services
Debt management plan services are services related to the
repayment, consolidation, or restructuring of a consumer's
debt, and includes the negotiation with creditors of lower
interest rates, the waiver or reduction of fees, and the
marketing and processing of debt management plans.
Effective date.--In general the provision applies to
taxable years beginning after the date of enactment. For a
credit counseling organization that is described in section
501(c)(3) or 501(c)(4) on the date of enactment, the
provision is effective for taxable years beginning after the
date that is one year after the date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
10. Expand the base of the tax on private foundation net
investment income (sec. 222 of the Senate amendment and
sec. 4940 of the Code)

Present Law

In general
Under section 4940(a) of the Code, private foundations that
are recognized as exempt from Federal income tax under
section 501(a) of the Code are subject to a two-percent
excise tax on their net investment income. Private
foundations that are not exempt from tax, such as certain
charitable trusts,\214\ also are subject to an excise tax
under section 4940(b) based on net investment income and
unrelated business income. The two-percent rate of tax is
reduced to one-percent if certain requirements are met in a
taxable year.\215\ Unlike certain other excise taxes imposed
on private foundations, the tax based on investment income
does not result from a violation of substantive law by the
private foundation; it is solely an excise tax.
---------------------------------------------------------------------------
\214\See sec. 4947(a)(1).
\215\Sec. 4940(e).
---------------------------------------------------------------------------
The tax on taxable private foundations under section
4940(b) is equal to the excess of the sum of the excise tax
that would have been imposed under section 4940(a) if the
foundation were tax exempt and the amount of the unrelated
business income tax that would have been imposed if the
foundation were tax exempt, over the income tax imposed on
the foundation under subtitle A of the Code.
Net investment income
Internal Revenue Code
In general, net investment income is defined as the amount
by which the sum of gross investment income and capital gain
net income exceeds the deductions relating to the production
of gross investment income.\216\
---------------------------------------------------------------------------
\216\Sec. 4940(c)(1). Net investment income also is
determined by applying section 103 (generally providing an
exclusion for interest on certain State and local bonds) and
section 265 (generally disallowing the deduction for interest
and certain other expenses with respect to tax-exempt
income). Sec. 4940(c)(5).
---------------------------------------------------------------------------
Gross investment income is the gross amount of income from
interest, dividends, rents, payments with respect to
securities loans, and royalties. Gross investment income does
not include any income that is included in computing a
foundation's unrelated business taxable income.\217\
---------------------------------------------------------------------------
\217\Sec. 4940(c)(2).
---------------------------------------------------------------------------
Capital gain net income takes into account only gains and
losses from the sale or other disposition of property used
for the production of interest, dividends, rents, and
royalties, and property used for the production of income
included in computing the unrelated business income tax
(except to the extent the gain or loss is taken into account
for purposes of such tax). Losses from sales or other
dispositions of property are allowed only to the extent of
gains from such sales or other dispositions, and no capital
loss carryovers are allowed.\218\
---------------------------------------------------------------------------
\218\Sec. 4940(c)(4).
---------------------------------------------------------------------------
Treasury Regulations and case law
The Treasury regulations elaborate on the Code definition
of net investment income. The regulations cite items of
investment income listed in the Code, and in addition clarify
that net investment income includes interest, dividends,
rents, and royalties derived from all sources, including from
assets devoted to charitable activities. For example,
interest received on a student loan is includible in the
gross investment income of a foundation making the loan.\219\
---------------------------------------------------------------------------
\219\Treas. Reg. sec. 53.4940-1(d)(1).
---------------------------------------------------------------------------
The regulations further provide that gross investment
income includes certain items of investment income that are
described in the unrelated business income tax
regulations.\220\ Such additional items include payments with
respect to securities loans (an item added to the Code in
1978), annuities, income from notional principal contracts,
and other substantially similar income from ordinary and
routine investments to the extent determined by the
Commissioner.\221\ These latter three categories of income
are not enumerated as net investment income in the Code.
---------------------------------------------------------------------------
\220\Id.
\221\Treas. Reg. sec. 1.512(b)-1(a)(1).
---------------------------------------------------------------------------
The Treasury regulations also elaborate on the Code
definition of capital gain net income. The regulations
provide that the only capital gains and losses that are taken
into account are (1) gains and losses from the sale or other
disposition of property held by a private foundation for
investment purposes (other than program related investments),
and (2) property used for the production of income included
in computing the unrelated business income tax (except to the
extent the gain or loss is taken into account for purposes of
such tax).
This definition of capital gain net income builds on the
definition provided in the Code by providing an exception for
gain and loss from program related investments and by
stating, in addition, that ``gains and losses from the sale
or other disposition of property used for the exempt purposes
of the private foundation are excluded.''\222\ As an example,
the regulations provide that gain or loss on the sale of
buildings used for the foundation's exempt activities are not
taken into account for purposes of the section 4940 tax. If a
foundation uses exempt income for exempt purposes and (other
than incidentally) for investment purposes, then the portion
of the gain or loss received upon sale or other disposition
that is allocable to the investment use is taken into account
for purposes of the tax.
---------------------------------------------------------------------------
\222\Treas. Reg. sec. 53.4940-1(f)(1).
---------------------------------------------------------------------------
The regulations further provide that ``property shall be
treated as held for investment purposes even though such
property is disposed of by the foundation immediately upon
its receipt, if it is property of a type which generally
produces interest, dividends, rents, royalties, or capital
gains through appreciation (for example, rental real estate,
stock, bonds, mineral interest, mortgages, and
securities).''\223\
---------------------------------------------------------------------------
\223\Id.
---------------------------------------------------------------------------
This regulation has been challenged in the courts. The
regulation says that property is treated as held for
investment purposes if it is of a type that ``generally
produces'' certain types of income. By contrast, the Code
provides that the property be ``used'' to produce such
income. In Zemurray Foundation v. United States, 687 F.2d 97
(5th Cir. 1982), the taxpayer foundation challenged the
Treasury's attempt to tax under section 4940 capital gain on
the sale of timber property. The taxpayer asserted that the
property was not actually used to produce investment income,
and that the Treasury Regulation was invalid because the
regulation would subject to tax property that is of a type
that could generally be used to produce investment income. On
this issue, the court upheld the Treasury regulation,
reasoning that the regulation's use of the phrase ``generally
used,'' though permitting taxation ``so long as the property
sold is usable to produce the applicable types of income,
regardless of whether the property is actually used to
produce income or not'' was not unreasonable or plainly
inconsistent with the statute.\224\ However, on remand to the
district court, the district court concluded that the timber
property at issue, though a type of property generally used
to produce investment income, was not susceptible for such
use.\225\ Thus, the district court concluded that the
Treasury could not tax the gain under this portion of the
regulation.
---------------------------------------------------------------------------
\224\Zemurray Foundation v. United States, 687 F.2d 97, 100
(5th Cir. 1982).
\225\Zemurray Foundation v. United States, 53 A.F.T.R. 2d
(RIA) 842 (E. D. La. 1983).
---------------------------------------------------------------------------
The question then turned to the taxpayer's second challenge
to the regulation. At issue was the meaning of the regulatory
phrase ``capital gains through appreciation.'' The regulation
provides that if property is of a type that generally
produces capital gains through appreciation, then the gain is
subject to tax. The Treasury argued that the timber property
at issue, although held by the court not to be property (in
this case) susceptible for use to produce interest,
dividends, rents, or royalties, still was held by the
taxpayer to produce capital gain through appreciation and
therefore the gain should be subject to tax under the
regulation.
On this issue, the court held for the taxpayer, reasoning
that the language of the Code clearly is limited to certain
gains and losses, e.g., the court cited the Code language
providing that ``there shall be taken into account only gains
and losses from the sale or other disposition of property
used for the production of interest, dividends, rents, and
royalties. . . .''\226\ The court noted that ``capital gains
through appreciation'' is not enumerated in the statute. The
court used as an example a jade figurine held by a
foundation. Jade figurines do not generally produce interest,
dividends, rents, or royalties, but gain on the sale of such
a figurine would be taxable under the ``capital gains through
appreciation'' standard, yet such standard does not appear in
the statute. After Zemurray, the Treasury generally conceded
this issue.\227\
---------------------------------------------------------------------------
\226\Zemurray Foundation v. United States, 755 F.2d 404 (5th
Cir. 1985), 413 (citing Code sec. 4940(c)(4)(A).
\227\G.C.M. 39538 (July 23, 1986).

---------------------------------------------------------------------------

[[Page 7422]]

With respect to capital losses, the Code provides that
carryovers are not permitted, whereas the regulations state
that neither carryovers nor carrybacks are permitted.\228\
---------------------------------------------------------------------------
\228\Treas. Reg. sec. 53.4940-1(f)(3).
---------------------------------------------------------------------------
Application of Zemurray to the Code and the regulations
Applying the Zemurray case to the Code and regulations
results in a general principle for purposes of present law:
private foundations are subject to tax under section 4940
only on the items of income and only on gains and losses
specifically enumerated therein. Under this principle,
private foundations generally are not subject to the section
4940 tax on other substantially similar types of income from
ordinary and routine investments, notwithstanding Treasury
regulations to the contrary. In addition, the regulations
provide that gain or loss from the sale or other disposition
of assets used for exempt purposes, with specific reference
to program-related investments, is excluded. The Code
provides for no such blanket exclusion; thus, under the
language of the Code and the reasoning of Zemurray, if a
foundation provided office space at below market rent to a
charitable organization for use in the organization's exempt
purposes, gain on the sale of the building by the foundation
should be subject to the section 4940 tax despite the
Treasury regulations.\229\
---------------------------------------------------------------------------
\229\See also the example in Treas. Reg. sec. 53.4940-
1(f)(1).
---------------------------------------------------------------------------
In addition, under the logic of Zemurray, capital loss
carrybacks arguably are permitted, notwithstanding Treasury
regulations to the contrary, because the Code mentions only a
bar on use of carryovers and says nothing about carrybacks.

house bill

No provision.

senate amendment

The provision amends the definition of gross investment
income (including for purposes of capital gain net income) to
include items of income that are similar to the items
presently enumerated in the Code. Such similar items include
income from notional principal contracts, annuities, and
other substantially similar income from ordinary and routine
investments, and, with respect to capital gain net income,
capital gains from appreciation, including capital gains and
losses from the sale or other disposition of assets used to
further an exempt purpose.
The provision provides that there are no carrybacks of
losses from sales or other dispositions of property.
Effective date.--The provision is effective for taxable
years beginning after the date of enactment.

conference agreement

The conference agreement does not include the Senate
amendment provision.
11. Definition of convention or association of churches (sec.
223 of the Senate amendment and sec. 7701 of the Code)

present law

Under present law, an organization that qualifies as a
``convention or association of churches'' (within the meaning
of sec. 170(b)(1)(A)(i)) is not required to file an annual
return,\230\ is subject to the church tax inquiry and church
tax examination provisions applicable to organizations
claiming to be a church,\231\ and is subject to certain other
provisions generally applicable to churches.\232\ The
Internal Revenue Code does not define the term ``convention
or association of churches.''
---------------------------------------------------------------------------
\230\Sec. 6033(a)(2)(A)(i).
\231\Sec. 7611(h)(1)(B).
\232\See, e.g., Sec. 402(g)(8)(B) (limitation on elective
deferrals); sec. 403(b)(9)(B) (definition of retirement
income account); sec. 410(d) (election to have participation,
vesting, funding, and certain other provisions apply to
church plans); sec. 414(e) (definition of church plan); sec.
415(c)(7) (certain contributions by church plans); sec.
501(h)(5) (disqualification of certain organizations from
making the sec. 501(h) election regarding lobbying
expenditure limits); sec. 501(m)(3) (definition of
commercial-type insurance); sec. 508(c)(1)(A) (exception from
requirement to file application seeking recognition of exempt
status); sec. 512(b)(12) (allowance of up to $1,000 deduction
for purposes of determining unrelated business taxable
income); sec. 514(b)(3)(E) (definition of debt-financed
property); sec. 3121(w)(3)(A) (election regarding exemption
from social security taxes); sec. 3309(b)(1) (application of
federal unemployment tax provisions to services performed in
the employ of certain organizations); sec. 6043(b)(1)
(requirement to file a return upon liquidation or dissolution
of the organization); and sec. 7702(j)(3)(A) (treatment of
certain death benefit plans as life insurance).
---------------------------------------------------------------------------

house bill

No provision.

senate amendment

The provision provides that an organization that otherwise
is a convention or association of churches does not fail to
so qualify merely because the membership of the organization
includes individuals as well as churches, or because
individuals have voting rights in the organization.
Effective date.--The provision is effective on the date of
enactment.

conference agreement

The conference agreement does not include the Senate
amendment provision.
12. Notification requirement for exempt entities not
currently required to file an annual information return
(sec. 224 of the Senate amendment and secs. 6033, 6104,
6652, and 7428 of the Code)

present law

Under present law, the requirement that an exempt
organization file an annual information return does not apply
to several categories of exempt organizations. Organizations
excepted from the filing requirement include organizations
(other than private foundations), the gross receipts of which
in each taxable year normally are not more than $25,000.\233\
Also exempt from the requirement are churches, their
integrated auxiliaries, and conventions or associations of
churches; the exclusively religious activities of any
religious order; section 501(c)(1) instrumentalities of the
United States; section 501(c)(21) trusts; an interchurch
organization of local units of a church; certain mission
societies; certain church-affiliated elementary and high
schools; certain state institutions whose income is excluded
from gross income under section 115; certain governmental
units and affiliates of governmental units; and other
organizations that the IRS has relieved from the filing
requirement pursuant to its statutory discretionary
authority.
---------------------------------------------------------------------------
\233\Sec. 6033(a)(2); Treas. Reg. sec. 1.6033-2(a)(2)(i);
Treas. Reg. sec. 1.6033-2(g)(1). Sec. 6033(a)(2)(A)(ii)
provides a $5,000 annual gross receipts exception from the
annual reporting requirements for certain exempt
organizations. In Announcement 82-88, 1982-25 I.R.B. 23, the
IRS exercised its discretionary authority under section 6033
to increase the gross receipts exception to $25,000, and
enlarge the category of exempt organizations that are not
required to file Form 990.
---------------------------------------------------------------------------

house bill

No provision.

senate amendment

The provision provides that organizations that are excused
from filing an information return by reason of normally
having gross receipts below a certain specified amount
(generally, under $25,000) shall furnish to the Secretary
annually the legal name of the organization, any name under
which the organization operates or does business, the
organization's mailing address and Internet web site address
(if any), the organization's taxpayer identification number,
the name and address of a principal officer, and evidence of
the organization's continuing basis for its exemption from
the generally applicable information return filing
requirements. Upon such organization's termination of
existence, the organization is required to furnish notice of
such termination.
The provision provides that if an organization fails to
provide the required notice for three consecutive years, the
organization's tax-exempt status is revoked. In addition, if
an organization that is required to file an annual
information return under section 6033(a) (Form 990) fails to
file such an information return for three consecutive years,
the organization's tax-exempt status is revoked. If an
organization fails to meet its filing obligation to the IRS
for three consecutive years in cases where the organization
is subject to the information return filing requirement in
one or more years during a three-year period and also is
subject to the notice requirement for one or more years
during the same three-year period, the organization's tax-
exempt status is revoked.
A revocation under the provision is effective from the date
that the Secretary determines was the last day the
organization could have timely filed the third required
information return or notice. To again be recognized as tax-
exempt, the organization must apply to the Secretary for
recognition of tax-exemption, irrespective of whether the
organization was required to make an application for
recognition of tax-exemption in order to gain tax-exemption
originally.
If upon application for tax-exempt status after a
revocation under the provision, the organization shows to the
satisfaction of the Secretary reasonable cause for failing to
file the required annual notices or returns, the
organization's tax-exempt status may, in the discretion of
the Secretary, be reinstated retroactive to the date of
revocation. An organization may not challenge under the
Code's declaratory judgment procedures (section 7428) a
revocation of tax-exemption made pursuant to the provision.
There is no monetary penalty for failure to file the
notice. The provision does not require that the notices be
made available to the public under the public disclosure and
inspection rules generally applicable to exempt
organizations. The provision does not affect an
organization's obligation under present law to file required
information returns or existing penalties for failure to file
such returns.
The Secretary is required to notify in a timely manner
every organization that is subject to the notice filing
requirement of the new filing obligation. Notification by the
Secretary shall be by mail, in the case of any organization
the identity and address of which is included in the list of
exempt organizations maintained by the Secretary, and by
Internet or other means of outreach, in the case of any other
organization. In addition, the Secretary is required to
publicize in a timely manner in appropriate forms and
instructions and other means of outreach the new penalty
imposed for consecutive failures to file the information
return.
The Secretary is authorized to publish a list of
organizations whose exempt status is revoked under the
provision.

[[Page 7423]]

Effective date.--The provision is effective for notices and
returns with respect to annual periods beginning after 2005.

conference agreement

The conference agreement does not include the Senate
amendment provision.
13. Disclosure to state officials of proposed actions related
to section 501(c) organizations (sec. 225 of the Senate
amendment and secs. 6103, 6104, 7213, 7213A, and 7431 of
the Code)

present law

In the case of organizations that are described in section
501(c)(3) and exempt from tax under section 501(a) or that
have applied for exemption as an organization so described,
present law (sec. 6104(c)) requires the Secretary to notify
the appropriate State officer of (1) a refusal to recognize
such organization as an organization described in section
501(c)(3), (2) a revocation of a section 501(c)(3)
organization's tax-exempt status, and (3) the mailing of a
notice of deficiency for any tax imposed under section 507,
chapter 41, or chapter 42.\234\ In addition, at the request
of such appropriate State officer, the Secretary is required
to make available for inspection and copying, such returns,
filed statements, records, reports, and other information
relating to the above-described disclosures, as are relevant
to any State law determination. An appropriate State officer
is the State attorney general, State tax officer, or any
State official charged with overseeing organizations of the
type described in section 501(c)(3).
---------------------------------------------------------------------------
\234\The applicable taxes include the termination tax on
private foundations; taxes on public charities for certain
excess lobbying expenses; taxes on a private foundation's net
investment income, self-dealing activities, undistributed
income, excess business holdings, investments that jeopardize
charitable purposes, and taxable expenditures (some of these
taxes also apply to certain non-exempt trusts); taxes on the
political expenditures and excess benefit transactions of
section 501(c)(3) organizations; and certain taxes on black
lung benefit trusts and foreign organizations.
---------------------------------------------------------------------------
In general, returns and return information (as such terms
are defined in section 6103(b)) are confidential and may not
be disclosed or inspected unless expressly provided by
law.\235\ Present law requires the Secretary to keep records
of disclosures and requests for inspection\236\ and requires
that persons authorized to receive returns and return
information maintain various safeguards to protect such
information against unauthorized disclosure.\237\ Willful
unauthorized disclosure or inspection of returns or return
information is subject to a fine and/or imprisonment.\238\
The knowing or negligent unauthorized inspection or
disclosure of returns or return information gives the
taxpayer a right to bring a civil suit.\239\ Such present-law
protections against unauthorized disclosure or inspection of
returns and return information do not apply to the
disclosures or inspections, described above, that are
authorized by section 6104(c).
---------------------------------------------------------------------------
\235\Sec. 6103(a).
\236\Sec. 6103(p)(3).
\237\Sec. 6103(p)(4).
\238\Secs. 7213 and 7213A.
\239\Sec. 7431.
---------------------------------------------------------------------------

house bill

No provision.

senate amendment

The provision provides that upon written request by an
appropriate State officer, the Secretary may disclose: (1) a
notice of proposed refusal to recognize an organization as a
section 501(c)(3) organization; (2) a notice of proposed
revocation of tax-exemption of a section 501(c)(3)
organization; (3) the issuance of a proposed deficiency of
tax imposed under section 507, chapter 41, or chapter 42; (4)
the names, addresses, and taxpayer identification numbers of
organizations that have applied for recognition as section
501(c)(3) organizations; and (5) returns and return
information of organizations with respect to which
information has been disclosed under (1) through (4)
above.\240\ Disclosure or inspection is permitted for the
purpose of, and only to the extent necessary in, the
administration of State laws regulating section 501(c)(3)
organizations, such as laws regulating tax-exempt status,
charitable trusts, charitable solicitation, and fraud. Such
disclosure or inspection may be made only to or by an
appropriate State officer or to an officer or employee of the
State who is designated by the appropriate State officer, and
may not be made by or to a contractor or agent. The Secretary
also is permitted to disclose or open to inspection the
returns and return information of an organization that is
recognized as tax-exempt under section 501(c)(3), or that has
applied for such recognition, to an appropriate State officer
if the Secretary determines that disclosure or inspection may
facilitate the resolution of Federal or State issues relating
to the tax-exempt status of the organization. For this
purpose, appropriate State officer means the State attorney
general, the State tax official, or any other State official
charged with overseeing organizations of the type described
in section 501(c)(3).
---------------------------------------------------------------------------
\240\Such returns and return information also may be open to
inspection by an appropriate State officer.
---------------------------------------------------------------------------
In addition, the provision provides that upon the written
request by an appropriate State officer, the Secretary may
make available for inspection or disclosure returns and
return information of an organization described in section
501(c)(2) (certain title holding companies), 501(c)(4)
(certain social welfare organizations), 501(c)(6) (certain
business leagues and similar organizations), 501(c)(7)
(certain recreational clubs), 501(c)(8) (certain fraternal
organizations), 501(c)(10) (certain domestic fraternal
organizations operating under the lodge system), and
501(c)(13) (certain cemetery companies). Such returns and
return information are available for inspection or disclosure
only for the purpose of, and to the extent necessary in, the
administration of State laws regulating the solicitation or
administration of the charitable funds or charitable assets
of such organizations. Such disclosure or inspection may be
made only to or by an appropriate State officer or to an
officer or employee of the State who is designated by the
appropriate State officer, and may not be made by or to a
contractor or agent. For this purpose, appropriate State
officer means the State attorney general, the State tax
officer, and the head of an agency designated by the State
attorney general as having primary responsibility for
overseeing the solicitation of funds for charitable purposes
of such organizations.
In addition, the provision provides that any returns and
return information disclosed under section 6104(c) may be
disclosed in civil administrative and civil judicial
proceedings pertaining to the enforcement of State laws
regulating the applicable tax-exempt organization in a manner
prescribed by the Secretary. Returns and return information
are not to be disclosed under section 6104(c), or in such an
administrative or judicial proceeding, to the extent that the
Secretary determines that such disclosure would seriously
impair Federal tax administration. The provision makes
disclosures of returns and return information under section
6104(c) subject to the disclosure, recordkeeping, and
safeguard provisions of section 6103, including the
requirements that the Secretary maintain a permanent system
of records of requests for disclosure (sec. 6103(p)(3)), and
that the appropriate State officer maintain various
safeguards that protect against unauthorized disclosure (sec.
6103(p)(4)). The provision provides that the willful
unauthorized disclosure of returns or return information
described in section 6104(c) is a felony subject to a fine of
up to $5,000 and/or imprisonment of up to five years (sec.
7213(a)(2)), the willful unauthorized inspection of returns
or return information described in section 6104(c) is subject
to a fine of up to $1,000 and/or imprisonment of up to one
year (sec. 7213A), and provides the taxpayer the right to
bring a civil action for damages in the case of knowing or
negligent unauthorized disclosure or inspection of such
information (sec. 7431(a)(2)).
Effective date.--The provision is effective on the date of
enactment but does not apply to requests made before such
date.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
14. Improve accountability of donor advised funds (secs. 231
through 234 of the Senate amendment and secs. 170 and
4958 and new secs. 4967, 4968, and 4969 of the Code)

Present Law

Requirements for section 501(c)(3) tax-exempt status
Charitable organizations, i.e., organizations described in
section 501(c)(3), generally are exempt from Federal income
tax and are eligible to receive tax deductible contributions.
A charitable organization must operate primarily in pursuance
of one or more tax-exempt purposes constituting the basis of
its tax exemption.\241\ In order to qualify as operating
primarily for a purpose described in section 501(c)(3), an
organization must satisfy the following operational
requirements: (1) the net earnings of the organization may
not inure to the benefit of any person in a position to
influence the activities of the organization; (2) the
organization must operate to provide a public benefit, not a
private benefit;\242\ (3) the organization may not be
operated primarily to conduct an unrelated trade or
business;\243\ (4) the organization may not engage in
substantial legislative lobbying; and (5) the organization
may not participate or intervene in any political campaign.
---------------------------------------------------------------------------
\241\Treas. Reg. sec. 1.501(c)(3)-1(c)(1). The Code specifies
such purposes as religious, charitable, scientific, testing
for public safety, literary, or educational purposes, or to
foster international amateur sports competition, or for the
prevention of cruelty to children or animals. In general, an
organization is organized and operated for charitable
purposes if it provides relief for the poor and distressed or
the underprivileged. Treas. Reg. sec. 1.501(c)(3)-1(d)(2).
\242\Treas. Reg. sec. 1.501(c)(3)-1(d)(1)(ii).
\243\Treas. Reg. sec. 1.501(c)(3)-1(e)(1). Conducting a
certain level of unrelated trade or business activity will
not jeopardize tax-exempt status.
---------------------------------------------------------------------------
Classification of section 501(c)(3) organizations
Section 501(c)(3) organizations are classified either as
``public charities'' or ``private foundations.''\244\ Private
foundations generally are defined under section 509(a) as all

[[Page 7424]]

organizations described in section 501(c)(3) other than an
organization granted public charity status by reason of: (1)
being a specified type of organization (i.e., churches,
educational institutions, hospitals and certain other medical
organizations, certain organizations providing assistance to
colleges and universities, or a governmental unit); (2)
receiving a substantial part of its support from governmental
units or direct or indirect contributions from the general
public; or (3) providing support to another section 501(c)(3)
entity that is not a private foundation. In contrast to
public charities, private foundations generally are funded
from a limited number of sources (e.g., an individual,
family, or corporation). Donors to private foundations and
persons related to such donors together often control the
operations of private foundations.
---------------------------------------------------------------------------
\244\Sec. 509(a). Private foundations are either private
operating foundations or private non-operating foundations.
In general, private operating foundations operate their own
charitable programs in contrast to private non-operating
foundations, which generally are grant-making organizations.
Most private foundations are non-operating foundations.
---------------------------------------------------------------------------
Because private foundations receive support from, and
typically are controlled by, a small number of supporters,
private foundations are subject to a number of anti-abuse
rules and excise taxes not applicable to public
charities.\245\ For example, the Code imposes excise taxes on
acts of ``self-dealing'' between disqualified persons
(generally, an enumerated class of foundation insiders\246\)
and a private foundation. Acts of self-dealing include, for
example, sales or exchanges, or leasing, of property; lending
of money; or the furnishing of goods, services, or facilities
between a disqualified person and a private foundation.\247\
In addition, private non-operating foundations are required
to pay out a minimum amount each year as qualifying
distributions. In general, a qualifying distribution is an
amount paid to accomplish one or more of the organization's
exempt purposes, including reasonable and necessary
administrative expenses.\248\ Certain expenditures of private
foundations are also subject to tax.\249\ In general, taxable
expenditures are expenditures: (1) for lobbying; (2) to
influence the outcome of a public election or carry on a
voter registration drive (unless certain requirements are
met); (3) as a grant to an individual for travel, study, or
similar purposes unless made pursuant to procedures approved
by the Secretary; (4) as a grant to an organization that is
not a public charity or exempt operating foundation unless
the foundation exercises expenditure responsibility\250\ with
respect to the grant; or (5) for any non-charitable purpose.
Additional excise taxes may also apply in the event a private
foundation holds certain business interests (``excess
business holdings'')\251\ or makes an investment that
jeopardizes the foundation's exempt purposes.\252\
---------------------------------------------------------------------------
\245\Secs. 4940-4945.
\246\See sec. 4946(a).
\247\Sec. 4941.
\248\Sec. 4942(g)(1)(A). A qualifying distribution also
includes any amount paid to acquire an asset used (or held
for use) directly in carrying out one or more of the
organization's exempt purposes and certain amounts set-aside
for exempt purposes. Sec. 4942(g)(1)(B) and 4942(g)(2).
\249\Sec. 4945. Taxes imposed may be abated if certain
conditions are met. Secs. 4961 and 4962.
\250\In general, expenditure responsibility requires that a
foundation make all reasonable efforts and establish
reasonable procedures to ensure that the grant is spent
solely for the purpose for which it was made, to obtain
reports from the grantee on the expenditure of the grant, and
to make reports to the Secretary regarding such expenditures.
Sec. 4945(h).
\251\Sec. 4943.
\252\Sec. 4944.
---------------------------------------------------------------------------
Supporting organizations
The Code provides that certain ``supporting organizations''
(in general, organizations that provide support to another
section 501(c)(3) organization that is not a private
foundation) are classified as public charities rather than
private foundations.\253\ To qualify as a supporting
organization, an organization must meet all three of the
following tests: (1) it must be organized and at all times
operated exclusively for the benefit of, to perform the
functions of, or to carry out the purposes of one or more
``publicly supported organizations''\254\ (the
``organizational and operational tests'');\255\ (2) it must
be operated, supervised, or controlled by or in connection
with one or more publicly supported organizations (the
``relationship test'');\256\ and (3) it must not be
controlled directly or indirectly by one or more disqualified
persons (as defined in section 4946) other than foundation
managers and other than one or more publicly supported
organizations (the ``lack of outside control test'').\257\
---------------------------------------------------------------------------
\253\Sec. 509(a)(3).
\254\In general, supported organizations of a supporting
organization must be publicly supported charities described
in sections 509(a)(1) or (a)(2).
\255\Sec. 509(a)(3)(A).
\256\Sec. 509(a)(3)(B).
\257\Sec. 509(a)(3)(C).
---------------------------------------------------------------------------
To satisfy the relationship test, a supporting organization
must hold one of three statutorily described close
relationships with the supported organization. The
organization must be: (1) operated, supervised, or controlled
by a publicly supported organization (commonly referred to as
``Type I'' supporting organizations); (2) supervised or
controlled in connection with a publicly supported
organization (``Type II'' supporting organizations); or (3)
operated in connection with a publicly supported organization
(``Type III'' supporting organizations).\258\
---------------------------------------------------------------------------
\258\Treas. Reg. sec. 1.509(a)-4(f)(2).
---------------------------------------------------------------------------
Type I supporting organizations
In the case of supporting organizations that are operated,
supervised, or controlled by one or more publicly supported
organizations (Type I supporting organizations), one or more
supported organizations must exercise a substantial degree of
direction over the policies, programs, and activities of the
supporting organization.\259\ The relationship between the
Type I supporting organization and the supported organization
generally is comparable to that of a parent and subsidiary.
The requisite relationship may be established by the fact
that a majority of the officers, directors, or trustees of
the supporting organization are appointed or elected by the
governing body, members of the governing body, officers
acting in their official capacity, or the membership of one
or more publicly supported organizations.\260\
---------------------------------------------------------------------------
\259\Treas. Reg. sec. 1.509(a)-4(g)(1)(i).
\260\Id.
---------------------------------------------------------------------------
Type II supporting organizations
Type II supporting organizations are supervised or
controlled in connection with one or more publicly supported
organizations. Rather than the parent-subsidiary relationship
characteristic of Type I organizations, the relationship
between a Type II organization and its supported
organizations is more analogous to a brother-sister
relationship. In order to satisfy the Type II relationship
requirement, generally there must be common supervision or
control by the persons supervising or controlling both the
supporting organization and the publicly supported
organizations.\261\ An organization generally is not
considered to be ``supervised or controlled in connection
with'' a publicly supported organization merely because the
supporting organization makes payments to the publicly
supported organization, even if the obligation to make
payments is enforceable under state law.\262\
---------------------------------------------------------------------------
\261\Treas. Reg. sec. 1.509(a)-4(h)(1).
\262\Treas. Reg. sec. 1.509(a)-4(h)(2).
---------------------------------------------------------------------------
Type III supporting organizations
Type III supporting organizations are ``operated in
connection with'' one or more publicly supported
organizations. To satisfy the ``operated in connection with''
relationship, Treasury regulations require that the
supporting organization be responsive to, and significantly
involved in the operations of, the publicly supported
organization. This relationship is deemed to exist where the
supporting organization meets both a ``responsiveness test''
and an ``integral part test.''\263\ In general, the
responsiveness test requires that the Type III supporting
organization be responsive to the needs or demands of the
publicly supported organizations. In general, the integral
part test requires that the Type III supporting organization
maintain significant involvement in the operations of one or
more publicly supported organizations, and that such publicly
supported organizations are in turn dependent upon the
supporting organization for the type of support which it
provides.
---------------------------------------------------------------------------
\263\Treas. Reg. sec. 1.509(a)-4(i)(1).
---------------------------------------------------------------------------
Charitable contributions
Contributions to organizations described in section
501(c)(3) are deductible, subject to certain limitations, as
an itemized deduction from Federal income taxes.\264\ Such
contributions also generally are deductible for estate and
gift tax purposes.\265\ However, if the taxpayer retains
control over the assets transferred to charity, the transfer
may not qualify as a completed gift for purposes of claiming
an income, estate, or gift tax deduction.
---------------------------------------------------------------------------
\264\Sec. 170.
\265\Secs. 2055 and 2522.
---------------------------------------------------------------------------
Public charities enjoy certain advantages over private
foundations regarding the deductibility of contributions. For
example, contributions of appreciated capital gain property
to a private foundation generally are deductible only to the
extent of the donor's cost basis.\266\ In contrast,
contributions to public charities generally are deductible in
an amount equal to the property's fair market value, except
for gifts of inventory and other ordinary income property,
short-term capital gain property, and tangible personal
property the use of which is unrelated to the donee
organization's exempt purpose. In addition, under present
law, a taxpayer's deductible contributions generally are
limited to specified percentages of the taxpayer's
contribution base, which generally is the taxpayer's adjusted
gross income for a taxable year. The applicable percentage
limitations vary depending upon the type of property
contributed and the classification of the donee organization.
In general, contributions to non-operating private
foundations are limited to a smaller percentage of the
donor's contribution base (up to 30 percent) than
contributions to public charities (up to 50 percent).\267\
---------------------------------------------------------------------------
\266\A special rule in section 170(e)(5) provides that
taxpayers are allowed a deduction equal to the fair market
value of certain contributions of appreciated, publicly
traded stock contributed to a private foundation.
\267\Sec. 170(b).
---------------------------------------------------------------------------
In general, taxpayers who make contributions and claim a
charitable deduction must

[[Page 7425]]

satisfy recordkeeping and substantiation requirements.\268\
The requirements vary depending on the type and value of
property contributed. A deduction generally may be denied if
the donor fails to satisfy applicable recordkeeping or
substantiation requirements.
---------------------------------------------------------------------------
\268\Sec. 170(f)(8).
---------------------------------------------------------------------------
Intermediate sanctions (excess benefit transaction tax)
The Code imposes excise taxes on excess benefit
transactions between disqualified persons and public
charities.\269\ An excess benefit transaction generally is a
transaction in which an economic benefit is provided by a
public charity directly or indirectly to or for the use of a
disqualified person, if the value of the economic benefit
provided exceeds the value of the consideration (including
the performance of services) received for providing such
benefit.
---------------------------------------------------------------------------
\269\Sec. 4958. The excess benefit transaction tax is
commonly referred to as ``intermediate sanctions,'' because
it imposes penalties generally considered to be less punitive
than revocation of the organization's exempt status. The tax
also applies to transactions between disqualified persons and
social welfare organizations (as described in section
501(c)(4)).
---------------------------------------------------------------------------
For purposes of the excess benefit transaction rules, a
disqualified person is any person in a position to exercise
substantial influence over the affairs of the public charity
at any time in the five-year period ending on the date of the
transaction at issue.\270\ Persons holding certain powers,
responsibilities, or interests (e.g., officers, directors, or
trustees) are considered to be in a position to exercise
substantial influence over the affairs of the public charity.
---------------------------------------------------------------------------
\270\Sec. 4958(f)(1). A disqualified person also includes
certain family members of such a person, and certain entities
that satisfy a control test with respect to such persons.
---------------------------------------------------------------------------
An excess benefit transaction tax is imposed on the
disqualified person and, in certain cases, on the
organization managers, but is not imposed on the public
charity. An initial tax of 25 percent of the excess benefit
amount is imposed on the disqualified person that receives
the excess benefit. An additional tax on the disqualified
person of 200 percent of the excess benefit applies if the
violation is not corrected within a specified period. A tax
of 10 percent of the excess benefit (not to exceed $10,000
with respect to any excess benefit transaction) is imposed on
an organization manager that knowingly participated in the
excess benefit transaction, if the manager's participation
was willful and not due to reasonable cause, and if the
initial tax was imposed on the disqualified person.
Community foundations
Community foundations generally are broadly supported
section 501(c)(3) public charities that make grants to other
charitable organizations located within a community
foundation's particular geographic area. Donors sometimes
make contributions to a community foundation through
transfers to a separate trust or fund, the assets of which
are held and managed by a bank or investment company.
Certain community foundations are subject to special rules
that permit them to treat the separate funds or trusts
maintained by the community foundation as a single entity for
tax purposes. This ``single entity'' status allows the
community foundation to be classified as a public charity.
One of the requirements that community foundations must meet
is that funds maintained by the community foundation may not
be subject by the donor to any material restrictions or
conditions. The prohibition against material restrictions or
conditions is designed to prevent a donor from encumbering a
fund in a manner that prevents the community foundation from
freely distributing the assets and income from it in
furtherance of the community foundation's charitable
purposes. Under Treasury regulations, whether a particular
restriction or condition placed by the donor on the transfer
of assets is material must be determined from all of the
facts and circumstances of the transfer. The regulations set
out some of the more significant facts and circumstances to
be considered in making a determination, including: (1)
whether the transferee public charity is the fee owner of the
assets received; (2) whether the assets are held and
administered by the public charity in a manner consistent
with its own exempt purposes; (3) whether the governing body
of the public charity has the ultimate authority and control
over the assets and the income derived from them; and (4)
whether the governing body of the public charity is
independent from the donor. The regulations provide several
non-adverse factors for determining whether a particular
restriction or condition placed by the donor on the transfer
of assets is material. In addition, the regulations list
numerous factors and subfactors that indicate that the
community foundation is prevented from freely and effectively
employing the donated assets and the income thereon.
Donor advised funds
Some charitable organizations (including community
foundations) establish accounts to which donors may
contribute and thereafter provide nonbinding advice or
recommendations with regard to distributions from the fund or
the investment of assets in the fund. Such accounts are
commonly referred to as ``donor advised funds.'' Donors who
make contributions to charities for maintenance in a donor
advised fund generally claim a charitable contribution
deduction at the time of the contribution. Although
sponsoring charities frequently permit donors (or other
persons appointed by donors) to provide nonbinding
recommendations concerning the distribution or investment of
assets in a donor advised fund, sponsoring charities
generally must have legal ownership and control of such
assets following the contribution. If the sponsoring charity
does not have such control (or permits a donor to exercise
control over amounts contributed), the donor's contributions
may not qualify for a charitable deduction, and, in the case
of a community foundation, the contribution may be treated as
being subject to a material restriction or condition by the
donor.
In recent years, a number of financial institutions have
formed charitable corporations for the principal purpose of
offering donor advised funds, sometimes referred to as
``commercial'' donor advised funds. In addition, some
established charities have begun operating donor advised
funds in addition to their primary activities. The IRS has
recognized several organizations that sponsor donor advised
funds, including ``commercial'' donor advised funds, as
section 501(c)(3) public charities. The term ``donor advised
fund'' is not defined in statute or regulations.
Under the Katrina Emergency Tax Relief Act of 2005, certain
of the above-described percent limitations on contributions
to public charities are temporarily suspended for purposes of
certain ``qualified contributions'' to public charities.
Under the Act, qualified contributions do not include a
contribution if the contribution is for establishment of a
new, or maintenance in an existing, segregated fund or
account with respect to which the donor (or any person
appointed or designated by such donor) has, or reasonably
expects to have, advisory privileges with respect to
distributions or investments by reason of the donor's status
as a donor.

House Bill

No provision.

Senate Amendment

Definitions
Donor advised fund
The provision defines a ``donor advised fund'' as a fund or
account that is: (1) separately identified by reference to
contributions of a donor or donors\271\ (2) owned and
controlled by a sponsoring organization and (3) with respect
to which a donor (or any person appointed or designated by
such donor (a ``donor advisor'')) has, or reasonably expects
to have, advisory privileges with respect to the distribution
or investment of amounts held in the separately identified
fund or account by reason of the donor's status as a donor.
---------------------------------------------------------------------------
\271\The requirement that a donor advised fund be separately
identified by reference to contributions of a donor or donors
is intended to exclude from the definition of ``donor advised
fund'' certain types of funds or accounts maintained by
community foundations and other charities, such as field-of-
interest funds and scholarship funds, provided such funds or
accounts are not separately identified by reference to
contributions of a donor or donors.
---------------------------------------------------------------------------
Notwithstanding the foregoing, the term ``donor advised
fund'' does not include a fund or account from which are made
grants to individuals for travel, study, or other similar
purposes by such individual, provided that (1) a donor's or
donor advisor's advisory privileges are performed exclusively
by such donor or donor advisor in such person's capacity as a
member of a committee appointed by the sponsoring
organization, (2) no combination of a donor and persons
related to or appointed by such donor, control, directly or
indirectly, such committee, and (3) all grants from such fund
or account satisfy requirements similar to those described in
section 4945(g) (concerning grants to individuals by private
foundations). In addition, the Secretary may exempt a fund or
account from treatment as a donor advised fund if such fund
or account (1) is advised by a committee not directly or
indirectly controlled by a donor, donor advisor, or persons
related to a donor or donor advisor or (2) will benefit a
single identified organization or governmental entity or a
single identified charitable purpose.
Sponsoring organization
The provision defines a ``sponsoring organization'' as an
organization that: (1) is described in section 170(c)\272\
(other than a governmental entity described in section
170(c)(1), and without regard to any requirement that the
organization be organized in the United States\273\); and (2)
maintains one or more donor advised funds.
---------------------------------------------------------------------------
\272\Section 170(c) describes organizations to which
charitable contributions that are deductible for income tax
purposes can be made.
\273\See sec. 170(c)(2)(A).
---------------------------------------------------------------------------
Investment advisor
Under the provision, the term ``investment advisor'' means,
with respect to any sponsoring organization, any person
(other than an employee of the sponsoring organization)
compensated by the sponsoring organization for managing the
investment of, or providing investment advice with respect
to, assets

[[Page 7426]]

maintained in donor advised funds owned by the sponsoring
organization.
Deductibility of contributions to a sponsoring organization
for maintenance in a donor advised fund
Contributions to certain sponsoring organizations for
maintenance in a donor advised fund not eligible for a
charitable deduction
Under the provision, contributions to a sponsoring
organization for maintenance in a donor advised fund are not
eligible for a charitable deduction for income tax purposes
if the sponsoring organization is a veterans' organization
described in section 170(c)(3), a fraternal society described
in section 170(c)(4), or a cemetery company described in
section 170(c)(5); for gift tax purposes if the sponsoring
organization is a fraternal society described in section
2522(a)(3) or a veterans' organization described in section
2522(a)(4); or for estate tax purposes if the sponsoring
organization is a fraternal society described in section
2055(a)(3) or a veterans' organization described in section
2055(a)(4). In addition, contributions to a sponsoring
organization for maintenance in a donor advised fund are not
eligible for a charitable deduction if the sponsoring
organization is a Type III supporting organization; a
deduction is allowed for such a contribution to a Type I or
Type II supporting organization to the extent not prohibited
by regulations. Regulations generally shall prohibit such a
deduction where the donor of the contribution directly or
indirectly controls a supported organization of the Type I or
Type II supporting organization.
Additional substantiation requirements
In addition to satisfying present-law substantiation
requirements under section 170(f), a donor must obtain, with
respect to each charitable contribution to a sponsoring
organization to be maintained in a donor advised fund, a
contemporaneous written acknowledgment from the sponsoring
organization providing that the sponsoring organization has
exclusive legal control over the assets contributed.
Minimum distributions
Aggregate distribution requirement
Under the provision, a sponsoring organization is required,
for each taxable year of the organization, to make qualifying
distributions, from the assets of donor advised funds
maintained by the organization, equivalent to the applicable
percentage of the aggregate asset value of donor advised
funds maintained by the sponsoring organization as determined
on the last day of the immediately preceding taxable year.
Such qualifying distributions generally must be made by the
first day of the second taxable year following the taxable
year. The provision excludes from the computation of the
required distributable amount for a taxable year the assets
of donor advised funds that have been in existence for less
than one full year as of the end of the immediately preceding
taxable year.\274\ The aggregate payout rule does not apply
in the case of a donor advised fund maintained by a private
foundation that is subject to the requirements of section
4942. The applicable percentage is three percent for the
first taxable year beginning after the date of enactment,
four percent for the second such taxable year, and five
percent for any such taxable year thereafter.
---------------------------------------------------------------------------
\274\Assume, for example, that a sponsoring organization
initially maintained 10 donor advised funds, each established
in Year 1. In Year 3, a new donor advised fund is
established. For purposes of determining the sponsoring
organization's aggregate payout requirement for Year 4, the
donor advised fund established in Year 3 is excluded, because
it was in existence for less than a year as of the end of
Year 3. For these purposes, a donor advised fund is
considered created when the account is first established
(rather than, for example, when a donor achieves the minimum
account balance required under the sponsoring organization's
rules to begin grantmaking).
---------------------------------------------------------------------------
Generally applicable account-level activity requirement
Under the provision, a sponsoring organization must
distribute from each of its donor advised funds at least a
certain amount in qualifying distributions during any
applicable three-year period by the 181st day of the first
taxable year following such period. The required
distributable amount is the greater of (1) $250 or (2) two
and one-half percent of the sponsoring organization's average
required minimum initial contribution amount for such
period\275\ (or average required minimum balance, if greater)
for the type of donor\276\ at issue. An applicable three-year
period must correspond with three consecutive taxable years
of the sponsoring organization. The first applicable three-
year period for a donor advised fund begins only after the
fund has been in existence for one full year.\277\
---------------------------------------------------------------------------
\275\For purposes of the provision, the required minimum
initial contribution amount is the minimum contribution
amount required by the sponsoring organization in order to
open a donor advised fund.
\276\Under some circumstances, for example, a sponsoring
organization may establish higher minimum initial
contribution amounts for corporate donors than for individual
donors.
\277\Applicable three-year periods for any donor advised fund
run consecutively, such that the second three-year period
begins immediately after the first three-year period ends.
For example, assume donor advised fund X is established on
March 30 of Year 1, and the sponsoring organization's taxable
year corresponds to the calendar year. As of the end of Year
1, X has not been in existence for one full year; therefore,
X's first applicable three-year period does not begin in Year
2. Instead, the first such period begins on January 1 of Year
3 and runs through December 31 of Year 5. X's second
applicable three-year period begins on January 1 of Year 6
and ends on December 31 of Year 8.
---------------------------------------------------------------------------
Account-level distribution requirement for accounts that
hold illiquid assets
If, as of the end of any taxable year of the sponsoring
organization, a donor advised fund holds assets other than
cash and marketable securities (i.e., ``illiquid assets'')
that equal more than 10 percent of the total value of assets
in the fund (determined using the valuation procedures
described below), the donor advised fund is considered to be
an ``illiquid asset donor advised fund'' for the subsequent
taxable year of the sponsoring organization. A sponsoring
organization must distribute from each illiquid asset donor
advised fund as qualifying distributions by the 181st day of
the second taxable year following such subsequent taxable
year an amount equal to the applicable percentage of the
value of the assets in the donor advised fund as of the end
of such year (the ``illiquid asset payout requirement''). The
applicable percentage is three percent for the first taxable
year beginning after the date of enactment, four percent for
the second such taxable year, and five percent for any such
taxable year thereafter.
If, as of the end of a taxable year of the sponsoring
organization, an illiquid asset in a donor advised fund has
not been held for a period of 12 months, such asset is not
considered an illiquid asset for such year. However, if an
illiquid asset has been exchanged for another illiquid asset,
then the holding period for any such other illiquid asset
includes the period during which the illiquid asset that was
exchanged was held. The Secretary is authorized to promulgate
anti- abuse rules to prevent the circumvention of the
provision through transactions designed to avoid application
of illiquid asset payout requirement, such as through
exchanges of illiquid assets for other assets.
Qualifying distributions
For purposes of all of the distribution requirements
described in the provision, qualifying distributions are
amounts paid to organizations described in section
170(b)(1)(A) (other than Type III supporting organizations or
a sponsoring organization if the amount is for maintenance in
a donor advised fund). Distributions to Type I or Type II
supporting organizations may be qualifying distributions if
not prohibited by regulations.\278\ Distributions to the
sponsoring organization generally are qualifying
distributions; however, a distribution to the sponsoring
organization in satisfaction of the aggregate distribution
requirement is a qualifying distribution only if the
distribution is designated for use in connection with a
charitable program of the sponsoring organization (e.g., if
funds are transferred to a scholarship fund (that does not
meet the definition of donor advised fund because, for
example, the scholarship fund is not separately identified by
reference to donors) for the awarding of scholarships
consistent with the sponsoring organization's exempt
purposes). Amounts permanently set aside for purposes, and
under procedures similar to those, described in section
4942(g) are treated as qualifying distributions. Qualifying
distributions also include amounts paid during a taxable year
for reasonable and necessary administrative expenses charged
to a donor advised fund by a sponsoring organization.
---------------------------------------------------------------------------
\278\Regulations generally shall prohibit such a distribution
where the donor or donor advisor of the amounts distributed
directly or indirectly controls a supported organization of
the Type I or Type II supporting organization.
---------------------------------------------------------------------------
Valuation
Special valuation rules apply for purposes of determining
the required distributable amount for a taxable year under
the aggregate payout requirement and the account-level payout
requirement applicable to accounts that hold illiquid assets.
For such purposes, the fair market values of cash and of
securities for which market quotations are readily available
are determined on a monthly basis. All other assets
(``illiquid assets'') transferred by a donor to a sponsoring
organization for maintenance in a donor advised fund are
valued at the sum of (1) the value claimed by the donor for
purposes of determining the donor's charitable deduction for
the contribution of such assets to the sponsoring
organization,\279\ and (2) an assumed annual rate of return
of five percent. If a donor advised fund purchases an
illiquid asset, such asset is valued at the sum of (1) the
purchase price paid for the assets, and (2) an assumed annual
rate of return of five percent. The Secretary of the Treasury
is authorized to specify the requirements for making such
computations. Under the provision, the Secretary of the
Treasury is also authorized to promulgate rules permitting
adjustments in the value of an illiquid asset

[[Page 7427]]

in situations where the asset declines significantly in value
following a contribution or purchase of the asset.
---------------------------------------------------------------------------
\279\The donor is required to report to the sponsoring
organization the value of the asset claimed by the donor for
charitable deduction purposes either by supplying to the
sponsoring organization a copy of the donor's completed Form
8283 related to the deduction (if applicable) or by following
any alternative procedures specified by the Secretary.
---------------------------------------------------------------------------
Treatment of qualifying distributions
Distributions made in satisfaction of any of the above-
described distribution requirements are counted for purposes
of all payout requirements described in the provision. For
purposes of any distribution requirement described in this
provision, the taxpayer may designate a qualifying
distribution as being made out of the undistributed amount
remaining from any prior taxable year or as being made in
satisfaction of the distribution requirement for the current
taxable year. Amounts distributed in excess of the
undistributed amount for the current year and all previous
taxable years may be carried forward for up to five taxable
years following the taxable year in which the excess payment
is made.
Excise tax for failure to distribute
In the event of a failure to distribute the required amount
in connection with any of the above-described distribution
requirements within the prescribed time period, the provision
imposes excise taxes similar to the private foundation excise
taxes under section 4942. Specifically, a first-tier excise
tax equal to 30 percent of the undistributed amount is
imposed. If the failure is not corrected within the taxable
period (as defined in existing section 4942(j)(1)), a second-
tier tax equal to 100 percent of the undistributed amount is
imposed. The first and second tier taxes are subject to
abatement under generally applicable present law rules.
Taxable period means, with respect to any undistributed
amount for any taxable year or applicable 3-year period, the
period beginning with the first day of the taxable year or
applicable period and ending on the earlier of the date of
mailing of a notice of deficiency with respect to the
imposition of the initial tax or the date on which such tax
is assessed.
Disqualified persons, excess benefit transactions, and other
sanctions
Disqualified persons
The provision provides that donors, donor advisors, and
investment advisors to donor advised funds (as well as
persons related to the foregoing persons\280\) are treated as
disqualified persons with respect to the sponsoring
organization under section 4958 or under section 4946(a).
---------------------------------------------------------------------------
\280\For purposes of the provision, a person is treated as
related to another person if (1) such person bears a
relationship to such other person similar to the
relationships described in sections 4958(f)(1)(B) and
4958(f)(1)(C).
---------------------------------------------------------------------------
Excess benefit transactions
The provision also provides that distributions from a donor
advised fund to a person that with respect to such fund is a
donor, donor adviser, or a person related to a donor or donor
adviser (though not an investment advisor) is treated as an
excess benefit transaction under section 4958, with the
entire amount paid to any such person treated as the amount
of the excess benefit. This rule applies regardless of
whether the sponsoring organization is a public charity or a
private foundation and regardless of whether, but for this
rule, the transaction would have been subject to the section
4941 self-dealing rules.\281\
---------------------------------------------------------------------------
\281\This rule includes any distribution to a donor, donor
advisor, or a related person, whether in the form of a grant,
loan, compensation arrangement, expense reimbursement, or
other payment. If the excess benefit results from the payment
of compensation, the entire amount paid as compensation will
be deemed the amount of the excess benefit, whether the
sponsoring organization is a private foundation or a public
charity.
---------------------------------------------------------------------------
Any amount repaid as a result of correcting such an excess
benefit transaction shall not be held in or credited to any
donor advised fund.
Other sanctions
Under the provision, distributions from a donor advised
fund (as opposed to a sponsoring organization's non donor
advised funds or accounts) to any person other than the
sponsoring organization's non donor advised funds or accounts
or organizations described in section 170(b)(1)(A)\282\
(other than Type III supporting organizations\283\ or
sponsoring organizations for maintenance in a donor advised
fund) are prohibited.\284\ The provision provides for a
penalty in the event a distribution is made from a donor
advised fund to an ineligible person, such as a private non-
operating foundation or a Type III supporting organization.
In the event of such a distribution, an excise tax equal to
20 percent of the amount of the distribution is imposed
against any donor or donor advisor who advised that such
distribution be made. In addition, an excise tax equal to
five percent of the amount of the distribution is imposed
against any manager of the sponsoring organization (defined
in a manner similar to the term ``foundation manager'' under
section 4945) who knowingly approved the distribution. The
taxes described in this paragraph are subject to abatement
under generally applicable present law rules.
---------------------------------------------------------------------------
\282\By requiring that distributions from a donor advised
fund be made only to certain entities, the provision
prohibits distributions from a donor advised fund to a donor
or donor advisor (or person related to a donor or donor
advisor), whether as compensation, loans, or reimbursement of
expenses.
\283\Distributions to Type I and Type II supporting
organizations generally are not prohibited unless prohibited
under regulations. Regulations generally shall prohibit such
distributions where the donor or donor advisor of the amounts
distributed directly or indirectly controls a supported
organization of the Type I or Type II supporting
organization.
\284\Under the provision, distributions from donor advised
funds to individuals are prohibited. However, sponsoring
organizations may make grants to individuals from amounts not
held in donor advised funds and may establish scholarship
funds that are not donor advised funds. A donor may choose to
make a contribution directly to such a scholarship fund (or
advise that a donor advised fund make a distribution to such
a scholarship fund).
---------------------------------------------------------------------------
Under the provision, if a donor, a donor advisor, or a
person related to a donor or donor advisor of a donor advised
fund advises as to a distribution that results in any such
person receiving, directly or indirectly, a more than
incidental benefit, excise taxes are imposed against any
donor or donor advisor who advised as to the distribution,
and against the recipient of the benefit. The amount of the
tax is determined by multiplying the rate of the initial tax
imposed against a disqualified person under section 4958 by
the amount of the distribution that gave rise to the more-
than-incidental benefit. Persons subject to the tax are
jointly and severally liable for the entire amount of the
tax. In addition, if a manager of the sponsoring organization
(defined in a manner similar to the term ``foundation
manager'' under section 4945) who agreed to the making of the
distribution knowing that the distribution would confer a
more than incidental benefit on a donor, a donor advisor, or
a person related to a donor or donor advisor of a donor
advised fund, the manager also is subject to an excise tax,
calculated by multiplying the rate of the initial tax
specified under section 4958 with respect to organization
managers by the amount of the distribution that gave rise to
the more than incidental benefit. The taxes on more than
incidental benefit are subject to abatement under generally
applicable present law rules.
Reporting and disclosure
The provision requires each sponsoring organization to
disclose on its information return: (1) the total number of
donor advised funds it owns; (2) the aggregate value of
assets held in those funds at the end of the organization's
taxable year; and (3) the aggregate contributions to and
grants made from those funds during the year. The statute of
limitations for assessing any tax arising under the provision
in any year with respect to which the required information
has not been provided shall not expire before three years
after the date on which the required information is disclosed
to the IRS.
In addition, when seeking recognition of its tax-exempt
status, a sponsoring organization must disclose whether it
intends to maintain donor advised funds.
Effective date.--The provision generally is effective for
taxable years beginning after the date of enactment.
Distribution requirements are effective for taxable years
beginning after the date of enactment. Information return
requirements are effective for taxable years ending after the
date of enactment. The requirements concerning disclosures on
an organization's application for tax exemption are effective
for organizations applying for recognition of exempt status
after the date of enactment. Requirements relating to
charitable contributions to donor advised funds are effective
for contributions made after 180 days from the date of
enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
15. Improve accountability of supporting organizations (secs.
241-246 of the Senate amendment and secs. 509, 4942,
4943, 4945, 4958, and 6033 and new sec. 4959 of the Code)

Present Law

[[Page 7428]]

engage in substantial legislative lobbying; and (5) the
organization may not participate or intervene in any
political campaign.
---------------------------------------------------------------------------
\285\Treas. Reg. sec. 1.501(c)(3)-1(c)(1). The Code specifies
such purposes as religious, charitable, scientific, testing
for public safety, literary, or educational purposes, or to
foster international amateur sports competition, or for the
prevention of cruelty to children or animals. In general, an
organization is organized and operated for charitable
purposes if it provides relief for the poor and distressed or
the underprivileged. Treas. Reg. sec. 1.501(c)(3)-1(d)(2).
\286\Treas. Reg. sec. 1.501(c)(3)-1(d)(1)(ii).
\287\Treas. Reg. sec. 1.501(c)(3)-1(e)(1). Conducting a
certain level of unrelated trade or business activity will
not jeopardize tax-exempt status.
---------------------------------------------------------------------------
Section 501(c)(3) organizations (with certain exceptions)
are required to seek formal recognition of tax-exempt status
by filing an application with the IRS (Form 1023). In
response to the application, the IRS issues a determination
letter or ruling either recognizing the applicant as tax-
exempt or not.
In general, organizations exempt from Federal income tax
under section 501(a) are required to file an annual
information return with the IRS.\288\ Under present law, the
information return requirement does not apply to several
categories of exempt organizations. Organizations exempt from
the filing requirement include organizations (other than
private foundations), the gross receipts of which in each
taxable year normally are not more than $25,000.\289\
---------------------------------------------------------------------------
\288\Sec. 6033(a)(1).
\289\Sec. 6033(a)(2); Treas. Reg. sec. 1.6033-2(a)(2)(i);
Treas. Reg. sec. 1.6033-2(g)(1). Sec. 6033(a)(2)(A)(ii)
provides a $5,000 annual gross receipts exception from the
annual reporting requirements for certain exempt
organizations. In Announcement 82-88, 1982-25 I.R.B. 23, the
IRS exercised its discretionary authority under section 6033
to increase the gross receipts exception to $25,000, and
enlarge the category of exempt organizations that are not
required to file Form 990.
---------------------------------------------------------------------------
Classification of section 501(c)(3) organizations
In general
Section 501(c)(3) organizations are classified either as
``public charities'' or ``private foundations.''\290\ Private
foundations generally are defined under section 509(a) as all
organizations described in section 501(c)(3) other than an
organization granted public charity status by reason of: (1)
being a specified type of organization (i.e., churches,
educational institutions, hospitals and certain other medical
organizations, certain organizations providing assistance to
colleges and universities, or a governmental unit); (2)
receiving a substantial part of its support from governmental
units or direct or indirect contributions from the general
public; or (3) providing support to another section 501(c)(3)
entity that is not a private foundation. In contrast to
public charities, private foundations generally are funded
from a limited number of sources (e.g., an individual,
family, or corporation). Donors to private foundations and
persons related to such donors together often control the
operations of private foundations.
---------------------------------------------------------------------------
\290\Sec. 509(a). Private foundations are either private
operating foundations or private non-operating foundations.
In general, private operating foundations operate their own
charitable programs in contrast to private non-operating
foundations, which generally are grant-making organizations.
Most private foundations are non-operating foundations.
---------------------------------------------------------------------------
Because private foundations receive support from, and
typically are controlled by, a small number of supporters,
private foundations are subject to a number of anti-abuse
rules and excise taxes not applicable to public
charities.\291\ For example, the Code imposes excise taxes on
acts of ``self-dealing'' between disqualified persons
(generally, an enumerated class of foundation insiders\292\)
and a private foundation. Acts of self-dealing include, for
example, sales or exchanges, or leasing, of property; lending
of money; or the furnishing of goods, services, or facilities
between a disqualified person and a private foundation.\293\
In addition, private non-operating foundations are required
to pay out a minimum amount each year as qualifying
distributions. In general, a qualifying distribution is an
amount paid to accomplish one or more of the organization's
exempt purposes, including reasonable and necessary
administrative expenses.\294\ Certain expenditures of private
foundations are also subject to tax.\295\ In general, taxable
expenditures are expenditures: (1) for lobbying; (2) to
influence the outcome of a public election or carry on a
voter registration drive (unless certain requirements are
met); (3) as a grant to an individual for travel, study, or
similar purposes unless made pursuant to procedures approved
by the Secretary; (4) as a grant to an organization that is
not a public charity or exempt operating foundation unless
the foundation exercises expenditure responsibility\296\ with
respect to the grant; or (5) for any non-charitable purpose.
Additional excise taxes may apply in the event a private
foundation holds certain business interests (``excess
business holdings'')\297\ or makes an investment that
jeopardizes the foundation's exempt purposes.\298\
---------------------------------------------------------------------------
\291\Secs. 4940-4945.
\292\See sec. 4946(a).
\293\Sec. 4941.
\294\Sec. 4942(g)(1)(A). A qualifying distribution also
includes any amount paid to acquire an asset used (or held
for use) directly in carrying out one or more of the
organization's exempt purposes and certain amounts set-aside
for exempt purposes. Sec. 4942(g)(1)(B) and 4942(g)(2).
\295\Sec. 4945. Taxes imposed may be abated if certain
conditions are met. Secs. 4961 and 4962.
\296\In general, expenditure responsibility requires that a
foundation make all reasonable efforts and establish
reasonable procedures to ensure that the grant is spent
solely for the purpose for which it was made, to obtain
reports from the grantee on the expenditure of the grant, and
to make reports to the Secretary regarding such expenditures.
Sec. 4945(h).
\297\Sec. 4943.
\298\Sec. 4944.
---------------------------------------------------------------------------
Public charities also enjoy certain advantages over private
foundations regarding the deductibility of contributions. For
example, contributions of appreciated capital gain property
to a private foundation generally are deductible only to the
extent of the donor's cost basis.\299\ In contrast,
contributions to public charities generally are deductible in
an amount equal to the property's fair market value, except
for gifts of inventory and other ordinary income property,
short-term capital gain property, and tangible personal
property the use of which is unrelated to the donee
organization's exempt purpose. In addition, under present
law, a taxpayer's deductible contributions generally are
limited to specified percentages of the taxpayer's
contribution base, which generally is the taxpayer's adjusted
gross income for a taxable year. The applicable percentage
limitations vary depending upon the type of property
contributed and the classification of the donee organization.
In general, contributions to non-operating private
foundations are limited to a smaller percentage of the
donor's contribution base (up to 30 percent) than
contributions to public charities (up to 50 percent).\300\
---------------------------------------------------------------------------
\299\A special rule in section 170(e)(5) provides that
taxpayers are allowed a deduction equal to the fair market
value of certain contributions of appreciated, publicly
traded stock contributed to a private foundation.
\300\Sec. 170(b).
---------------------------------------------------------------------------
Supporting organizations (section 509(a)(3))
The Code provides that certain ``supporting organizations''
(in general, organizations that provide support to another
section 501(c)(3) organization that is not a private
foundation) are classified as public charities rather than
private foundations.\301\ To qualify as a supporting
organization, an organization must meet all three of the
following tests: (1) it must be organized and at all times
operated exclusively for the benefit of, to perform the
functions of, or to carry out the purposes of one or more
``publicly supported organizations''\302\ (the
``organizational and operational tests'');\303\ (2) it must
be operated, supervised, or controlled by or in connection
with one or more publicly supported organizations (the
``relationship test'');\304\ and (3) it must not be
controlled directly or indirectly by one or more disqualified
persons (as defined in section 4946) other than foundation
managers and other than one or more publicly supported
organizations (the ``lack of outside control test'').\305\
---------------------------------------------------------------------------
\301\Sec. 509(a)(3).
\302\In general, supported organizations of a supporting
organization must be publicly supported charities described
in sections 509(a)(1) or (a)(2).
\303\Sec. 509(a)(3)(A).
\304\Sec. 509(a)(3)(B).
\305\Sec. 509(a)(3)(C).
---------------------------------------------------------------------------
To satisfy the relationship test, a supporting organization
must hold one of three statutorily described close
relationships with the supported organization. The
organization must be: (1) operated, supervised, or controlled
by a publicly supported organization (commonly referred to as
``Type I'' supporting organizations); (2) supervised or
controlled in connection with a publicly supported
organization (``Type II'' supporting organizations); or (3)
operated in connection with a publicly supported organization
(``Type III'' supporting organizations).\306\
---------------------------------------------------------------------------
\306\ Treas. Reg. sec. 1.509(a)-4(f)(2).
---------------------------------------------------------------------------
Type I supporting organizations
In the case of supporting organizations that are operated,
supervised, or controlled by one or more publicly supported
organizations (Type I supporting organizations), one or more
supported organizations must exercise a substantial degree of
direction over the policies, programs, and activities of the
supporting organization.\307\ The relationship between the
Type I supporting organization and the supported organization
generally is comparable to that of a parent and subsidiary.
The requisite relationship may be established by the fact
that a majority of the officers, directors, or trustees of
the supporting organization are appointed or elected by the
governing body, members of the governing body, officers
acting in their official capacity, or the membership of one
or more publicly supported organizations.\308\
---------------------------------------------------------------------------
\307\Treas. Reg. sec. 1.509(a)-4(g)(1)(i).
\308\Id.
---------------------------------------------------------------------------
Type II supporting organizations
Type II supporting organizations are supervised or
controlled in connection with one or more publicly supported
organizations. Rather than the parent-subsidiary relationship
characteristic of Type I organizations, the relationship
between a Type II organization and its supported
organizations is more analogous to a brother-sister
relationship. In order to satisfy the Type II relationship
requirement, generally there must be common supervision or
control by the persons supervising or controlling both the
supporting organization and the publicly supported
organizations.\309\ An organization generally is not
considered to be ``supervised or controlled in connection
with'' a publicly supported organization merely because the
supporting organization makes payments to the publicly
supported organization, even if the obligation to make
payments is enforceable under state law.\310\
---------------------------------------------------------------------------
\309\Treas. Reg. sec. 1.509(a)-4(h)(1).
\310\Treas. Reg. sec. 1.509(a)-4(h)(2).
---------------------------------------------------------------------------
Type III supporting organizations
Type III supporting organizations are ``operated in
connection with'' one or more publicly supported
organizations. To satisfy the

[[Page 7429]]

``operated in connection with'' relationship, Treasury
regulations require that the supporting organization be
responsive to, and significantly involved in the operations
of, the publicly supported organization. This relationship is
deemed to exist where the supporting organization meets both
a ``responsiveness test'' and an ``integral part test.''\311\
---------------------------------------------------------------------------
\311\Treas. Reg. sec. 1.509(a)-4(i)(1).
---------------------------------------------------------------------------
In general, the responsiveness test requires that the Type
III supporting organization be responsive to the needs or
demands of the publicly supported organizations. The
responsiveness test may be satisfied in one of two ways.\312\
First, the supporting organization may demonstrate that:
(1)(a) one or more of its officers, directors, or trustees
are elected or appointed by the officers, directors,
trustees, or membership of the supported organization; (b)
one or more members of the governing bodies of the publicly
supported organizations are also officers, directors, or
trustees of the supporting organization; or (c) the officers,
directors, or trustees of the supporting organization
maintain a close continuous working relationship with the
officers, directors, or trustees of the publicly supported
organizations; and (2) by reason of such arrangement, the
officers, directors, or trustees of the supported
organization have a significant voice in the investment
policies of the supporting organization, the timing and
manner of making grants, the selection of grant recipients by
the supporting organization, and otherwise directing the use
of the income or assets of the supporting organization.\313\
Alternatively, the responsiveness test may be satisfied if
the supporting organization is a charitable trust under state
law, each specified supported organization is a named
beneficiary under the trust's governing instrument, and the
beneficiary organization has the power to enforce the trust
and compel an accounting under state law.\314\
---------------------------------------------------------------------------
\312\For an organization that was supporting or benefiting
one or more publicly supported organizations before November
20, 1970, additional facts and circumstances, such as an
historic and continuing relationship between organizations,
also may be taken into consideration to establish compliance
with either of the responsiveness tests. Treas. Reg. sec.
1.509(a)-4(i)(1)(ii).
\313\Treas. Reg. sec. 1.509(a)-4(i)(2)(ii).
\314\Treas. Reg. sec. 1.509(a)-4(i)(2)(iii).
---------------------------------------------------------------------------
In general, the integral part test requires that the Type
III supporting organization maintain significant involvement
in the operations of one or more publicly supported
organizations, and that such publicly supported organizations
are in turn dependent upon the supporting organization for
the type of support which it provides. There are two
alternative methods for satisfying the integral part test.
The first alternative is to establish that (1) the activities
engaged in for or on behalf of the publicly supported
organization are activities to perform the functions of, or
carry out the purposes of, such organizations; and (2) these
activities, but for the involvement of the supporting
organization, normally would be engaged in by the publicly
supported organizations themselves.\315\ The second method
for satisfying the integral part test is to establish that:
(1) the supporting organization pays substantially all of its
income to or for the use of one or more publicly supported
organizations;\316\ (2) the amount of support received by one
or more of the publicly supported organizations is sufficient
to insure the attentiveness of the organization or
organizations to the operations of the supporting
organization (this is known as the ``attentiveness
requirement'');\317\ and (3) a significant amount of the
total support of the supporting organization goes to those
publicly supported organizations that meet the attentiveness
requirement.\318\
---------------------------------------------------------------------------
\315\Treas. Reg. sec. 1.509(a)-4(i)(3)(ii).
\316\For this purpose, the IRS has defined the term
``substantially all'' of an organization's income to mean 85
percent or more. Rev. Rul. 76-208, 1976-1 C.B. 161.
\317\Although the regulations do not specify the requisite
level of support in numerical or percentage terms, the IRS
has suggested that grants that represent less than 10 percent
of the beneficiary's support likely would be viewed as
insufficient to ensure attentiveness. Gen. Couns. Mem. 36379
(August 15, 1975). As an alternative to satisfying the
attentiveness standard by the foregoing method, a supporting
organization may demonstrate attentiveness by showing that,
in order to avoid the interruption of the carrying on of a
particular function or activity, the beneficiary organization
will be sufficiently attentive to the operations of the
supporting organization. Treas. Reg. sec. 1.509(a)-
4(i)(3)(iii)(b).
\318\Treas. Reg. sec. 1.509(a)-4(i)(3)(iii).
---------------------------------------------------------------------------
Intermediate sanctions (excess benefit transaction tax)
The Code imposes excise taxes on excess benefit
transactions between disqualified persons and public
charities.\319\ An excess benefit transaction generally is a
transaction in which an economic benefit is provided by a
public charity directly or indirectly to or for the use of a
disqualified person, if the value of the economic benefit
provided exceeds the value of the consideration (including
the performance of services) received for providing such
benefit.
---------------------------------------------------------------------------
\319\Sec. 4958. The excess benefit transaction tax is
commonly referred to as ``intermediate sanctions,'' because
it imposes penalties generally considered to be less punitive
than revocation of the organization's exempt status. The tax
also applies to transactions between disqualified persons and
social welfare organizations (as described in section
501(c)(4)).
---------------------------------------------------------------------------
For purposes of the excess benefit transaction rules, a
disqualified person is any person in a position to exercise
substantial influence over the affairs of the public charity
at any time in the five-year period ending on the date of the
transaction at issue.\320\ Persons holding certain powers,
responsibilities, or interests (e.g., officers, directors, or
trustees) are considered to be in a position to exercise
substantial influence over the affairs of the public charity.
---------------------------------------------------------------------------
\320\Sec. 4958(f)(1). A disqualified person also includes
certain family members of such a person, and certain entities
that satisfy a control test with respect to such persons.
---------------------------------------------------------------------------
An excess benefit transaction tax is imposed on the
disqualified person and, in certain cases, on the
organization managers, but is not imposed on the public
charity. An initial tax of 25 percent of the excess benefit
amount is imposed on the disqualified person that receives
the excess benefit. An additional tax on the disqualified
person of 200 percent of the excess benefit applies if the
violation is not corrected within a specified period. A tax
of 10 percent of the excess benefit (not to exceed $10,000
with respect to any excess benefit transaction) is imposed on
an organization manager that knowingly participated in the
excess benefit transaction, if the manager's participation
was willful and not due to reasonable cause, and if the
initial tax was imposed on the disqualified person.

House Bill

No provision.

Senate Amendment

Provisions relating to all (Type I, Type II, and Type III)
supporting organizations
Excess benefit transactions
Under the provision, if a supporting organization (Type I,
Type II, or Type III) makes a grant, loan, payment of
compensation, or other similar payment to a substantial
contributor (or person related to the substantial
contributor) of the supporting organization, for purposes of
the excess benefit transaction rules (sec. 4958), the
substantial contributor is treated as a disqualified person
and the payment is treated as an excess benefit transaction
with the entire amount of the payment treated as the excess
benefit.
A substantial contributor means any person who contributed
or bequeathed an aggregate amount of more than $5,000 to the
organization, if such amount is more than two percent of the
total contributions and bequests received by the organization
before the close of the taxable year of the organization in
which the contribution or bequest is received by the
organization from such person. In the case of a trust, a
substantial contributor also includes the creator of the
trust. A substantial contributor does not include a public
charity (other than a supporting organization).
A person is a related person (``related person'') if a
person is a member of the family (determined under section
4958(f)(4)) of a substantial contributor, or a 35 percent
entity, defined as a corporation, partnership, trust, or
estate in which a substantial contributor or family member
thereof own more than 35 percent of the total combined voting
power, profits interest, or beneficial interest, as the case
may be.
In addition, under the provision, loans by any supporting
organization (Type I, Type II, or Type III) to a disqualified
person (as defined in section 4958) of the supporting
organization are treated as an excess benefit transaction
under section 4958 and the entire amount of the loan is
treated as an excess benefit. For this purpose, a
disqualified person does not include a public charity (other
than a supporting organization).
Disclosure requirements
All supporting organizations are required to file an annual
information return (Form 990 series) with the Secretary,
regardless of the organization's gross receipts. A supporting
organization must indicate on such annual information return
whether it is a Type I, Type II, or Type III supporting
organization and must identify its supported organizations.
Supporting organizations must demonstrate annually that the
organization is not controlled directly or indirectly by one
or more disqualified persons (other than foundation managers
and other than one or more publicly supported organizations)
through a certification on the annual information return.
Disqualified person
For purposes of the excess benefit transaction rules (sec.
4958), a disqualified person of a supporting organization is
treated as a disqualified person of the supported
organization.
Provisions that apply to Type III supporting organizations
Modify payout requirement of Type III supporting
organizations
A Type III supporting organization must pay each taxable
year, to or for the use of one or more public charities
described in section 509(a)(1) or 509(a)(2) (``qualifying
distributions''), the sum of (1) the greater of (i) 85
percent of its adjusted net income (as defined in section
4942(f)) for the preceding taxable year or (ii) the
applicable percentage\321\

[[Page 7430]]

of the aggregate fair market value of all of the assets of
the organization other than assets that are used (or held for
use) directly in supporting the charitable programs of the
supporting organization or one or more supported
organizations, determined as of the last day of the preceding
taxable year, and (2) any amount received or accrued in such
year as repayments of amounts that were taken into account as
support provided by the supporting organization in prior
years. Qualifying distributions are treated as made first to
satisfy the pay out requirement of the immediately preceding
taxable year, and then of the taxable year, unless the
taxpayer elects to have an amount as satisfying the payout of
any prior taxable year. Amounts distributed in excess of the
required payout for the current year and all previous taxable
years may be carried forward for up to five taxable years
following the taxable year in which the excess payment is
made.
---------------------------------------------------------------------------
\321\The percentage is three percent for the first taxable
year beginning after the date of enactment, four percent for
the second such taxable year, and five percent for any such
taxable year thereafter.
---------------------------------------------------------------------------
A supporting organization's administrative expenses count
as expenses to or for the use of a supported organization.
The holding of assets for investment purposes, or to operate
an unrelated trade or business, is not considered a use or
holding for use directly to support a supported
organization's charitable programs. The Secretary may provide
guidance as to types of uses of assets that are considered to
be directly in support of a supported organization's
charitable programs similar to guidance provided under
Treasury Regulation section 53.4942(a)-2(c)(3)(i).
An organization that fails to meet the payout requirement
is subject to an initial tax of 30 percent of the unpaid
amount, increased to 100 percent of the unpaid amount if the
payout requirement is not met by the earlier of the date of
mailing of a notice of deficiency with respect to the initial
tax or the date on which the initial tax is assessed.
Excess business holdings
The excess business holdings rules of section 4943 are
applied to Type III supporting organizations. In applying
such rules, the term disqualified person has the meaning
provided in section 4958, and also includes substantial
contributors and related persons and any organization that is
effectively controlled by the same person or persons who
control the supporting organization or any organization
substantially all of the contributions to which were made by
the same person or persons who made substantially all of the
contributions to the supporting organization. The excess
business holdings rules do not apply if the holdings are held
for the benefit of the community pursuant to the direction of
a State attorney general or a State official with
jurisdiction over the Type III supporting organization. The
Secretary has the authority not to impose the excess business
holding rules if the organization establishes to the
satisfaction of the Secretary that the excess holdings are
consistent with the exempt purposes of the organization.
Transition rules apply to the present holdings of an
organization similar to those of section 4943(c)(4)-(6).
The excess business holdings rules also apply to Type II
supporting organizations but only if such organization
accepts any gift or contribution from a person (other than a
public charity, not including a supporting organization) who
(1) controls, directly or indirectly, either alone or
together (with persons described below) the governing body of
a supported organization of the supporting organization; (2)
is a member of the family of such a person; or (3) is a 35
percent controlled entity.
Organizational and operational requirements
In general, after the date of enactment of the provision, a
Type III supporting organization may not support more than
five organizations. A transition rule applies to Type III
supporting organizations that support more than five
organizations on such date. Such organizations are not
required to reduce the number of supported organizations, but
may not increase the number of organizations supported above
the number of organizations supported on the date of
enactment, and may not add new supported organizations as
beneficiaries unless no more than five organizations are
supported by the supporting organization following such
addition.
A Type III supporting organization may not support an
organization that is not organized in the United States on
any date after the date which is 180 days after the date of
enactment,\322\ and may not be a donor with respect to a
donor advised fund.
---------------------------------------------------------------------------
\322\U.S. charities established principally to provide
financial and other assistance to a foreign charity,
sometimes referred to as ``friends of'' organizations, may
not be established as supporting organizations under the
provision. Such organizations may continue to obtain public
charity status, however, by virtue of demonstrating broad
public support (as described in sections 509(a)(1) and
509(a)(2)).
---------------------------------------------------------------------------
Relationship to supported organization(s)
A Type III supporting organization must, as part of its
exemption application (Form 1023) attach a letter from each
supported organization acknowledging that the supported
organization has been designated by such organization as a
supported organization.
On the annual information return filed by a Type III
supporting organization, the organization must indicate that
it has obtained letters from organizations that received its
support. It is intended that all such letters must be signed
by a senior officer or a member of the Board of the supported
organization. The letters must show (1) that the supported
organization agrees to be supported by the supporting
organization, (2) the type of support provided or to be
provided, and (3) how such support furthers the supported
organization's charitable purposes.
A Type III supporting organization must apprise each
organization it supports of information regarding the
supporting organization in order to help ensure the
supporting organization's responsiveness. Such a showing
could be satisfied, for example, through provision of
documentation such as a copy of the supporting organization's
governing documents, any changes made to the governing
documents, the organization's annual information return filed
with the Secretary (Form 990 series), any tax return (Form
990-T) filed with the Secretary, and an annual report
(including a description of all of the support provided by
the supporting organization, how such support was calculated,
and a projection of the next year's support). Failure to make
a sufficient showing is a factor in determining whether the
responsiveness test of present law is met.
A Type III supporting organization that is organized as a
trust must, in addition to present law requirements,
establish to the satisfaction of the Secretary, that it has a
close and continuous relationship with the supported
organization such that the trust is responsive to the needs
or demands of the supported organization.
Other provisions
Under the provision, if a Type I or Type III supporting
organization accepts any gift or contribution from a person
(other than a public charity, not including a supporting
organization) who (1) controls, directly or indirectly,
either alone or together (with persons described below) the
governing body of a supported organization of the supporting
organization; (2) is a member of the family of such a person;
or (3) is a 35 percent controlled entity, then the supporting
organization is treated as a private foundation for all
purposes until such time as the organization can demonstrate
to the satisfaction of the Secretary that it qualifies as a
public charity other than as a supporting organization.
Under the provision, a non-operating private foundation may
not count as a qualifying distribution under section 4942 any
amount paid to a supporting organization. In addition, any
such amount is treated as a taxable expenditure under section
4945.
Effective date.--The provision generally is effective on
the date of enactment. The distribution requirements are
effective for taxable years beginning after the date of
enactment. The prohibited transaction rules are effective for
transactions occurring after the date of enactment. The
excess business holdings requirements are effective for
taxable years beginning after the date of enactment. The
provision relating to distributions by nonoperating private
foundations is effective for distributions and expenditures
made after the date of enactment. The return requirements are
effective for returns filed for taxable years ending after
the date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.

TITLE IV--MISCELLANEOUS PROVISIONS

A. Restructure New York Liberty Zone Tax Incentives

(Sec. 301 of the Senate amendment)

Present Law

In general
Present law includes a number of incentives to invest in
property located in the New York Liberty Zone (``NYLZ''),
which is the area located on or south of Canal Street, East
Broadway (east of its intersection with Canal Street), or
Grand Street (east of its intersection with East Broadway) in
the Borough of Manhattan in the City of New York, New York.
These incentives were enacted following the terrorist attack
in New York City on September 11, 2001.\323\
---------------------------------------------------------------------------
\323\In addition to the NYLZ provisions described above,
other NYLZ incentives are provided: (1) $8 billion of tax-
exempt private activity bond financing for certain
nonresidential real property, residential rental property and
public utility property is authorized to be issued after
March 9, 2002, and before January 1, 2010; and (2) $9 billion
of additional tax-exempt advance refunding bonds is available
after March 9, 2002, and before January 1, 2006, with respect
to certain State or local bonds outstanding on September 11,
2001.
---------------------------------------------------------------------------
Special depreciation allowance for qualified New York Liberty
Zone property
Section 1400L(b) allows an additional first-year
depreciation deduction equal to 30 percent of the adjusted
basis of qualified NYLZ property.\324\ In order to qualify,
property generally must be placed in service on or before
December 31, 2006 (December 31, 2009 in the case of
nonresidential real property and residential rental
property).
---------------------------------------------------------------------------
\324\The amount of the additional first-year depreciation
deduction is not affected by a short taxable year.
---------------------------------------------------------------------------
The additional first-year depreciation deduction is allowed
for both regular tax and

[[Page 7431]]

alternative minimum tax purposes for the taxable year in
which the property is placed in service. A taxpayer is
allowed to elect out of the additional first-year
depreciation for any class of property for any taxable year.
In order for property to qualify for the additional first-
year depreciation deduction, it must meet all of the
following requirements. First, the property must be property
to which the general rules of the Modified Accelerated Cost
Recovery System (``MACRS'')\325\ apply with (1) an applicable
recovery period of 20 years or less, (2) water utility
property (as defined in section 168(e)(5)), (3) certain
nonresidential real property and residential rental property,
or (4) computer software other than computer software covered
by section 197. A special rule precludes the additional
first-year depreciation under this provision for (1)
qualified NYLZ leasehold improvement property\326\ and (2)
property eligible for the additional first-year depreciation
deduction under section 168(k) (i.e., property is eligible
for only one 30 percent additional first-year depreciation).
Second, substantially all of the use of such property must be
in the NYLZ. Third, the original use of the property in the
NYLZ must commence with the taxpayer on or after September
11, 2001. Finally, the property must be acquired by
purchase\327\ by the taxpayer after September 10, 2001 and
placed in service on or before December 31, 2006. For
qualifying nonresidential real property and residential
rental property the property must be placed in service on or
before December 31, 2009 in lieu of December 31, 2006.
Property will not qualify if a binding written contract for
the acquisition of such property was in effect before
September 11, 2001.\328\
---------------------------------------------------------------------------
\325\A special rule precludes the additional first-year
depreciation deduction for property that is required to be
depreciated under the alternative depreciation system of
MACRS.
\326\Qualified NYLZ leasehold improvement property is defined
in another provision. Leasehold improvements that do not
satisfy the requirements to be treated as ``qualified NYLZ
leasehold improvement property'' maybe eligible for the 30
percent additional first-year depreciation deduction
(assuming all other conditions are met).
\327\For purposes of this provision, purchase is defined as
under section 179(d).
\328\Property is not precluded from qualifying for the
additional first-year depreciation merely because a binding
written contract to acquire a component of the property is in
effect prior to September 11, 2001.
---------------------------------------------------------------------------
Nonresidential real property and residential rental
property is eligible for the additional first-year
depreciation only to the extent such property rehabilitates
real property damaged, or replaces real property destroyed or
condemned as a result of the terrorist attacks of September
11, 2001.
Property that is manufactured, constructed, or produced by
the taxpayer for use by the taxpayer qualifies for the
additional first-year depreciation deduction if the taxpayer
begins the manufacture, construction, or production of the
property after September 10, 2001, and the property is placed
in service on or before December 31, 2006\329\ (and all other
requirements are met). Property that is manufactured,
constructed, or produced for the taxpayer by another person
under a contract that is entered into prior to the
manufacture, construction, or production of the property is
considered to be manufactured, constructed, or produced by
the taxpayer.
---------------------------------------------------------------------------
\329\December 31, 2009 with respect to qualified
nonresidential real property and residential rental property.
---------------------------------------------------------------------------
Depreciation of New York Liberty Zone leasehold improvements
Generally, depreciation allowances for improvements made on
leased property are determined under MACRS, even if the MACRS
recovery period assigned to the property is longer than the
term of the lease.\330\ This rule applies regardless of
whether the lessor or the lessee places the leasehold
improvements in service.\331\ If a leasehold improvement
constitutes an addition or improvement to nonresidential real
property already placed in service, the improvement generally
is depreciated using the straight-line method over a 39-year
recovery period, beginning in the month the addition or
improvement is placed in service.\332\
---------------------------------------------------------------------------
\330\Sec. 168(i)(8). The Tax Reform Act of 1986 modified the
Accelerated Cost Recovery System (``ACRS'') to institute
MACRS. Prior to the adoption of ACRS by the Economic Recovery
Tax Act of 1981, taxpayers were allowed to depreciate the
various components of a building as separate assets with
separate useful lives. The use of component depreciation was
repealed upon the adoption of ACRS. The Tax Reform Act of
1986 also denied the use of component depreciation under
MACRS.
\331\Former sections 168(f)(6) and 178 provided that, in
certain circumstances, a lessee could recover the cost of
leasehold improvements made over the remaining term of the
lease. The Tax Reform Act of 1986 repealed these provisions.
\332\Secs. 168(b)(3), (c), (d)(2), and (i)(6). If the
improvement is characterized as tangible personal property,
ACRS or MACRS depreciation is calculated using the shorter
recovery periods, accelerated methods, and conventions
applicable to such property. The determination of whether
improvements are characterized as tangible personal property
or as nonresidential real property often depends on whether
or not the improvements constitute a ``structural component''
of a building (as defined by Treas. Reg. sec. 1.48-1(e)(1)).
See, e.g., Metro National Corp v. Commissioner, 52 TCM (CCH)
1440 (1987); King Radio Corp Inc. v. U.S., 486 F.2d 1091
(10th Cir. 1973); Mallinckrodt, Inc. v. Commissioner, 778
F.2d 402 (8th Cir. 1985) (with respect to various leasehold
improvements).
---------------------------------------------------------------------------
A special rule exists for qualified NYLZ leasehold
improvement property, which is recovered over five years
using the straight-line method. The term qualified NYLZ
leasehold improvement property means property defined in
section 168(e)(6) that is acquired and placed in service
after September 10, 2001, and before January 1, 2007 (and not
subject to a binding contract on September 10, 2001), in the
NYLZ. For purposes of the alternative depreciation system,
the property is assigned a nine-year recovery period. A
taxpayer may elect out of the 5-year (and 9-year) recovery
period for qualified NYLZ leasehold improvement property.
Increased section 179 expensing for qualified New York
Liberty Zone property
In lieu of depreciation, a taxpayer with a sufficiently
small amount of annual investment may elect to deduct the
cost of qualifying property. For taxable years beginning in
2003 through 2007, a taxpayer may deduct up to $100,000 of
the cost of qualifying property placed in service for the
taxable year. In general, qualifying property for this
purpose is defined as depreciable tangible personal property
(and certain computer software) that is purchased for use in
the active conduct of a trade or business. The $100,000
amount is reduced (but not below zero) by the amount by which
the cost of qualifying property placed in service during the
taxable year exceeds $400,000. The $100,000 and $400,000
amounts are indexed for inflation.
For taxable years beginning in 2008 and thereafter, a
taxpayer with a sufficiently small amount of annual
investment may elect to deduct up to $25,000 of the cost of
qualifying property placed in service for the taxable year.
The $25,000 amount is reduced (but not below zero) by the
amount by which the cost of qualifying property placed in
service during the taxable year exceeds $200,000. In general,
qualifying property for this purpose is defined as
depreciable tangible personal property that is purchased for
use in the active conduct of a trade or business.
The amount eligible to be expensed for a taxable year may
not exceed the taxable income for a taxable year that is
derived from the active conduct of a trade or business
(determined without regard to this provision). Any amount
that is not allowed as a deduction because of the taxable
income limitation may be carried forward to succeeding
taxable years (subject to similar limitations). No general
business credit under section 38 is allowed with respect to
any amount for which a deduction is allowed under section
179.
The amount a taxpayer can deduct under section 179 is
increased for qualifying property used in the NYLZ.
Specifically, the maximum dollar amount that may be deducted
under section 179 is increased by the lesser of (1) $35,000
or (2) the cost of qualifying property placed in service
during the taxable year. This amount is in addition to the
amount otherwise deductible under section 179.
Qualifying property for purposes of the NYLZ provision
means section 179 property\333\ purchased and placed in
service by the taxpayer after September 10, 2001 and before
January 1, 2007, where (1) substantially all of the use of
such property is in the NYLZ in the active conduct of a trade
or business by the taxpayer in the NYLZ, and (2) the original
use of which in the NYLZ commences with the taxpayer after
September 10, 2001.\334\
---------------------------------------------------------------------------
\333\As defined in sec. 179(d)(1).
\334\See Rev. Proc. 2002-33, 2002-20 I.R.B. 963 (May 20,
2002), for procedures on claiming the increased section 179
expensing deduction by taxpayers who filed their tax returns
before June 1, 2002.
---------------------------------------------------------------------------
The phase-out range for the section 179 deduction
attributable to NYLZ property is applied by taking into
account only 50 percent of the cost of NYLZ property that is
section 179 property. Also, no general business credit under
section 38 is allowed with respect to any amount for which a
deduction is allowed under section 179.
The provision is effective for property placed in service
after September 10, 2001 and before January 1, 2007.
Extended replacement period for New York Liberty Zone
involuntary conversions
A taxpayer may elect not to recognize gain with respect to
property that is involuntarily converted if the taxpayer
acquires within an applicable period (the ``replacement
period'') property similar or related in service or use
(section 1033). If the taxpayer does not replace the
converted property with property similar or related in
service or use, then gain generally is recognized. If the
taxpayer elects to apply the rules of section 1033, gain on
the converted property is recognized only to the extent that
the amount realized on the conversion exceeds the cost of the
replacement property. In general, the replacement period
begins with the date of the disposition of the converted
property and ends two years after the close of the first
taxable year in which any part of the gain upon conversion is
realized.\335\ The replacement period is extended to three
years if the

[[Page 7432]]

converted property is real property held for the productive
use in a trade or business or for investment.\336\
---------------------------------------------------------------------------
\335\Section 1033(a)(2)(B).
\336\Section 1033(g)(4).
---------------------------------------------------------------------------
The replacement period is extended to five years with
respect to property that was involuntarily converted within
the NYLZ as a result of the terrorist attacks that occurred
on September 11, 2001. However, the five-year period is
available only if substantially all of the use of the
replacement property is in New York City. In all other cases,
the present-law replacement period rules continue to apply.

House Bill

No provision.

Senate Amendment

Repeal of certain NYLZ incentives
The provision repeals the four NYLZ incentives relating to
the additional first-year depreciation allowance of 30
percent, the five-year depreciation of leasehold
improvements, the additional section 179 expensing, and the
extended replacement period for involuntary conversions.\337\
---------------------------------------------------------------------------
\337\The provision does not change the present-law rules
relating to certain NYLZ private activity bond financing and
additional advance refunding bonds.
---------------------------------------------------------------------------
Creation of New York Liberty Zone tax credits
The provision provides a credit against tax imposed (other
than taxes of section 3111(a), 3403, or subtitle D) paid or
incurred by any governmental unit of the State of New York
and the City of New York equal to the lesser of (1) the total
expenditures during such year by such governmental unit for
qualifying projects, or (2) the amount allocated to such
governmental unit for such calendar year.
Qualifying projects means any transportation infrastructure
project, including highways, mass transit systems, railroads,
airports, ports, and waterways, in or connecting with the New
York Liberty Zone, which is designated as a qualifying
project jointly by the Governor of the State of New York and
the Mayor of the City of New York.
The Governor of the State of New York and the Mayor of the
City of New York shall jointly allocate to a governmental
unit the amount of expenditures which may be taken into
account for purposes of the credit for any calendar year in
the credit period with respect to a qualifying project. The
aggregate limit that may be allocated for all calendar years
in the credit period is two billion dollars. The annual limit
for any calendar year in the credit period shall not exceed
the sum of 200 million dollars plus the aggregate amount
authorized to be allocated for all preceding calendar years
in the credit period which was not allocated. The credit
period is the ten-year period beginning on January 1, 2006.
If, at the close of the credit period, the aggregate
amounts allocated are less than the 2 billion dollar
aggregate limit, the Governor of the State of New York and
the Mayor of the City of New York may jointly allocate, for
any calendar year following the credit period, for
expenditures with respect to qualifying projects, amounts
that in sum for all years following the credit period would
equal such shortfall.
Under the provision, any expenditure for a qualifying
project taken into account for purposes of the credit shall
be considered State and local funds for the purpose of any
Federal program.
Effective date
The provision is effective on the date of enactment, with
an exception for property subject to a written binding
contract in effect on the date of enactment which is placed
in service prior to the original sunset dates under present
law. The extended replacement period for involuntarily
converted property ends on the earlier of (1) the date of
enactment or (2) the last day of the five-year period
specified in the Jobs Creation and Worker Assistance Act of
2002 (``JCWAA'').\338\
---------------------------------------------------------------------------
\338\Pub. L. No. 107-147, sec. 301 (2002).
---------------------------------------------------------------------------

Conference Agreement

The conference agreement does not include the Senate
amendment provision.

B. Modification of S Corporation Passive Investment Income Rules

(Sec. 302 of the Senate amendment and secs. 1362 and 1375 of
the Code)

Present Law

An S corporation is subject to corporate-level tax, at the
highest corporate tax rate, on its excess net passive income
if the corporation has (1) accumulated earnings and profits
at the close of the taxable year and (2) gross receipts more
than 25 percent of which are passive investment income.
Excess net passive income is the net passive income for a
taxable year multiplied by a fraction, the numerator of which
is the amount of passive investment income in excess of 25
percent of gross receipts and the denominator of which is the
passive investment income for the year. Net passive income is
defined as passive investment income reduced by the allowable
deductions that are directly connected with the production of
that income. Passive investment income generally means gross
receipts derived from royalties, rents, dividends, interest,
annuities, and sales or exchanges of stock or securities (to
the extent of gains). Passive investment income generally
does not include interest on accounts receivable, gross
receipts that are derived directly from the active and
regular conduct of a lending or finance business, gross
receipts from certain liquidations, or gain or loss from any
section 1256 contract (or related property) of an options or
commodities dealer.
In addition, an S corporation election is terminated
whenever the S corporation has accumulated earnings and
profits at the close of each of three consecutive taxable
years and has gross receipts for each of those years more
than 25 percent of which are passive investment income.

House Bill

No provision.

Senate Amendment

The Senate amendment increases the 25-percent threshold to
60 percent; eliminates gains from the sale or exchange of
stock or securities from the definition of passive investment
income; and eliminates the rule terminating an S election by
reason of having excess passive investment income for three
consecutive taxable years.
Effective date.--The provision applies to taxable years
beginning after December 31, 2006, and before October 1,
2009.

Conference Agreement

The conference agreement does not contain the Senate
amendment provision.

C. Capital Expenditure Limitation for Qualified Small Issue Bonds

(Sec. 303 of the Senate amendment and sec. 144 of the Code)

Present Law

Qualified small-issue bonds are tax-exempt State and local
government bonds used to finance private business
manufacturing facilities (including certain directly related
and ancillary facilities) or the acquisition of land and
equipment by certain farmers. In both instances, these bonds
are subject to limits on the amount of financing that may be
provided, both for a single borrowing and in the aggregate.
In general, no more than $1 million of small-issue bond
financing may be outstanding at any time for property of a
business (including related parties) located in the same
municipality or county. Generally, this $1 million limit may
be increased to $10 million if all other capital expenditures
of the business in the same municipality or county are
counted toward the limit over a six-year period that begins
three years before the issue date of the bonds and ends three
years after such date. Outstanding aggregate borrowing is
limited to $40 million per borrower (including related
parties) regardless of where the property is located.
For bonds issued after September 30, 2009, the Code permits
up to $10 million of capital expenditures to be disregarded,
in effect increasing from $10 million to $20 million the
maximum allowable amount of total capital expenditures by an
eligible business in the same municipality or county.\339\
However, no more than $10 million of bond financing may be
outstanding at any time for property of an eligible business
(including related parties) located in the same municipality
or county. Other limits (e.g., the $40 million per borrower
limit) also continue to apply.
---------------------------------------------------------------------------
\339\Sec. 144(a)(4)(G) as added by sec. 340(a) of the
American Jobs Creation Act of 2004, Pub. L. No. 108-357
(2004).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

The provision accelerates the application of the $20
million capital expenditure limitation from bonds issued
after September 30, 2009, to bonds issued after December 31,
2006.
Effective date.--The provision is effective on the date of
enactment for bonds issued after December 31, 2006.

Conference Agreement

The conference agreement includes the Senate amendment
provision.

D. Premiums for Mortgage Insurance

(Sec. 304 of the Senate amendment and secs. 163(h) and 6050H
of the Code)

Present Law

Present law provides that qualified residence interest is
deductible notwithstanding the general rule that personal
interest is nondeductible (sec. 163(h)).
Qualified residence interest is interest on acquisition
indebtedness and home equity indebtedness with respect to a
principal and a second residence of the taxpayer. The maximum
amount of home equity indebtedness is $100,000. The maximum
amount of acquisition indebtedness is $1 million. Acquisition
indebtedness means debt that is incurred in acquiring
constructing, or substantially improving a qualified
residence of the taxpayer, and that is secured by the
residence. Home equity indebtedness is debt (other than
acquisition indebtedness) that is secured by the taxpayer's
principal or second residence, to the extent the aggregate
amount of such debt does not exceed the difference between
the total acquisition indebtedness with respect to the
residence, and the fair market value of the residence.

House Bill

No provision.

[[Page 7433]]

Senate Amendment

The Senate amendment provision provides that premiums paid
or accrued for qualified mortgage insurance by a taxpayer
during the taxable year in connection with acquisition
indebtedness on a qualified residence of the taxpayer are
treated as interest that is qualified residence interest and
thus deductible. The amount allowable as a deduction under
the provision is phased out ratably by 10 percent for each
$1,000 by which the taxpayer's adjusted gross income exceeds
$100,000 ($500 and $50,000, respectively, in the case of a
married individual filing a separate return). Thus, the
deduction is not allowed if the taxpayer's adjusted gross
income exceeds $110,000 ($55,000 in the case of married
individual filing a separate return).
For this purpose, qualified mortgage insurance means
mortgage insurance provided by the Veterans Administration,
the Federal Housing Administration, or the Rural Housing
Administration, and private mortgage insurance (defined in
section 2 of the Homeowners Protection Act of 1998 as in
effect on the date of enactment of the Senate amendment
provision).
Amounts paid for qualified mortgage insurance that are
properly allocable to periods after the close of the taxable
year are treated as paid in the period to which they are
allocated. No deduction is allowed for the unamortized
balance if the mortgage is paid before its term (except in
the case of qualified mortgage insurance provided by the
Department of Veterans Affairs or Rural Housing
Administration).
Reporting rules apply under the provision.
Effective date.--The Senate amendment provision is
effective for amounts paid or accrued in taxable years
beginning after December 31, 2006, and ending before January
1, 2008, and properly allocable to that period, with respect
to mortgage insurance contracts issued after December 31,
2006.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.

E. Sense of the Senate on Use of No-Bid Contracting by Federal
Emergency Management Agency

(Sec. 305 of the Senate amendment)

present law

Present law does not provide for the special rules
contemplated in the Sense of the Senate provision described
below.

house bill

No provision.

senate amendment

The Senate Amendment provision provides that it is the
sense of the Senate that the Federal Emergency Management
Agency should (1) rebid certain contracts entered into
following Hurricane Katrina for which competing bids were not
solicited; (2) implement its planned competitive contracting
strategy and, in carrying out that strategy, prioritize local
and small disadvantaged businesses in contracting and
subcontracting; and (3) immediately after awarding any
contract, make public the dollar amount of the contract and
whether competing bids were solicited.
Effective date.--The Senate amendment provision is
effective upon enactment.

conference agreement

The conference agreement does not include the Senate
amendment provision.

F. Sense of Congress Regarding Doha Round

(Sec. 306 of the Senate amendment)

present law

Present law does not provide a sense of Congress regarding
the Doha Round of trade negotiations.

house bill

No provision.

senate amendment

The Senate amendment provision provides that it is the
sense of Congress that the United States should not be a
signatory to an agreement or protocol with respect to the
Doha Development Round of the World Trade Organization (WTO)
negotiations or any other bilateral or multilateral trade
negotiations if the agreement or protocol (1) adopts any
provision to lessen the effectiveness of domestic and
international disciplines on unfair trade or safeguard
provisions or (2) would lessen in any manner the ability of
the United States to enforce rigorously its trade laws,
including the antidumping, countervailing duty, and safeguard
laws. The provision also provides that it is the sense of
Congress that (1) the United States trade laws and
international rules appropriately serve the public interest
by offsetting injurious unfair trade, and that further
balancing modifications or other similar provisions are
unnecessary and would add to the complexity and difficulty of
achieving relief against injurious unfair trade practices,
and (2) the United States should ensure that any new
agreement relating to international disciplines on unfair
trade or safeguard provisions fully rectifies and corrects
decisions by WTO dispute settlement panels or the Appellate
Body that have unjustifiably and negatively impacted, or
threaten to negatively impact, United States law or practice,
including a law or practice with respect to foreign dumping
or subsidization.
Effective date.--The Senate amendment provision is
effective upon enactment.

conference agreement

The conference agreement does not include the Senate
amendment provision.

G. Treatment of Certain Stock Option Plans Under Nonqualified Deferred
Compensation Rules

(Sec. 308 of the Senate amendment)

present law

Amounts deferred under a nonqualified deferred compensation
plan for all taxable years are currently includible in gross
income to the extent not subject to a substantial risk of
forfeiture and not previously included in gross income,
unless certain requirements are satisfied.\340\For example,
distributions from a nonqualified deferred compensation plan
may be allowed only upon certain times and events. Rules also
apply for the timing of elections. If the requirements are
not satisfied, in addition to current income inclusion,
interest at the underpayment rate plus one percentage point
is imposed on the underpayments that would have occurred had
the compensation been includible in income when first
deferred, or if later, when not subject to a substantial risk
of forfeiture. The amount required to be included in income
is also subject to a 20-percent additional tax.
---------------------------------------------------------------------------
\340\Section 409A.
---------------------------------------------------------------------------
The rules governing the tax treatment of nonqualified
deferred compensation generally apply to stock options
granted to employees. However, exceptions apply to incentive
stock options and options granted under employee stock
purchase plans.\341\
---------------------------------------------------------------------------
\341\Sections 422 and 423, respectively.
---------------------------------------------------------------------------

house bill

No provision.

senate amendment

Under the Senate amendment, the Secretary of the Treasury
is directed to modify the regulations relating to
nonqualified deferred compensation to extend to applicable
foreign option plans the exceptions for incentive stock
options and options granted under employee stock purchase
plans. The exception for applicable foreign option plans is
subject to such terms and conditions as may be prescribed in
the regulations.
An applicable foreign option plan means a plan that (1)
provides for the issuance of employee stock options; (2) is
established under the laws of a foreign jurisdiction; and (3)
under such laws or the terms of the plan (or both), is
subject to requirements substantially similar to the
requirements applicable to incentive stock options and
options granted under employee stock purchase plans.
For this purpose, a foreign option plan is not treated as
subject to requirements substantially similar to the
requirements applicable to incentive stock options and
options granted under employee stock purchase plans unless
the foreign option plan: (1) is required to cover
substantially all employees; (2) in the case of an option
under an employee stock purchase plan, is required to provide
an option price of not less than the lesser of not less than
80 percent of the fair market value of the stock at the time
the option is granted or an amount which, under the terms of
the option, cannot be less than 80 percent of the fair market
value of the stock at the time the option is exercised; (3)
is required to provide coverage of individuals who, but for
the exception under the provision, would be subject to tax
under the nonqualified deferred compensation rules with
respect to the plan; and (4) meets such other requirements as
prescribed in regulations issued under the provision.
Effective date.--The provision is effective on the date of
enactment.

conference agreement

The conference agreement does not include the Senate
amendment provision.

H. Sense of the Senate Regarding the Dedication of Excess Funds

(Sec. 309 of the Senate amendment)

Present Law

Present law does not provide a sense of the Senate
regarding the dedication of Treasury revenues that exceed
amounts specified in the reconciliation instructions for this
bill.

House Bill

No provision.

Senate Amendment

The Senate amendment provides that it is the sense of the
Senate that any Federal revenue increases resulting from the
Senate amendment and exceeding the amounts specified in
applicable reconciliation instructions are to be dedicated to
the Low-Income Home Energy Assistance Program. The amount so
dedicated is not to exceed by more than $2.9 billion the
funding level established for the program for fiscal year
2005.
Effective date.--The Senate amendment provision is
effective upon enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.

[[Page 7434]]

I. Modification of Treatment of Loans to Qualified Continuing Care
Facilities

(Sec. 310 of the Senate amendment and sec. 7872(g) of the
Code)

Present Law

Present law provides generally that certain loans that bear
interest at a below-market rate are treated as loans bearing
interest at the market rate, accompanied by imputed payments
characterized in accordance with the substance of the
transaction (for example, as a gift, compensation, a
dividend, or interest).\342\
---------------------------------------------------------------------------
\342\Sec. 7872.
---------------------------------------------------------------------------
An exception to this imputation rule is provided for any
calendar year for a below-market loan made by a lender to a
qualified continuing care facility pursuant to a continuing
care contract, if the lender or the lender's spouse attains
age 65 before the close of the calendar year.\343\
---------------------------------------------------------------------------
\343\Sec. 7872(g).
---------------------------------------------------------------------------
The exception applies only to the extent the aggregate
outstanding loans by the lender (and spouse) to any qualified
continuing care facility do not exceed $163,300 (for
2006).\344\
---------------------------------------------------------------------------
\344\Rev. Rul. 2005-75, 2005-49 I.R.B. 1073.
---------------------------------------------------------------------------
For this purpose, a continuing care contract means a
written contract between an individual and a qualified
continuing care facility under which: (1) the individual or
the individual's spouse may use a qualified continuing care
facility for their life or lives; (2) the individual or the
individual's spouse will first reside in a separate,
independent living unit with additional facilities outside
such unit for the providing of meals and other personal care
and will not require long-term nursing care, and then will be
provided long-term and skilled nursing care as the health of
the individual or the individual's spouse requires; and (3)
no additional substantial payment is required if the
individual or the individual's spouse requires increased
personal care services or long-term and skilled nursing care.
For this purpose, a qualified continuing care facility
means one or more facilities that are designed to provide
services under continuing care contracts, and substantially
all of the residents of which are covered by continuing care
contracts. A facility is not treated as a qualified
continuing care facility unless substantially all facilities
that are used to provide services required to be provided
under a continuing care contract are owned or operated by the
borrower. For these purposes, a nursing home is not a
qualified continuing care facility.

House Bill

No provision.

Senate Amendment

The Senate amendment provision modifies the present-law
exception under section 7872(g) relating to loans to
continuing care facilities by eliminating the dollar cap on
aggregate outstanding loans and making other modifications.
The Senate amendment provision provides an exception to the
imputation rule of section 7872 for any calendar year for any
below-market loan owed by a facility which on the last day of
the year is a qualified continuing care facility, if the loan
was made pursuant to a continuing care contract and if the
lender or the lender's spouse attains age 62 before the close
of the year.
For this purpose, a continuing care contract means a
written contract between an individual and a qualified
continuing care facility under which: (1) the individual or
the individual's spouse may use a qualified continuing care
facility for their life or lives; (2) the individual or the
individual's spouse will be provided with housing in an
independent living unit (which has additional available
facilities outside such unit for the provision of meals and
other personal care), an assisted living facility or nursing
facility, as is available in the continuing care facility, as
appropriate for the health of the individual or the
individual's spouse; and (3) the individual or the
individual's spouse will be provided assisted living or
nursing care as the health of the individual or the
individual's spouse requires, and as is available in the
continuing care facility.
For this purpose, a qualified continuing care facility
means one or more facilities: (1) that are designed to
provide services under continuing care contracts; (2) that
include an independent living unit, plus an assisted living
or nursing facility, or both; and (3) substantially all of
the independent living unit residents of which are covered by
continuing care contracts. For these purposes, a nursing home
is not a qualified continuing care facility.
Effective date.--The provision is effective for loans made
after December 31, 2005.

Conference Agreement

The conference agreement includes the Senate amendment
provision, with modifications. The conference agreement
provision provides that a continuing care contract is a
written contract between an individual and a qualified
continuing care facility under which: (1) the individual or
the individual's spouse may use a qualified continuing care
facility for their life or lives; (2) the individual or the
individual's spouse will be provided with housing, as
appropriate for the health of such individual or individual's
spouse, (i) in an independent living unit (which has
additional available facilities outside such unit for the
provision of meals and other personal care), and (ii) in an
assisted living facility or a nursing facility, as is
available in the continuing care facility; and (3) the
individual or the individual's spouse will be provided
assisted living or nursing care as the health of the
individual or the individual's spouse requires, and as is
available in the continuing care facility. The Secretary is
required to issue guidance that limits the term ``continuing
care contract'' to contracts that provide only facilities,
care, and services described in the preceding sentence.
For purposes of defining the terms ``continuing care
contract'' and ``qualified continuing care facility'' under
the conference agreement provision, the term ``assisted
living facility'' is intended to mean a facility at which
assistance is provided (1) with activities of daily living
(such as eating, toileting, transferring, bathing, dressing,
and continence) or (2) in cases of cognitive impairment, to
protect the health or safety of an individual. The term
``nursing facility'' is intended to mean a facility that
offers care requiring the utilization of licensed nursing
staff.
Effective date.--The conference agreement provision is
generally effective for calendar years beginning after
December 31, 2005, with respect to loans made before, on, or
after such date. The conference agreement provision does not
apply to any calendar year after 2010. Thus, the conference
agreement provision does not apply with respect to interest
imputed after December 31, 2010. After such date, the law as
in effect prior to enactment applies.

J. Exclusion of Gain on Sale of a Principal Residence by a Member of
the Intelligence Community

(Sec. 311 of the Senate amendment and sec. 121 of the Code)

Present Law

Under present law, an individual taxpayer may exclude up to
$250,000 ($500,000 if married filing a joint return) of gain
realized on the sale or exchange of a principal residence. To
be eligible for the exclusion, the taxpayer must have owned
and used the residence as a principal residence for at least
two of the five years ending on the sale or exchange. A
taxpayer who fails to meet these requirements by reason of a
change of place of employment, health, or, to the extent
provided under regulations, unforeseen circumstances is able
to exclude an amount equal to the fraction of the $250,000
($500,000 if married filing a joint return) that is equal to
the fraction of the two years that the ownership and use
requirements are met.
Present law also contains special rules relating to members
of the uniformed services or the Foreign Service of the
United States. An individual may elect to suspend for a
maximum of 10 years the five-year test period for ownership
and use during certain absences due to service in the
uniformed services or the Foreign Service of the United
States. The uniformed services include: (1) the Armed Forces
(the Army, Navy, Air Force, Marine Corps, and Coast Guard);
(2) the commissioned corps of the National Oceanic and
Atmospheric Administration; and (3) the commissioned corps of
the Public Health Service. If the election is made, the five-
year period ending on the date of the sale or exchange of a
principal residence does not include any period up to five
years during which the taxpayer or the taxpayer's spouse is
on qualified official extended duty as a member of the
uniformed services or in the Foreign Service of the United
States. For these purposes, qualified official extended duty
is any period of extended duty while serving at a place of
duty at least 50 miles away from the taxpayer's principal
residence or under orders compelling residence in Government
furnished quarters. Extended duty is defined as any period of
duty pursuant to a call or order to such duty for a period in
excess of 90 days or for an indefinite period. The election
may be made with respect to only one property for a
suspension period.

House Bill

No provision.

Senate Amendment

Under the provision, specified employees of the
intelligence community may elect to suspend the running of
the five-year test period during any period in which they are
serving on extended duty. The term ``employee of the
intelligence community'' means an employee of the Office of
the Director of National Intelligence, the Central
Intelligence Agency, the National Security Agency, the
Defense Intelligence Agency, the National Geospatial-
Intelligence Agency, or the National Reconnaissance Office.
The term also includes employment with: (1) any other office
within the Department of Defense for the collection of
specialized national intelligence through reconnaissance
programs; (2) any of the intelligence elements of the Army,
the Navy, the Air Force, the Marine Corps, the Federal Bureau
of Investigation, the Department of the Treasury, the
Department of Energy, and the Coast Guard; (3) the Bureau of
Intelligence and Research of the Department of State; and (4)

[[Page 7435]]

the elements of the Department of Homeland Security concerned
with the analyses of foreign intelligence information. To
qualify, a specified employee must move from one duty station
to another and at least one of such duty stations must be
located outside of the Washington, D.C. and Baltimore
metropolitan statistical areas, as defined by the Secretary
of Commerce. As under present law, the five-year period may
not be extended more than 10 years.
Effective date.--The provision is effective for sales and
exchanges after the date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.

K. Sense of the Senate Regarding the Permanent Extension of EGTRRA and
JGTRRA Provisions Relating to the Child Tax Credit

(Sec. 312 of the Senate amendment)

Present Law

Present law provides for the sunset of the child tax credit
provisions under Economic Growth and Tax Relief
Reconciliation Act of 2001 (``EGTRRA'') and Jobs and Growth
Tax Relief Reconciliation Act of 2003 (``JGTRRA'').

House Bill

No provision.

Senate Amendment

The Senate amendment includes a provision stating that it
is the sense of the Senate that the conferees for the Tax
Relief Act of 2006 should strive to permanently extend the
amendments to the child tax credit made by EGTRRA and JGTRRA.
Effective date.--The Senate amendment provision is
effective on the date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.

L. Partial Expensing for Advanced Mine Safety Equipment

(Sec. 313 of the Senate amendment)

Present Law

A taxpayer generally must capitalize the cost of property
used in a trade or business and recover such cost over time
through annual deductions for depreciation or amortization.
Tangible property generally is depreciated under the Modified
Accelerated Cost Recovery System (``MACRS''), which
determines depreciation by applying specific recovery
periods, placed-in-service conventions, and depreciation
methods to the cost of various types of depreciable property
(sec. 168).
Personal property is classified under MACRS based on the
property's class life unless a different classification is
specifically provided in section 168. The class life
applicable for personal property is the asset guideline
period (midpoint class life as of January 1, 1986). Based on
the property's classification, a recovery period is
prescribed under MACRS. In general, there are six classes of
recovery periods to which personal property can be assigned.
For example, personal property that has a class life of four
years or less has a recovery period of three years, whereas
personal property with a class life greater than four years
but less than 10 years has a recovery period of five years.
The class lives and recovery periods for most property are
contained in Revenue Procedure 87-56.\345\
---------------------------------------------------------------------------
\345\1987-2 C.B. 674 (as clarified and modified by Rev. Proc.
88-22, 1988-1 C.B. 785).
---------------------------------------------------------------------------
In lieu of depreciation, a taxpayer with a sufficiently
small amount of annual investment may elect to deduct (or
``expense'') such costs. Present law provides that the
maximum amount a taxpayer may expense, for taxable years
beginning in 2003 through 2007, is $100,000 of the cost of
qualifying property placed in service for the taxable year.
In general, qualifying property is defined as depreciable
tangible personal property that is purchased for use in the
active conduct of a trade or business. The $100,000 amount is
reduced (but not below zero) by the amount by which the cost
of qualifying property placed in service during the taxable
year exceeds $400,000.

House Bill

No provision.

Senate Amendment

The Senate amendment provides that the taxpayer may elect
to treat 50 percent of the cost of any qualified advanced
mine safety equipment property as a deduction in the taxable
year in which the equipment is placed in service.
Advanced mine safety equipment property means any of the
following: (1) emergency communication technology or devices
used to allow a miner to maintain constant communication with
an individual who is not in the mine; (2) electronic
identification and location devices that allow individuals
not in the mine to track at all times the movements and
location of miners working in or at the mine; (3) emergency
oxygen-generating, self-rescue devices that provide oxygen
for at least 90 minutes; (4) pre-positioned supplies of
oxygen providing each miner on a shift the ability to survive
for at least 48 hours; and (5) comprehensive atmospheric
monitoring systems that monitor the levels of carbon
monoxide, methane and oxygen that are present in all areas of
the mine and that can detect smoke in the case of a fire in a
mine.
To be treated as qualified advanced mine safety equipment
property under the provision, the original use of the
property must have commenced with the taxpayer, and the
taxpayer must have placed the property in service after the
date of enactment.
The portion of the cost of any property with respect to
which an expensing election under section 179 is made may not
be taken into account for purposes of the 50-percent
deduction allowed under this provision. For Federal tax
purposes, the basis of property is reduced by the portion of
its cost that is taken into account for purposes of the 50-
percent deduction allowed under the provision.
The provision requires the taxpayer to report information
required by the Treasury Secretary with respect to the
operation of mines of the taxpayer, in order for the
deduction to be allowed for the taxable year.
The provision includes a termination rule providing that it
does not apply to property placed in service after the date
that is three years after the date of enactment.
Effective date.--The provision applies to costs paid or
incurred after the date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.

M. Mine Rescue Team Training Credit

(Sec. 314 of the Senate amendment and new sec. 45N of the
Code)

Present Law

There is no present law credit for expenditures incurred by
a taxpayer to train mine rescue workers. In general, a
deduction is allowed for all ordinary and necessary expenses
that are paid or incurred by the taxpayer during the taxable
year in carrying on any trade or business.\346\A taxpayer
that employs individuals as miners in underground mines will
generally be permitted to deduct as ordinary and necessary
expenses the educational expenditures such taxpayer incurs to
train its employees in the principles, procedures, and
techniques of mine rescue, as well as the wages paid by the
taxpayer for the time its employees were engaged in such
training.
---------------------------------------------------------------------------
\346\Sec. 162(a).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

The Senate amendment provides that a taxpayer which is an
eligible employer may claim a credit equal to the lesser of
(1) 20 percent of the amount paid or incurred by the taxpayer
during the taxable year with respect to the training program
costs of each qualified mine rescue team employee (including
wages of the employee), or (2) $10,000.\347\An eligible
employer is any taxpayer which employs individuals as miners
in underground mines in the United States. No deduction is
allowed for the amount of the expenses otherwise deductible
which is equal to the amount of the credit.
---------------------------------------------------------------------------
\347\The credit is part of the general business credit (sec.
38).
---------------------------------------------------------------------------
A qualified mine rescue team employee is any full-time
employee of the taxpayer who is a miner eligible for more
than six months of a taxable year to serve as a mine rescue
team member by virtue of either having completed the initial
20-hour course of instruction prescribed by the Mine Safety
and Health Administration's Office of Educational Policy and
Development, or receiving at least 40 hours of refresher
training in such instruction.
Effective date.--The provision is effective for taxable
years beginning after December 31, 2005, and before January
1, 2009.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.

N. Funding for Veterans Health Care and Disability Compensation and
Hospital Infrastructure for Veterans

(Sec. 315 of the Senate amendment)

Present Law

Within the U.S. Department of Veterans Affairs, the
Veterans Health Administration provides a broad spectrum of
medical, surgical, and rehabilitative care to veterans. The
Veteran Benefits Administration provides services to
veterans, including services related to compensation and
pensions.

House Bill

No provision.

Senate Amendment

The Senate amendment authorizes the appropriation of funds
for the Department of Veterans Affairs for the Veterans
Health Administration for Medical Care as well as the
Veterans Benefits Administration for Compensation and
Pensions for fiscal years 2006 through 2010 in the amounts
listed below. The amounts authorized are in addition to any
other amounts authorized for these Administrations under any
other provision of law.

------------------------------------------------------------------------
Veterans health Veterans benefits
Fiscal year administration administration
------------------------------------------------------------------------
2006.............................. $900,000,000 $2,300,000,000

[[Page 7436]]

2007.............................. 1,300,000,000 2,700,000,000
2008.............................. 1,500,000,000 3,000,000,000
2009.............................. 1,600,000,000 3,000,000,000
2010.............................. 1,600,000,000 3,000,000,000
------------------------------------------------------------------------

The Senate amendment also establishes the Veterans Hospital
Improvement Fund, with an initial balance of $1,000,000,000,
to be administered by the Secretary of Veterans Affairs. The
funds are to be used for improvements of health facilities
treating veterans.
Effective date.--The Senate amendment is effective upon the
date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.

O. Sense of the Senate Regarding Protecting Middle-Class Families From
the Alternative Minimum Tax

(Sec. 316 of the Senate amendment)

Present Law

Present law imposes an alternative minimum tax. The
alternative minimum tax is the amount by which the tentative
minimum tax exceeds the regular income tax. An individual's
tentative minimum tax is the sum of (1) 26 percent of so much
of the taxable excess as does not exceed $175,000 ($87,500 in
the case of a married individual filing a separate return)
and (2) 28 percent of the remaining taxable excess. The
taxable excess is so much of the alternative minimum taxable
income (``AMTI'') as exceeds an exemption amount. AMTI is the
individual's taxable income adjusted to take account of
specified preferences and adjustments.
Under present law, for taxable years beginning before
January 1, 2009, the maximum rate of tax on the adjusted net
capital gain of an individual is 15 percent, and dividends
received by an individual from domestic corporations and
qualified foreign corporations are taxed at the same rates
that apply to capital gains. For taxable years beginning
after December 31, 2008, the maximum rate of tax on the
adjusted net capital gain of an individual is 20 percent, and
dividends received by an individual are taxed as ordinary
income at rates of up to 35 percent.

House Bill

No provision.

Senate Amendment

The Senate amendment provides that it is the sense of the
Senate that protecting middle-class families from the
alternative minimum tax should be a higher priority for
Congress in 2006 than extending a tax cut that does not
expire until the end of 2008.
Effective date.--The provision is effective on the date of
enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.

TITLE V--REVENUE OFFSET PROVISIONS

A. Provisions Designed to Curtail Tax Shelters

1. Understatement of taxpayer's liability by income tax
return preparer (Sec. 401 of the Senate amendment and
sec. 6694 of the Code)

Present Law

An income tax return preparer who prepares a return with
respect to which there is an understatement of tax that is
due to an undisclosed position for which there was not a
realistic possibility of being sustained on its merits, or a
frivolous position, is liable for a penalty of $250, provided
the preparer knew or reasonably should have known of the
position. An income tax return preparer who prepares a return
and engages in specified willful or reckless conduct with
respect to preparing such a return is liable for a penalty of
$1,000.

House Bill

No provision.

Senate Amendment

The provision alters the standards of conduct that must be
met to avoid imposition of the first penalty described above
by replacing the realistic possibility standard with a
requirement that there be a reasonable belief that the tax
treatment of the position was more likely than not the proper
treatment. The provision also replaces the not-frivolous
standard with the requirement that there be a reasonable
basis for the tax treatment of the position, increases the
present-law $250 penalty to $1,000, and increases the
present-law $1,000 penalty to $5,000.
Effective date.--The provision is effective for documents
prepared after the date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
2. Frivolous tax submissions (Sec. 402 of the Senate
amendment and sec. 6702 of the Code)

Present Law

The Code provides that an individual who files a frivolous
income tax return is subject to a penalty of $500 imposed by
the IRS (sec. 6702). The Code also permits the Tax Court\348\
to impose a penalty of up to $25,000 if a taxpayer has
instituted or maintained proceedings primarily for delay or
if the taxpayer's position in the proceeding is frivolous or
groundless (sec. 6673(a)).
---------------------------------------------------------------------------
\348\Because in general the Tax Court is the only pre-payment
forum available to taxpayers, it deals with most of the
frivolous, groundless, or dilatory arguments raised in tax
cases.
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

The Senate amendment modifies the IRS-imposed penalty by
increasing the amount of the penalty to up to $5,000 and by
applying it to all taxpayers and to all types of Federal
taxes.
The Senate amendment also modifies present law with respect
to certain submissions that raise frivolous arguments or that
are intended to delay or impede tax administration. The
submissions to which the Senate amendment applies are
requests for a collection due process hearing, installment
agreements, offers-in-compromise, and taxpayer assistance
orders. First, the Senate amendment permits the IRS to
disregard such requests. Second, the Senate amendment permits
the IRS to impose a penalty of up to $5,000 for such
requests, unless the taxpayer withdraws the request after
being given an opportunity to do so.
The Senate amendment requires the IRS to publish a list of
positions, arguments, requests, and submissions determined to
be frivolous for purposes of these provisions.
Effective date.--The Senate amendment applies to
submissions made and issues raised after the date on which
the Secretary first prescribes the required list of frivolous
positions.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
3. Penalty for promoting abusive tax shelters (Sec. 403 of
the Senate amendment and sec. 6700 of the Code)

Present Law

A penalty is imposed on any person who organizes, assists
in the organization of, or participates in the sale of any
interest in, a partnership or other entity, any investment
plan or arrangement, or any other plan or arrangement, if in
connection with such activity the person makes or furnishes a
qualifying false or fraudulent statement or a gross valuation
overstatement.\349\ A qualified false or fraudulent statement
is any statement with respect to the allowability of any
deduction or credit, the excludability of any income, or the
securing of any other tax benefit by reason of holding an
interest in the entity or participating in the plan or
arrangement which the person knows or has reason to know is
false or fraudulent as to any material matter. A ``gross
valuation overstatement'' means any statement as to the value
of any property or services if the stated value exceeds 200
percent of the correct valuation, and the value is directly
related to the amount of any allowable income tax deduction
or credit.
---------------------------------------------------------------------------
\349\Sec. 6700.
---------------------------------------------------------------------------
In the case of a gross valuation overstatement, the amount
of the penalty is $1,000 (or, if the person establishes that
it is less, 100 percent of the gross income derived or to be
derived by the person from such activity). A penalty
attributable to a gross valuation misstatement can be waived
on a showing that there was a reasonable basis for the
valuation and it was made in good faith. In the case of any
activity that involves a qualified false or fraudulent
statement, the penalty amount is equal to 50 percent of the
gross income derived by the person from the activity.

House Bill

No provision.

Senate Amendment

The Senate amendment modifies the penalty rate imposed on
any person who organizes, assists in the organization of, or
participates in the sale of any interest in, a partnership or
other entity, any investment plan or arrangement, or any
other plan or arrangement, if in connection with such
activity the person makes or furnishes a qualifying false or
fraudulent statement or a gross valuation overstatement. The
penalty is equal to 100 percent of the gross income derived
(or to be derived) from the activity. The penalty amount is
calculated with respect to each instance of an activity
subject to the penalty, each instance in which income was
derived by the person or persons subject to the penalty, and
each person who participated in an activity subject to the
penalty.
Under the Senate amendment, if more than one person is
liable for the penalty, all such persons are jointly and
severally liable for the penalty. In addition, the Senate
amendment provides that the penalty, as well as amounts paid
to settle or avoid the imposition of the penalty, is not
deductible for tax purposes.
Effective date.--The provision is effective for activities
occurring after the date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.

[[Page 7437]]

4. Penalty for aiding and abetting the understatement of tax
liability (Sec. 404 of the Senate amendment and sec. 6701
of the Code)

Present Law

A penalty is imposed on a person who: (1) aids or assists
in, procures, or advises with respect to a tax return or
other document; (2) knows (or has reason to believe) that
such document will be used in connection with a material tax
matter; and (3) knows that this would result in an
understatement of tax of another person. In general, the
amount of the penalty is $1,000. If the document relates to
the tax return of a corporation, the amount of the penalty is
$10,000.

House Bill

No provision.

Senate Amendment

The Senate amendment expands the scope of the penalty in
several ways. First, it applies the penalty to aiding or
assisting with respect to tax liability reflected in a tax
return. Second, it applies the penalty to each instance of
aiding or abetting. Third, it increases the amount of the
penalty to a maximum of 100 percent of the gross income
derived (or to be derived) from the aiding or abetting.
Fourth, if more than one person is liable for the penalty,
all such persons are jointly and severally liable for the
penalty. Fifth, the penalty, as well as amounts paid to
settle or avoid the imposition of the penalty, is not
deductible for tax purposes.
Effective date.--The provision is effective for activities
occurring after the date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.

B. Economic Substance Doctrine

1. Clarification of the economic substance doctrine (sec. 411
of the Senate amendment)

present law

In general
The Code provides specific rules regarding the computation
of taxable income, including the amount, timing, source, and
character of items of income, gain, loss and deduction. These
rules are designed to provide for the computation of taxable
income in a manner that provides for a degree of specificity
to both taxpayers and the government. Taxpayers generally may
plan their transactions in reliance on these rules to
determine the federal income tax consequences arising from
the transactions.
In addition to the statutory provisions, courts have
developed several doctrines that can be applied to deny the
tax benefits of tax motivated transactions, notwithstanding
that the transaction may satisfy the literal requirements of
a specific tax provision. The common-law doctrines are not
entirely distinguishable, and their application to a given
set of facts is often blurred by the courts and the IRS.
Although these doctrines serve an important role in the
administration of the tax system, invocation of these
doctrines can be seen as at odds with an objective, ``rule-
based'' system of taxation. Nonetheless, courts have applied
the doctrines to deny tax benefits arising from certain
transactions.\350\
---------------------------------------------------------------------------
\350\See, e.g., ACM Partnership v. Commissioner, 157 F.3d 231
(3d Cir. 1998), aff'g 73 T.C.M. (CCH) 2189 (1997), cert.
denied 526 U.S. 1017 (1999).
---------------------------------------------------------------------------
A common-law doctrine applied with increasing frequency is
the ``economic substance'' doctrine. In general, this
doctrine denies tax benefits arising from transactions that
do not result in a meaningful change to the taxpayer's
economic position other than a purported reduction in federal
income tax.\351\
---------------------------------------------------------------------------
\351\Closely related doctrines also applied by the courts
(sometimes interchangeable with the economic substance
doctrine) include the ``sham transaction doctrine'' and the
``business purpose doctrine''. See, e.g., Knetsch v. United
States, 364 U.S. 361 (1960) (denying interest deductions on a
``sham transaction'' whose only purpose was to create the
deductions).
---------------------------------------------------------------------------
Economic substance doctrine
Courts generally deny claimed tax benefits if the
transaction that gives rise to those benefits lacks economic
substance independent of tax considerations--notwithstanding
that the purported activity actually occurred. The tax court
has described the doctrine as follows:

The tax law . . . requires that the intended transactions
have economic substance separate and distinct from economic
benefit achieved solely by tax reduction. The doctrine of
economic substance becomes applicable, and a judicial remedy
is warranted, where a taxpayer seeks to claim tax benefits,
unintended by Congress, by means of transactions that serve
no economic purpose other than tax savings.\352\
---------------------------------------------------------------------------
\352\ACM Partnership v. Commissioner, 73 T.C.M. at 2215.
---------------------------------------------------------------------------
Business purpose doctrine
Another common law doctrine that overlays and is often
considered together with (if not part and parcel of) the
economic substance doctrine is the business purpose doctrine.
The business purpose test is a subjective inquiry into the
motives of the taxpayer--that is, whether the taxpayer
intended the transaction to serve some useful non-tax
purpose. In making this determination, some courts have
bifurcated a transaction in which independent activities with
non-tax objectives have been combined with an unrelated item
having only tax-avoidance objectives in order to disallow the
tax benefits of the overall transaction.\353\
---------------------------------------------------------------------------
\353\ACM Partnership v. Commissioner, 157 F.3d at 256 n.48.
---------------------------------------------------------------------------
Application by the courts
Elements of the doctrine
There is a lack of uniformity regarding the proper
application of the economic substance doctrine.\354\ Some
courts apply a conjunctive test that requires a taxpayer to
establish the presence of both economic substance (i.e., the
objective component) and business purpose (i.e., the
subjective component) in order for the transaction to survive
judicial scrutiny.\355\ A narrower approach used by some
courts is to conclude that either a business purpose or
economic substance is sufficient to respect the
transaction).\356\ A third approach regards economic
substance and business purpose as ``simply more precise
factors to consider'' in determining whether a transaction
has any practical economic effects other than the creation of
tax benefits.\357\
---------------------------------------------------------------------------
\354\``The casebooks are glutted with [economic substance]
tests. Many such tests proliferate because they give the
comforting illusion of consistency and precision. They often
obscure rather than clarify.'' Collins v. Commissioner, 857
F.2d 1383, 1386 (9th Cir. 1988).
\355\See, e.g., Pasternak v. Commissioner, 990 F.2d 893, 898
(6th Cir. 1993) (``The threshold question is whether the
transaction has economic substance. If the answer is yes, the
question becomes whether the taxpayer was motivated by profit
to participate in the transaction.'').
\356\See, e.g., Rice's Toyota World v. Commissioner, 752 F.2d
89, 91-92 (4th Cir. 1985) (``To treat a transaction as a
sham, the court must find that the taxpayer was motivated by
no business purposes other than obtaining tax benefits in
entering the transaction, and, second, that the transaction
has no economic substance because no reasonable possibility
of a profit exists.''); IES Industries v. United States, 253
F.3d 350, 358 (8th Cir. 2001) (``In determining whether a
transaction is a sham for tax purposes [under the Eighth
Circuit test], a transaction will be characterized as a sham
if it is not motivated by any economic purpose out of tax
considerations (the business purpose test), and if it is
without economic substance because no real potential for
profit exists (the economic substance test).''). As noted
earlier, the economic substance doctrine and the sham
transaction doctrine are similar and sometimes are applied
interchangeably. For a more detailed discussion of the sham
transaction doctrine, see, e.g., Joint Committee on Taxation,
Study of Present-Law Penalty and Interest Provisions as
Required by Section 3801 of the Internal Revenue Service
Restructuring and Reform Act of 1998 (including Provisions
Relating to Corporate Tax Shelters) (JCS-3-99) at 182.
\357\See, e.g., ACM Partnership v. Commissioner, 157 F.3d at
247; James v. Commissioner, 899 F.2d 905, 908 (10th Cir.
1995); Sacks v. Commissioner, 69 F.3d 982, 985 (9th Cir.
1995) (``Instead, the consideration of business purpose and
economic substance are simply more precise factors to
consider . . . We have repeatedly and carefully noted that
this formulation cannot be used as a `rigid two-step
analysis'.'').
---------------------------------------------------------------------------
Recently, the Court of Federal Claims questioned the
continuing viability of the doctrine.\358\ The court also
stated that ``the use of the `economic substance' doctrine to
trump `mere compliance with the Code' would violate the
separation of powers.''\359\
---------------------------------------------------------------------------
\358\Coltec Industries, Inc. v. United States, 62 Fed. Cl.
716 (2004) (slip opinion at 123-124). The court also found,
however, that the doctrine was satisfied in that case. Id. at
128.
\359\Id. at 128.
---------------------------------------------------------------------------
Nontax economic benefits
There also is a lack of uniformity regarding the type of
non-tax economic benefit a taxpayer must establish in order
to satisfy economic substance. Several courts have denied tax
benefits on the grounds that the subject transactions lacked
profit potential.\360\ In addition, some courts have applied
the economic substance doctrine to disallow tax benefits in
transactions in which a taxpayer was exposed to risk and the
transaction had a profit potential, but the court concluded
that the economic risks and profit potential were
insignificant when compared to the tax benefits.\361\ Under
this analysis, the taxpayer's profit potential must be more
than nominal. Conversely, other courts view the application
of the economic substance doctrine as requiring an objective
determination of whether a ``reasonable possibility of
profit'' from the transaction existed apart from the tax
benefits.\362\ In these cases, in assessing whether a
reasonable possibility of profit exists, it is sufficient if
there is a nominal amount of pre-tax profit as measured
against expected net tax benefits.
---------------------------------------------------------------------------
\360\See, e.g., Knetsch, 364 U.S. at 361; Goldstein v.
Commissioner, 364 F.2d 734 (2d Cir. 1966) (holding that an
unprofitable, leveraged acquisition of Treasury bills, and
accompanying prepaid interest deduction, lacked economic
substance).
\361\See, e.g., Goldstein v. Commissioner, 364 F.2d at 739-40
(disallowing deduction even though taxpayer had a possibility
of small gain or loss by owning Treasury bills); Sheldon v.
Commissioner, 94 T.C. 738, 768 (1990) (stating that
``potential for gain . . . is infinitesimally nominal and
vastly insignificant when considered in comparison with the
claimed deductions'').
\362\See, e.g., Rice's Toyota World v. Commissioner, 752 F.2d
at 94 (the economic substance inquiry requires an objective
determination of whether a reasonable possibility of profit
from the transaction existed apart from tax benefits); Compaq
Computer Corp. v. Commissioner, 277 F.3d at 781 (applied the
same test, citing Rice's Toyota World); IES Industries v.
United States, 253 F.3d 350, 354 (8th Cir. 2001).

[[Page 7438]]

Financial accounting benefits
In determining whether a taxpayer had a valid business
purpose for entering into a transaction, at least one court
has concluded that financial accounting benefits arising from
tax savings do not qualify as a non-tax business
purpose.\363\ However, based on court decisions that
recognize the importance of financial accounting treatment,
taxpayers have asserted that financial accounting benefits
arising from tax savings can satisfy the business purpose
test.\364\
---------------------------------------------------------------------------
\363\See, American Electric Power, Inc. v. U.S., 136 F. Supp.
2d 762, 791-92 (S.D. Ohio 2001); aff'd 326 F.3d.737 (6th Cir.
2003).
\364\See, e.g., Joint Committee on Taxation, Report of
Investigation of Enron Corporation and Related Entities
Regarding Federal Tax and Compensation Issues, and Policy
Recommendations (JSC-3-03) February, 2003 (``Enron Report''),
Volume III at C-93, 289. Enron Corporation relied on Frank
Lyon Co. v. United States, 435 U.S. 561, 577-78 (1978), and
Newman v. Commissioner, 902 F.2d 159, 163 (2d Cir. 1990) to
argue that financial accounting benefits arising from tax
savings constitutes a good business purpose.
---------------------------------------------------------------------------

House bill

No provision.

Senate Amendment

The Senate amendment provision clarifies and enhances the
application of the economic substance doctrine. Under the
provision, in a case in which a court determines that the
economic substance doctrine is relevant to a transaction (or
a series of transactions), such transaction (or series of
transactions) has economic substance (and thus satisfies the
economic substance doctrine) only if the taxpayer establishes
that (1) the transaction changes in a meaningful way (apart
from Federal income tax consequences) the taxpayer's economic
position, and (2) the taxpayer has a substantial non-tax
purpose for entering into such transaction and the
transaction is a reasonable means of accomplishing such
purpose.\365\
---------------------------------------------------------------------------
\365\If the tax benefits are clearly contemplated and
expected by the language and purpose of the relevant
authority, it is not intended that such tax benefits be
disallowed if the only reason for such disallowance is that
the transaction fails the economic substance doctrine as
defined in this provision.
---------------------------------------------------------------------------
The provision does not change current law standards used by
courts in determining when to utilize an economic substance
analysis.\366\ Also, the provision does not alter the court's
ability to aggregate, disaggregate or otherwise
recharacterize a transaction when applying the doctrine.\367\
The provision provides a uniform definition of economic
substance, but does not alter the flexibility of the courts
in other respects.
---------------------------------------------------------------------------
\366\See, e.g., Treas. Reg. sec. 1.269-2, stating that
characteristic of circumstances in which a deduction
otherwise allowed will be disallowed are those in which the
effect of the deduction, credit, or other allowance would be
to distort the liability of the particular taxpayer when the
essential nature of the transaction or situation is examined
in the light of the basic purpose or plan which the
deduction, credit, or other allowance was designed by the
Congress to effectuate.
\367\See, e.g., Minnesota Tea Co. v. Helvering, 302 U.S. 609,
613 (1938) (``A given result at the end of a straight path is
not made a different result because reached by following a
devious path.'').
---------------------------------------------------------------------------
Conjunctive analysis
The provision clarifies that the economic substance
doctrine involves a conjunctive analysis--there must be an
objective inquiry regarding the effects of the transaction on
the taxpayer's economic position, as well as a subjective
inquiry regarding the taxpayer's motives for engaging in the
transaction. Under the provision, a transaction must satisfy
both tests--i.e., it must change in a meaningful way (apart
from Federal income tax consequences) the taxpayer's economic
position, and the taxpayer must have a substantial non-tax
purpose for entering into such transaction (and the
transaction is a reasonable means of accomplishing such
purpose)--in order to satisfy the economic substance
doctrine. This clarification eliminates the disparity that
exists among the circuits regarding the application of the
doctrine, and modifies its application in those circuits in
which either a change in economic position or a non-tax
business purpose (without having both) is sufficient to
satisfy the economic substance doctrine.
Non-tax business purpose
Under the provision, a taxpayer's non-tax purpose for
entering into a transaction (the second prong in the
analysis) must be ``substantial,'' and the transaction must
be ``a reasonable means'' of accomplishing such purpose.
Under this formulation, the non-tax purpose for the
transaction must bear a reasonable relationship to the
taxpayer's normal business operations or investment
activities.\368\
---------------------------------------------------------------------------
\368\See, e.g., Treas. Reg. sec. 1.269-2(b) (stating that a
distortion of tax liability indicating the principal purpose
of tax evasion or avoidance might be evidenced by the fact
that ``the transaction was not undertaken for reasons germane
to the conduct of the business of the taxpayer''). Similarly,
in ACM Partnership v. Commissioner, 73 T.C.M. (CCH) 2189
(1997), the court stated:
``Key to [the determination of whether a transaction has
economic substance] is that the transaction must be
rationally related to a useful nontax purpose that is
plausible in light of the taxpayer's conduct and useful in
light of the taxpayer's economic situation and intentions.
Both the utility of the stated purpose and the rationality of
the means chosen to effectuate it must be evaluated in
accordance with commercial practices in the relevant
industry. A rational relationship between purpose and means
ordinarily will not be found unless there was a reasonable
expectation that the nontax benefits would be at least
commensurate with the transaction costs.'' [citations
omitted]
---------------------------------------------------------------------------
In determining whether a taxpayer has a substantial non-tax
business purpose, an objective of achieving a favorable
accounting treatment for financial reporting purposes will
not be treated as having a substantial non-tax purpose.\369\
Furthermore, a transaction that is expected to increase
financial accounting income as a result of generating tax
deductions or losses without a corresponding financial
accounting charge (i.e., a permanent book-tax
difference)\370\ should not be considered to have a
substantial non-tax purpose unless a substantial non-tax
purpose exists apart from the financial accounting
benefits.\371\
---------------------------------------------------------------------------
\369\However, if the tax benefits are clearly contemplated
and expected by the language and purpose of the relevant
authority, such tax benefits should not be disallowed solely
because the transaction results in a favorable accounting
treatment. An example is the repealed foreign sales
corporation rules.
\370\This includes tax deductions or losses that are
anticipated to be recognized in a period subsequent to the
period the financial accounting benefit is recognized. For
example, FAS 109 in some cases permits the recognition of
financial accounting benefits prior to the period in which
the tax benefits are recognized for income tax purposes.
\371\Claiming that a financial accounting benefit constitutes
a substantial non-tax purpose fails to consider the origin of
the accounting benefit (i.e., reduction of taxes) and
significantly diminishes the purpose for having a substantial
non-tax purpose requirement. See, e.g., American Electric
Power, Inc. v. U.S., 136 F. Supp. 2d 762, 791-92 (S.D. Ohio,
2001) (``AEP's intended use of the cash flows generated by
the [corporate-owned life insurance] plan is irrelevant to
the subjective prong of the economic substance analysis. If a
legitimate business purpose for the use of the tax savings
'were sufficient to breathe substance into a transaction
whose only purpose was to reduce taxes, [then] every sham
tax-shelter device might succeed,''') (citing Winn-Dixie v.
Commissioner, 113 T.C. 254, 287 (1999)); aff'd 326 F3d 737
(6th Cir. 2003).
---------------------------------------------------------------------------
By requiring that a transaction be a ``reasonable means''
of accomplishing its non-tax purpose, the provision
reiterates the present-law ability of the courts to bifurcate
a transaction in which independent activities with non-tax
objectives are combined with an unrelated item having only
tax-avoidance objectives in order to disallow the tax
benefits of the overall transaction.\372\
---------------------------------------------------------------------------
\372\See, e.g., ACM Partnership v. Commissioner, 157 F.3d at
256 n.48.
---------------------------------------------------------------------------
Profit potential
Under the provision, a taxpayer may rely on factors other
than profit potential to demonstrate that a transaction
results in a meaningful change in the taxpayer's economic
position; the provision merely sets forth a minimum threshold
of profit potential if that test is relied on to demonstrate
a meaningful change in economic position. If a taxpayer
relies on a profit potential, however, the present value of
the reasonably expected pre-tax profit must be substantial in
relation to the present value of the expected net tax
benefits that would be allowed if the transaction were
respected.\373\ Moreover, the profit potential must exceed a
risk-free rate of return. In addition, in determining pre-tax
profit, fees and other transaction expenses and foreign taxes
are treated as expenses.
---------------------------------------------------------------------------
\373\Thus, a ``reasonable possibility of profit'' will not be
sufficient to establish that a transaction has economic
substance.
---------------------------------------------------------------------------
In applying the profit potential test to a lessor of
tangible property, depreciation, applicable tax credits (such
as the rehabilitation tax credit and the low income housing
tax credit), and any other deduction as provided in guidance
by the Secretary are not taken into account in measuring tax
benefits.
Transactions with tax-indifferent parties
The provision also provides special rules for transactions
with tax-indifferent parties. For this purpose, a tax-
indifferent party means any person or entity not subject to
Federal income tax, or any person to whom an item would have
no substantial impact on its income tax liability. Under
these rules, the form of a financing transaction will not be
respected if the present value of the tax deductions to be
claimed is substantially in excess of the present value of
the anticipated economic returns to the lender. Also, the
form of a transaction with a tax-indifferent party will not
be respected if it results in an allocation of income or gain
to the tax-indifferent party in excess of the tax-indifferent
party's economic gain or income or if the transaction results
in the shifting of basis on account of overstating the income
or gain of the tax-indifferent party.
Other rules
The Secretary may prescribe regulations which provide (1)
exemptions from the application of the provision, and (2)
other rules as may be necessary or appropriate to carry out
the purposes of the provision.
No inference is intended as to the proper application of
the economic substance doctrine under present law. In
addition, except with respect to the economic substance
doctrine, the provision shall not be construed as altering or
supplanting any other common law doctrine (including the sham
transaction doctrine), and the provision shall be construed
as being additive to any such other doctrine.

[[Page 7439]]

Effective date.--The provision applies to transactions
entered into after the date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
2. Penalty for understatements attributable to transactions
lacking economic substance, etc. (Sec. 412 of the Senate
amendment)

Present Law

General accuracy-related penalty
An accuracy-related penalty under section 6662 applies to
the portion of any underpayment that is attributable to (1)
negligence, (2) any substantial understatement of income tax,
(3) any substantial valuation misstatement, (4) any
substantial overstatement of pension liabilities, or (5) any
substantial estate or gift tax valuation understatement. If
the correct income tax liability exceeds that reported by the
taxpayer by the greater of 10 percent of the correct tax or
$5,000 (or, in the case of corporations, by the lesser of (a)
10 percent of the correct tax (or $10,000 if greater) or (b)
$10 million), then a substantial understatement exists and a
penalty may be imposed equal to 20 percent of the
underpayment of tax attributable to the understatement.\374\
Except in the case of tax shelters,\375\ the amount of any
understatement is reduced by any portion attributable to an
item if (1) the treatment of the item is supported by
substantial authority, or (2) facts relevant to the tax
treatment of the item were adequately disclosed and there was
a reasonable basis for its tax treatment. The Treasury
Secretary may prescribe a list of positions which the
Secretary believes do not meet the requirements for
substantial authority under this provision.
---------------------------------------------------------------------------
\374\Sec. 6662.
\375\A tax shelter is defined for this purpose as a
partnership or other entity, an investment plan or
arrangement, or any other plan or arrangement if a
significant purpose of such partnership, other entity, plan,
or arrangement is the avoidance or evasion of Federal income
tax. Sec. 6662(d)(2)(C).
---------------------------------------------------------------------------
The section 6662 penalty generally is abated (even with
respect to tax shelters) in cases in which the taxpayer can
demonstrate that there was ``reasonable cause'' for the
underpayment and that the taxpayer acted in good faith.\376\
The relevant regulations provide that reasonable cause exists
where the taxpayer ``reasonably relies in good faith on an
opinion based on a professional tax advisor's analysis of the
pertinent facts and authorities [that] . . . unambiguously
concludes that there is a greater than 50-percent likelihood
that the tax treatment of the item will be upheld if
challenged'' by the IRS.\377\
---------------------------------------------------------------------------
\376\Sec. 6664(c).
\377\Treas. Reg. sec. 1.6662-4(g)(4)(i)(B); Treas. Reg. sec.
1.6664-4(c).
---------------------------------------------------------------------------
Listed transactions and reportable avoidance transactions
In general
A separate accuracy-related penalty under section 6662A
applies to ``listed transactions'' and to other ``reportable
transactions'' with a significant tax avoidance purpose
(hereinafter referred to as a ``reportable avoidance
transaction''). The penalty rate and defenses available to
avoid the penalty vary depending on whether the transaction
was adequately disclosed.
Both listed transactions and reportable transactions are
allowed to be described by the Treasury Department under
section 6707A(c), which imposes a penalty for failure
adequately to report such transactions under section 6011. A
reportable transaction is defined as one that the Treasury
Secretary determines is required to be disclosed because it
is determined to have a potential for tax avoidance or
evasion.\378\ A listed transaction is defined as a reportable
transaction which is the same as, or substantially similar
to, a transaction specifically identified by the Secretary as
a tax avoidance transaction for purposes of the reporting
disclosure requirements.\379\
---------------------------------------------------------------------------
\378\Sec. 6707A(c)(1).
\379\Sec. 6707A(c)(2).
---------------------------------------------------------------------------
Disclosed transactions
In general, a 20-percent accuracy-related penalty is
imposed on any understatement attributable to an adequately
disclosed listed transaction or reportable avoidance
transaction.\380\ The only exception to the penalty is if the
taxpayer satisfies a more stringent reasonable cause and good
faith exception (hereinafter referred to as the
``strengthened reasonable cause exception''), which is
described below. The strengthened reasonable cause exception
is available only if the relevant facts affecting the tax
treatment are adequately disclosed, there is or was
substantial authority for the claimed tax treatment, and the
taxpayer reasonably believed that the claimed tax treatment
was more likely than not the proper treatment.
---------------------------------------------------------------------------
\380\Sec. 6662A(a).
---------------------------------------------------------------------------
Undisclosed transactions
If the taxpayer does not adequately disclose the
transaction, the strengthened reasonable cause exception is
not available (i.e., a strict-liability penalty generally
applies), and the taxpayer is subject to an increased penalty
equal to 30 percent of the understatement.\381\ However, a
taxpayer will be treated as having adequately disclosed a
transaction for this purpose if the IRS Commissioner has
separately rescinded the separate penalty under section 6707A
for failure to disclose a reportable transaction.\382\ The
IRS Commissioner is authorized to do this only if the failure
does not relate to a listed transaction and only if
rescinding the penalty would promote compliance and effective
tax administration.\383\
---------------------------------------------------------------------------
\381\Sec. 6662A(c).
\382\Sec. 6664(d).
\383\Sec. 6707A(d).
---------------------------------------------------------------------------
A public entity that is required to pay a penalty for an
undisclosed listed or reportable transaction must disclose
the imposition of the penalty in reports to the SEC for such
periods as the Secretary shall specify. The disclosure to the
SEC applies without regard to whether the taxpayer determines
the amount of the penalty to be material to the reports in
which the penalty must appear; and any failure to disclose
such penalty in the reports is treated as a failure to
disclose a listed transaction. A taxpayer must disclose a
penalty in reports to the SEC once the taxpayer has exhausted
its administrative and judicial remedies with respect to the
penalty (or if earlier, when paid).\384\
---------------------------------------------------------------------------
\384\Sec. 6707A(e).
---------------------------------------------------------------------------
Determination of the understatement amount
The penalty is applied to the amount of any understatement
attributable to the listed or reportable avoidance
transaction without regard to other items on the tax return.
For purposes of this provision, the amount of the
understatement is determined as the sum of: (1) the product
of the highest corporate or individual tax rate (as
appropriate) and the increase in taxable income resulting
from the difference between the taxpayer's treatment of the
item and the proper treatment of the item (without regard to
other items on the tax return);\385\ and (2) the amount of
any decrease in the aggregate amount of credits which results
from a difference between the taxpayer's treatment of an item
and the proper tax treatment of such item.
---------------------------------------------------------------------------
\385\For this purpose, any reduction in the excess of
deductions allowed for the taxable year over gross income for
such year, and any reduction in the amount of capital losses
which would (without regard to section 1211) be allowed for
such year, shall be treated as an increase in taxable income.
Sec. 6662A(b).
---------------------------------------------------------------------------
Except as provided in regulations, a taxpayer's treatment
of an item shall not take into account any amendment or
supplement to a return if the amendment or supplement is
filed after the earlier of when the taxpayer is first
contacted regarding an examination of the return or such
other date as specified by the Secretary.\386\
---------------------------------------------------------------------------
\386\Sec. 6662A(e)(3).
---------------------------------------------------------------------------
Strengthened reasonable cause exception
A penalty is not imposed under the provision with respect
to any portion of an understatement if it is shown that there
was reasonable cause for such portion and the taxpayer acted
in good faith. Such a showing requires: (1) adequate
disclosure of the facts affecting the transaction in
accordance with the regulations under section 6011;\387\ (2)
that there is or was substantial authority for such
treatment; and (3) that the taxpayer reasonably believed that
such treatment was more likely than not the proper treatment.
For this purpose, a taxpayer will be treated as having a
reasonable belief with respect to the tax treatment of an
item only if such belief: (1) is based on the facts and law
that exist at the time the tax return (that includes the
item) is filed; and (2) relates solely to the taxpayer's
chances of success on the merits and does not take into
account the possibility that (a) a return will not be
audited, (b) the treatment will not be raised on audit, or
(c) the treatment will be resolved through settlement if
raised.\388\
---------------------------------------------------------------------------
\387\See the previous discussion regarding the penalty for
failing to disclose a reportable transaction.
\388\Sec. 6664(d).
---------------------------------------------------------------------------
A taxpayer may (but is not required to) rely on an opinion
of a tax advisor in establishing its reasonable belief with
respect to the tax treatment of the item. However, a taxpayer
may not rely on an opinion of a tax advisor for this purpose
if the opinion (1) is provided by a ``disqualified tax
advisor'' or (2) is a ``disqualified opinion.''
Disqualified tax advisor
A disqualified tax advisor is any advisor who: (1) is a
material advisor\389\ and who participates in the
organization, management, promotion or sale of the
transaction or is related (within the meaning of section
267(b) or 707(b)(1)) to any person who so participates; (2)
is compensated directly or indirectly\390\ by a material
advisor with respect to the

[[Page 7440]]

transaction; (3) has a fee arrangement with respect to the
transaction that is contingent on all or part of the intended
tax benefits from the transaction being sustained; or (4) as
determined under regulations prescribed by the Secretary, has
a disqualifying financial interest with respect to the
transaction.
---------------------------------------------------------------------------
\389\The term ``material advisor'' means any person who
provides any material aid, assistance, or advice with respect
to organizing, managing, promoting, selling, implementing, or
carrying out any reportable transaction, and who derives
gross income in excess of $50,000 in the case of a reportable
transaction substantially all of the tax benefits from which
are provided to natural persons ($250,000 in any other case).
Sec. 6111(b)(1).
\390\This situation could arise, for example, when an advisor
has an arrangement or understanding (oral or written) with an
organizer, manager, or promoter of a reportable transaction
that such party will recommend or refer potential
participants to the advisor for an opinion regarding the tax
treatment of the transaction.
---------------------------------------------------------------------------
A material advisor is considered as participating in the
``organization'' of a transaction if the advisor performs
acts relating to the development of the transaction. This may
include, for example, preparing documents: (1) establishing a
structure used in connection with the transaction (such as a
partnership agreement); (2) describing the transaction (such
as an offering memorandum or other statement describing the
transaction); or (3) relating to the registration of the
transaction with any federal, state or local government
body.\391\ Participation in the ``management'' of a
transaction means involvement in the decision-making process
regarding any business activity with respect to the
transaction. Participation in the ``promotion or sale'' of a
transaction means involvement in the marketing or
solicitation of the transaction to others. Thus, an advisor
who provides information about the transaction to a potential
participant is involved in the promotion or sale of a
transaction, as is any advisor who recommends the transaction
to a potential participant.
---------------------------------------------------------------------------
\391\An advisor should not be treated as participating in the
organization of a transaction if the advisor's only
involvement with respect to the organization of the
transaction is the rendering of an opinion regarding the tax
consequences of such transaction. However, such an advisor
may be a ``disqualified tax advisor'' with respect to the
transaction if the advisor participates in the management,
promotion or sale of the transaction (or if the advisor is
compensated by a material advisor, has a fee arrangement that
is contingent on the tax benefits of the transaction, or as
determined by the Secretary, has a continuing financial
interest with respect to the transaction).
---------------------------------------------------------------------------
Disqualified opinion
An opinion may not be relied upon if the opinion: (1) is
based on unreasonable factual or legal assumptions (including
assumptions as to future events); (2) unreasonably relies
upon representations, statements, findings or agreements of
the taxpayer or any other person; (3) does not identify and
consider all relevant facts; or (4) fails to meet any other
requirement prescribed by the Secretary.
Coordination with other penalties
To the extent a penalty on an understatement is imposed
under section 6662A, that same amount of understatement is
not also subject to the accuracy-related penalty under
section 6662(a) or to the valuation misstatement penalties
under section 6662(e) or 6662(h). However, such amount of
understatement is included for purposes of determining
whether any understatement (as defined in sec. 6662(d)(2)) is
a substantial understatement as defined under section
6662(d)(1) and for purposes of identifying an underpayment
under the section 6663 fraud penalty.
The penalty imposed under section 6662A does not apply to
any portion of an understatement to which a fraud penalty is
applied under section 6663.

House Bill

No provision.

Senate Amendment

The Senate amendment provision imposes a new, stronger
penalty for an understatement attributable to any transaction
that lacks economic substance (referred to in the statute as
a ``non-economic substance transaction
understatement'').\392\ The penalty rate is 40 percent
(reduced to 20 percent if the taxpayer adequately discloses
the relevant facts in accordance with regulations prescribed
under section 6011). No exceptions (including the reasonable
cause or rescission rules) to the penalty are available
(i.e., the penalty is a strict-liability penalty).
---------------------------------------------------------------------------
\392\Thus, unlike the present-law accuracy-related penalty
under section 6662A (which applies only to listed and
reportable avoidance transactions), the new penalty under the
provision applies to any transaction that lacks economic
substance.
---------------------------------------------------------------------------
A ``non-economic substance transaction'' means any
transaction if (1) the transaction lacks economic substance
(as defined in the Senate amendment provision regarding the
clarification of the economic substance doctrine),\393\ (2)
the transaction was not respected under the rules relating to
transactions with tax-indifferent parties (as described in
the Senate amendment provision regarding the clarification of
the economic substance doctrine),\394\ or (3) any similar
rule of law. For this purpose, a similar rule of law would
include, for example, an understatement attributable to a
transaction that is determined to be a sham transaction.
---------------------------------------------------------------------------
\393\That Senate amendment provision generally provides that
in any case in which a court determines that the economic
substance doctrine is relevant, a transaction has economic
substance only if: (1) the transaction changes in a
meaningful way (apart from Federal income tax effects) the
taxpayer's economic position, and (2) the taxpayer has a
substantial non-tax purpose for entering into such
transaction and the transaction is a reasonable means of
accomplishing such purpose. Specific other rules also apply.
See ``Explanation of Provision'' for the immediately
preceding Senate amendment provision, ``Clarification of the
economic substance doctrine.''
\394\That Senate amendment provision provides that the form
of a transaction that involves a tax-indifferent party will
not be respected in certain circumstances. See ``Explanation
of Provision'' for the immediately preceding Senate amendment
provision, ``Clarification of the economic substance
doctrine.''
---------------------------------------------------------------------------
For purposes of the bill, the calculation of an
``understatement'' is made in the same manner as in the
present law provision relating to accuracy-related penalties
for listed and reportable avoidance transactions (sec.
6662A). Thus, the amount of the understatement under the
provision would be determined as the sum of (1) the product
of the highest corporate or individual tax rate (as
appropriate) and the increase in taxable income resulting
from the difference between the taxpayer's treatment of the
item and the proper treatment of the item (without regard to
other items on the tax return),\395\ and (2) the amount of
any decrease in the aggregate amount of credits which results
from a difference between the taxpayer's treatment of an item
and the proper tax treatment of such item. In essence, the
penalty will apply to the amount of any understatement
attributable solely to a non-economic substance transaction.
---------------------------------------------------------------------------
\395\For this purpose, any reduction in the excess of
deductions allowed for the taxable year over gross income for
such year, and any reduction in the amount of capital losses
that would (without regard to section 1211) be allowed for
such year, would be treated as an increase in taxable income.
---------------------------------------------------------------------------
As in the case of the understatement penalty for reportable
and listed transactions under present law section
6662A(e)(3), except as provided in regulations, the
taxpayer's treatment of an item will not take into account
any amendment or supplement to a return if the amendment or
supplement is filed after the earlier of the date the
taxpayer is first contacted regarding an examination of such
return or such other date as specified by the Secretary.
As in the case of the understatement penalty for
undisclosed reportable transactions under present law section
6707A, a public entity that is required to pay a penalty
under the provision (but in this case, regardless of whether
the transaction was disclosed) must disclose the imposition
of the penalty in reports to the SEC for such periods as the
Secretary shall specify. The disclosure to the SEC applies
without regard to whether the taxpayer determines the amount
of the penalty to be material to the reports in which the
penalty must appear, and any failure to disclose such penalty
in the reports is treated as a failure to disclose a listed
transaction. A taxpayer must disclose a penalty in reports to
the SEC once the taxpayer has exhausted its administrative
and judicial remedies with respect to the penalty (or if
earlier, when paid).
Regardless of whether the transaction was disclosed, once a
penalty under the provision has been included in the first
letter of proposed deficiency which allows the taxpayer an
opportunity for administrative review in the IRS Office of
Appeals, the penalty cannot be compromised for purposes of a
settlement without approval of the Commissioner personally.
Furthermore, the IRS is required to keep records summarizing
the application of this penalty and providing a description
of each penalty compromised under the provision and the
reasons for the compromise.
Any understatement on which a penalty is imposed under the
provision will not be subject to the accuracy-related penalty
under section 6662 or under 6662A (accuracy-related penalties
for listed and reportable avoidance transactions). However,
an understatement under the provision is taken into account
for purposes of determining whether any understatement (as
defined in sec. 6662(d)(2)) is a substantial understatement
as defined under section 6662(d)(1). The penalty imposed
under the provision will not apply to any portion of an
understatement to which a fraud penalty is applied under
section 6663.
Effective date.--The provision applies to transactions
entered into after the date of enactment.

Conference Agreement

The conference agreement does not contain the Senate
amendment provision.
3. Denial of deduction for interest on underpayments
attributable to noneconomic substance transactions (sec.
413 of the Senate amendment and sec. 163(m) of the Code)

Present Law

No deduction for interest is allowed for interest paid or
accrued on any underpayment of tax which is attributable to
the portion of any reportable transaction understatement with
respect to which the relevant facts were not adequately
disclosed.\396\ The Secretary of the Treasury is authorized
to define reportable transactions for this purpose.\397\
---------------------------------------------------------------------------
\396\Sec. 163(m). Under section 6664(d)(2)(A), in such a case
of nondisclosure, the taxpayer also is not entitled to the
``reasonable cause and good faith'' exception to the section
6662A penalty for a reportable transaction understatement.
\397\See the description of present law with respect to the
immediately preceding Senate amendment provision, ``Penalty
for understatements attributable to transactions lacking
economic substance, etc.''
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

The Senate amendment provision extends the disallowance of
interest deductions to interest paid or accrued on any
underpayment

[[Page 7441]]

of tax which is attributable to any noneconomic substance
underpayment (whether or not disclosed).
Effective date.--The provision applies to transactions
after the date of enactment in taxable years ending after
such date.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.

C. Improvements in Efficiency and Safeguards in Internal Revenue
Service Collections

1. Waiver of user fee for installment agreements using
automated withdrawals (Sec. 421 of the Senate amendment
and sec. 6159 of the Code)

Present Law

House Bill

No provision.

Senate Amendment

The Senate amendment waives the user fee for installment
agreements in which the parties agree to the use of automated
installment payments (such as automated debits from a bank
account).
Effective date.--The provision is effective with respect to
agreements entered into on or after the date which is 180
days after the date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
2. Termination of installment agreements (Sec. 422 of the
Senate amendment and sec. 6159 of the Code)

Present Law

The Code authorizes the IRS to enter into written
agreements with any taxpayer under which the taxpayer is
allowed to pay taxes owed, as well as interest and penalties,
in installment payments, if the IRS determines that doing so
will facilitate collection of the amounts owed.\399\ An
installment agreement does not reduce the amount of taxes,
interest, or penalties owed. Generally, during the period
installment payments are being made, other IRS enforcement
actions (such as levies or seizures) with respect to the
taxes included in that agreement are held in abeyance.
---------------------------------------------------------------------------
\399\Sec. 6159.
---------------------------------------------------------------------------
Under present law, the IRS is permitted to terminate an
installment agreement only if: (1) the taxpayer fails to pay
an installment at the time the payment is due; (2) the
taxpayer fails to pay any other tax liability at the time
when such liability is due; (3) the taxpayer fails to provide
a financial condition update as required by the IRS; (4) the
taxpayer provides inadequate or incomplete information when
applying for an installment agreement; (5) there has been a
significant change in the financial condition of the
taxpayer; or (6) the collection of the tax is in
jeopardy.\400\
---------------------------------------------------------------------------
\400\Sec. 6159(b)(2), (3), and (4).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

The Senate amendment grants the IRS authority to terminate
installment agreement when a taxpayer fails to timely make a
required Federal tax deposit or fails to timely file a tax
return (including extensions). Under the provision, the IRS
may terminate an installment agreement even if the taxpayer
remained current with payments under the installment
agreement.
Effective date.--The provision is effective for failures
occurring on or after the date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
3. Partial payments required with submissions of offers-in-
compromise (Sec. 423 of the Senate amendment and sec.
7122 of the Code)

Present Law

The IRS has the authority to compromise any civil or
criminal case arising under the internal revenue laws.\401\
In general, taxpayers initiate this process by making an
offer-in-compromise, which is an offer by the taxpayer to
settle an outstanding tax liability for less than the total
amount due. The IRS currently imposes a user fee of $150 on
most offers, payable upon submission of the offer to the IRS.
Taxpayers may justify their offers on the basis of doubt as
to collectibility or liability or on the basis of effective
tax administration. In general, enforcement action is
suspended during the period that the IRS evaluates an offer.
In some instances, it may take the IRS 12 to 18 months to
evaluate an offer.\402\ Taxpayers are permitted (but not
required) to make a deposit with their offer; if the offer is
rejected, the deposit is generally returned to the taxpayer.
There are two general categories\403\ of offers-in-
compromise, lump-sum offers and periodic payment offers.
Taxpayers making lump-sum offers propose to make one lump-sum
payment of a specified dollar amount in settlement of their
outstanding liability. Taxpayers making periodic payment
offers propose to make a series of payments over time (either
short-term or long-term) in settlement of their outstanding
liability.
---------------------------------------------------------------------------
\401\Sec. 7122.
\402\Olsen v. United States, 326 F. Supp. 2d 184 (D. Mass.
2004).
\403\The IRS categorizes payment plans with more specificity,
which is generally not significant for purposes of the
provision. See Form 656, Offer in Compromise, page 6 of
instruction booklet (revised July 2004).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

The provision requires a taxpayer to make partial payments
to the IRS while the taxpayer's offer is being considered by
the IRS. For lump-sum offers, taxpayers must make a down
payment of 20 percent of the amount of the offer with any
application. For purposes of this provision, a lump-sum offer
includes single payments as well as payments made in five or
fewer installments. For periodic payment offers, the
provision requires the taxpayer to comply with the taxpayer's
own proposed payment schedule while the offer is being
considered. Offers submitted to the IRS that do not comport
with these payment requirements are returned to the taxpayer
as unprocessable and immediate enforcement action is
permitted. The provision eliminates the user fee requirement
for offers submitted with the appropriate partial payment.
The provision also provides that an offer is deemed
accepted if the IRS does not make a decision with respect to
the offer within two years from the date the offer was
submitted.
The Senate amendment authorizes the Secretary to issue
regulations providing exceptions to the partial payment
requirements in the case of offers from certain low-income
taxpayers and offers based on doubt as to liability.
Effective date.--The provision is effective for offers-in-
compromise submitted on and after the date which is 60 days
after the date of enactment.

Conference Agreement

The conference agreement includes the Senate amendment
provision, with the following modifications. Under the
conference agreement, any user fee imposed by the IRS for
participation in the offer-in-compromise program must be
submitted with the appropriate partial payment. The user fee
is applied to the taxpayer's outstanding tax liability. In
addition, under the conference agreement, offers submitted to
the IRS that do not comport with the payment requirements may
be returned to the taxpayer as unprocessable.

D. Penalties and Fines

1. Increase in criminal monetary penalty limitation for the
underpayment or overpayment of tax due to fraud (Sec. 431
of the Senate amendment and secs. 7201, 7203, and 7206 of
the Code)

Present Law

Attempt to evade or defeat tax
In general, section 7201 imposes a criminal penalty on
persons who willfully attempt to evade or defeat any tax
imposed by the Code. Upon conviction, the Code provides that
the penalty is up to $100,000 or imprisonment of not more
than five years (or both). In the case of a corporation, the
Code increases the monetary penalty to a maximum of $500,000.
Willful failure to file return, supply information, or pay
tax
In general, section 7203 imposes a criminal penalty on
persons required to make estimated tax payments, pay taxes,
keep records, or supply information under the Code who
willfully fails to do so. Upon conviction, the Code provides
that the penalty is up to $25,000 or imprisonment of not more
than one year (or both). In the case of a corporation, the
Code increases the monetary penalty to a maximum of $100,000.
Fraud and false statements
In general, section 7206 imposes a criminal penalty on
persons who make fraudulent or false statements under the
Code. Upon conviction, the Code provides that the penalty is
up to $100,000 or imprisonment of not more than three years
(or both). In the case of a corporation, the Code increases
the monetary penalty to a maximum of $500,000.
Uniform sentencing guidelines
Under the uniform sentencing guidelines established by 18
U.S.C. 3571, a defendant found guilty of a criminal offense
is subject to a maximum fine that is the greatest of: (a) the
amount specified in the underlying provision, (b) for a
felony\404\ $250,000 for an

[[Page 7442]]

individual or $500,000 for an organization, or (c) twice the
gross gain if a person derives pecuniary gain from the
offense. This Title 18 provision applies to all criminal
provisions in the United States Code, including those in the
Internal Revenue Code. For example, for an individual, the
maximum fine under present law upon conviction of violating
section 7206 is $250,000 or, if greater, twice the amount of
gross gain from the offense.
---------------------------------------------------------------------------
\404\Section 7206 states that making fraudulent or false
statements under the Code is a felony. In addition, this
offense is a felony pursuant to the classification guidelines
of 18 U.S.C. 3559(a)(5).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

Attempt to evade or defeat tax
The provision increases the criminal penalty under section
7201 of the Code for individuals to $500,000 and for
corporations to $1,000,000. The provision increases the
maximum prison sentence to ten years.
Willful failure to file return, supply information, or pay
tax
The provision increases the criminal penalty under section
7203 of the Code for individuals from $25,000 to $50,000 and,
in the case of an ``aggravated failure to file'' (defined as
a failure to file a return for a period of three or more
consecutive taxable years if the aggregated tax liability for
such period is at least $100,000), changes the crime from a
misdemeanor to a felony and increases the maximum prison
sentence to ten years.
Fraud and false statements
The provision increases the criminal penalty for making
fraudulent or false statements to $500,000 for individuals
and $1,000,000 for corporations. The provision increases the
maximum prison sentence for making fraudulent or false
statements to five years. The provision provides that in no
event shall the amount of the monetary penalty under the
provision be less than the amount of the underpayment or
overpayment attributable to fraud.
Effective date
The provision is effective for actions and failures to act
occurring after the date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
2. Doubling of certain penalties, fines, and interest on
underpayments related to certain offshore financial
arrangements (Sec. 432 of the Senate amendment)

Present Law

In general
The Code contains numerous civil penalties, such as the
delinquency, accuracy-related, fraud, and assessable
penalties. These civil penalties are in addition to any
interest that may be due as a result of an underpayment of
tax. If all or any part of a tax is not paid when due, the
Code imposes interest on the underpayment, which is assessed
and collected in the same manner as the underlying tax and is
subject to the respective statutes of limitations for
assessment and collection.
Delinquency penalties
Failure to file.--Under present law, a taxpayer who fails
to file a tax return on a timely basis is generally subject
to a penalty equal to 5 percent of the net amount of tax due
for each month that the return is not filed, up to a maximum
of five months or 25 percent. An exception from the penalty
applies if the failure is due to reasonable cause. In the
case of fraudulent failure to file, the penalty is increased
to 15 percent of the net amount of tax due for each month
that the return is not filed, up to a maximum of five months
or 75 percent. The net amount of tax due is the excess of the
amount of the tax required to be shown on the return over the
amount of any tax paid on or before the due date prescribed
for the payment of tax.
Failure to pay.--Taxpayers who fail to pay their taxes are
subject to a penalty of 0.5 percent per month on the unpaid
amount, up to a maximum of 25 percent. If a penalty for
failure to file and a penalty for failure to pay tax shown on
a return both apply for the same month, the amount of the
penalty for failure to file for such month is reduced by the
amount of the penalty for failure to pay tax shown on a
return. If an income tax return is filed more than 60 days
after its due date, then the penalty for failure to pay tax
shown on a return may not reduce the penalty for failure to
file below the lesser of $100 or 100 percent of the amount
required to be shown on the return. For any month in which an
installment payment agreement with the IRS is in effect, the
rate of the penalty is half the usual rate (0.25 percent
instead of 0.5 percent), provided that the taxpayer filed the
tax return in a timely manner (including extensions).
Failure to make timely deposits of tax.--The penalty for
the failure to make timely deposits of tax consists of a
four-tiered structure in which the amount of the penalty
varies with the length of time within which the taxpayer
corrects the failure. A depositor is subject to a penalty
equal to 2 percent of the amount of the underpayment if the
failure is corrected on or before the date that is five days
after the prescribed due date. A depositor is subject to a
penalty equal to 5 percent of the amount of the underpayment
if the failure is corrected after the date that is five days
after the prescribed due date but on or before the date that
is 15 days after the prescribed due date. A depositor is
subject to a penalty equal to 10 percent of the amount of the
underpayment if the failure is corrected after the date that
is 15 days after the due date but on or before the date that
is 10 days after the date of the first delinquency notice to
the taxpayer (under sec. 6303). Finally, a depositor is
subject to a penalty equal to 15 percent of the amount of the
underpayment if the failure is not corrected on or before
earlier of 10 days after the date of the first delinquency
notice to the taxpayer and 10 days after the date on which
notice and demand for immediate payment of tax is given in
cases of jeopardy.
An exception from the penalty applies if the failure is due
to reasonable cause. In addition, the Secretary may waive the
penalty for an inadvertent failure to deposit any tax by
specified first-time depositors.
Accuracy-related penalties
In general.--The accuracy-related penalties are imposed at
a rate of 20 percent of the portion of any underpayment that
is attributable, in relevant part, to (1) negligence, (2) any
substantial understatement of income tax, (3) any substantial
valuation misstatement, and (4) any reportable transaction
understatement. The penalty for a substantial valuation
misstatement is doubled for certain gross valuation
misstatements. In the case of a reportable transaction
understatement for which the transaction is not disclosed,
the penalty rate is 30 percent. These penalties are
coordinated with the fraud penalty. This statutory structure
operates to eliminate any stacking of the penalties.
No penalty is to be imposed if it is shown that there was
reasonable cause for an underpayment and the taxpayer acted
in good faith, and in the case of a reportable transaction
understatement the relevant facts of the transaction have
been disclosed, there is or was substantial authority for the
taxpayer's treatment of such transaction, and the taxpayer
reasonably believed that such treatment was more likely than
not the proper treatment.
Negligence or disregard for the rules or regulations.--If
an underpayment of tax is attributable to negligence, the
negligence penalty applies only to the portion of the
underpayment that is attributable to negligence. Negligence
means any failure to make a reasonable attempt to comply with
the provisions of the Code. Disregard includes any careless,
reckless, or intentional disregard of the rules or
regulations.
Substantial understatement of income tax.--Generally, an
understatement is substantial if the understatement exceeds
the greater of (1) 10 percent of the tax required to be shown
on the return for the tax year, or (2) $5,000. In determining
whether a substantial understatement exists, the amount of
the understatement is reduced by any portion attributable to
an item if (1) the treatment of the item on the return is or
was supported by substantial authority, or (2) facts relevant
to the tax treatment of the item were adequately disclosed on
the return or on a statement attached to the return.
Substantial valuation misstatement.--A penalty applies to
the portion of an underpayment that is attributable to a
substantial valuation misstatement. Generally, a substantial
valuation misstatement exists if the value or adjusted basis
of any property claimed on a return is 200 percent or more of
the correct value or adjusted basis. The amount of the
penalty for a substantial valuation misstatement is 20
percent of the amount of the underpayment if the value or
adjusted basis claimed is 200 percent or more but less than
400 percent of the correct value or adjusted basis. If the
value or adjusted basis claimed is 400 percent or more of the
correct value or adjusted basis, then the overvaluation is a
gross valuation mis-
statement.
Reportable transaction understatement.--A penalty applies
to any item that is attributable to any listed transaction,
or to any reportable transaction (other than a listed
transaction) if a significant purpose of such reportable
transaction is tax avoidance or evasion.
Fraud penalty
The fraud penalty is imposed at a rate of 75 percent of the
portion of any underpayment that is attributable to fraud.
The accuracy-related penalty does not apply to any portion of
an underpayment on which the fraud penalty is imposed.
Assessable penalties
In addition to the penalties described above, the Code
imposes a number of additional penalties, including, for
example, penalties for failure to file (or untimely filing
of) information returns with respect to foreign trusts, and
penalties for failure to disclose any required information
with respect to a reportable transaction.
Interest provisions
Taxpayers are required to pay interest to the IRS whenever
there is an underpayment of tax. An underpayment of tax
exists whenever the correct amount of tax is not paid by the
last date prescribed for the payment of the tax. The last
date prescribed for the payment of the income tax is the
original due date of the return.

[[Page 7443]]

Different interest rates are provided for the payment of
interest depending upon the type of taxpayer, whether the
interest relates to an underpayment or overpayment, and the
size of the underpayment or overpayment. Interest on
underpayments is compounded daily.
Offshore Voluntary Compliance Initiative
In January 2003, Treasury announced the Offshore Voluntary
Compliance Initiative (``OVCI'') to encourage the voluntary
disclosure of previously unreported income placed by
taxpayers in offshore accounts and accessed through credit
card or other financial arrangements. A taxpayer had to
comply with various requirements in order to participate in
the OVCI, including sending a written request to participate
in the program by April 15, 2003. This request had to include
information about the taxpayer, the taxpayer's introduction
to the credit card or other financial arrangements and the
names of parties that promoted the transaction. A taxpayer
entering into a closing agreement under the OVCI is not
liable for the civil fraud penalty, the fraudulent failure to
file penalty, or the civil information return penalties. Such
a taxpayer is responsible for back taxes, interest, and
certain accuracy-related and delinquency penalties.\405\
---------------------------------------------------------------------------
\405\Rev. Proc. 2003-11, 2003-4 C.B. 311.
---------------------------------------------------------------------------
Voluntary disclosure policy
A taxpayer's timely, voluntary disclosure of a substantial
unreported tax liability has long been an important factor in
deciding whether the taxpayer's case should ultimately be
referred for criminal prosecution. The voluntary disclosure
must be truthful, timely, and complete. The taxpayer must
show a willingness to cooperate (as well as actual
cooperation) with the IRS in determining the correct tax
liability. The taxpayer must make good-faith arrangements
with the IRS to pay in full the tax, interest, and any
penalties determined by the IRS to be applicable. A voluntary
disclosure does not guarantee immunity from prosecution. It
creates no substantive or procedural rights for
taxpayers.\406\ The IRS treats participation in the OVCI as a
voluntary disclosure.\407\
---------------------------------------------------------------------------
\406\Internal Revenue News Release 2002-135, IR-2002-135
(December 11, 2002).
\407\Rev. Proc. 2003-11, 2003-4 C.B. 311.
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

The Senate amendment doubles the amounts of civil
penalties, interest, and fines related to taxpayers'
underpayments of U.S. income tax liability through the direct
or indirect use of certain offshore financial arrangements.
The provision applies to taxpayers who did not (or do not)
voluntarily disclose such arrangements through the OVCI or
otherwise. Under the Senate amendment, the determination of
whether any civil penalty is to be applied to such
underpayment is made without regard to whether a return has
been filed, whether there was reasonable cause for such
underpayment, and whether the taxpayer acted in good faith.
The proscribed financial arrangements include, but are not
limited to, the use of certain foreign leasing corporations
for providing domestic employee services,\408\ certain
arrangements whereby the taxpayer may hold securities trading
accounts through offshore banks or other financial
intermediaries, certain arrangements whereby the taxpayer may
access funds through the use of offshore credit, debit, or
charge cards, and offshore annuities or trusts.
---------------------------------------------------------------------------
\408\These arrangements were described and classified as
listed transactions in Notice 2003-22, 2003-1 C.B. 851.
---------------------------------------------------------------------------
The Secretary of the Treasury is granted the authority to
waive the application of the provision if the use of the
offshore financial arrangements is incidental to the
transaction and, in the case of a trade or business, such use
is conducted in the ordinary course of the type of trade or
business in which the taxpayer is engaged.
Effective date.--The provision generally is effective with
respect to a taxpayer's open tax years on or after the date
of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
3. Denial of deduction for certain fines, penalties, and
other amounts (Sec. 433 of the Senate Amendment and sec.
162 of the Code)

Present Law

Under present law, no deduction is allowed as a trade or
business expense under section 162(a) for the payment of a
fine or similar penalty to a government for the violation of
any law (sec. 162(f)). The enactment of section 162(f) in
1969 codified existing case law that denied the deductibility
of fines as ordinary and necessary business expenses on the
grounds that ``allowance of the deduction would frustrate
sharply defined national or State policies proscribing the
particular types of conduct evidenced by some governmental
declaration thereof.''\409\
---------------------------------------------------------------------------
\409\S. Rep. No. 91-552, 91st Cong, 1st Sess., 273-74 (1969),
referring to Tank Truck Rentals, Inc. v. Commissioner, 356
U.S. 30 (1958).
---------------------------------------------------------------------------
Treasury regulation section 1.162-21(b)(1) provides that a
fine or similar penalty includes an amount: (1) paid pursuant
to conviction or a plea of guilty or nolo contendere for a
crime (felony or misdemeanor) in a criminal proceeding; (2)
paid as a civil penalty imposed by Federal, State, or local
law, including additions to tax and additional amounts and
assessable penalties imposed by chapter 68 of the Code; (3)
paid in settlement of the taxpayer's actual or potential
liability for a fine or penalty (civil or criminal); or (4)
forfeited as collateral posted in connection with a
proceeding which could result in imposition of such a fine or
penalty. Treasury regulation section 1.162-21(b)(2) provides,
among other things, that compensatory damages (including
damages under section 4A of the Clayton Act (15 U.S.C. 15a),
as amended) paid to a government do not constitute a fine or
penalty.

House Bill

No provision.

Senate Amendment

The Senate amendment provision modifies the rules regarding
the determination whether payments are nondeductible payments
of fines or penalties under section 162(f). In particular,
the provision generally provides that amounts paid or
incurred (whether by suit, agreement, or otherwise) to, or at
the direction of, a government in relation to the violation
of any law or the investigation or inquiry into the potential
violation of any law\410\ are nondeductible under any
provision of the income tax provisions.\411\ The provision
applies to deny a deduction for any such payments, including
those where there is no admission of guilt or liability and
those made for the purpose of avoiding further investigation
or litigation. An exception applies to payments that the
taxpayer establishes are either restitution (including
remediation of property), or amounts required to come into
compliance with any law that was violated or involved in the
investigation or inquiry, and that are identified in the
court order or settlement as restitution, remediation, or
required to come into compliance.\412\ The IRS remains free
to challenge the characterization of an amount so identified;
however, no deduction is allowed unless the identification is
made.\413\
---------------------------------------------------------------------------
\410\The provision does not affect amounts paid or incurred
in performing routine audits or reviews such as annual audits
that are required of all organizations or individuals in a
similar business sector, or profession, as a requirement for
being allowed to conduct business. However, if the government
or regulator raised an issue of compliance and a payment is
required in settlement of such issue, the provision would
affect that payment.
\411\The provision provides that such amounts are
nondeductible under chapter 1 of the Internal Revenue Code.
\412\The provision does not affect the treatment of antitrust
payments made under section 4 of the Clayton Act, which
continue to be governed by the provisions of section 162(g).
\413\If a settlement agreement does not specify a specific
amount to be paid for the purpose of coming into compliance
but instead simply requires the taxpayer to come into
compliance, it is sufficient identification to so state.
Amounts expended by the taxpayer for that purpose would then
be considered identified. However, if an agreement specifies
a specific dollar amount that must be paid or incurred, the
amount would not be eligible to be deducted without a
specification that it is for restitution (including
remediation of property), or coming into compliance.
---------------------------------------------------------------------------
An exception also applies to any amount paid or incurred as
taxes due.\414\
---------------------------------------------------------------------------
\414\Thus, amounts paid or incurred as taxes due are not
affected by the provision (e.g., State taxes that are
otherwise deductible). The reference to taxes due is also
intended to include interest with respect to such taxes (but
not interest, if any, with respect to any penalties imposed
with respect to such taxes).
---------------------------------------------------------------------------
The provision is intended to apply only where a government
(or other entity treated in a manner similar to a government
under the amendment) is a complainant or investigator with
respect to the violation or potential violation of any
law.\415\
---------------------------------------------------------------------------
\415\Thus, for example, the provision would not apply to
payments made by one private party to another in a lawsuit
between private parties, merely because a judge or jury
acting in the capacity as a court directs the payment to be
made. The mere fact that a court enters a judgment or directs
a result in a private dispute does not cause a payment to be
made ``at the direction of a government'' for purposes of the
provision.
---------------------------------------------------------------------------
It is intended that a payment will be treated as
restitution (including remediation of property) only if
substantially all of the payment is required to be paid to
the specific persons, or in relation to the specific
property, actually harmed by the conduct of the taxpayer that
resulted in the payment. Thus, a payment to or with respect
to a class substantially broader than the specific persons or
property that were actually harmed (e.g., to a class
including similarly situated persons or property) does not
qualify as restitution or included remediation of
property.\416\ Restitution and included remediation of
property is limited to the amount that bears a substantial
quantitative relationship to the harm caused by the past
conduct or actions of the taxpayer that resulted in the
payment in question. If the party harmed is a government or
other entity, then restitution and included remediation of
property

[[Page 7444]]

includes payment to such harmed government or entity,
provided the payment bears a substantial quantitative
relationship to the harm. However, restitution or included
remediation of property does not include reimbursement of
government investigative or litigation costs, or payments to
whistleblowers.
---------------------------------------------------------------------------
\416\Similarly, a payment to a charitable organization
benefiting a broader class than the persons or property
actually harmed, or to be paid out without a substantial
quantitative relationship to the harm caused, would not
qualify as restitution. Under the provision, such a payment
not deductible under section 162 would also not be deductible
under section 170.
---------------------------------------------------------------------------
It is intended that a payment will be treated as an amount
required to come into compliance only if it directly corrects
a violation with respect to a particular requirement of law
that was under investigation. For example, if the law
requires a particular emission standard to be met or
particular machinery to be used, amounts required to be paid
under a settlement agreement to meet the required standard or
install the machinery are deductible to the extent otherwise
allowed. Similarly, if the law requires certain practices and
procedures to be followed and a settlement agreement requires
the taxpayer to pay to establish such practices or
procedures, such amounts would be deductible. However,
amounts paid for other purposes not directly correcting a
violation of law are not deductible. For example, amounts
paid to bring other machinery that is already in compliance
up to a standard higher than required by the law, or to
create other benefits (such as a park or other action not
previously required by law), are not deductible if required
under a settlement agreement. Similarly, amounts paid to
educate consumers or customers about the risks of doing
business with the taxpayer or about the field in which the
taxpayer does business generally, which education efforts are
not specifically required under the law, are not deductible
if required under a settlement agreement.
The provision requires government agencies to report to the
IRS and to the taxpayer the amount of each settlement
agreement or order entered where the aggregate amount
required to be paid or incurred to or at the direction of the
government under such settlement agreements and orders with
respect to the violation, investigation, or inquiry is least
$600 (or such other amount as may be specified by the
Secretary of the Treasury as necessary to ensure the
efficient administration of the Internal Revenue laws). The
reports must be made within 30 days of the date the court
order is issued or the settlement agreement is entered into,
or such other time as may be required by Secretary. The
report must separately identify any amounts that are
restitution or remediation of property, or correction of
noncompliance.\417\
---------------------------------------------------------------------------
\417\As in the case of the identification requirement, if the
agreement does not specify a specific amount to be expended
to come into compliance but simply requires that to occur, it
is expected that the report may state simply that the
taxpayer is required to come into compliance but no specific
dollar amount has been specified for that purpose in the
settlement agreement.
---------------------------------------------------------------------------
The IRS is encouraged to require taxpayers to identify
separately on their tax returns the amounts of any such
settlements with respect to which reporting is required under
the provision, including separate identification of the
nondeductible amount and of any amount deductible as
restitution, remediation, or required to correct
noncompliance.\418\
---------------------------------------------------------------------------
\418\For example, the IRS might require such reporting as
part of the schedule M-3, whether or not the particular
amounts create a book-tax difference.
---------------------------------------------------------------------------
Amounts paid or incurred (whether by suit, agreement, or
otherwise) to, or at the direction of, any self-regulatory
entity that regulates a financial market or other market that
is a qualified board or exchange under section 1256(g)(7),
and that is authorized to impose sanctions (e.g., the
National Association of Securities Dealers) are likewise
subject to the provision if paid in relation to a violation,
or investigation or inquiry into a potential violation, of
any law (or any rule or other requirement of such entity). To
the extent provided in regulations, amounts paid or incurred
to, or at the direction of, any other nongovernmental entity
that exercises self-regulatory powers as part of performing
an essential governmental function are similarly subject to
the provision. The exception for payments that the taxpayer
establishes are paid or incurred for restitution, remediation
of property, or coming into compliance and that are
identified as such in the order or settlement agreement
likewise applies in these cases. The requirement of reporting
to the IRS and the taxpayer also applies in these cases.
No inference is intended as to the treatment of payments as
nondeductible fines or penalties under present law. In
particular, the provision is not intended to limit the scope
of present-law section 162(f) or the regulations thereunder.
Effective date.--The provision is effective for amounts
paid or incurred on or after the date of enactment; however
the provision does not apply to amounts paid or incurred
under any binding order or agreement entered into before such
date. Any order or agreement requiring court approval is not
a binding order or agreement for this purpose unless such
approval was obtained before the date of enactment.

Conference Agreement

The conference agreement does not contain the Senate
amendment provision.
4. Denial of deduction for punitive damages (Sec. 434 of the
Senate amendment and sec. 162 of the Code)

Present Law

In general, a deduction is allowed for all ordinary and
necessary expenses that are paid or incurred by the taxpayer
during the taxable year in carrying on any trade or
business.\419\ However, no deduction is allowed for any
payment that is made to an official of any governmental
agency if the payment constitutes an illegal bribe or
kickback or if the payment is to an official or employee of a
foreign government and is illegal under Federal law.\420\ In
addition, no deduction is allowed under present law for any
fine or similar payment made to a government for violation of
any law.\421\ Furthermore, no deduction is permitted for two-
thirds of any damage payments made by a taxpayer who is
convicted of a violation of the Clayton antitrust law or any
related antitrust law.\422\
---------------------------------------------------------------------------
\419\Sec. 162(a).
\420\Sec. 162(c).
\421\Sec. 162(f).
\422\Sec. 162(g).
---------------------------------------------------------------------------
In general, gross income does not include amounts received
on account of personal physical injuries and physical
sickness.\423\ However, this exclusion does not apply to
punitive damages.\424\
---------------------------------------------------------------------------
\423\Sec. 104(a).
\424\Sec. 104(a)(2).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

The provision denies any deduction for punitive damages
that are paid or incurred by the taxpayer as a result of a
judgment or in settlement of a claim. If the liability for
punitive damages is covered by insurance, any such punitive
damages paid by the insurer are included in gross income of
the insured person and the insurer is required to report such
amounts to both the insured person and the IRS.
Effective date.--The provision is effective for punitive
damages that are paid or incurred on or after the date of
enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
5. Increase in penalty for bad checks and money orders (Sec.
435 of the Senate amendment and sec. 6657 of the Code)

Present Law

The Code\425\ imposes a penalty for bad checks and money
orders on the person who tendered it. The penalty is two
percent of the amount of the bad check or money order. For
checks that are less than $750, the minimum penalty is $15
(or, if less, the amount of the check).
---------------------------------------------------------------------------
\425\Sec. 6657.
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

The provision increases the minimum penalty to $25 (or, if
less, the amount of the check), applicable to checks that are
less than $1,250.
Effective date.--The provision is effective with respect to
checks or money orders received after the date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.

E. Provisions to Discourage Expatriation

1. Tax treatment of inverted corporate entities (Sec. 441 of
the Senate amendment and sec. 7874 of the Code)

Present Law

Determination of corporate residence
The U.S. tax treatment of a multinational corporate group
depends significantly on whether the parent corporation of
the group is domestic or foreign. For purposes of U.S. tax
law, a corporation is treated as domestic if it is
incorporated under the law of the United States or of any
State. Other corporations (i.e., those incorporated under the
laws of foreign countries or U.S. possessions) generally are
treated as foreign.
U.S. taxation of domestic corporations
The United States employs a ``worldwide'' tax system, under
which domestic corporations generally are taxed on all
income, whether derived in the United States or abroad. In
order to mitigate the double taxation that may arise from
taxing the foreign-source income of a domestic corporation, a
foreign tax credit for income taxes paid to foreign countries
is provided to reduce or eliminate the U.S. tax owed on such
income, subject to certain limitations.
Income earned by a domestic parent corporation from foreign
operations conducted by foreign corporate subsidiaries
generally is subject to U.S. tax when the income is
distributed as a dividend to the domestic corporation. Until
such repatriation, the U.S. tax on such income generally is
deferred, and U.S. tax is imposed on such income when
repatriated. However, certain anti-deferral regimes may cause
the domestic parent corporation to be taxed on a current
basis in the United States with respect to certain categories
of passive or highly mobile income earned by its foreign
subsidiaries, regardless

[[Page 7445]]

of whether the income has been distributed as a dividend to
the domestic parent corporation. The main anti-deferral
regimes in this context are the controlled foreign
corporation rules of subpart F (secs. 951-964) and the
passive foreign investment company rules (secs. 1291-1298). A
foreign tax credit is generally available to offset, in whole
or in part, the U.S. tax owed on this foreign-source income,
whether such income is repatriated as an actual dividend or
included under one of the anti-deferral regimes.
U.S. taxation of foreign corporations
The United States taxes foreign corporations only on income
that has a sufficient nexus to the United States. Thus, a
foreign corporation is generally subject to U.S. tax only on
income that is ``effectively connected'' with the conduct of
a trade or business in the United States. Such ``effectively
connected income'' generally is taxed in the same manner and
at the same rates as the income of a U.S. corporation. An
applicable tax treaty may limit the imposition of U.S. tax on
business operations of a foreign corporation to cases in
which the business is conducted through a ``permanent
establishment'' in the United States.
In addition, foreign corporations generally are subject to
a gross-basis U.S. tax at a flat 30-percent rate on the
receipt of interest, dividends, rents, royalties, and certain
similar types of income derived from U.S. sources, subject to
certain exceptions. The tax generally is collected by means
of withholding by the person making the payment. This tax may
be reduced or eliminated under an applicable tax treaty.
U.S. tax treatment of inversion transactions prior to the
American Jobs Creation Act of 2004
Prior to the American Jobs Creation Act of 2004 (``AJCA''),
a U.S. corporation could reincorporate in a foreign
jurisdiction and thereby replace the U.S. parent corporation
of a multinational corporate group with a foreign parent
corporation. These transactions were commonly referred to as
inversion transactions. Inversion transactions could take
many different forms, including stock inversions, asset
inversions, and various combinations of and variations on the
two. Most of the known transactions were stock inversions. In
one example of a stock inversion, a U.S. corporation forms a
foreign corporation, which in turn forms a domestic merger
subsidiary. The domestic merger subsidiary then merges into
the U.S. corporation, with the U.S. corporation surviving,
now as a subsidiary of the new foreign corporation. The U.S.
corporation's shareholders receive shares of the foreign
corporation and are treated as having exchanged their U.S.
corporation shares for the foreign corporation shares. An
asset inversion could be used to reach a similar result, but
through a direct merger of the top-tier U.S. corporation into
a new foreign corporation, among other possible forms. An
inversion transaction could be accompanied or followed by
further restructuring of the corporate group. For example, in
the case of a stock inversion, in order to remove income from
foreign operations from the U.S. taxing jurisdiction, the
U.S. corporation could transfer some or all of its foreign
subsidiaries directly to the new foreign parent corporation
or other related foreign corporations.
In addition to removing foreign operations from U.S. taxing
jurisdiction, the corporate group could seek to derive
further advantage from the inverted structure by reducing
U.S. tax on U.S.-source income through various earnings
stripping or other transactions. This could include earnings
stripping through payment by a U.S. corporation of deductible
amounts such as interest, royalties, rents, or management
service fees to the new foreign parent or other foreign
affiliates. In this respect, the post-inversion structure
could enable the group to employ the same tax-reduction
strategies that are available to other multinational
corporate groups with foreign parents and U.S. subsidiaries,
subject to the same limitations (e.g., secs. 163(j) and 482).
Inversion transactions could give rise to immediate U.S.
tax consequences at the shareholder and/or the corporate
level, depending on the type of inversion. In stock
inversions, the U.S. shareholders generally recognized gain
(but not loss) under section 367(a), based on the difference
between the fair market value of the foreign corporation
shares received and the adjusted basis of the domestic
corporation stock exchanged. To the extent that a
corporation's share value had declined, and/or it had many
foreign or tax-exempt shareholders, the impact of this
section 367(a) ``toll charge'' was reduced. The transfer of
foreign subsidiaries or other assets to the foreign parent
corporation also could give rise to U.S. tax consequences at
the corporate level (e.g., gain recognition and earnings and
profits inclusions under secs. 1001, 311(b), 304, 367, 1248
or other provisions). The tax on any income recognized as a
result of these restructurings could be reduced or eliminated
through the use of net operating losses, foreign tax credits,
and other tax attributes.
In asset inversions, the U.S. corporation generally
recognized gain (but not loss) under section 367(a) as though
it had sold all of its assets, but the shareholders generally
did not recognize gain or loss, assuming the transaction met
the requirements of a reorganization under section 368.
U.S. tax treatment of inversion transactions under AJCA
In general
AJCA added new section 7874 to the Code, which defines two
different types of corporate inversion transactions and
establishes a different set of consequences for each type.
Certain partnership transactions also are covered.
Transactions involving at least 80 percent identity of
stock ownership
The first type of inversion is a transaction in which,
pursuant to a plan\426\ or a series of related transactions:
(1) a U.S. corporation becomes a subsidiary of a foreign-
incorporated entity or otherwise transfers substantially all
of its properties to such an entity in a transaction
completed after March 4, 2003; (2) the former shareholders of
the U.S. corporation hold (by reason of holding stock in the
U.S. corporation) 80 percent or more (by vote or value) of
the stock of the foreign-incorporated entity after the
transaction; and (3) the foreign-incorporated entity,
considered together with all companies connected to it by a
chain of greater than 50 percent ownership (i.e., the
``expanded affiliated group''), does not have substantial
business activities in the entity's country of incorporation,
compared to the total worldwide business activities of the
expanded affiliated group. The provision denies the intended
tax benefits of this type of inversion by deeming the top-
tier foreign corporation to be a domestic corporation for all
purposes of the Code.\427\
---------------------------------------------------------------------------
\426\Acquisitions with respect to a domestic corporation or
partnership are deemed to be ``pursuant to a plan'' if they
occur within the four-year period beginning on the date which
is two years before the ownership threshold under the
provision is met with respect to such corporation or
partnership.
\427\Since the top-tier foreign corporation is treated for
all purposes of the Code as domestic, the shareholder-level
``toll charge'' of sec. 367(a) does not apply to these
inversion transactions.
---------------------------------------------------------------------------
In determining whether a transaction meets the definition
of an inversion under the provision, stock held by members of
the expanded affiliated group that includes the foreign
incorporated entity is disregarded. For example, if the
former top-tier U.S. corporation receives stock of the
foreign incorporated entity (e.g., so-called ``hook'' stock),
the stock would not be considered in determining whether the
transaction meets the definition. Similarly, if a U.S. parent
corporation converts an existing wholly owned U.S. subsidiary
into a new wholly owned controlled foreign corporation, the
stock of the new foreign corporation would be disregarded,
with the result that the transaction would not meet the
definition of an inversion under the provision. Stock sold in
a public offering related to the transaction also is
disregarded for these purposes.
Transfers of properties or liabilities as part of a plan a
principal purpose of which is to avoid the purposes of the
provision are disregarded. In addition, the Treasury
Secretary is to provide regulations to carry out the
provision, including regulations to prevent the avoidance of
the purposes of the provision, including avoidance through
the use of related persons, pass-through or other
noncorporate entities, or other intermediaries, and through
transactions designed to qualify or disqualify a person as a
related person or a member of an expanded affiliated group.
Similarly, the Treasury Secretary has the authority to treat
certain non-stock instruments as stock, and certain stock as
not stock, where necessary to carry out the purposes of the
provision.
Transactions involving at least 60 percent but less than 80
percent identity of stock ownership
The second type of inversion is a transaction that would
meet the definition of an inversion transaction described
above, except that the 80-percent ownership threshold is not
met. In such a case, if at least a 60-percent ownership
threshold is met, then a second set of rules applies to the
inversion. Under these rules, the inversion transaction is
respected (i.e., the foreign corporation is treated as
foreign), but any applicable corporate-level ``toll charges''
for establishing the inverted structure are not offset by tax
attributes such as net operating losses or foreign tax
credits. Specifically, any applicable corporate-level income
or gain required to be recognized under sections 304, 311(b),
367, 1001, 1248, or any other provision with respect to the
transfer of controlled foreign corporation stock or the
transfer or license of other assets by a U.S. corporation as
part of the inversion transaction or after such transaction
to a related foreign person is taxable, without offset by any
tax attributes (e.g., net operating losses or foreign tax
credits). This rule does not apply to certain transfers of
inventory and similar property. These measures generally
apply for a 10-year period following the inversion
transaction.
Other rules
Under section 7874, inversion transactions include certain
partnership transactions.

[[Page 7446]]

Specifically, the provision applies to transactions in which
a foreign-incorporated entity acquires substantially all of
the properties constituting a trade or business of a domestic
partnership, if after the acquisition at least 60 percent (or
80 percent, as the case may be) of the stock of the entity is
held by former partners of the partnership (by reason of
holding their partnership interests), provided that the other
terms of the basic definition are met. For purposes of
applying this test, all partnerships that are under common
control within the meaning of section 482 are treated as one
partnership, except as provided otherwise in regulations. In
addition, the modified ``toll charge'' rules apply at the
partner level.
A transaction otherwise meeting the definition of an
inversion transaction is not treated as an inversion
transaction if, on or before March 4, 2003, the foreign-
incorporated entity had acquired directly or indirectly more
than half of the properties held directly or indirectly by
the domestic corporation, or more than half of the properties
constituting the partnership trade or business, as the case
may be.

House Bill

No provision.

senate amendment

The Senate amendment makes several changes to the
inversions regime of section 7874. First, the provision
applies the rules of section 7874 to transactions completed
after March 20, 2002 (as opposed to March 4, 2003 under
present law). A transaction otherwise meeting the definition
of an inversion transaction under the provision is not
treated as an inversion transaction if, on or before March
20, 2002, the foreign-incorporated entity had acquired
directly or indirectly more than half the properties held
directly or indirectly by the domestic corporation, or more
than half the properties constituting the partnership trade
or business, as the case may be.
The Senate amendment also lowers the present-law 60-percent
ownership threshold for the second category of inversion
transactions to greater-than-50-percent, and increases the
accuracy-related penalties and tightens the earnings
stripping rules of section 163(j) with respect to companies
involved in this type of transaction. Specifically, the 20-
percent penalty for negligence or disregard of rules or
regulations, substantial understatement of income tax, and
substantial valuation misstatement is increased to 30 percent
with respect to the inverting entity and taxpayers related to
the inverting entity, and the 40-percent penalty for gross
valuation misstatement is increased to 50 percent with
respect to such taxpayers. In applying section 163(j) to
taxpayers related to the inverted entity, the generally
applicable debt-equity threshold is eliminated, and the 50-
percent thresholds for ``excess interest expense'' and
``excess limitation'' are lowered to 25 percent.
The Senate amendment also excludes from the inversions
regime the acquisition of a U.S. corporation in cases in
which none of the stock of the U.S. corporation was readily
tradable on an established securities market at any time
during the four-year period ending on the date of the
acquisition, except as provided in regulations.
Effective date.--The provision in the Senate amendment is
effective for taxable years ending after March 20, 2002.

conference agreement

The conference agreement does not include the Senate
amendment provision.
2. Revision of tax rules on expatriation of individuals (Sec.
442 of the Senate amendment and secs. 102, 877, 2107,
2501, 7701, and 6039G of the Code)

present law

In general
U.S. citizens and residents generally are subject to U.S.
income taxation on their worldwide income. The U.S. tax may
be reduced or offset by a credit allowed for foreign income
taxes paid with respect to foreign source income. Nonresident
aliens are taxed at a flat rate of 30 percent (or a lower
treaty rate) on certain types of passive income derived from
U.S. sources, and at regular graduated rates on net profits
derived from a U.S. trade or business. The estates of
nonresident aliens generally are subject to estate tax on
U.S.-situated property (e.g., real estate and tangible
property located within the United States and stock in a U.S.
corporation). Nonresident aliens generally are subject to
gift tax on transfers by gift of U.S.-situated property
(e.g., real estate and tangible property located within the
United States), but excluding intangibles, such as stock,
regardless of where they are located.
Income tax rules with respect to expatriates
For the 10 taxable years after an individual relinquishes
his or her U.S. citizenship or terminates his or her U.S.
long-term residency, unless certain conditions are met, the
individual is subject to an alternative method of income
taxation than that generally applicable to nonresident aliens
(the ``alternative tax regime''). Generally, the individual
is subject to income tax for the 10-year period at the rates
applicable to U.S. citizens, but only on U.S.-source
income.\428\
---------------------------------------------------------------------------
\428\For this purpose, however, U.S.-source income has a
broader scope than it does typically in the Code.
---------------------------------------------------------------------------
A ``long-term resident'' is a noncitizen who is a lawful
permanent resident of the United States for at least eight
taxable years during the period of 15 taxable years ending
with the taxable year during which the individual either
ceases to be a lawful permanent resident of the United States
or commences to be treated as a resident of a foreign country
under a tax treaty between such foreign country and the
United States (and does not waive such benefits).
A former citizen or former long-term resident is subject to
the alternative tax regime for a 10-year period following
citizenship relinquishment or residency termination, unless
the former citizen or former long-term resident: (1)
establishes that his or her average annual net income tax
liability for the five preceding years does not exceed
$124,000 (adjusted for inflation after 2004) and his or her
net worth is less than $2 million, or alternatively satisfies
limited, objective exceptions for certain dual citizens and
minors who have had no substantial contacts with the United
States; and (2) certifies under penalties of perjury that he
or she has complied with all U.S. Federal tax obligations for
the preceding five years and provides such evidence of
compliance as the Secretary of the Treasury may require.
Anti-abuse rules are provided to prevent the circumvention
of the alternative tax regime.
Estate tax rules with respect to expatriates
Special estate tax rules apply to individuals who die
during a taxable year in which he or she is subject to the
alternative tax regime. Under these special rules, certain
closely-held foreign stock owned by the former citizen or
former long-term resident is includible in his or her gross
estate to the extent that the foreign corporation owns U.S.-
situated assets. The special rules apply if, at the time of
death: (1) the former citizen or former long-term resident
directly or indirectly owns 10 percent or more of the total
combined voting power of all classes of stock entitled to
vote of the foreign corporation; and (2) directly or
indirectly, is considered to own more than 50 percent of (a)
the total combined voting power of all classes of stock
entitled to vote in the foreign corporation, or (b) the total
value of the stock of such corporation. If this stock
ownership test is met, then the gross estate of the former
citizen or former long-term resident includes that proportion
of the fair market value of the foreign stock owned by the
individual at the time of death, which the fair market value
of any assets owned by such foreign corporation and situated
in the United States (at the time of death) bears to the
total fair market value of all assets owned by such foreign
corporation (at the time of death).
Gift tax rules with respect to expatriates
Special gift tax rules apply to individuals who make gifts
during a taxable year in which he or she is subject to the
alternative tax regime. The individual is subject to gift tax
on gifts of U.S.-situated intangibles made during the 10
years following citizenship relinquishment or residency
termination. In addition, gifts of stock of certain closely-
held foreign corporations by a former citizen or former long-
term resident are subject to gift tax, if the gift is made
during the time that such person is subject to the
alternative tax regime. The operative rules with respect to
these gifts of closely-held foreign stock are the same as
described above relating to the estate tax, except that the
relevant testing and valuation date is the date of gift
rather than the date of death.
Termination of U.S. citizenship or long-term resident status
for U.S. Federal income tax purposes
An individual continues to be treated as a U.S. citizen or
long-term resident for U.S. Federal tax purposes, including
for purposes of section 7701(b)(10), until the individual:
(1) gives notice of an expatriating act or termination of
residency (with the requisite intent to relinquish
citizenship or terminate residency) to the Secretary of State
or the Secretary of Homeland Security, respectively; and (2)
provides a statement to the Secretary of the Treasury in
accordance with section 6039G.
Sanction for individuals subject to the individual tax regime
who return to the United States for extended periods
The alternative tax regime does not apply to any individual
for any taxable year during the 10-year period following
citizenship relinquishment or residency termination if such
individual is present in the United States for more than 30
days in the calendar year ending in such taxable year. Such
individual is treated as a U.S. citizen or resident for such
taxable year and, therefore, is taxed on his or her worldwide
income.
Similarly, if an individual subject to the alternative tax
regime is present in the United States for more than 30 days
in any calendar year ending during the 10-year period
following citizenship relinquishment or residency
termination, and the individual dies during that year, he or
she is treated as a U.S. resident, and the individual's
worldwide estate is subject to U.S. estate tax. Likewise, if
an individual subject to the alternative tax regime is
present in the United

[[Page 7447]]

States for more than 30 days in any year during the 10-year
period following citizenship relinquishment or residency
termination, the individual is subject to U.S. gift tax on
any transfer of his or her worldwide assets by gift during
that taxable year.
For purposes of these rules, an individual is treated as
present in the United States on any day if such individual is
physically present in the United States at any time during
that day. The present-law exceptions from being treated as
present in the United States for residency purposes\429\
generally do not apply for this purpose. However, for
individuals with certain ties to countries other than the
United States\430\ and individuals with minimal prior
physical presence in the United States,\431\ a day of
physical presence in the United States is disregarded if the
individual is performing services in the United States on
such day for an unrelated employer (within the meaning of
sections 267 and 707(b)), who meets the requirements the
Secretary of the Treasury may prescribe in regulations. No
more than 30 days may be disregarded during any calendar year
under this rule.
---------------------------------------------------------------------------
\429\Secs. 7701(b)(3)(D), 7701(b)(5) and 7701(b)(7)(B)-(D).
\430\An individual has such a relationship to a foreign
country if (1) the individual becomes a citizen or resident
of the country in which the individual was born, such
individual's spouse was born, or either of the individual's
parents was born, and (2) the individual becomes fully liable
for income tax in such country.
\431\An individual has a minimal prior physical presence in
the United States if the individual was physically present
for no more than 30 days during each year in the ten-year
period ending on the date of loss of United States
citizenship or termination of residency. However, for
purposes of this test, an individual is not treated as being
present in the United States on a day if the individual
remained in the United States because of a medical condition
that arose while the individual was in the United States.
Sec. 7701(b)(3)(D)(ii).
---------------------------------------------------------------------------
Annual return
Former citizens and former long-term residents are required
to file an annual return for each year following citizenship
relinquishment or residency termination in which they are
subject to the alternative tax regime. The annual return is
required even if no U.S. Federal income tax is due. The
annual return requires certain information, including
information on the permanent home of the individual, the
individual's country of residence, the number of days the
individual was present in the United States for the year, and
detailed information about the individual's income and assets
that are subject to the alternative tax regime. This
requirement includes information relating to foreign stock
potentially subject to the special estate and gift tax rules.
If the individual fails to file the statement in a timely
manner or fails correctly to include all the required
information, the individual is required to pay a penalty of
$10,000. The $10,000 penalty does not apply if it is shown
that the failure is due to reasonable cause and not to
willful neglect.

house bill

No provision.

Senate Amendment

In general
The Senate amendment creates new section 877A, that
generally subjects certain U.S. citizens who relinquish their
U.S. citizenship and certain long-term U.S. residents who
terminate their U.S. residence to tax on the net unrealized
gain in their property as if such property were sold for fair
market value on the day before the expatriation or residency
termination (``mark-to-market tax''). Gain from the deemed
sale is taken into account at that time without regard to
other Code provisions. Any loss from the deemed sale
generally is taken into account to the extent otherwise
provided in the Code, except that the wash sale rules of
section 1091 do not apply. Any net gain on the deemed sale,
is recognized to the extent it exceeds $600,000 ($1.2 million
in the case of married individuals filing a joint return,
both of whom relinquish citizenship or terminate residency).
The $600,000 amount is increased by a cost of living
adjustment factor for calendar years after 2005.
Individuals covered
Under the Senate amendment, the mark-to-market tax applies
to U.S. citizens who relinquish citizenship and long-term
residents who terminate U.S. residency (collectively,
``covered expatriates''). The definition of ``long-term
resident'' under the provision is the same as that under
present law. As under present law, an individual is
considered to terminate long-term residency when the
individual either ceases to be a lawful permanent resident
(i.e., loses his or her green card status), or is treated as
a resident of another country under a tax treaty and does not
waive the benefits of the treaty.
Exceptions to an individual's classification as a covered
expatriate are provided in two situations. The first
exception applies to an individual who was born with
citizenship both in the United States and in another country;
provided that (1) as of the expatriation date the individual
continues to be a citizen of, and is taxed as a resident of,
such other country, and (2) the individual was not a resident
of the United States for the five taxable years ending with
the year of expatriation. The second exception applies to a
U.S. citizen who relinquishes U.S. citizenship before
reaching age 18\1/2\, provided that the individual was a
resident of the United States for no more than five taxable
years before such relinquishment.
For purposes of the mark-to-market tax, an individual is
treated as having relinquished U.S. citizenship on the
earliest of four possible dates: (1) the date that the
individual renounces U.S. nationality before a diplomatic or
consular officer of the United States (provided that the
voluntary relinquishment is later confirmed by the issuance
of a certificate of loss of nationality); (2) the date that
the individual furnishes to the State Department a signed
statement of voluntary relinquishment of U.S. nationality
confirming the performance of an expatriating act (again,
provided that the voluntary relinquishment is later confirmed
by the issuance of a certificate of loss of nationality); (3)
the date that the State Department issues a certificate of
loss of nationality; or (4) the date that a U.S. court
cancels a naturalized citizen's certificate of
naturalization.
In addition, the provision provides that, for all tax
purposes (i.e., not limited to the mark-to-market tax), a
U.S. citizen continues to be treated as a U.S. citizen for
tax purposes until that individual's citizenship is treated
as relinquished under the rules of the immediately preceding
paragraph. However, under Treasury regulations,
relinquishment may occur earlier with respect to an
individual who became at birth a citizen of the United Sates
and of another country.
Election to be treated as a U.S. citizen
Under the provision, a covered expatriate is permitted to
make an irrevocable election to continue to be taxed as a
U.S. citizen with respect to all property that otherwise is
covered by the expatriation tax. This election is an ``all or
nothing'' election; an individual is not permitted to elect
this treatment for some property but not for other property.
The election, if made, applies to all property that would be
subject to the expatriation tax and to any property the basis
of which is determined by reference to such property. Under
this election, following expatriation the individual
continues to pay U.S. income taxes at the rates applicable to
U.S. citizens on any income generated by the property and on
any gain realized on the disposition of the property. In
addition, the property continues to be subject to U.S. gift,
estate, and generation-skipping transfer taxes. In order to
make this election, the taxpayer is required to waive any
treaty rights that would preclude the collection of the tax.
The individual is also required to provide security to
ensure payment of the tax under this election in such form,
manner, and amount as the Secretary of the Treasury requires.
The amount of mark-to-market tax that would have been owed
but for this election (including any interest, penalties, and
certain other items) becomes a lien in favor of the United
States on all U.S.-situated property owned by the individual.
This lien arises on the expatriation date and continues until
the tax liability is satisfied, the tax liability has become
unenforceable by reason of lapse of time, or the Secretary of
the Treasury is satisfied that no further tax liability may
arise by reason of this provision. The rules of section
6324A(d)(1), (3), and (4) (relating to liens arising in
connection with the deferral of estate tax under section
6166) apply to liens arising under this provision.
Deemed sale of property upon expatriation or residency
termination and tentative tax
The deemed sale rule of the provision generally applies to
all property interests held by the individual on the date of
relinquishment of citizenship or termination of residency.
Special rules apply in the case of trust interests, as
described below. U.S. real property interests (which remain
subject to U.S. tax in the hands of nonresident noncitizens),
with the exception of stock of certain former U.S. real
property holding corporations, are exempted from the
provision. Regulatory authority is granted to the Treasury to
exempt other types of property from the provision.
Under the provision, an individual who is subject to the
mark-to-market tax is required to pay a tentative tax equal
to the amount of tax that would be due for a hypothetical
short tax year ending on the date the individual relinquishes
citizenship or terminates residency. Thus, the tentative tax
is based on all income, gains, deductions, losses, and
credits of the individual for the year through such date,
including amounts realized from the deemed sale of property.
Moreover, notwithstanding any other provision of the Code,
any period during which recognition of income or gain had
been deferred terminates on the day before relinquishment of
citizenship or termination of residency (and, therefore, such
income or gain recognition becomes part of the tax base of
the tentative tax). The tentative tax is due on the 90th day
after the date of relinquishment of citizenship or
termination of residency, subject to the election, described
below, to defer payments of the mark-to-market tax. In
addition, notwithstanding any other provision of the Code,
any extension of time for payment of tax ceases to apply on
the day before relinquishment of

[[Page 7448]]

citizenship or termination of residency, and the unpaid
portion of such tax becomes due and payable at the time and
in the manner prescribed by the Secretary of the Treasury.
Deferral of payment of mark-to-market tax
Under the provision, an individual is permitted to elect to
defer payment of the mark-to-market tax imposed on the deemed
sale of property. Interest is charged for the period the tax
is deferred at a rate two percentage points higher than the
rate normally applicable to individual underpayments. The
election is irrevocable and is made on a property-by-property
basis. Under the election, the deferred tax attributable to a
particular property is due when the property is disposed of
(or, if the property is disposed of in a transaction in which
gain is not recognized in whole or in part, at such other
time as the Secretary of the Treasury may prescribe). The
deferred tax attributable to a particular property is an
amount that bears the same ratio to the total mark-to-market
tax as the gain taken into account with respect to such
property bears to the total gain taken into account under
these rules. The deferral of the mark-to-market tax may not
be extended beyond the due date of the return for the taxable
year which includes the individual's death.
In order to elect deferral of the mark-to-market tax, the
individual is required to provide a bond in the amount of the
deferred tax to the Secretary of the Treasury. Other security
mechanisms are permitted provided that the individual
establishes to the satisfaction of the Secretary of the
Treasury that the security is adequate. In the event that the
security provided with respect to a particular property
subsequently becomes inadequate and the individual fails to
correct the situation, the deferred tax and the interest with
respect to such property will become due. As a further
condition to making the election, the individual is required
to consent to the waiver of any treaty rights that would
preclude the collection of the tax.
The deferred tax amount (including any interest, penalties,
and certain other items) becomes a lien in favor of the
United States on all U.S.-situated property owned by the
individual. This lien arises on the expatriation date and
continues until the tax liability is satisfied, the tax
liability has become unenforceable by reason of lapse of
time, or the Secretary is satisfied that no further tax
liability may arise by reason of this provision. The rules of
section 6324A(d)(1), (3), and (4) (relating to liens arising
in connection with the deferral of estate tax under section
6166) apply to such liens.
Retirement plans and similar arrangements
Subject to certain exceptions, the provision applies to all
property interests held by covered expatriates at the time of
relinquishment of citizenship or termination of residency.
Accordingly, such property includes an interest in an
employer-sponsored qualified plan or deferred compensation
arrangement as well as an interest in an individual
retirement account or annuity (i.e., an IRA).\432\ However,
the provision contains a special rule for an interest in a
``retirement plan.'' For purposes of the provision, a
``retirement plan'' includes an employer-sponsored qualified
plan (sec. 401(a)), a qualified annuity (sec. 403(a)), a tax-
sheltered annuity (sec. 403(b)), an eligible deferred
compensation plan of a governmental employer (sec. 457(b)),
an individual retirement account (sec. 408(a)), and an
individual retirement annuity (sec. 408(b)). The special
retirement plan rule also applies, to the extent provided in
regulations, to any foreign plan or similar retirement
arrangement or program. An interest in a trust that is part
of a retirement plan is subject to the special retirement
plan rules and not to the rules for interests in trusts
(discussed below).
---------------------------------------------------------------------------
\432\Application of the provision is not limited to an
interest that meets the definition of property under section
83 (relating to property transferred in connection with the
performance of services).
---------------------------------------------------------------------------
Under the special retirement plan rules, in lieu of the
deemed sale rule, an amount equal to the present value of the
individual's vested, accrued benefit under a retirement plan
is treated as having been received by the individual as a
distribution under the retirement plan on the day before the
individual's relinquishment of citizenship or termination of
residency. In the case of any later distribution to the
individual from the retirement plan, the amount otherwise
includible in the individual's income as a result of the
distribution is reduced to reflect the amount previously
included in income under the special retirement plan rule.
The amount of the reduction applied to a distribution is the
excess of: (1) the amount included in income under the
special retirement plan rule, over (2) the total reductions
applied to any prior distributions. It is not intended that
the retirement plan would be deemed to have made a
distribution at the time of expatriation for purposes of the
tax-favored status of the retirement plan, such as whether a
plan may permit distributions before a participant has
severed employment. However, the retirement plan, and any
person acting on the plan's behalf, will treat any later
distribution in the same manner as the distribution would be
treated without regard to the special retirement plan rule.
It is expected that the Treasury Department will provide
guidance for determining the present value of an individual's
vested, accrued benefit under a retirement plan, such as the
individual's account balance in the case of a defined
contribution plan or an IRA, or present value determined
under the qualified joint and survivor annuity rules
applicable to a defined benefit plan (sec. 417(e)).
Interests in trusts
Detailed rules apply under the provision to trust interests
held by an individual at the time of relinquishment of
citizenship or termination of residency. The treatment of
trust interests depends on whether the trust is a ``qualified
trust.'' A trust is a qualified trust if a court within the
United States is able to exercise primary supervision over
the administration of the trust and one or more U.S. persons
have the authority to control all substantial decisions of
the trust.
Constructive ownership rules apply to a trust beneficiary
that is a corporation, partnership, trust, or estate. In such
cases, the shareholders, partners, or beneficiaries of the
entity are deemed to be the direct beneficiaries of the
trust. In addition, an individual who holds (or who is
treated as holding) a trust instrument at the time of
relinquishment of citizenship or termination of residency is
required to disclose on his or her tax return the methodology
used to determine his or her interest in the trust, and
whether such individual knows (or has reason to know) that
any other beneficiary of the trust uses a different method.
Nonqualified trusts.--If an individual holds an interest in
a trust that is not a qualified trust, a special rule applies
for purposes of determining the amount of the mark-to-market
tax due with respect to such trust interest. The individual's
interest in the trust is treated as a separate trust
consisting of the trust assets allocable to such interest.
Such separate trust is treated as having sold its net assets
for their fair market value on the day before the date of
relinquishment of citizenship or termination of residency and
having distributed the assets to the individual, who then is
treated as having recontributed the assets to the trust. Any
income, gain, or loss of the individual arising from the
deemed distribution from the trust is taken into account as
if it had arisen under the deemed sale rules.
The election to defer payment is available for the mark-to-
market tax attributable to a nonqualified trust interest. A
beneficiary's interest in a nonqualified trust is determined
under all the facts and circumstances, including the trust
instrument, letters of wishes, historical patterns of trust
distributions, and the existence of, and function performed
by, a trust protector or any similar advisor.
Qualified trusts.--If an individual has an interest in a
qualified trust, the amount of mark-to-market tax on
unrealized gain allocable to the individual's trust interest
(``allocable expatriation gain'') is calculated at the time
of expatriation or residency termination, but is collected as
the individual receives distributions from the qualified
trust. The allocable expatriation gain is the amount of gain
which would be allocable to the individual's trust interest
if the individual directly held all the assets allocable to
such interest.\433\ If any individual's interest in a trust
is vested as of the day before the expatriation date (e.g.,
if the individual's interest in the trust is non-contingent
and non-discretionary), the gain allocable to the
individual's trust interest is determined based on the trust
assets allocable to his or her trust interest. If the
individual's interest in the trust is not vested as of the
expatriation date (e.g., if the individual's trust interest
is a contingent or discretionary interest), the gain
allocable to his or her trust interest is determined based on
all of the trust assets that could be allocable to his or her
trust interest, determined by resolving all contingencies and
discretionary powers in the individual's favor (i.e., the
individual is allocated the maximum amount that he or she
could receive).
---------------------------------------------------------------------------
\433\Allocable expatriation gain is subject to the $600,000
exemption (adjusted for cost of living increases).
---------------------------------------------------------------------------
Taxes are imposed on each distribution from a qualified
trust. These distributions also may be subject to other U.S.
income taxes. If a distribution from a qualified trust is
made after the individual relinquishes citizenship or
terminates residency, the mark-to-market tax is imposed in an
amount equal to the amount of the distribution multiplied by
the highest tax rate generally applicable to trusts and
estates for the taxable year which includes the date of
expatriation, but in no event will the tax imposed exceed the
balance in the ``deferred tax account'' with respect to the
trust interest. For this purpose, the balance in the deferred
tax account is equal to (1) the hypothetical tax calculated
under the ``regular'' deemed sale rules with respect to the
allocable expatriation gain, (2) increased by interest
charged on the balance in the deferred tax account at a rate
two percentage points higher than the rate normally
applicable to individual underpayments, for periods beginning
after the 90th day after the expatriation date and calculated
up to 30 days prior to the date of the distribution, (3)
reduced by any mark-to-market tax imposed on prior trust
distributions to the individual, and (4) to the extent

[[Page 7449]]

provided in Treasury regulations, in the case of a covered
expatriate holding a nonvested interest, reduced by mark-to-
market taxes imposed on trust distributions to other persons
holding nonvested interests.
The tax that is imposed on distributions from a qualified
trust generally is to be deducted and withheld by the
trustees. If the individual does not agree to waive treaty
rights that would preclude collection of the tax, the tax
with respect to such distributions is imposed on the trust,
the trustee is personally liable for the tax, and any other
beneficiary has a right of contribution against such
individual with respect to the tax.
Mark-to-market taxes become due immediately if the trust
ceases to be a qualified trust, the individual disposes of
his or her qualified trust interest, or the individual dies.
In such cases, the amount of mark-to-market tax equals the
lesser of (1) the tax calculated under the rules for
nonqualified trust interests as of the date of the triggering
event, or (2) the balance in the deferred tax account with
respect to the trust interest immediately before that date.
Such tax is imposed on the trust, the trustee is personally
liable for the tax, and any other beneficiary has a right of
contribution against such individual (or his or her estate)
with respect to such tax.
Regulatory authority
The provision authorizes the Secretary of the Treasury to
prescribe such regulations as may be necessary or appropriate
to carry out the purposes of section 877A. In addition, the
Secretary of the Treasury may provide for adjustments to the
bases of assets in a trust or a deferred tax account, and the
timing of such adjustments, to ensure that gain is taxed only
once.
Income tax treatment of gifts and inheritances from a former
citizen or former long-term resident
Under the provision, the exclusion from income provided in
section 102 (relating to exclusions from income for the value
of property acquired by gift or inheritance) does not apply
to the value of any property received by gift or inheritance
from a covered expatriate. Accordingly, a U.S. taxpayer who
receives a gift or inheritance from such an individual is
required to include the value of such gift or inheritance in
gross income and is subject to U.S. tax on such amount.
Having included the value of the property in income, the
recipient takes a basis in the property equal to that value.
The tax does not apply to property that is shown on a timely
filed gift tax return and that is a taxable gift by the
former citizen or former long-term resident, or property that
is shown on a timely filed estate tax return and included in
the gross U.S. estate of the former citizen or former long-
term resident (regardless of whether the tax liability shown
on such a return is reduced by credits, deductions, or
exclusions available under the estate and gift tax rules). In
addition, the tax does not apply to property in cases in
which no estate or gift tax return was filed, but no such
return would have been required to be filed if the former
citizen or former long-term resident had not relinquished
citizenship or terminated residency, as the case may be.
Coordination with present-law alternative tax regime
The provision provides a coordination rule with the
present-law alternative tax regime. Under the provision, the
expatriation income tax rules under section 877, and the
special present-law expatriation estate and gift tax rules
under sections 2107 and 2501(a)(3) (generally described
above), do not apply to a covered expatriate whose
expatriation or residency termination occurs on or after the
date of enactment.
Information reporting
Certain information reporting requirements under the law
presently applicable to former citizens and former long-term
residents (sec. 6039G) also apply for purposes of the
provision.
Immigration rules
The provision denies former citizens reentry into the
United States if the individual is determined not to be in
compliance with his or her tax obligations under the
provision's expatriation tax rules (regardless of the
subjective motive for expatriating). For this purpose, the
provision permits the IRS to disclose certain items of return
information of an individual, upon written request of the
Attorney General or his delegate, as is necessary for making
a determination under section 212(a)(10)(E) of the
Immigration and Nationality Act. Specifically, the provision
permits the IRS to disclose to the agency administering
section 212(a)(10)(E) whether such taxpayer is in compliance
with section 877A, and to identify the items of any
noncompliance. Recordkeeping requirements, safeguards, and
civil and criminal penalties for unauthorized disclosure or
inspection apply to return information disclosed under this
provision.
Effective date
The provision generally is effective for U.S. citizens who
relinquish citizenship or long-term residents who terminate
their residency on or after the date of enactment. The due
date for tentative tax, however, may not occur before the
90th day after the date of enactment. The provision relating
to income taxes on gifts and inheritances is effective for
gifts and inheritances received from former citizens or
former long-term residents (or their estates) on or after the
date of enactment, whose relinquishment of citizenship or
residency termination occurs after such date. The immigration
and disclosure provisions relating to former citizens are
effective with respect to individuals who relinquish
citizenship on or after the date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.

F. Miscellaneous Provisions

1. Treatment of contingent payment convertible debt
instruments (Sec. 451 of the Senate amendment and sec.
1275 of the Code)

Present Law

Under present law, a taxpayer generally deducts the amount
of interest paid or accrued within the taxable year on
indebtedness issued by the taxpayer. In the case of original
issue discount (``OID''), the issuer of a debt instrument
generally accrues and deducts, as interest, the OID over the
life of the obligation, even though the amount of the OID may
not be paid until the maturity of the instrument.
The amount of OID with respect to a debt instrument is
equal to the excess of the stated redemption price at
maturity over the issue price of the debt instrument. The
stated redemption price at maturity includes all amounts that
are payable on the debt instrument by maturity. The amount of
OID with respect to a debt instrument is allocated over the
life of the instrument through a series of adjustments to the
issue price for each accrual period. The adjustment to the
issue price is determined by multiplying the adjusted issue
price (i.e., the issue price increased or decreased by
adjustments prior to the accrual period) by the instrument's
yield to maturity, and then subtracting any payments on the
debt instrument (other than non-OID stated interest) during
the accrual period. Thus, in order to compute the amount of
OID and the portion of OID allocable to a particular period,
the stated redemption price at maturity and the time of
maturity must be known. Issuers of debt instruments with OID
accrue and deduct the amount of OID as interest expense in
the same manner as the holders of such instruments accrue and
include in gross income the amount of OID as interest income.
Treasury regulations provide special rules for determining
the amount of OID allocated to a period with respect to
certain debt instruments that provide for one or more
contingent payments of principal or interest.\434\ The
regulations provide that a debt instrument does not provide
for contingent payments merely because it provides for an
option to convert the debt instrument into the stock of the
issuer, into the stock or debt of a related party, or into
cash or other property in an amount equal to the approximate
value of such stock or debt.\435\ The regulations also
provide that a payment is not a contingent payment merely
because of a contingency that, as of the issue date of the
debt instrument, is either remote or incidental.\436\
---------------------------------------------------------------------------
\434\Treas. Reg. sec. 1.1275-4.
\435\Treas. Reg. sec. 1.1275-4(a)(4).
\436\Treas. Reg. sec. 1.1275-4(a)(5).
---------------------------------------------------------------------------
In the case of contingent payment debt instruments that are
issued for money or publicly traded property,\437\ the
regulations provide that interest on a debt instrument must
be taken into account (as OID) whether or not the amount of
any payment is fixed or determinable in the taxable year. The
amount of OID that is taken into account for each accrual
period is determined by constructing a comparable yield and a
projected payment schedule for the debt instrument, and then
accruing the OID on the basis of the comparable yield and
projected payment schedule by applying rules similar to those
for accruing OID on a noncontingent debt instrument (the
``noncontingent bond method''). If the actual amount of a
contingent payment is not equal to the projected amount,
appropriate adjustments are made to reflect the difference.
The comparable yield for a debt instrument is the yield at
which the issuer would be able to issue a fixed-rate
noncontingent debt instrument with terms and conditions
similar to those of the contingent payment debt instrument
(i.e., the comparable fixed-rate debt instrument), including
the level of subordination, term, timing of payments, and
general market conditions.\438\
---------------------------------------------------------------------------
\437\Treas. Reg. sec. 1.1275-4(b).
\438\Treas. Reg. sec. 1.1275-4(b)(4)(i)(A).
---------------------------------------------------------------------------
With respect to certain debt instruments that are
convertible into the common stock of the issuer and that also
provide for contingent payments (other than the conversion
feature)--often referred to as ``contingent convertible''
debt instruments--the IRS has stated that the noncontingent
bond method applies in computing the accrual of OID on the
debt instrument.\439\ In applying the noncontingent bond
method, the IRS has stated that the comparable yield for a
contingent convertible debt instrument is determined

[[Page 7450]]

by reference to a comparable fixed-rate nonconvertible debt
instrument, and the projected payment schedule is determined
by treating the issuer stock received upon a conversion of
the debt instrument as a contingent payment.
---------------------------------------------------------------------------
\439\Rev. Rul. 2002-31, 2002-1 C.B. 1023.
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

The Senate amendment provides that, in the case of a
contingent convertible debt instrument,\440\ any Treasury
regulations which require OID to be determined by reference
to the comparable yield of a noncontingent fixed-rate debt
instrument shall be applied as requiring that such comparable
yield be determined by reference to a noncontingent fixed-
rate debt instrument which is convertible into stock. For
purposes of applying the provision, the comparable yield
shall be determined without taking into account the yield
resulting from the conversion of a debt instrument into
stock. Thus, the noncontingent bond method in the Treasury
regulations shall be applied in a manner such that the
comparable yield for contingent convertible debt instruments
shall be determined by reference to comparable noncontingent
fixed-rate convertible (rather than nonconvertible) debt
instruments.
---------------------------------------------------------------------------
\440\Under the provision, a contingent convertible debt
instrument is defined as a debt instrument that: (1) is
convertible into stock of the issuing corporation, or a
corporation in control of, or controlled by, the issuing
corporation; and (2) provides for contingent payments.
---------------------------------------------------------------------------
Effective date.--The provision is effective for debt
instruments issued on or after date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
2. Grant Treasury regulatory authority to address foreign tax
credit transactions involving inappropriate separation of
foreign taxes from related foreign income (sec. 452 of
the Senate amendment and sec. 901 of the Code)

Present Law

The United States employs a ``worldwide'' tax system, under
which residents generally are taxed on all income, whether
derived in the United States or abroad. In order to mitigate
the possibility of double taxation arising from overlapping
claims of the United States and a source country to tax the
same item of income, the United States provides a credit for
foreign income taxes paid or accrued, subject to several
conditions and limitations.
For purposes of the foreign tax credit, regulations provide
that a foreign tax is treated as being paid by ``the person
on whom foreign law imposes legal liability for such
tax.''\441\ Thus, for example, if a U.S. corporation owns an
interest in a foreign partnership, the U.S. corporation can
claim foreign tax credits for the tax that is imposed on it
as a partner in the foreign entity. This would be true under
the regulations even if the U.S. corporation elected to treat
the foreign entity as a corporation for U.S. tax purposes. In
such a case, if the foreign entity does not meet the
definition of a controlled foreign corporation or does not
generate income that is subject to current inclusion under
the rules of subpart F, the income generated by the foreign
entity might never be reported on a U.S. return, and yet the
U.S. corporation might take the position that it can claim
credits for taxes imposed on that income. This is one example
of how a taxpayer might attempt to separate foreign taxes
from the related foreign income, and thereby attempt to claim
a foreign tax credit under circumstances in which there is no
threat of double taxation.
---------------------------------------------------------------------------
\441\Treas. Reg. sec. 1.901-2(f)(1).
---------------------------------------------------------------------------
The Treasury Department currently has the authority to
promulgate regulations under section 901 and other provisions
of the Code to address transactions and structures that
produce inappropriate foreign tax credit results.

House Bill

No provision.

Senate Amendment

The Senate amendment enhances the regulatory authority of
the Treasury Department to address transactions that involve
the inappropriate separation of foreign taxes from the
related foreign income or in which foreign taxes are imposed
on any person in respect of income of another person. This
grant of regulatory authority supplements existing Treasury
Department authority and thereby provide greater flexibility
in addressing a wide range of transactions and structures.
Regulations issued pursuant to this authority could, for
example, provide for the disallowance of a credit for all or
a portion of the foreign taxes, or for the allocation of the
foreign taxes among the participants in the transaction in a
manner more consistent with the economics of the transaction.
Effective date.--The provision generally is effective for
transactions entered into after the date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision. No inference is intended as to the scope
of the Treasury Department's existing regulatory authority to
address transactions that involve the inappropriate
separation of foreign taxes from the related foreign income.
3. Modifications of effective dates of leasing provisions of
the American Jobs Creation Act of 2004 (sec. 453 of the
Senate amendment and sec. 470 of the Code)

Present Law

Present law provides for the deferral of losses
attributable to certain tax exempt use property, generally
effective for leases entered into after March 12, 2004.
However, the deferral provision does not apply to property
located in the United States that is subject to a lease with
respect to which a formal application: (1) was submitted for
approval to the Federal Transit Administration (an agency of
the Department of Transportation) after June 30, 2003, and
before March 13, 2004; (2) is approved by the Federal Transit
Administration before January 1, 2006; and (3) includes a
description and the fair market value of such property (the
``qualified transportation property exception'').

House Bill

No provision.

Senate Amendment

The Senate amendment makes two changes to the effective
date of the loss deferral rules. First, the Senate amendment
repeals the qualified transportation property exception.
Second, the Senate amendment applies the loss deferral rules
to leases entered into on or before March 12, 2004, if the
lessee is a foreign person or entity. With respect to such
leases, losses are deferred starting in taxable years
beginning after December 31, 2005.
Effective date.--The Senate amendment is effective as if
included in the provisions of the American Jobs Creation Act
of 2004, Pub. L. No. 108-357 (2004), to which it relates.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
4. Application of earnings stripping rules to partners which
are corporations (sec. 454 of the Senate amendment and
sec. 163 of the Code)

Present Law

Present law provides rules to limit the ability of U.S.
corporations to reduce the U.S. tax on their U.S.-source
income through earnings stripping transactions. Section
163(j) specifically addresses earnings stripping involving
interest payments, by limiting the deductibility of interest
paid to certain related parties (``disqualified
interest''),\442\ if the payor's debt-equity ratio exceeds
1.5 to 1 and the payor's net interest expense exceeds 50
percent of its ``adjusted taxable income'' (generally taxable
income computed without regard to deductions for net interest
expense, net operating losses, and depreciation,
amortization, and depletion). Disallowed interest amounts can
be carried forward indefinitely. In addition, excess
limitation (i.e., any excess of the 50-percent limit over a
company's net interest expense for a given year) can be
carried forward three years.
---------------------------------------------------------------------------
\442\This interest also may include interest paid to
unrelated parties in certain cases in which a related party
guarantees the debt.
---------------------------------------------------------------------------
Proposed Treasury regulations provide that a partner's
proportionate share of partnership liabilities is treated as
liabilities incurred directly by the partner, for purposes of
applying the earnings stripping limitation to interest
payments by a corporate partner of a partnership.\443\ The
proposed Treasury regulations provide that interest paid or
accrued to a partnership is treated as paid or accrued to the
partners of the partnership in proportion to each partner's
distributive share of the partnership's interest income for
the taxable year.\444\ In addition, the proposed Treasury
regulations provide that interest expense paid or accrued by
a partnership is treated as paid or accrued by the partners
of the partnership in proportion to each partner's
distributive share of the partnership's interest
expense.\445\
---------------------------------------------------------------------------
\443\Prop. Treas. Reg. sec. 1.163(j)-3(b)(3).
\444\Prop. Treas. Reg. sec. 1.163(j)-2(e)(4).
\445\Prop. Treas. reg. sec. 1.163(j)-2(e)(5).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

The Senate amendment provision codifies the approach of the
proposed Treasury regulations by providing that, except to
the extent provided by regulations, in the case of a
corporation that owns, directly or indirectly, an interest in
a partnership, the corporation's share of partnership
liabilities is treated as liabilities of the corporation for
purposes of applying the earnings stripping rules to the
corporation. The provision provides that the corporation's
distributive share of interest income of the partnership, and
of interest expense of the partnership, is treated as
interest income or interest expense of the corporation.
The provision provides Treasury regulatory authority to
reallocate shares of partnership debt, or distributive shares
of the partnership's interest income or interest expense, as
may be appropriate to carry out the purposes of the
provision. For example, it is not intended that the
application of the earnings stripping rules to corporations
with

[[Page 7451]]

direct or indirect interests in partnerships be circumvented
through the use of allocations of partnership interest income
or expense (or partnership liabilities) to or away from
partners.
Effective date.--The provision is effective for taxable
years beginning on or after the date of enactment.

Conference Agreement

The conference agreement includes the Senate amendment
provision.
5. Limitation on employer deduction for certain entertainment
expenses (sec. 455 of the Senate amendment and sec.
274(e) of the Code)

Present Law

In general
Under present law, no deduction is allowed with respect to
(1) an activity generally considered to be entertainment,
amusement or recreation, unless the taxpayer establishes that
the item was directly related to (or, in certain cases,
associated with) the active conduct of the taxpayer's trade
or business, or (2) a facility (e.g., an airplane) used in
connection with such activity.\446\ The Code includes a
number of exceptions to the general rule disallowing
deductions of entertainment expenses. Under one exception,
the deduction disallowance rule does not apply to expenses
for goods, services, and facilities to the extent that the
expenses are reported by the taxpayer as compensation and
wages to an employee.\447\ The deduction disallowance rule
also does not apply to expenses paid or incurred by the
taxpayer for goods, services, and facilities to the extent
that the expenses are includible in the gross income of a
recipient who is not an employee (e.g., a nonemployee
director) as compensation for services rendered or as a prize
or award.\448\ The exceptions apply only to the extent that
amounts are properly reported by the company as compensation
and wages or otherwise includible in income. In no event can
the amount of the deduction exceed the amount of the actual
cost, even if a greater amount is includible in income.
---------------------------------------------------------------------------
\446\Sec. 274(a).
\447\Sec. 274(e)(2). As discussed below, a special rule
applies in the case of specified individuals.
\448\Sec. 274(e)(9).
---------------------------------------------------------------------------
Except as otherwise provided, gross income includes
compensation for services, including fees, commissions,
fringe benefits, and similar items. In general, an employee
or other service provider must include in gross income the
amount by which the fair value of a fringe benefit exceeds
the amount paid by the individual. Treasury regulations
provide rules regarding the valuation of fringe benefits,
including flights on an employer-provided aircraft.\449\ In
general, the value of a non-commercial flight is determined
under the base aircraft valuation formula, also known as the
Standard Industry Fare Level formula or ``SIFL''.\450\ If the
SIFL valuation rules do not apply, the value of a flight on a
company-provided aircraft is generally equal to the amount
that an individual would have to pay in an arm's-length
transaction to charter the same or a comparable aircraft for
that period for the same or a comparable flight.\451\
---------------------------------------------------------------------------
\449\Treas. Reg. sec. 1.61-21.
\450\Treas. Reg. sec. 1.61-21(g).
\451\Treas. Reg. sec. 1.61-21(b)(6).
---------------------------------------------------------------------------
In the context of an employer providing an aircraft to
employees for nonbusiness (e.g., vacation) flights, the
exception for expenses treated as compensation was
interpreted in Sutherland Lumber-Southwest, Inc. v.
Commissioner (``Sutherland Lumber'') as not limiting the
company's deduction for operation of the aircraft to the
amount of compensation reportable to its employees,\452\
which can result in a deduction many times larger than the
amount required to be included in income. In many cases, the
individual including amounts attributable to personal travel
in income directly benefits from the enhanced deduction,
resulting in a net deduction for the personal use of the
company aircraft.
---------------------------------------------------------------------------
\452\Sutherland Lumber-Southwest, Inc. v. Comm., 114 T.C. 197
(2000), aff'd, 255 F.3d 495 (8th Cir. 2001), acq., AOD 2002-
02 (Feb. 11, 2002).
---------------------------------------------------------------------------
Specified individuals
In the case of specified individuals, the exceptions to the
general entertainment expense disallowance rule for expenses
treated as compensation or includible in income apply only to
the extent of the amount of expenses treated as compensation
or includible in income of the specified individual. For
example, a company's deduction attributable to aircraft
operating costs and other expenses for a specified
individual's vacation use of a company aircraft is limited to
the amount reported as compensation to the specified
individual. Sutherland Lumber is thus overturned with respect
to specified individuals.
Specified individuals are individuals who, with respect to
an employer or other service recipient (or a related party),
are subject to the requirements of section 16(a) of the
Securities and Exchange Act of 1934, or would be subject to
such requirements if the employer or service recipient (or
the related party) were an issuer of equity securities
referred to in section 16(a).\453\ Such individuals generally
include officers (as defined by section 16(a)),\454\
directors, and 10-percent-or-greater owners of private and
publicly-held companies.
---------------------------------------------------------------------------
\453\For purposes of this definition, a person is a related
party with respect to another person if such person bears a
relationship to such other person described in section 267(b)
or 707(b).
\454\An officer is defined as the president, principal
financial officer, principal accounting officer (or, if there
is no such accounting officer, the controller), any vice-
president in charge of a principal business unit, division or
function (such as sales, administration or finance), any
other officer who performs a policy-making function, or any
other person who performs similar policy-making functions.
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

Under the Senate amendment, in the case of all individuals,
the exceptions to the general entertainment expense
disallowance rule for expenses treated as compensation or
includible in income apply only to the extent of the amount
of expenses treated as compensation or includible in income.
Thus, under those exceptions, no deduction is allowed with
respect to expenses for (1) a nonbusiness activity generally
considered to be entertainment, amusement or recreation, or
(2) a facility (e.g., an airplane) used in connection with
such activity to the extent that such expenses exceed the
amount treated as compensation or includible in income. The
provision is intended to overturn Sutherland Lumber for all
individuals. As under present law, the exceptions apply only
if amounts are properly reported by the company as
compensation and wages or otherwise includible in income.
Effective date.--The provision is effective for expenses
incurred after the date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
6. Increase in age of minor children whose unearned income is
taxed as if parent's income (Sec. 456 of the Senate
amendment and sec. 1(g) of the Code)

Present Law

Filing requirements for children
A single unmarried individual eligible to be claimed as a
dependent on another taxpayer's return generally must file an
individual income tax return if he or she has: (1) earned
income only over $5,150 (for 2006); (2) unearned income only
over the minimum standard deduction amount for dependents
($850 in 2006); or (3) both earned income and unearned income
totaling more than the smaller of (a) $5,150 (for 2006) or
(b) the larger of (i) $850 (for 2006), or (ii) earned income
plus $300.\455\ Thus, if a dependent child has less than $850
in gross income, the child does not have to file an
individual income tax return for 2006.\456\
---------------------------------------------------------------------------
\455\Sec. 6012(a)(1)(C). Other filing requirements apply to
dependents who are married, elderly, or blind. See, Internal
Revenue Service, Publication 929, Tax Rules for Children and
Dependents, at 2, Table 1 (2005).
\456\A taxpayer generally need not file a return if he or she
has gross income in an amount less than the standard
deduction (and, if allowable to the taxpayer, the personal
exemption amount). An individual who may be claimed as a
dependent of another taxpayer is not eligible to claim the
dependency exemption relating to that individual. Sec.
151(d)(2). For taxable years beginning in 2006, the standard
deduction amount for an individual who may be claimed as a
dependent by another taxpayer may not exceed the greater of
$850 or the sum of $300 and the individual's earned income.
---------------------------------------------------------------------------
A child who cannot be claimed as a dependent on another
person's tax return is subject to the generally applicable
filing requirements. Such a child generally must file a
return if the individual's gross income exceeds the sum of
the standard deduction and the personal exemption amount
($3,300 for 2006).
Taxation of unearned income under section 1(g)
Special rules (generally referred to as the ``kiddie tax'')
apply to the unearned income of a child who is under age
14.\457\ The kiddie tax applies if: (1) the child has not
reached the age of 14 by the close of the taxable year; (2)
the child's unearned income was more than $1,700 (for 2006);
and (3) the child is required to file a return for the year.
The kiddie tax applies regardless of whether the child may be
claimed as a dependent on the parent's return.
---------------------------------------------------------------------------
\457\Sec. 1(g).
---------------------------------------------------------------------------
For these purposes, unearned income is income other than
wages, salaries, professional fees, or other amounts received
as compensation for personal services actually rendered.\458\
For children under age 14, net unearned income (for 2006,
generally unearned income over $1,700) is taxed at the
parent's rate if the parent's rate is higher than the child's
rate. The remainder of a child's taxable income (i.e., earned
income, plus unearned income up to $1,700 (for 2006), less
the child's standard deduction) is taxed at the child's
rates, regardless of whether the kiddie tax applies to the
child. In general, a child is eligible to use the
preferential tax rates for qualified dividends and capital
gains.\459\
---------------------------------------------------------------------------
\458\Sec. 1(g)(4) and sec. 911(d)(2).
\459\Sec. 1(h).
---------------------------------------------------------------------------
The kiddie tax is calculated by computing the ``allocable
parental tax.'' This involves adding the net unearned income
of the child to the parent's income and then applying the

[[Page 7452]]

parent's tax rate. A child's ``net unearned income'' is the
child's unearned income less the sum of (1) the minimum
standard deduction allowed to dependents ($850 for 2006), and
(2) the greater of (a) such minimum standard deduction amount
or (b) the amount of allowable itemized deductions that are
directly connected with the production of the unearned
income.\460\ A child's net unearned income cannot exceed the
child's taxable income.
---------------------------------------------------------------------------
\460\Sec. 1(g)(4).
---------------------------------------------------------------------------
The allocable parental tax equals the hypothetical increase
in tax to the parent that results from adding the child's net
unearned income to the parent's taxable income. If the child
has net capital gains or qualified dividends, these items are
allocated to the parent's hypothetical taxable income
according to the ratio of net unearned income to the child's
total unearned income. If a parent has more than one child
subject to the kiddie tax, the net unearned income of all
children is combined, and a single kiddie tax is calculated.
Each child is then allocated a proportionate share of the
hypothetical increase, based upon the child's net unearned
income relative to the aggregate net unearned income of all
of the parent's children subject to the tax.
Special rules apply to determine which parent's tax return
and rate is used to calculate the kiddie tax. If the parents
file a joint return, the allocable parental tax is calculated
using the income reported on the joint return. In the case of
parents who are married but file separate returns, the
allocable parental tax is calculated using the income of the
parent with the greater amount of taxable income. In the case
of unmarried parents, the child's custodial parent is the
parent whose taxable income is taken into account in
determining the child's liability. If the custodial parent
has remarried, the stepparent is treated as the child's other
parent. Thus, if the custodial parent and stepparent file a
joint return, the kiddie tax is calculated using that joint
return. If the custodial parent and stepparent file separate
returns, the return of the one with the greater taxable
income is used. If the parents are unmarried but lived
together all year, the return of the parent with the greater
taxable income is used.\461\
---------------------------------------------------------------------------
\461\Sec. 1(g)(5); Internal Revenue Service, Publication 929,
Tax Rules for Children and Dependents, at 6 (2005).
---------------------------------------------------------------------------
Unless the parent elects to include the child's income on
the parent's return (as described below) the child files a
separate return to report the child's income.\462\ In this
case, items on the parent's return are not affected by the
child's income. The total tax due from a child is the greater
of:
---------------------------------------------------------------------------
\462\The child must attach to the return Form 8615, Tax for
Children Under Age 14 With Investment Income of More Than
$1,700 (2006).
---------------------------------------------------------------------------
1. the sum of (a) the tax payable by the child on the
child's earned income and unearned income up to $1,700 (for
2006), plus (b) the allocable parental tax on the child's
unearned income, or
2. the tax on the child's income without regard to the
kiddie tax provisions.
Parental election to include child's dividends and interest
on parent's return
Under certain circumstances, a parent may elect to report a
child's dividends and interest on the parent's return. If the
election is made, the child is treated as having no income
for the year and the child does not have to file a return.
The parent makes the election on Form 8814, Parents' Election
to Report Child's Interest and Dividends. The requirements
for the parent's election are that:
1. the child has gross income only from interest and
dividends (including capital gains distributions and Alaska
Permanent Fund Dividends);\463\
---------------------------------------------------------------------------
\463\Internal Revenue Service, Publication 929, Tax Rules for
Children and Dependents, at 6 (2005).
---------------------------------------------------------------------------
2. such income is more than the minimum standard deduction
amount for dependents ($850 in 2006) and less than 10 times
that amount ($8500 in 2006);
3. no estimated tax payments for the year were made in the
child's name and taxpayer identification number;
4. no backup withholding occurred; and
5. the child is required to file a return if the parent
does not make the election.
Only the parent whose return must be used when calculating
the kiddie tax may make the election. The parent includes in
income the child's gross income in excess of twice the
minimum standard deduction amount for dependents (i.e., the
child's gross income in excess of $1,700 for 2007). This
amount is taxed at the parent's rate. The parent also must
report an additional tax liability equal to the lesser of:
(1) $85 (in 2006), or (2) 10 percent of the child's gross
income exceeding the child's standard deduction ($850 in
2006).
Including the child's income on the parent's return can
affect the parent's deductions and credits that are based on
adjusted gross income, as well as income-based phaseouts,
limitations, and floors.\464\ In addition, certain deductions
that the child would have been entitled to take on his or her
own return are lost.\465\ Further, if the child received tax-
exempt interest from a private activity bond, that item is
considered a tax preference of the parent for alternative
minimum tax purposes.\466\
---------------------------------------------------------------------------
\464\Internal Revenue Service, Publication 929, Tax Rules for
Children and Dependents, at 7 (2005).
\465\Internal Revenue Service, Publication 929, Tax Rules for
Children and Dependents, at 7 (2005).
\466\Sec. 1(g)(7)(B).
---------------------------------------------------------------------------
Taxation of compensation for services under section 1(g)
Compensation for a child's services is considered the gross
income of the child, not the parent, even if the compensation
is not received or retained by the child (e.g. is the
parent's income under local law).\467\ If the child's income
tax is not paid, however, an assessment against the child
will be considered as also made against the parent to the
extent the assessment is attributable to amounts received for
the child's services.\468\
---------------------------------------------------------------------------
\467\Sec. 73(a).
\468\Sec. 6201(c).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

The provision increases the age to which the kiddie tax
provisions apply from under 14 to under 18 years of age. The
provision also creates an exception to the kiddie tax for
distributions from certain qualified disability trusts,
defined by cross-reference to sections 1917 and 1614(a)(3) of
the Social Security Act.
Effective date.--The provision applies to taxable years
beginning after December 31, 2005.

Conference Agreement

The conference agreement includes the Senate amendment
provision with one modification. This modification provides
that the kiddie tax does not apply to a child who is married
and files a joint return for the taxable year.
7. Impose loan and redemption requirements on pooled
financing bonds (sec. 457 of the Senate amendment and
sec. 149 of the Code)

Present Law

In general
Interest on bonds issued by State and local governments
generally is excluded from gross income for Federal income
tax purposes if the proceeds of such bonds are used to
finance direct activities of governmental units or if such
bonds are repaid with revenues of governmental units. These
bonds are called ``governmental bonds.'' Interest on State or
local government bonds issued to finance activities of
private persons is taxable unless a specific exception
applies. These bonds are called ``private activity bonds.''
The exclusion from income for State and local bonds does not
apply to private activity bonds, unless the bonds are issued
for certain permitted purposes. In addition, the Code imposes
qualification requirements that apply to all State and local
bonds. Arbitrage restrictions, for example, limit the ability
of issuers to profit from investment of tax-exempt bond
proceeds. The Code also imposes requirements that only apply
to specific types of bond issues. For instance, pooled
financing bonds (defined below) are not tax-exempt unless the
issuer meets certain requirements regarding the expected use
of proceeds.
Pooled financing bond restrictions
State or local governments also issue bonds to provide
financing for the benefit of a third party (a ``conduit
borrower''). Pooled financing bonds are bond issues that are
used to make or finance loans to two or more conduit
borrowers, unless the conduit loans are to be used to finance
a single project.\469\ The Code imposes several requirements
on pooled financing bonds if more than $5 million of proceeds
are expected to be used to make loans to conduit borrowers.
For purposes of these rules, a pooled financing bond does not
include certain private activity bonds.\470\
---------------------------------------------------------------------------
\469\Treas. Reg. sec. 1.150-1(b).
\470\Sec. 149(f)(4)(B).
---------------------------------------------------------------------------
A pooled financing bond is not tax-exempt unless the issuer
reasonably expects that at least 95 percent of the net
proceeds will be lent to ultimate borrowers by the end of the
third year after the date of issue. The term ``net proceeds''
is defined to mean the proceeds of the issue less the
following amounts: 1) proceeds used to finance issuance
costs; 2) proceeds necessary to pay interest on the bonds
during a three-year period; and 3) amounts in reasonably
required reserves.\471\
---------------------------------------------------------------------------
\471\Sec. 149(f)(2)(C).
---------------------------------------------------------------------------
An issuer's past experience regarding loan origination is a
criterion upon which the reasonableness of the issuer's
expectations can be based. As an additional requirement for
tax exemption, all legal and underwriting costs associated
with the issuance of pooled financing bonds may not be
contingent and must be substantially paid within 180 days of
the date of issuance.
Arbitrage restrictions on tax-exempt bonds
To prevent the issuance of more Federally subsidized tax-
exempt bonds than necessary; the tax exemption for State and
local bonds does not apply to any arbitrage bond.\472\ An
arbitrage bond is defined as any bond that is part of an
issue if any proceeds of the issue are reasonably expected to
be used (or intentionally are used) to acquire higher
yielding investments or to replace funds that are used to
acquire higher yielding investments. In

[[Page 7453]]

general, arbitrage profits may be earned only during
specified periods (e.g., defined ``temporary periods'')
before funds are needed for the purpose of the borrowing or
on specified types of investments (e.g., ``reasonably
required reserve or replacement funds''). Subject to limited
exceptions, investment profits that are earned during these
periods or on such investments must be rebated to the Federal
Government (``arbitrage rebate'').
---------------------------------------------------------------------------
\472\Secs. 103(a) and (b)(2).
---------------------------------------------------------------------------
The Code contains several exceptions to the arbitrage
rebate requirement, including an exception for bonds issued
by small governments (the ``small issuer exception''). For
this purpose, small governments are defined as general
purpose governmental units that issue no more than $5 million
of tax-exempt governmental bonds in a calendar year.\473\
---------------------------------------------------------------------------
\473\The $5 million limit is increased to $15 million if at
least $10 million of the bonds are used to finance public
schools.
---------------------------------------------------------------------------
Pooled financing bonds are subject to the arbitrage
restrictions that apply to all tax-exempt bonds, including
arbitrage rebate. Under certain circumstances, however, small
governments may issue pooled financing bonds without those
bonds counting towards the determination of whether the
issuer qualifies for the small issuer exception to arbitrage
rebate. In the case of a pooled financing bond where the
ultimate borrowers are governmental units with general taxing
powers not subordinate to the issuer of the pooled bond, the
pooled bond does not count against the issuer's $5 million
limitation, provided the issuer is not a borrower from the
pooled bond.\474\ However, the issuer of the pooled financing
bond remains subject to the arbitrage rebate requirement for
unloaned proceeds.\475\
---------------------------------------------------------------------------
\474\Sec. 148(f)(4)(D)(ii)(II).
\475\Treas. Reg. sec. 1.148-8(d)(1).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

In general
The provision imposes new requirements on pooled financing
bonds as a condition of tax-exemption. First, the provision
imposes a written loan commitment requirement to restrict the
issuance of pooled bonds where potential borrowers have not
been identified (``blind pools''). Second, in addition to the
current three-year expectations requirement, the issuer must
reasonably expect that at least 50 percent of the net
proceeds of the pooled bond will be lent to borrowers one
year after the date of issue. Third, the provision requires
the redemption of outstanding bonds with proceeds that are
not loaned to borrowers within the expected loan origination
periods. Finally, the provision eliminates the rule allowing
an issuer of pooled financing bonds to disregard the pooled
bonds for purposes of determining whether the issuer
qualifies for the small issuer exception to rebate.
Borrower identification
Under the provision, interest on a pooled financing bond is
tax exempt only if the issuer obtains written commitments
with ultimate borrowers for loans equal to at least 50
percent of the net proceeds of the pooled bond prior to
issuance. The loan commitment requirement does not apply to
bonds issued by States (or an integral part of a State) to
provide loans to subordinate governmental units or State
entities created to provide financing for water-
infrastructure projects through the federally-sponsored State
revolving fund program.
Loan origination expectations
The provision imposes new reasonable expectations
requirements for loan originations. The issuer must expect
that at least 50 percent of the net proceeds of a pooled
financing bond will be lent to ultimate borrowers one year
after the date of issue. This is in addition to the present-
law requirement that at least 95 percent of the net proceeds
will be lent to ultimate borrowers by the end of the third
year after the date of issue.
Redemption requirement
Under the provision, if bond proceeds are not loaned to
borrowers within prescribed periods, outstanding bonds equal
to the amount of proceeds that were not loaned within the
required period must be redeemed with 90 days. The bond
redemption requirement applies with respect to proceeds that
are unloaned as of expiration of the one-year and three-year
loan origination periods. For example, if an amount equal to
45 percent of the net proceeds of an issue are used to make
loans to ultimate borrowers as of one year after the bonds
are issued, an amount equal to five percent of the net
proceeds of the issue is no longer available for lending and
must be used to redeem bonds within the following six-month
period. Similarly, if only 85 percent of the net proceeds of
the issue are used to make qualifying loans (or to redeem
bonds) as of three years after the bonds are issued, 10
percent of the remaining net proceeds is no longer available
for lending and must be used to redeem bonds within the
following six months.
Small issuer exception
The provision eliminates the rule disregarding pooled
financing bonds from the issuer's $5,000,000 annual
limitation for purposes of the small issuer exception to
arbitrage rebate.
Effective date.--The provision is effective for bonds
issued after the date of enactment.

Conference Agreement

The conference agreement includes the Senate amendment
provision, with the following modifications.
Under the conference agreement, issuers of pooled financing
bonds must reasonably expect that at least 30 percent of the
net proceeds of such bonds will be loaned to ultimate
borrowers one year after the date of issue. The present-law
requirement that issuers must reasonably expect to loan at
least 95 percent of the net proceeds of a pooled financing
bond to ultimate borrowers three years after the date of
issue is unchanged. Bond proceeds that are not loaned to
borrowers as required under the one- and three-year rules
must be used to redeem outstanding bonds within 90 days of
the expiration of such one- and three-year periods.
The conference agreement requires issuers of pooled
financing bonds to obtain, prior to issuance, written
commitments from borrowers equal to at least 30 percent of
the net proceeds of the pooled financing bond. The conference
agreement includes the Senate amendment's exception to the
written loan commitment requirement. Thus, the loan
commitment requirement does not apply to pooled financing
bonds issued by States (or an integral part of a State) to
provide loans to subordinate governmental units or State
entities created to provide financing for water-
infrastructure projects through the federally-sponsored State
revolving fund program.
8. Amend information reporting requirements to include
interest on tax-exempt bonds (sec. 458 of the Senate
amendment and sec. 6049 of the Code)

Present Law

Tax-exempt bonds
Generally, gross income does not include interest on State
or local bonds.\476\ State and local bonds are classified
generally as either governmental bonds or private activity
bonds. Governmental bonds are bonds the proceeds of which are
primarily used to finance governmental facilities or the debt
is repaid with governmental funds. Private activity bonds are
bonds in which the State or local government serves as a
conduit providing financing to nongovernmental persons (e.g.,
private businesses or individuals). The exclusion from income
for State and local bonds does not apply to private activity
bonds, unless the bonds are issued for certain purposes
(``qualified private activity bonds'') permitted by the
Code.\477\
---------------------------------------------------------------------------
\476\Sec. 103.
\477\Secs. 103(b)(1) and 141.
---------------------------------------------------------------------------
Tax-exempt interest reporting by taxpayers
The Code provides that every person required to file a
return must report the amount of tax-exempt interest received
or accrued during any taxable year.\478\ There are a number
of reasons why the amount of tax-exempt interest received is
relevant to determining tax liability despite the general
exclusion from income. For example, the interest income from
qualified private activity bonds (other than qualified
501(c)(3) bonds) issued after August 7, 1986, is a preference
item for purposes of calculating the alternative minimum tax
(``AMT'').\479\ Tax-exempt interest also is relevant for
determining eligibility for the earned income credit (the
``EIC'')\480\ and the amount of Social Security benefits
includable in gross income.\481\ Moreover, determining
includable Social Security benefits is necessary for
calculating either adjusted or modified adjusted gross income
under several Code sections.\482\
---------------------------------------------------------------------------
\478\Sec. 6012(d).
\479\Sec. 57(a)(5). Special rules apply to exclude refundings
of bonds issued before August 8, 1986, and certain bonds
issued before September 1, 1986.
\480\Sec. 32(i).
\481\Sec. 86.
\482\See Secs. 135, 219, and 221.
---------------------------------------------------------------------------
Information reporting by payors
The Code generally requires every person who makes payments
of interest aggregating $10 or more or receives payments of
interest as a nominee and who makes payments aggregating $10
or more to file an information return setting forth the
amount of interest payments for the calendar year and the
name, address, and TIN\483\ of the person to whom interest is
paid.\484\ Treasury regulations prescribe the form and manner
for filing interest payment information returns. Penalties
are imposed for failures to file interest payment information
returns or payee statements.\485\ Treasury Regulations also
impose recordkeeping requirements on any person required to
file information returns.\486\ The Code excludes interest
paid on tax-exempt bonds from interest reporting
requirements.\487\
---------------------------------------------------------------------------
\483\The taxpayer's identification number, generally, for
individuals is the taxpayer's social security number. Sec.
7701(a)(41).
\484\Sec. 6049.
\485\Secs. 6721 and 6722.
\486\Treas. Reg. sec. 1.6001-1(a).
\487\Sec. 6049.
---------------------------------------------------------------------------

House Bill

No provision.

[[Page 7454]]

Senate Amendment

The provision eliminates the exception from information
reporting requirements for interest paid on tax-exempt bonds.
Effective date.--The provision is effective for interest
paid on tax-exempt bonds after December 31, 2005.

Conference Agreement

The conference agreement includes the Senate amendment
provision.
9. Modification of credit for fuel from a non-conventional
source (sec. 459 of the Senate amendment and sec. 45K of
the Code)

Present Law

Certain fuels produced from ``non-conventional sources''
and sold to unrelated parties are eligible for an income tax
credit equal to $3 (generally adjusted for inflation)\488\
per barrel or Btu oil barrel equivalent (``non- conventional
source fuel credit'').\489\ Qualified fuels must be produced
within the United States.
---------------------------------------------------------------------------
\488\The inflation adjustment is generally calculated using
1979 as the base year. Generally, the value of the credit for
fuel produced in 2005 was $6.79 per barrel-of-oil equivalent
produced, which is approximately $1.20 per thousand cubic
feet of natural gas. The credit for coke or coke gas is
indexed for inflation using 2004 as the base year instead of
1979.
\489\Sec. 29 (for tax years ending before 2006); sec. 45K
(for tax years ending after 2005).
---------------------------------------------------------------------------
Qualified fuels include:
--oil produced from shale and tar sands;
--gas produced from geopressured brine, Devonian shale,
coal seams, tight formations, or biomass; and
--liquid, gaseous, or solid synthetic fuels produced from
coal (including lignite).
Generally, the non-conventional source fuel credit has
expired, except for certain biomass gas and synthetic fuels
sold before January 1, 2008, and produced at facilities
placed in service after December 31, 1992, and before July 1,
1998. The non-conventional source fuel credit provision also
includes a credit for producing coke or coke gas at qualified
facilities placed in service before 1993 or after June 30,
1998, and before 2010. The coke production credit is
available for coke or coke gas produced over the four-year
period beginning on January 1, 2006, or the date the facility
was placed in service, if later. The amount of credit-
eligible coke produced at any one facility may not exceed an
average barrel-of-oil equivalent of 4,000 barrels per day.
The non-conventional source fuel credit is reduced (but not
below zero) over a $6 (inflation-adjusted) phase-out period
as the reference price for oil exceeds $23.50 per barrel
(also adjusted for inflation). The reference price is the
Secretary's estimate of the annual average wellhead price per
barrel for all domestic crude oil. The credit did not phase-
out for 2004 because the reference price for that year of
$50.26 did not exceed the inflation adjusted threshold of
$51.35.
Beginning with taxable years ending after December 31,
2005, the non-conventional source fuel credit is part of the
general business credit (sec. 38).

House Bill

No provision.

Senate Amendment

The provision modifies the manner in which the phase-out of
the non-conventional source fuel credit is calculated.
Specifically, in calculating the phase-out of the credit
rather than relying upon the reference price for the calendar
year in which the sale of qualified non-conventional fuel
occurs, the provision uses the reference price for the
calendar year preceding the calendar year in which the sale
occurs. Thus, under the provision, whether the credit is
phased out in 2005 is determined by reference to 2004
wellhead prices, whether the credit is phased out in 2006 is
determined by reference to 2005 wellhead prices, and so on.
In addition, the provision repeals the phase-out limitation
entirely for coke and coke gas produced under section 45K(g).
The provision eliminates the inflation adjustment for all
fuels other than coke and coke gas for 2005, 2006, and 2007.
Thus, the current credit amount of $6.79 per barrel of oil
equivalent would be retroactively reduced to $6.56 per barrel
of oil equivalent, and that reduced amount would remain in
effect through the December 31, 2007. Under the provision,
the credit amount of $3 per barrel of oil equivalent for coke
and coke gas produced under section 45K(g) would continue to
be adjusted for inflation using 2004 as the base year.
Finally, the provision clarifies that qualifying facilities
producing coke and coke gas under section 45K(g) do not
include facilities that produce petroleum-based coke or coke
gas.
Effective date.--The provision applies to fuel sold after
December 31, 2004.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
10. Modification of individual estimated tax safe harbor
(sec. 460 of the Senate Amendment and sec. 6654 of the
Code)

Present Law

An individual taxpayer generally is subject to an addition
to tax for any underpayment of estimated tax. An individual
generally does not have an underpayment of estimated tax if
he or she makes timely estimated tax payments equal to the
lesser of: (1) 90 percent of the tax shown on the current
year's return or (2) 100 percent of the prior year's tax. For
individuals with a prior year's AGI above $150,000, however,
the rule that allows payment of 100 percent of prior year's
tax is modified. Individuals with prior-year AGI above
$150,000 generally must make estimated payments equal to the
lesser of (1) 90 percent of the tax shown on the current
year's return or (2) 110 percent of the tax shown on the
prior year's return.

House Bill

No provision.

Senate Amendment

The Senate amendment provides that individuals with prior
year's AGI above $150,000 who make estimated tax payments
based on prior year's tax must do so based on 120 percent of
the tax shown on the prior year's return, for estimated tax
payments for taxable years beginning in 2006. That percentage
will revert back to 110 percent for taxable years beginning
after 2006.
Effective date.--The provision is effective for estimated
tax payments for taxable years beginning after December 31,
2005.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
11. Revaluation of LIFO inventories of large integrated oil
companies (sec. 461 of the Senate amendment)

Present Law

A taxpayer is generally permitted to use a last-in, first-
out (LIFO) method to inventory goods, on the condition that
the taxpayer also uses the LIFO method in reporting to
shareholders, partners, other proprietors, and beneficiaries,
and for credit purposes.\490\ Under the LIFO method, a
taxpayer (i) treats goods on hand at the close of the taxable
year as being: first, those goods included in the opening
inventory of the taxable year (in the order of acquisition)
to the extent thereof; and second, those acquired in the
taxable year; (ii) inventories the goods at cost; and (iii)
treats those goods included in the opening inventory of the
taxable year in which the LIFO method was first used as
having been acquired at the same time, and determines their
cost by the average cost method.\491\
---------------------------------------------------------------------------
\490\Sec. 472(c).
\491\Sec. 472.
---------------------------------------------------------------------------
In periods during which a taxpayer produces or purchases
more goods than the taxpayer sells (such excess, an
``inventory increment''), a LIFO method taxpayer generally
records the inventory cost of such excess (and separately
tracks such amount as the ``LIFO layer'' for such period),
adds it to the cost of inventory at the start of the period,
and carries such total inventory cost forward to the
beginning inventory of the following year.
In periods during which the taxpayer sells more goods than
the taxpayer produces or purchases (such decrease, an
``inventory decrement''), a LIFO method taxpayer generally
determines the cost of goods sold of the amount of the
decrement by treating such sales as occurring out of the most
recent LIFO layer (or the most recent LIFO layers, if the
amount of the decrement exceeds the amount of inventory in
the most recent LIFO layer) in reverse chronological order.

House Bill

No provision.

Senate Amendment

The provision disallows a portion of the benefit of the
LIFO method to integrated oil companies\492\ which have an
average daily production of crude oil of at least 500,000
barrels of oil and which have in excess of $1 billion for the
last taxable year ending during 2005.
---------------------------------------------------------------------------
\492\The provision defines an ``integrated oil company'' by
cross-reference to section 291(b)(4), which generally
includes retailers and large refiners of oil or natural gas
or any product derived from oil or natural gas.
---------------------------------------------------------------------------
Specifically, the provision requires such taxpayers to
revalue each historic LIFO layer of crude oil inventories by
adding to each layer an amount equal to $18.75 multiplied by
the number of barrels of crude oil represented by such LIFO
layer; the taxpayer must reduce its cost of sales for such
taxable year by a like amount.
For example, suppose a taxpayer, which is an integrated oil
company with average daily production of at least 500,000
barrels of oil and revenues in excess of $1 billion, has a
2005 starting inventory of 200x barrels, comprised of a 1955
LIFO layer with 50x barrels valued at $5 per barrel (with a
total cost of $250x); a 1985 LIFO layer with 100x barrels
valued at $18 per barrel (with a total cost $1800x); a 2000
LIFO layer with 30x barrels valued at $25 per barrel (with a
total cost of $750x), and a 2004 LIFO layer with 20x barrels
valued at $35 per barrel (with a total cost $700x), for a
total inventory value of $3500x. Suppose further that the
taxpayer's ending inventory is 200x barrels, i.e., the same
as the starting inventory, so the taxpayer has neither an
inventory increment nor an inventory decrement for the
taxable year.
Under the provision, the taxpayer will revalue each layer
upwards by $18.75/barrel.

[[Page 7455]]

Thus, the taxpayer will increase its 1955 LIFO layer by
$937.50x; its 1985 LIFO layer by $1875x; its 2000 LIFO layer
by $562.50x; and its 2004 LIFO layer by $375x. The taxpayer
will offset this $3750x increase in inventory by reducing by
$3750x the taxpayer's cost of goods sold for the last taxable
year ending in 2005. In the event the taxpayer's cost of
goods sold for such taxable year prior to such reduction is
less than $3750x, the taxpayer will reduce its cost of goods
sold to zero and increase its gross income for such taxable
year by such difference.
Effective date.--The provision is effective for the last
taxable year of a taxpayer ending in 2005.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
12. Amortization of geological and geophysical expenditures
(sec. 462 of the Senate amendment and sec. 167(h) of the
Code)

Present Law

Geological and geophysical expenditures (``G&G costs'') are
costs incurred by a taxpayer for the purpose of obtaining and
accumulating data that will serve as the basis for the
acquisition and retention of mineral properties by taxpayers
exploring for minerals. G&G costs incurred in connection with
oil and gas exploration in the United States may be amortized
over two years.\493\ In the case of abandoned property,
remaining basis may not be recovered in the year of
abandonment of a property as all basis is recovered over the
two-year amortization period.
---------------------------------------------------------------------------
\493\Sec. 167(h).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

The provision repeals the two-year amortization period with
respect to G&G costs paid or incurred by certain large
integrated oil companies, defined to include integrated oil
companies (as defined in section 291(b)(4) of the Code) that
have an average daily worldwide production of crude oil of at
least 500,000 barrels. Thus, affected oil companies are
required to capitalize their G&G costs associated with
successful exploration projects that result in the
acquisition of property. Such companies can recover any G&G
costs associated with abandoned property in the year of
abandonment.
Effective date.--The provision is effective for G&G costs
paid or incurred in taxable years beginning after August 8,
2005.

Conference Agreement

The conference agreement extends the two-year amortization
period for G&G costs to five years for certain major
integrated oil companies. Under the conference agreement, the
five-year amortization rule for G&G costs applies only to
integrated oil companies that have an average daily worldwide
production of crude oil of at least 500,000 barrels for the
taxable year, gross receipts in excess of $1 billion in the
last taxable year ending during calendar year 2005, and an
ownership interest in a crude oil refiner of 15 percent or
more.
Effective date.--The provision applies to amounts paid or
incurred after the date of enactment.
13. Valuation of employee personal use of noncommercial
aircraft (sec. 463 of the Senate amendment)

Present Law

Unless an exception applies, gross income includes
compensation for services, including fees, commissions,
fringe benefits, and similar items. In general, an employee
or other service provider must include in gross income the
amount by which the fair value of a fringe benefit exceeds
the amount paid by the individual. Treasury regulations
provide rules regarding the valuation of fringe benefits,
including flights on an employer-provided aircraft.\494\ In
general, the value of a non-commercial flight is determined
under the base aircraft valuation formula, also known as the
Standard Industry Fare Level formula or ``SIFL''.\495\ If the
SIFL valuation rules do not apply, the value of a flight on a
company-provided aircraft is generally equal to the amount
that an individual would have to pay in an arm's-length
transaction to charter the same or a comparable aircraft for
that period for the same or a comparable flight.\496\
---------------------------------------------------------------------------
\494\Treas. Reg. sec. 1.61-21.
\495\Treas. Reg. sec. 1.61-21(g).
\496\Treas. Reg. sec. 1.61-21(b)(6).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

Under the Senate amendment, for purposes of income
inclusion, the value of any employee personal use of
noncommercial aircraft is equal to the excess of (1) the
greater of the fair market value of such use or actual cost
of such use (including all fixed and variable costs), over
(2) the amount paid by or on behalf of the employee for such
use. Thus, the SIFL valuation rules may no longer be used to
determine the value of such use.
Effective date.--The provision applies to use after the
date of enactment.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
14. Application of Foreign Investment in Real Property Tax
Act (``FIRPTA'') to Regulated Investment Companies
(``RICs'') (sec. 464 of the Senate amendment and sec.
897(h)(4) of the Code)
In general
A nonresident alien individual or foreign corporation is
taxable on its taxable income which is effectively connected
with the conduct of a trade or business within the United
States, at the income tax rates applicable to U.S. persons. A
nonresident alien individual is taxed (at a 30-percent rate)
on gains, derived from sources within the United States, from
the sale or exchange of capital assets if the individual is
present in the United States for 183 days or more during the
taxable year.
In addition, the Foreign Investment in Real Property Tax
Act (FIRPTA)\497\ generally treats a nonresident alien
individual or foreign corporation's gain or loss from the
disposition of a U.S. real property interest (USRPI) as
income that is effectively connected with a U.S. trade or
business, and thus taxable at the income tax rates applicable
to U.S. persons, including the rates for net capital gain. A
foreign investor subject to tax on this income is required to
file a U.S. income tax return under the normal rules relating
to receipt of income effectively connected with a U.S. trade
or business.
---------------------------------------------------------------------------
\497\FIRPTA is codified in section 897 of the Code.
---------------------------------------------------------------------------
The payor of FIRPTA effectively connected income to a
foreign person is generally required to withhold U.S. tax
from the payment. Withholding is generally 10 percent of the
sales price in the case of a direct sale by the foreign
person of a USRPI, and 35 percent of the amount of a
distribution to a foreign person of proceeds attributable to
such sales from an entity such as a partnership.\498\ The
foreign person can request a refund with its U.S. tax return,
if appropriate based on that person's total U.S. effectively
connected income and deductions (if any) for the taxable
year.
---------------------------------------------------------------------------
\498\Sec. 1445 and Treasury regulations thereunder. The
Treasury department is authorized to issue regulations that
would reduce the 35 percent withholding on distributions to
15 percent during the time that the maximum income tax rate
on dividends and capital gains of U.S. persons is 15 percent.
Section 1445 statutorily requires the 10 percent withholding
by the purchaser of a USRPI and the 35 percent withholding
(or less if directed by Treasury) on certain distributions by
partnerships, trusts, and estates, among other situations.
Treasury regulations prescribe the 35 percent withholding
requirement for distributions by REITs to foreign
shareholders. Treas. Reg. sec. 1.1445-8. No regulations have
been issued relating specifically to RIC distributions, which
first became subject to FIRPTA in 2005.
---------------------------------------------------------------------------
USRPIs include interests in real property located in the
United States or the U.S. Virgin Islands, and stock of a
domestic U.S. real property holding company (USRPHC),
generally defined as any corporation, unless the taxpayer
established that the fair market value of its U.S. real
property interests is less than 50 percent of the combined
fair market value of all its real property interests (U.S.
and worldwide) and of all its assets used or held for use in
a trade or business.\499\ However, any class of stock that is
regularly traded on an established securities market located
in the U.S. is treated as a U.S. real property interest only
if the seller held more than 5 percent of the stock at any
time during the 5-year period ending on the date of
disposition of the stock.\500\
---------------------------------------------------------------------------
\499\Sec. 897(c)(2).
\500\Sec. 897(c)(3).
---------------------------------------------------------------------------
Special rules for certain investment entities
Real estate investment trusts and regulated investment
companies are generally passive investment entities. They are
organized as U.S. domestic entities and are taxed as U.S.
domestic corporations. However, because of their special
status, they are entitled to deduct amounts distributed to
shareholders and, in some cases, to allow the shareholders to
characterize these amounts based on the type of income the
REIT or RIC received. Among numerous other requirements for
qualification as a REIT or RIC, the entity is required to
distribute to shareholders at least 90 percent of its income
(excluding net capital gain) annually.\501\ A REIT or RIC may
designate a capital gain dividend to its shareholders, who
then treat the amount designated as capital gain.\502\ A REIT
or RIC is taxed at regular corporate rates on undistributed
income; but the combination of the requirement to distribute
income other than net capital gain, plus the ability to
declare a capital gain dividend and avoid corporate level tax
on such income, can result in little, if any, corporate level
tax paid by a REIT or RIC. Instead, the shareholder-level tax
on distributions is the principal tax paid with respect to
income of these entities. The requirements for REIT
eligibility include primary investment in real estate assets
(which assets can include mortgages). The requirements for
RIC eligibility include primary investment in stocks and
securities (which can include stock of REITs or of other
RICs).
---------------------------------------------------------------------------
\501\Secs. 852(a)(1) and 852(b)(2)(A); 857(a)(1).
\502\Secs. 852(b)(3); 857(b)(3).
---------------------------------------------------------------------------
FIRPTA contains special rules for real estate investment
trusts (REITs) and regulated investment companies
(RICs).\503\
---------------------------------------------------------------------------
\503\Sec. 897(h).

---------------------------------------------------------------------------

[[Page 7456]]

Stock of a ``domestically controlled'' REIT is not a USRPI.
The term ``domestically controlled'' is defined to mean that
less than 50 percent in value of the REIT has been owned by
non-U.S. shareholders during the 5-year period ending on the
date of disposition.\504\ For 2005, 2006, and 2007, a similar
exception applies to RIC stock. Thus, stock of a domestically
controlled REIT or RIC can be sold without FIRPTA
consequences. This exception applies regardless of whether
the sale of stock is made directly by a foreign person, or by
a REIT or RIC whose distributions to foreign persons of gain
attributable to the sale of USRPI's would be subject to
FIRPTA as described below.
---------------------------------------------------------------------------
\504\Sec. 897(h)(2) and (h)(4)(B).
---------------------------------------------------------------------------
A distribution by a REIT to a foreign shareholder, to the
extent attributable to gain from the REIT's sale or exchange
of USRPIs, is generally treated as FIRPTA gain to the
shareholder. An exception enacted in 2004 applies if the
distribution is made on a class of REIT stock that is
regularly traded on an established securities market located
in the United States and the foreign shareholder has not held
more than 5 percent of the class of stock at any time during
the one-year period ending on the date of the
distribution.\505\ Where the exception applies, the
distribution to the foreign shareholder is treated as the
distribution of an ordinary dividend (rather than as a
capital gain dividend), subject to 30-percent (or lower
treaty rate) withholding.\506\
---------------------------------------------------------------------------
\505\This exception, effective beginning in 2005, was added
by section 418 of the American Jobs Creation Act of 2004
(``AJCA''), Pub. L. No. 108-357, and modified by section
403(p) of the Tax Technical Corrections Act of 2005.
\506\Sec. 857(b)(3)(F).
---------------------------------------------------------------------------
Prior to 2005, distributions by RICs to foreign
shareholders, to the extent attributable to the RIC's sale or
exchange of USRPIs, were not treated as FIRPTA gain. If
distributions were attributable to long-term capital gains,
the RIC could designate the distributions as long-term
capital gain dividends that would not be subject to any tax
to the foreign shareholder, rather than as a regular
dividends subject to 30-percent (or lower treaty rate)
withholding.\507\ For 2005, 2006, and 2007, RICs are subject
to the rule that had applied to REITs prior to 2005, i.e.,
any distribution to a foreign shareholder attributable to
gain from the RIC's sale of a USRPI is characterized as
FIRPTA gain, without any exceptions.\508\
---------------------------------------------------------------------------
\507\Sec. 852(b)(3)(C); Treas. Reg. sec. 1.1441-3(c)(2)(D).
\508\This requirement for RICs was added by section 411 of
the American Jobs Creation Act of 2004 (``AJCA''), in
connection with the enactment of other rules that allow RICs
to identify certain types of distributions to foreign
shareholders, attributable to the RIC's receipt of short-term
capital gains or interest income, as distributions to such
shareholders of such short-term gains or interest income and
thus not taxed to the foreign shareholders, rather than as
regular dividends that would be subject to withholding. See
Secs. 871(k), 881(e), 1441(c)(12) and 1442(a). All these
rules are scheduled to expire at the end of 2007, as is the
rule subjecting to FIRPTA all distributions of RIC gain
attributable to sales of U.S. real property interests and the
rule excepting from FIRPTA a foreign person's sale of stock
of a ``domestically controlled'' RIC.
---------------------------------------------------------------------------

house Bill

No provision.

Senate Amendment

The Senate amendment provision provides that distributions
by a RIC to foreign shareholders of amounts attributable to
the sale of USRPIs are not treated as FIRPTA income unless
the RIC itself is a U.S. real property holding corporation
(i.e. 50 percent or more of its value is represented by its
U.S. real property interests, including investments in U.S.
real property holding corporations). In determining whether a
RIC is a real property holding company for this purpose, a
special rule applies that requires the RIC to include as U.S.
real property interests its holdings of RIC or REIT stock if
such RIC or REIT is a U.S. real property holding corporation,
even if such stock is regularly traded on an established
securities market and even if the RIC owns less than 5
percent of such stock. Another special rule requires the RIC
to include as U.S. real property interests its interests in
any domestically controlled RIC or REIT that is a U.S. real
property holding corporation.
Effective date.--The provision applies to distributions
with respect to taxable years beginning after December 31,
2004.

Conference Agreement

The conference agreement includes the Senate amendment
provision with a clarification to the effective date. Under
the clarification, the provision takes effect as if included
in the provisions of section 411 of the American Jobs
Creation Act of 2004 to which it relates.
15. Treatment of REIT and RIC distributions attributable to
FIRPTA gains (secs. 465 and 466 of the Senate amendment
and secs. 897, 852, and 871 of the Code)

Present Law

General treatment of U.S.-source income of foreign investors
Fixed and determinable annual and periodical income
The United States generally imposes a flat 30-percent tax,
collected by withholding, on the gross amount of U.S.-source
investment income payments, such as interest, dividends,
rents, royalties and similar types of fixed and determinable
annual and periodical income, to nonresident alien
individuals and foreign corporations (``foreign
persons'').\509\ Under treaties, the United States may reduce
or eliminate such taxes.
---------------------------------------------------------------------------
\509\Secs. 871(a), 881, 1441, and 1442.
---------------------------------------------------------------------------
Dividends
Even taking into account U.S. treaties, the tax on a
dividend generally is not entirely eliminated. Instead, U.S.-
source portfolio investment dividends received by foreign
persons generally are subject to U.S. withholding tax at a
rate of at least 15 percent.
Interest
Although payments of U.S.-source interest that is not
effectively connected with a U.S. trade or business generally
are subject to the 30-percent withholding tax, there are
exceptions to that rule. For example, interest from certain
deposits with banks and other financial institutions is
exempt from tax.\510\ Original issue discount on obligations
maturing in 183 days or less from the date of original issue
(without regard to the period held by the taxpayer) is also
exempt from tax.\511\ An additional exception is provided for
certain interest paid on portfolio obligations.\512\ Such
``portfolio interest'' generally is defined as any U.S.-
source interest (including original issue discount), not
effectively connected with the conduct of a U.S. trade or
business, (i) on an obligation that satisfies certain
registration requirements or specified exceptions thereto
(i.e., the obligation is ``foreign targeted''), and (ii) that
is not received by a 10-percent shareholder.\513\ With
respect to a registered obligation, a statement that the
beneficial owner is not a U.S. person is required.\514\ This
exception is not available for any interest received either
by a bank on a loan extended in the ordinary course of its
business (except in the case of interest paid on an
obligation of the United States), or by a controlled foreign
corporation from a related person.\515\ Moreover, this
exception is not available for certain contingent interest
payments.\516\ For 2005, 2006 and 2007, a regulated
investment company (``RIC'') may designate certain
distributions to foreign shareholders that are attributable
to the RIC's qualified interest income as non-taxable
interest distributions to such foreign persons.\517\
---------------------------------------------------------------------------
\510\Secs. 871(i)(2)(A) and 881(d).
\511\Sec. 871(g).
\512\Secs. 871(h) and 881(c).
\513\Secs. 871(h)(3) and 881(c)(3).
\514\Secs. 871(h)(2), (5) and 881(c)(2).
\515\Sec. 881(c)(3).
\516\Secs. 871(h)(4) and 881(c)(4).
\517\This interest distribution rule was added by section 411
of the American Jobs Creation Act of 2004 (``AJCA''), Pub. L.
No. 108-357.
---------------------------------------------------------------------------
Capital gains
A foreign person generally is not subject to U.S. tax on
capital gain, including gain realized on the disposition of
stock or securities issued by a U.S. person, unless the gain
is effectively connected with the conduct of a trade or
business in the United States or such person is an individual
present in the United States for a period or periods
aggregating 183 days or more during the taxable year.\518\ A
regulated investment company (RIC) can generally designate
dividends to foreign persons that are attributable to the
RIC's long term capital gain as a long-term gain dividends
that are not subject to withholding.\519\ For 2005, 2006 and
2007, RICs may also designate short-term capital gain
dividends.\520\
---------------------------------------------------------------------------
\518\Secs. 871(a)(2) and 881.
\519\Treas. Reg. sec. 1.1441-3(c)(2)(D).
\520\This short-term gain distribution rule was added by
section 411 of AJCA.
---------------------------------------------------------------------------
For the years 2005, 2006 and 2007, RIC capital gain
dividends that are attributable to the sale of U.S. real
property interests (which can include stock of companies that
are U.S. real property holding companies) are subject to
special rules described below.
Real estate investment trusts (REITs) can also designate
long-term capital gain dividends to shareholders; but when
made to a foreign person such distributions attributable to
the sale of U.S. real property interests are also subject to
the special rules described below.
Foreign Investment in Real Property Tax Act (``FIRPTA'')
Unlike most other U.S. source capital gains, which are
generally not taxed to a foreign investor, the Foreign
Investment in Real Property Tax Act of 1980 (FIRPTA) subjects
gain or loss of a foreign person from the disposition of a
U.S. real property interest (USRPI) to tax as if the taxpayer
were engaged in a trade or business within the United States
and the gain or loss were effectively connected with such
trade or business.\521\ In addition to an interest in real
property located in the United States or the Virgin Islands,
USRPIs include (among other things) any interest in a
domestic corporation unless the taxpayer establishes that the
corporation was not, during a five-year period ending on the
date of the disposition of the interest, a U.S. real property
holding corporation (which is defined generally to mean any
corporation the fair market value of whose U.S. real property
interests equals

[[Page 7457]]

or exceeds 50 percent of the sum of the fair market values of
its real property interests and any other of its assets used
or held for use in a trade or business).
---------------------------------------------------------------------------
\521\Sec. 897.
---------------------------------------------------------------------------
Distributions by a REIT to its foreign shareholders
attributable to the sale of USRPI's are generally treated as
income from the sale of USRPIs.\522\ Treasury regulations
require the REIT to withhold at 35 percent on such a
distribution.\523\ However, there is an exception for
distributions by a REIT with respect to stock of the REIT
that is regularly traded on an established securities market
located in the U.S., to a foreign shareholder that has not
held more than 5 percent of the stock of the REIT for the one
year period ending with the date of the distribution.\524\ In
such cases, the REIT and the shareholder treat the
distribution to a foreign shareholder as the distribution of
an ordinary dividend,\525\ subject to the 30-percent (or
lower treaty rate) withholding applicable to dividends.
---------------------------------------------------------------------------
\522\Sec. 897(h)(1).
\523\Treas. Reg. sec. 1.1445-8.
\524\Sec. 897(h)(1)(second sentence).
\525\Sec. 857(b)(3)(F).
---------------------------------------------------------------------------
For 2005, 2006, and 2007, any RIC distribution to a foreign
shareholder attributable to the sale of USRPIs is treated as
FIRPTA income, without any exceptions.\526\ However, no
Treasury regulations have been issued addressing withholding
obligations with respect to such distributions.
---------------------------------------------------------------------------
\526\Sec. 897(h)(1)
---------------------------------------------------------------------------
A more complete description of the provisions of FIRPTA and
the special rules under FIRPTA that apply to RICs and REITs
is contained under ``Present Law'' for the provision
``Application of Foreign Investors in Real Property Tax Act
(FIRPTA) to Regulated Investment Companies (RICS).
Although the law thus provides rules for taxing foreign
persons under FIRPTA on distributions of gain from the sale
of USRPIs by RICs or REITs, some taxpayers may be taking the
position that if a foreign person invests in a RIC or REIT
that, in turn, invests in a lower-tier RIC or REIT that is
the entity that disposes of USRPIs and distributes the
proceeds, then the proceeds from such disposition by the
lower-tier RIC or REIT cease to be FIRPTA income when
distributed to the upper-tier RIC or REIT (which is not
itself a foreign person), and can thereafter be distributed
by that latter entity to its foreign shareholders as non-
FIRPTA income of such RIC or REIT, rather than continuing to
be categorized as FIRPTA income. Furthermore, RICs may take
the position that in the absence of regulations or a specific
statutory rule addressing the withholding rules for FIRPTA
capital gain that is treated as effectively connected with a
U.S. trade or business, such gain should be considered
capital gain for which no withholding is required.
In addition, some foreign persons may be attempting to
avoid FIRPTA tax on a distribution from a RIC or a REIT, by
selling the RIC or REIT stock shortly before the distribution
and buying back the stock shortly after the distribution. If
the stock is not a U.S. real property interest in the hands
of the foreign seller, that person would take the position
that the gain on the sale of the stock is capital gain not
subject to U.S. tax. Stock of a RIC or REIT that is
``domestically controlled'' is not a U.S. real property
interest.\527\
---------------------------------------------------------------------------
\527\Sec. 897(g)(3). A RIC or REIT is ``domestically
controlled'' if less than 50 percent in value of the entity's
stock is held by foreign persons. RIC stock ceases to be
eligible for this exception as of the end of 2007.
Distributions by a domestically controlled RIC or REIT, if
attributable to the sale of U.S. real property interests, are
not exempt from FIRPTA by reason of such domestic control. A
foreign person that would be subject to FIRPTA on receipt of
a distribution from such an entity might sell its stock
before the distribution and repurchase stock after the
distribution in an attempt to avoid FIRPTA consequences.
Under a different exception from FIRPTA, applicable to stock
of all entities, neither RIC nor REIT stock is a U.S. real
property interest if the RIC or REIT stock is regularly
traded on an established securities market located in the
United States and if the stock sale is made by a foreign
shareholder that has not owned more than five percent of the
stock during the five years ending with the date of the sale.
Sec. 897(c)(3). Distributions by a REIT to a foreign person,
attributable to the sale of U.S. real property interests, are
also not subject to FIRPTA if made with respect to stock that
is regularly traded on an established securities market
located in the United States and made to a foreign person
that has not held more than five percent of the REIT stock
for the one-year period ending on the date of distribution.
(Sec. 897(h)(1), second sentence.) Thus, any foreign
shareholder of such a regularly traded REIT that would be
exempt from FIRPTA on a sale of the REIT stock immediately
before a distribution would also generally be exempt from
FIRPTA on a distribution from the REIT if such shareholder
held the stock through the date of the distribution, due to
the holding period requirements. Distributions that are not
subject to FIRPTA under this five percent exception are
recharacterized as ordinary dividends and thus would normally
be subject to ordinary dividend withholding rules. Secs.
857(b)(3)(F) and 1441.
---------------------------------------------------------------------------
If the stock is a USRPI in the hands of the foreign person,
the transferee generally is required to withhold 10 percent
of the gross sales price under general FIRPTA withholding
rules.\528\
---------------------------------------------------------------------------
\528\Secs. 1445(a) and 1445(e).
---------------------------------------------------------------------------

House Bill

No provision.

Senate Amendment

The first part of the Senate amendment provision requires
any distribution that is made by a RIC or a REIT that would
otherwise be subject to FIRPTA because the distribution is
attributable to the disposition of a U.S. real property
interest (USRPI) to retain its character as FIRPTA income
when distributed to any other RIC or REIT, and to be treated
as if it were from the disposition of a USRPI by that other
RIC or REIT. Under the provision, a RIC continues to be
subject to FIRPTA, even after December 31, 2007, in any case
in which a REIT makes a distribution to the RIC that is
attributable to gain from the sale of U.S. real property
interests.
The second part of the Senate amendment provision provides
that a distribution by a RIC to a foreign shareholder, or to
a RIC or REIT shareholder, attributable to sales of USRPIs is
not treated as gain from the sale of a USRPI by that
shareholder if the distribution is made with respect to a
class of RIC stock that is regularly traded on an established
securities market\529\ located in the U.S. and if such
shareholder did not hold more than 5 percent of such stock
within the one year period ending on the date of the
distribution. Such distributions instead are treated as
dividend distributions.\530\
---------------------------------------------------------------------------
\529\It is intended that the rules generally applicable for
this purpose under section 897 also apply under the provision
in determining whether a class of interests is regularly
traded on an established securities market located in the
United States. For example, at the present time the rules
currently in force for this purpose include Temp. Reg. sec.
1.897-9T(d)(2).
\530\The provision treats such distributions as ordinary
dividend distributions rather than as distributions of long
term capital gain. This rule is the same as the present law
rule for publicly traded REITs making a distribution to a
foreign shareholder. In addition, under the immediately
preceding provision (sec. 464) of the Senate amendment, for
the years 2005, 2006 and 2007 that RICs are subject to
FIRPTA, a RIC can make distributions from sales of USRPIs to
shareholders who do not meet this rule, and such
distributions will be treated not as dividends but as non-
taxable long- or short-term capital gain, if so designated by
the RIC, as long as the RIC itself is not a USRPHC after
applying the special rules for counting the RIC's ownership
of REIT or other RIC stock.
---------------------------------------------------------------------------
The third part of the Senate amendment provision requires a
foreign person that disposes of stock of a RIC or REIT during
the 30-day period preceding a distribution on that stock that
would have been treated as a distribution from the
disposition of a USRPI, that acquires an identical stock
interest during the 60 day period beginning the first day of
such 30-day period preceding the distribution, and that does
not in fact receive the distribution in a manner that
subjects the person to tax under FIRPTA, to pay FIRPTA tax on
an amount equal to the amount of the distribution that was
not taxed under FIRPTA as a result of the disposition. A
foreign person is treated as having acquired any interest
acquired by any person treated as related to that foreign
first person under section 465(b)(3)(C).\531\
---------------------------------------------------------------------------
\531\These relationships generally include persons that are
engaged in trades or businesses under common control
(generally, a more than 50 percent relationship) and also
include persons that have a more than 10 percent
relationship, such as (for example) a corporation and an
individual owning more than 10 percent of the corporation; or
a corporation and a partnership if the same persons own more
than 10 percent of the interests in each.
---------------------------------------------------------------------------
This third part of the Senate amendment provision applies
only in the case of a shareholder that would have been
treated as receiving FIRPTA income on the distribution if
that shareholder had in fact received the distribution, but
that would not have been treated as receiving FIRPTA income
if the form of the disposition transaction were respected.
This category of persons consists of persons that are
shareholders in a domestically controlled RIC or REIT (since
sales of shares of such an entity are not subject to FIRPTA
tax), but does not include a person who sells stock that is
regularly traded on an established securities market located
in the U.S. and who did not own more than five percent of
such stock during the one year period ending on the date of
the distribution (since such a person would not have been
subject to FIRPTA tax under present law for REITs and under
the second part of the Senate amendment provision for RICs,
supra., if that person had received the dividend instead of
disposing of the stock).
Notwithstanding the recharacterization of the disposition
as involving a FIRPTA distribution to the foreign person, no
withholding on disposition proceeds to the foreign person on
the disposition of such stock would be required. No inference
is intended as to what situations under present law would or
would not be respected as dispositions.
Effective dates.--The first part of the Senate amendment
provision is effective for distributions with respect to
taxable years of a RIC or REIT beginning after the date of
enactment.
The second part of the Senate amendment provision applies
to dividends with respect to taxable years of regulated
investment companies beginning after December 31, 2004.
The third part of the Senate amendment provision is
effective for dispositions after December 31, 2005, in
taxable years ending after that date.

[[Page 7458]]

Conference Agreement

The conference agreement includes the Senate amendment
provision with modifications and clarifications.
The conference agreement provides that the second part of
the Senate amendment provision, treating certain
distributions attributable to sales of U.S. real property
interests as dividends subject to dividend withholding,
applies when the distribution is made to a foreign
shareholder of a RIC or REIT, but does not apply when the
distribution is made to another RIC or a REIT. In such cases,
the character of the distribution as FIRPTA gain is retained
and must be tracked by the recipient RIC or REIT, but the
distribution itself does not become dividend income in the
hands of such RIC or REIT. Therefore, such recipient RIC or
REIT can in turn distribute amounts attributable to that
distribution (attributable to the sale of USRPIs) to its U.S
shareholders as capital gain. However, if any recipient RIC
or REIT in turn distributes to a foreign shareholder amounts
that are attributable to a sale by a lower tier RIC or REIT
of USRPIs, such amounts distributed to a foreign shareholder
shall be treated as FIRPTA gain or as dividend income,
according to whether or not such distribution to such foreign
shareholder qualifies for dividend treatment.
The conference agreement amends section 1445 so that it
explicitly requires withholding on RIC and REIT distributions
to foreign persons, attributable to the sale of USRPIs, at 35
percent, or, to the extent provided by regulations, at 15
percent.\532\
---------------------------------------------------------------------------
\532\This provision is similar to present law section
1445(c)(1). The regulatory authority to reduce the
withholding to 15 percent sunsets in accordance with the same
sunset that applies to section 1445(c)(1), at the time that
the present law maximum 15 percent rate on dividends is
scheduled to sunset.
Treasury regulations under section 1445 already impose FIRPTA
withholding on REITs under present law. Treasury has not yet
written regulations applicable to RICs. No inference is
intended regarding the existing Treasury regulations in force
under section 1445 with respect to REITs.
---------------------------------------------------------------------------
The conference agreement clarifies that the treatment of a
RIC as a qualified investment entity continues after December
2007 with respect to a RIC that receives a distribution from
a REIT, not only for purposes of the distribution rules,
including withholding on distributions to foreign
shareholders, but also for purposes of the new ``wash sale''
rules of the provision.
The conference agreement modifies the new ``wash sale''
rule. The period within which the basic ``wash-sale'' rule
applies is changed from 60 days to 61 days.\533\ The
definition of ``applicable wash sales transaction'' is
expanded to cover not only situations in which the taxpayer
acquires a substantially identical interest, but also
situations in which the taxpayer enters into a contract or
option to acquire such an interest. The related party rule is
also modified to apply the 50-percent relationship test under
section 267(b) and 707(b)(1) rather than a 10-percent test.
---------------------------------------------------------------------------
\533\Thus the period includes the 30 days before and the 30
days after the ex-dividend date, in addition to the ex-
dividend date itself.
---------------------------------------------------------------------------
In addition, treatment of a foreign shareholder of a RIC or
REIT as if it had received a FIRPTA distribution that is
treated as U.S. effectively connected income is extended to
transactions that meet the definition of ``substitute
dividend payments'' provided for purposes of section 861 and
that would be properly treated by the foreign taxpayer as
receipt of a distribution of FIRPTA gain if the distribution
from the RIC or REIT had itself been received by the
taxpayer, but that, by virtue of the substitute dividend
payment, is not so treated but for the provision,\534\ as
well as to other similar arrangements to which Treasury may
extend the rules.
---------------------------------------------------------------------------
\534\The conference agreement adopts the definition of
``substitute dividend payment'' used for purposes of section
861, which definition applies to determine substitute
dividend payments under the conference agreement provision,
even though the recipient may not be an individual and even
though the underlying payment would not have been treated as
a dividend to the recipient but as a distribution of FIRPTA
gain. Treasury regulations section 1.861-3(a)(6) defines a
``substitute dividend payment'' as a payment, made to the
transferor of a security in a securities lending transaction
or a sale-repurchase transaction, of an amount equivalent to
a dividend distribution which the owner of the transferred
security is entitled to receive during the term of the
transaction. The regulation applies to amounts received or
accrued by the taxpayer. The regulation defines a securities
lending transaction as a transfer of one or more securities
that is described in section 1058(a) or a substantially
similar transaction. The regulation defines a sale-repurchase
transaction as an agreement under which a person transfers a
security in exchange for cash and simultaneously agrees to
receive substantially identical securities from the
transferee in the future in exchange for cash. Under the
regulation, a ``substitute dividend payment'' is generally
sourced and in many instances characterized in the same
manner as the underlying distribution with respect to the
transferred security.
---------------------------------------------------------------------------
Effective date.--The first part of the conference agreement
provision, relating to distributions generally, applies to
distributions with respect to taxable years of RICs and REITs
beginning after December 31, 2005, except that no withholding
is required under sections 1441, 1442, or 1445 with respect
to any distribution before the date of enactment if such
amount was not otherwise required to be withheld under any
such section as in affect before the amendments made by the
conference agreement.
The second part of the conference agreement, relating to
the ``wash sale'' and substitute dividend payment
transactions, is applicable to distributions and substitute
dividend payments occurring on or after the 30th day
following the date of enactment.
No inference is intended regarding the treatment under
present law of any transactions addressed by the conference
agreement.
16. Credit to holders of rural renaissance bonds (sec. 469 of
the Senate amendment)

Present Law

In general
Interest on bonds issued by State and local governments
generally is excluded from gross income for Federal income
tax purposes if the proceeds of such bonds are used to
finance direct activities of governmental units or if such
bonds are repaid with revenues of governmental units. These
bonds are called ``governmental bonds.'' Interest on State or
local government bonds issued to finance activities of
private persons is taxable unless a specific exception
applies. These bonds are called ``private activity bonds.''
The term ``private person'' generally includes the Federal
Government and all other individuals and entities other than
States or local governments.
Private activity bonds are eligible for tax-exemption if
issued for certain purposes permitted by the Code
(``qualified private activity bonds''). Generally, qualified
private activity bonds are subject to restrictions on the use
of proceeds for the acquisition of land and existing
property, use of proceeds to finance certain specified
facilities (e.g., airplanes, skyboxes, other luxury boxes,
health club facilities, gambling facilities, and liquor
stores), and use of proceeds to pay costs of issuance (e.g.,
bond counsel and underwriter fees). Small issue and
redevelopment also are subject to additional restrictions on
the use of proceeds for certain facilities (e.g., golf
courses and massage parlors). Moreover, the term of qualified
private activity bonds generally may not exceed 120 percent
of the economic life of the property being financed and
certain public approval requirements (similar to requirements
that typically apply under State law to issuance of
governmental debt) apply under Federal law to issuance of
private activity bonds.
Tax-credit bonds
As an alternative to traditional tax-exempt bonds, States
and local governments may issue tax-credit bonds for certain
purposes. Rather than receiving interest payments, a taxpayer
holding a tax-credit bond on an allowance date is entitled to
a credit. Generally, the credit amount is includible in gross
income (as if it were a taxable interest payment on the
bond), and the credit may be claimed against regular income
tax and alternative minimum tax liability. The following
types of tax-credit bonds may be issued under present law:
``qualified zone academy bonds,'' which are bonds issued for
the purpose of renovating, providing equipment to, developing
course materials for use at, or training teachers and other
personnel at certain school facilities; ``clean renewable
energy bonds,'' which are bonds issued to finance for
facilities that would qualify for the tax credit under
section 45 without regard to the placed in service date
requirements of that section; and ``gulf tax credit bonds,''
which are bonds issued by the States of Louisiana,
Mississippi, and Alabama to pay principal, interest, or
premium on certain prior bonds.
Arbitrage restrictions on tax-exempt bonds
To prevent States and local governments from issuing more
tax-exempt bonds than is necessary for the activity being
financed or from issuing such bonds earlier than needed for
the purpose of the borrowing, the Code includes arbitrage
restrictions limiting the ability to profit from investment
of tax-exempt bond proceeds. In general, arbitrage profits
may be earned only during specified periods (e.g., defined
``temporary periods'' before funds are needed for the purpose
of the borrowing) or on specified types of investments (e.g.,
``reasonably required reserve or replacement funds'').
Subject to limited exceptions, profits that are earned during
these periods or on such investments must be rebated to the
Federal Government. Governmental bonds are subject to less
restrictive arbitrage rules than most private activity bonds.

House Bill

No provision.

Senate Amendment

The Senate amendment creates a new category of tax-credit
bonds to finance certain projects located in rural areas
(``Rural Renaissance Bonds''). As with present law tax-credit
bonds, the taxpayer holding Rural Renaissance Bonds on the
allowance date would be entitled to a tax credit. The amount
of the credit would be determined by multiplying the bond's
credit rate by the face amount on the holder's bond. The
credit would be includible in gross income (as if it were an
interest payment on the bond) and could be claimed against
regular income tax liability and alternative minimum tax
liability.

[[Page 7459]]

Under the Senate amendment, Rural Renaissance Bonds are
defined as any bonds issued by a qualified issuer if, in
addition to the requirements discussed below, 95 percent or
more of the proceeds of such bonds are used to finance
capital expenditures incurred for one or more qualified
projects. ``Qualified projects'' include any of the following
projects located in a rural area: (i) a water or waste
treatment project, (ii) an affordable housing project, (iii)
a community facility project, including hospitals, fire and
police stations, and nursing and assisted-living facilities,
(iv) a value-added agriculture or renewable energy facility
project for agricultural producers or farmer-owned entities,
including any project to promote the production, processing,
or retail sale of ethanol (including fuel at least 85 percent
of the volume of which consists of ethanol), bio-diesel,
animal waste, biomass, raw commodities, or wind as a fuel,
(v) a distance learning or telemedicine project, (vi) a rural
utility infrastructure project, including any electric or
telephone system, (vii) a project to expand broadband
technology, (viii) a rural teleworks project, and (ix) any of
the previously described projects if carried out by the Delta
Regional Authority. A ``rural area'' means any area other
than a city or town which has a population of greater than
50,000 inhabitants or the urbanized area contiguous and
adjacent to such a city or town.
For purposes of the provision, the term ``qualified
issuer'' means any not-for-profit cooperative lender which,
as of the date of enactment of this provision, has received a
guarantee under the Rural Electrification Act. A qualified
issuer must also meet a user fee requirement during the
period any Rural Renaissance Bond issued by such qualified
issuer is outstanding. The user fee requirement is met if the
qualified issuer makes semi-annual grants for qualified
projects equal to the outstanding principal of Rural
Renaissance Bond issued by such issuer multiplied by one-half
the rate on United States Treasury securities of the same
maturity.
The Senate amendment imposes a maximum maturity limitation
on Rural Renaissance Bonds. The maximum maturity is the term
which the Secretary estimates will result in the present
value of the obligation to repay the principal on any bonds
being equal to 50 percent of the face amount of such bond.
The provision also requires level amortization of Rural
Renaissance Bonds during the period such bonds are
outstanding.
To qualify as Rural Renaissance Bonds, the qualified issuer
of such bonds must reasonably expect to and actually spend 95
percent or more of the proceeds of such bonds on qualified
projects within the five-year period that begins on the date
of issuance. To the extent less than 95 percent of the
proceeds are used to finance qualified projects during the
five-year spending period, bonds will continue to qualify as
Rural Renaissance Bonds if unspent proceeds are used within
90 days from the end of such five-year period to redeem any
``nonqualified bonds.'' For these purposes, the amount of
nonqualified bonds is to be determined in the same manner as
Treasury regulations under section 142. In addition, the
provision provides that the five-year spending period may be
extended by the Secretary upon the qualified issuer's
request.
Under the provision, Rural Renaissance Bonds are subject to
the arbitrage requirements of section 148 that apply to
traditional tax-exempt bonds. Principles under section 148
and the regulations thereunder shall apply for purposes of
determining the yield restriction and arbitrage rebate
requirements applicable to Rural Renaissance Bonds. For
example, for arbitrage purposes, the yield on an issue of
Rural Renaissance Bonds is computed by taking into account
all payments of interest, if any, on such bonds, i.e.,
whether the bonds are issued at par, premium, or discount.
However, for purposes of determining yield, the amount of the
credit allowed to a taxpayer holding Rural Renaissance Bonds
is not treated as interest, although such credit amount is
treated as interest income to the taxpayer.
Rural Renaissance Bonds must be designated as such by the
qualified issuer and must be issued in registered form. The
provision also requires issuers of Rural Renaissance Bonds to
report issuance to the IRS in a manner similar to that
required for tax-exempt bonds. There is a national limitation
of $200 million of Rural Renaissance Bonds that the Secretary
may allocate, in the aggregate, to qualified projects. The
authority to issue Rural Renaissance Bonds expires December
31, 2009.
Effective date.--The provision is effective for bonds
issued after the date of enactment and before January 1,
2010.

Conference Agreement

The conference agreement does not include the Senate
amendment provision.
17. Modify foreign tax credit rules for large integrated oil
companies which are dual capacity taxpayers (sec. 470 of
the Senate amendment and sec. 901 of the Code)

Present Law

U.S. persons are subject to U.S. income tax on their
worldwide income. A credit against U.S. tax on foreign source
income is allowed for foreign taxes that are paid or
accrued.\535\ In addition, a domestic corporation which owns
10 percent or more of the voting stock of a foreign
corporation from which it receives dividends or with respect
to which it is taxed under the rules of subpart F is deemed
to have paid a portion of the foreign taxes of such foreign
corporation.\536\ The foreign tax credit is available only
for foreign income, war profits, and excess profits taxes,
and for certain taxes that qualify under section 903 as
imposed ``in lieu'' of such taxes. Other foreign levies
generally are treated as deductible expenses only.
---------------------------------------------------------------------------
\535\Sec. 901. Foreign taxes include taxes imposed by
possessions.
\536\Secs. 902 and 960. Foreign corporations include
corporations created or organized in possessions.
---------------------------------------------------------------------------
The amount of foreign tax credits that a taxpayer may claim
in a year is subject to a limitation that prevents taxpayers
from using foreign tax credits to offset U.S. tax on U.S.
source income. The foreign tax credit limitation is
calculated separately for specific categories of income. The
amount of creditable taxes paid or accrued (or deemed paid)
in any taxable year which exceeds the foreign tax credit
limitation is permitted to be carried back one year and
carried forward 10 years.
Treasury regulations provide detailed rules for determining
whether a foreign levy is a creditable income tax. A levy
generally is a tax if it is a compulsory payment under the
authority of a foreign country to levy taxes and is not
compensation for a specific economic benefit provided by a
foreign country. A taxpayer that is subject to a foreign levy
and also receives a specific economic benefit from such
country is considered a ``dual capacity taxpayer.''\537\
Treasury regulations provide that the portion of a foreign
levy paid by a dual capacity taxpayer that is considered a
tax is determined based on all the facts and
circumstances.\538\ Alternatively, under a safe harbor
provided in the regulations, the portion of a foreign levy
paid by a dual capacity taxpayer that is creditable is
determined based on the foreign country's generally imposed
income tax or, if the foreign country has no generally
imposed income tax, the U.S. tax.\539\
---------------------------------------------------------------------------
\537\Treas. Reg. sec. 1.901-2(a)(2)(ii)(A).
\538\Treas. Reg. sec. 1.901-2A(c)(2)(i).
\539\Treas. Reg. sec. 1.901-2A(e).
---------------------------------------------------------------------------

house bill

No provision.

senate amendment

The Senate amendment denies the foreign tax credit with
respect to all amounts paid or accrued (or deemed paid) to
any foreign country or possession by a large integrated oil
company which is a dual capacity taxpayer if the country or
possession does not impose a generally applicable income tax.
The provision modifies the safe harbor rule currently
provided by Treasury Regulations. Under the provision, as
under present law, a dual capacity taxpayer is a person who
is subject to a levy in a foreign country or possession and
also directly or indirectly receives (or will receive) a
specific economic benefit (as determined in accordance with
regulations) from such foreign country or possession. A
generally applicable income tax is an income tax that is
generally imposed on income derived from a trade or business
conducted within that foreign country or possession (which
may include taxes qualifying under section 903 as imposed in
lieu of income taxes), provided that the tax has substantial
application (by its terms and in practice) to persons who are
not dual capacity taxpayers and to persons who are citizens
or residents of the foreign country or possession.
If the country does impose a generally applicable income
tax, the foreign tax credit is denied to the extent that such
amounts exceed the amount (as determined under regulations)
which is paid by the dual capacity taxpayer pursuant to such
generally applicable income tax, or which would have been
paid if such generally applicable income tax were applicable
to the dual capacity taxpayer. Amounts not in excess of the
amount calculated under the generally applicable income tax
are subject to all other rules pertaining to foreign tax
credits. Amounts for which the foreign tax credit is denied
under the provision are not subject to carryback or
carryforward, but could constitute deductible expenses if
such amounts qualify under the relevant deduction provisions.
The provision does not apply to the extent contrary to any
treaty obligation of the United States.
The provision applies only to ``large integrated oil
companies.'' These are persons that meet all of the following
requirements for a particular taxable year: (1) the person is
a producer of crude oil; (2) the person has gross receipts in
excess of one billion dollars; (3) the person or persons
related to such person has an average daily worldwide
production of crude oil of at least 500,000 barrels; and (4)
either (a) the person or persons related to such person sells
at retail oil or natural gas (excluding bulk sales of such
items to commercial or industrial users), or any product
derived from oil or natural gas (excluding bulk sales of
aviation fuels to the Department of Defense), in an aggregate
amount of five million dollars or greater, or (b) the person
or persons related to such person engage in the refining of
crude oil, if the

[[Page 7460]]

aggregate average daily refinery runs for that taxable year
exceeds 75,000 barrels. For purposes of requirement (4), a
person is a related person with respect to another person if
either one owns a five percent or greater interest in the
other, or if a third person owns such an interest in both.
Effective date.--The provision applies to taxes paid or
accrued in taxable years beginning after the date of
enactment.

conference agreement

The conference agreement does not include the Senate
amendment provision.
18. Disability preference program for tax collection
contracts (sec. 471 of the Senate amendment)

present law

Under present law, the IRS may use private debt collection
companies to locate and contact taxpayers owing outstanding
tax liabilities of any type and to arrange payment of those
taxes by the taxpayers.
There are several procedural conditions applicable to the
use of private debt collection contracts. First, provisions
of the Fair Debt Collection Practices Act apply to the
private debt collection company. Second, taxpayer protections
that are statutorily applicable to the IRS are also made
statutorily applicable to the private sector debt collection
companies. In addition, taxpayer protections that are
statutorily applicable to IRS employees also are made
statutorily applicable to employees of private sector debt
collection companies. Third, subcontractors are prohibited
from having contact with taxpayers, providing quality
assurance services, and composing debt collection notices;
any other service provided by a subcontractor must receive
prior approval from the IRS.

house bill

No provision.

senate amendment

The Senate amendment provides that the IRS may not enter a
contract with a private debt collection company after April
1, 2006, until the Secretary implements a qualified
disability preference program. A qualified disability
preference program is a program that requires qualified
employers to receive not less than 10 percent of taxpayer
accounts (based on dollar value) awarded to private debt
collection companies. A qualified employer is an employer
who, as of the date the private debt collection contract is
awarded, employs not less than 50 severely disabled
individuals or not less than 30 percent of such employer's
employees are severely disabled. In addition, a qualified
employer must agree that not more than 90 days after being
awarded a private debt collection contract not less than 35
percent of the employees providing services under the private
debt collection contract shall be severely disabled
individuals and hired after the date the contract is awarded.
For purposes of the provision, a severely disabled
individual means (i) a veteran of the United States armed
forces with a disability of 50 percent or greater determined
by law or the Secretary of Veterans Affairs to be service-
connected or (ii) any individual who is a disabled
beneficiary as defined by the Social Security Act or would be
considered to such a disabled beneficiary but for having
income or resources in excess of limits established by the
Social Security Act.
Effective date.--The provision is effective on the date of
enactment.

conference agreement

The conference agreement does not include the Senate
amendment provision.

TITLE VI--SUNSET OF CERTAIN PROVISIONS AND AMENDMENTS

(Sec. 501 of the Senate amendment)

present law

Reconciliation is a procedure under the Congressional
Budget Act of 1974 (the ``Budget Act'') by which Congress
implements spending and tax policies contained in a budget
resolution. The Budget Act contains numerous rules enforcing
the scope of items permitted to be considered under the
budget reconciliation process. One such rule, the so-called
``Byrd rule,'' was incorporated into the Budget Act in 1990.
The Byrd rule, named after its principal sponsor, Senator
Robert C. Byrd, is contained in section 313 of the Budget
Act. The Byrd rule generally permits members to raise a point
of order against extraneous provisions (those which are
unrelated to the goals of the reconciliation process) from
either a reconciliation bill or a conference report on such
bill.
Under the Byrd rule, a provision is considered to be
extraneous if it falls under one or more of the following six
definitions:
1. It does not produce a change in outlays or revenues;
2. It produces an outlay increase or revenue decrease when
the instructed committee is not in compliance with its
instructions;
3. It is outside of the jurisdiction of the committee that
submitted the title or provision for inclusion in the
reconciliation measure;
4. It produces a change in outlays or revenues which is
merely incidental to the nonbudgetary components of the
provision;
5. It would increase the deficit for a fiscal year beyond
those covered by the reconciliation measure; and
6. It recommends changes in Social Security.

house bill

No provision.

senate amendment

To ensure compliance with the Budget Act, the Senate
amendment provides that the provisions of, and amendments
made by, title I, subtitle A of title II, and title III of
the Senate amendment shall not apply to taxable years
beginning after September 30, 2010, and that the Code shall
be applied and administered to such years as if those
provisions and amendments had never been enacted.
Effective date.--The provision is effective on the date of
enactment.

conference agreement

The conference agreement does not include the Senate
amendment provision.

TITLE VII--FUNDING FOR MILITARY OPERATIONS

(Secs. 601 and 602 of the Senate amendment)

present law

Present law does not include the Senate amendment
provision.

house bill

No provision.

senate amendment

The Senate amendment provides that there is to be
appropriated, out of any money in the Treasury that is not
otherwise appropriated, for the fiscal years 2006 through
2010, the following amounts, to be used for resetting and
recapitalizing equipment being used in theaters of
operations: (1) $16,900,000,000 for operations and
maintenance of the Army; (2) $1,800,000,000 for aircraft for
the Army; (3) $6,300,000,000 for other Army procurement; (4)
$10,000,000,000 for wheeled and tracked combat vehicles for
the Army; (5) $467,000,000 for the Army working capital fund;
(6) $6,000,000 for missiles for the Department of Defense;
(7) $100,000,000 for defense wide procurement for the
Department of Defense; (8) $4,500,000,000 for Marine Corps
procurement; (9) $4,500,000,000 for operations and
maintenance of the Marine Corps; and (10) $2,700,000,000 for
Navy aircraft procurement.

conference agreement

The conference agreement does not include the Senate
amendment provision.

TITLE VIII--OTHER REVENUE OFFSET PROVISIONS

A. Imposition of Withholding on Certain Payments Made by Government
Entities

(Sec. 3402 of the Code)

Present Law

Withholding requirements
Employers are required to withhold income tax on wages paid
to employees, including wages and salaries of employees or
elected officials of Federal, State, and local government
units. Withholding rates vary depending on the amount of
wages paid, the length of the payroll period, and the number
of withholding allowances claimed by the employee.
Certain non-wage payments also are subject to mandatory or
voluntary withholding. For example:
--Employers are required to withhold FICA and Railroad
Retirement taxes from wages paid to their employees.
Withholding rates are generally uniform.
--Payors of pensions are required to withhold from payments
made to payees, unless the payee elects no withholding.\540\
Withholding from periodic payments is at variable rates,
parallel to income tax withholding from wages, whereas
withholding from nonperiodic payments is at a flat 10-percent
rate.
---------------------------------------------------------------------------
\540\Withholding at a rate of 20 percent is required in the
case of an eligible rollover distribution that is not
directly rolled over.
---------------------------------------------------------------------------
--A variety of payments (such as interest and dividends)
are subject to backup withholding if the payee has not
provided a valid taxpayer identification number (TIN).
Withholding is at a flat rate based on the fourth lowest rate
of tax applicable to single taxpayers.
--Certain gambling proceeds are subject to withholding.
Withholding is at a flat rate based on the third lowest rate
of tax applicable to single taxpayers.
--Voluntary withholding applies to certain Federal
payments, such as Social Security payments. Withholding is at
rates specified by Treasury regulations.
--Voluntary withholding applies to unemployment
compensation benefits. Withholding is at a flat 10-percent
rate.
--Foreign taxpayers are generally subject to withholding on
certain U.S.-source income which is not effectively connected
with the conduct of a U.S. trade or business. Withholding is
at a flat 30-percent rate (14-percent for certain items of
income).
Many payments, including payments made by government
entities, are not subject to withholding under present law.
For example, no tax is generally withheld from payments made
to workers who are not classified as employees (i.e.,
independent contractors).
Information reporting
Present law imposes numerous information reporting
requirements that enable the Internal Revenue Service
(``IRS'') to verify the

[[Page 7461]]

correctness of taxpayers' returns. For example, every person
engaged in a trade or business generally is required to file
information returns for each calendar year for payments of
$600 or more made in the course of the payor's trade or
business. Special information reporting requirements exist
for employers required to deduct and withhold tax from
employees' income. In addition, any service recipient engaged
in a trade or business and paying for services is required to
make a return according to regulations when the aggregate of
payments is $600 or more. Government entities are
specifically required to make an information return,
reporting certain payments to corporations as well as
individuals. Moreover, the head of every Federal executive
agency that enters into certain contracts must file an
information return reporting the contractor's name, address,
TIN, date of contract action, amount to be paid to the
contractor, and any other information required by Forms 8596
(Information Return for Federal Contracts) and 8596A
(Quarterly Transmittal of Information Returns for Federal
Contracts).

House Bill

No provision.

Senate Amendment

No provision.

Conference Agreement

The conference agreement requires withholding on certain
payments to persons providing property or services made by
the Government of the United States, every State, every
political subdivision thereof, and every instrumentality of
the foregoing (including multi-State agencies). The
withholding requirement applies regardless of whether the
government entity making such payment is the recipient of the
property or services. Political subdivisions of States (or
any instrumentality thereof) with less than $100 million of
annual expenditures for property or services that would
otherwise be subject to withholding under this provision are
exempt from the withholding requirement.
The rate of withholding is three percent on all payments
regardless of whether the payments are for property or
services. Payments subject to withholding under the provision
include any payment made in connection with a government
voucher or certificate program which functions as a payment
for property or services. For example, payments to a
commodity producer under a government commodity support
program are subject to the withholding requirement. The
provision imposes information reporting requirements on the
payments that are subject to withholding under the provision.
The provision does not apply to any payments made through a
Federal, State, or local government public assistance or
public welfare program for which eligibility is determined by
a needs or income test. For example, payments under
government programs providing food vouchers or medical
assistance to low-income individuals are not subject to
withholding under the provision. However, payments under
government programs to provide health care or other services
that are not based on the needs or income of the recipients
are subject to withholding, including programs where
eligibility is based on the age of the beneficiary.
The provision does not apply to payments of wages or to any
other payment with respect to which mandatory (e.g., U.S.-
source income of foreign taxpayers) or voluntary (e.g.,
unemployment benefits) withholding applies under present law.
The provision does not exclude payments that are potentially
subject to backup withholding under section 3406. If,
however, payments are actually being withheld under backup
withholding, withholding under the provision does not apply.
The provision also does not apply to the following:
payments of interest; payments for real property; payments to
tax-exempt entities or foreign governments; intra-
governmental payments; payments made pursuant to a classified
or confidential contract (as defined in section 6050M(e)(3));
and payments to government employees that are not otherwise
excludable from the new withholding provision with respect to
the employees' services as an employees.
Effective date.--The provision applies to payments made
after December 31, 2010.

B. Eliminate Income Limitations on Roth IRA Conversions

(Sec. 408A of the Code)

Present Law

There are two general types of individual retirement
arrangements (``IRAs''): traditional IRAs and Roth IRAs. The
total amount that an individual may contribute to one or more
IRAs for a year is generally limited to the lesser of: (1) a
dollar amount ($4,000 for 2006); and (2) the amount of the
individual's compensation that is includible in gross income
for the year. In the case of an individual who has attained
age 50 before the end of the year, the dollar amount is
increased by an additional amount ($1,000 for 2006). In the
case of a married couple, contributions can be made up to the
dollar limit for each spouse if the combined compensation of
the spouses that is includible in gross income is at least
equal to the contributed amount. IRA contributions in excess
of the applicable limit are generally subject to an excise
tax of six percent per year until withdrawn.
Contributions to a traditional IRA may or may not be
deductible. The extent to which contributions to a
traditional IRA are deductible depends on whether or not the
individual (or the individual's spouse) is an active
participant in an employer-sponsored retirement plan and the
taxpayer's AGI. An individual may deduct his or her
contributions to a traditional IRA if neither the individual
nor the individual's spouse is an active participant in an
employer-sponsored retirement plan. If an individual or the
individual's spouse is an active participant in an employer-
sponsored retirement plan, the deduction is phased out for
taxpayers with AGI over certain levels. To the extent an
individual does not or cannot make deductible contributions,
the individual may make nondeductible contributions to a
traditional IRA, subject to the maximum contribution limit.
Distributions from a traditional IRA are includible in gross
income to the extent not attributable to a return of
nondeductible contributions.
Individuals with adjusted gross income (``AGI'') below
certain levels may make contributions to a Roth IRA (up to
the maximum IRA contribution limit). The maximum Roth IRA
contribution is phased out between $150,000 to $160,000 of
AGI in the case of married taxpayers filing a joint return
and between $95,000 to $105,000 in the case of all other
returns (except a separate return of a married
individual).\541\ Contributions to a Roth IRA are not
deductible. Qualified distributions from a Roth IRA are
excludable from gross income. Distributions from a Roth IRA
that are not qualified distributions are includible in gross
income to the extent attributable to earnings. In general, a
qualified distribution is a distribution that is made on or
after the individual attains age 59\1/2\, death, or
disability or which is a qualified special purpose
distribution. A distribution is not a qualified distribution
if it is made within the five-taxable year period beginning
with the taxable year for which an individual first made a
contribution to a Roth IRA.
---------------------------------------------------------------------------
\541\In the case of a married taxpayer filing a separate
return, the phaseout range is $0 to $10,000 of AGI.
---------------------------------------------------------------------------
A taxpayer with AGI of $100,000 or less may convert all or
a portion of a traditional IRA to a Roth IRA.\542\ The amount
converted is treated as a distribution from the traditional
IRA for income tax purposes, except that the 10-percent
additional tax on early withdrawals does not apply.
---------------------------------------------------------------------------
\542\Married taxpayers filing a separate return may not
convert amounts in a traditional IRA into a Roth IRA.
---------------------------------------------------------------------------
In the case of a distribution from a Roth IRA that is not a
qualified distribution, certain ordering rules apply in
determining the amount of the distribution that is includible
in income. For this purpose, a distribution that is not a
qualified distribution is treated as made in the following
order: (1) regular Roth IRA contributions; (2) conversion
contributions (on a first in, first out basis); and (3)
earnings. To the extent a distribution is treated as made
from a conversion contribution, it is treated as made first
from the portion, if any, of the conversion contribution that
was required to be included in income as a result of the
conversion.
Includible amounts withdrawn from a traditional IRA or a
Roth IRA before attainment of age 59\1/2\, death, or
disability are subject to an additional 10-percent early
withdrawal tax, unless an exception applies.

House Bill

No provision.

Senate Amendment

No provision.

Conference Agreement

The conference agreement eliminates the income limits on
conversions of traditional IRAs to Roth IRAs.\543\ Thus,
taxpayers may make such conversions without regard to their
AGI.
---------------------------------------------------------------------------
\543\Under the conference agreement, married taxpayers filing
a separate return may convert amounts in a traditional IRA
into a Roth IRA.
---------------------------------------------------------------------------
For conversions occurring in 2010, unless a taxpayer elects
otherwise, the amount includible in gross income as a result
of the conversion is included ratably in 2011 and 2012. That
is, unless a taxpayer elects otherwise, none of the amount
includible in gross income as a result of a conversion
occurring in 2010 is included in income in 2010, and half of
the income resulting from the conversion is includible in
gross income in 2011 and half in 2012. However, income
inclusion is accelerated if converted amounts are distributed
before 2012.\544\ In that case, the amount included in income
in the year of the distribution is increased by the amount
distributed, and the amount included in income in 2012 (or
2011 and 2012 in the case of a distribution in 2010) is the
lesser of: (1) half of the amount includible in income as a
result of the conversion; and (2) the remaining portion of
such amount not already included in income. The following
example illustrates the application of the accelerated
inclusion rule.
---------------------------------------------------------------------------
\544\Whether a distribution consists of converted amounts is
determined under the present-law ordering rules.
---------------------------------------------------------------------------
Example.--Taxpayer A has a traditional IRA with a value of
$100, consisting of deductible contributions and earnings. A
does

[[Page 7462]]

not have a Roth IRA. A converts the traditional IRA to a Roth
IRA in 2010, and, as a result of the conversion, $100 is
includible in gross income. Unless A elects otherwise, $50 of
the income resulting from the conversion is included in
income in 2011 and $50 in 2012. Later in 2010, A takes a $20
distribution, which is not a qualified distribution and all
of which, under the ordering rules, is attributable to
amounts includible in gross income as a result of the
conversion. Under the accelerated inclusion rule, $20 is
included in income in 2010. The amount included in income in
2011 is the lesser of (1) $50 (half of the income resulting
from the conversion) or (2) $70 (the remaining income from
the conversion), or $50. The amount included in income in
2012 is the lesser of (1) $50 (half of the income resulting
from the conversion) or (2) $30 (the remaining income from
the conversion, i.e., $100--$70 ($20 included in income in
2010 and $50 included in income in 2011)), or $30.
Effective date.---he provision is effective for taxable
years beginning after December 31, 2009.

C. Repeal of FSC/ETI Binding Contract Relief

Prior and Present Law

For most of the last two decades, the United States
provided export-related tax benefits under the foreign sales
corporation (``FSC'') regime. In 2000, the World Trade
Organization (``WTO'') held that the FSC regime constituted a
prohibited export subsidy under the relevant trade
agreements. In response to this WTO finding, the United
States repealed the FSC rules and enacted a new regime, under
the FSC Repeal and Extraterritorial Income (``ETI'')
Exclusion Act of 2000. Transition rules delayed the repeal of
the FSC rules and the effective date of ETI for transactions
in the ordinary course of a trade or business occurring
before January 1, 2002, or after December 31, 2001 pursuant
to a binding contract between the taxpayer and an unrelated
person which was in effect on September 30, 2000 and at all
times thereafter (the ``FSC binding contract relief'').\545\
In 2002, the WTO held that the ETI regime also constituted a
prohibited export subsidy.
---------------------------------------------------------------------------
\545\An election was provided, however, under which taxpayers
could adopt ETI at an earlier date for transactions after
September 30, 2000. This election allowed the ETI rules to
apply to transactions after September 30, 2000, including
transactions occurring pursuant to pre-existing binding
contracts.
---------------------------------------------------------------------------
In general, under the ETI regime, an exclusion from gross
income applied with respect to ``extraterritorial income,''
which was a taxpayer's gross income attributable to ``foreign
trading gross receipts.'' This income was eligible for the
exclusion to the extent that it was ``qualifying foreign
trade income.'' Qualifying foreign trade income was the
amount of gross income that, if excluded, would result in a
reduction of taxable income by the greatest of: (1) 1.2
percent of the foreign trading gross receipts derived by the
taxpayer from the transaction; (2) 15 percent of the
``foreign trade income'' derived by the taxpayer from the
transaction;\546\ or (3) 30 percent of the ``foreign sale and
leasing income'' derived by the taxpayer from the
transaction.\547\
---------------------------------------------------------------------------
\546\``Foreign trade income'' was the taxable income of the
taxpayer (determined without regard to the exclusion of
qualifying foreign trade income) attributable to foreign
trading gross receipts.
\547\``Foreign sale and leasing income'' was the amount of
the taxpayer's foreign trade income (with respect to a
transaction) that was properly allocable to activities
constituting foreign economic processes. Foreign sale and
leasing income also included foreign trade income derived by
the taxpayer in connection with the lease or rental of
qualifying foreign trade property for use by the lessee
outside the United States.
---------------------------------------------------------------------------
Foreign trading gross receipts were gross receipts derived
from certain activities in connection with ``qualifying
foreign trade property'' with respect to which certain
economic processes had taken place outside of the United
States. Specifically, the gross receipts must have been: (1)
from the sale, exchange, or other disposition of qualifying
foreign trade property; (2) from the lease or rental of
qualifying foreign trade property for use by the lessee
outside the United States; (3) for services which were
related and subsidiary to the sale, exchange, disposition,
lease, or rental of qualifying foreign trade property (as
described above); (4) for engineering or architectural
services for construction projects located outside the United
States; or (5) for the performance of certain managerial
services for unrelated persons. A taxpayer could elect to
treat gross receipts from a transaction as not being foreign
trading gross receipts. As a result of such an election, a
taxpayer could use any related foreign tax credits in lieu of
the exclusion.
Qualifying foreign trade property generally was property
manufactured, produced, grown, or extracted within or outside
the United States that was held primarily for sale, lease, or
rental in the ordinary course of a trade or business for
direct use, consumption, or disposition outside the United
States. No more than 50 percent of the fair market value of
such property could be attributable to the sum of: (1) the
fair market value of articles manufactured outside the United
States; and (2) the direct costs of labor performed outside
the United States. With respect to property that was
manufactured outside the United States, certain rules were
provided to ensure consistent U.S. tax treatment with respect
to manufacturers.
The American Jobs Creation Act of 2004 (``AJCA'') repealed
the ETI exclusion,\548\ generally effective for transactions
after December 31, 2004. AJCA provides a general transition
rule under which taxpayers retain 100 percent of their ETI
benefits for transactions prior to 2005, 80 percent of their
otherwise-applicable ETI benefits for transactions during
2005, and 60 percent of their otherwise-applicable ETI
benefits for transactions during 2006.
---------------------------------------------------------------------------
\548\Pub. L. No. 108-357, sec. 101. In addition, foreign
corporations that elected to be treated for all Federal tax
purposes as domestic corporations in order to facilitate the
claiming of ETI benefits were allowed to revoke such
elections within one year of the date of enactment of the
repeal without recognition of gain or loss, subject to anti-
abuse rules.
---------------------------------------------------------------------------
In addition to the general transition rule, AJCA provides
that the ETI exclusion provisions remain in effect for
transactions in the ordinary course of a trade or business if
such transactions are pursuant to a binding contract\549\
between the taxpayer and an unrelated person and such
contract is in effect on September 17, 2003, and at all times
thereafter (the ``ETI binding contract relief'').
---------------------------------------------------------------------------
\549\This rule also applies to a purchase option, renewal
option, or replacement option that is included in such
contract. For this purpose, a replacement option is
considered enforceable against a lessor notwithstanding the
fact that a lessor retained approval of the replacement
lessee.
---------------------------------------------------------------------------
In early 2006, the WTO Appellate Body held that the ETI
general transition rule and the FSC and ETI binding contract
relief measures are prohibited export subsidies.

House Bill

No provision.

Senate Amendment

No provision.

Conference Agreement

The conference agreement repeals both the FSC binding
contract relief and the ETI binding contract relief. The
general transition rule remains in effect.
Effective date.--The provision is effective for taxable
years beginning after date of enactment.

D. Modification of Wage Limit for Purposes of Domestic Production
Activities Deduction

(Sec. 199 of the Code)

Present Law

In general
Present law provides a deduction from taxable income (or,
in the case of an individual, adjusted gross income) that is
equal to a portion of the taxpayer's qualified production
activities income. For taxable years beginning after 2009,
the deduction is nine percent of such income. For taxable
years beginning in 2005 and 2006, the deduction is three
percent of income and, for taxable years beginning in 2007,
2008 and 2009, the deduction is six percent of income.
However, the deduction for a taxable year is limited to 50
percent of the wages paid by the taxpayer during the calendar
year that ends in such taxable year.\550\
---------------------------------------------------------------------------
\550\For purposes of the provision, ``wages'' include the sum
of the amounts of wages as defined in section 3401(a) and
elective deferrals that the taxpayer properly reports to the
Social Security Administration with respect to the employment
of employees of the taxpayer during the calendar year ending
during the taxpayer's taxable year. Elective deferrals
include elective deferrals as defined in section 402(g)(3),
amounts deferred under section 457, and, for taxable years
beginning after December 31, 2005, designated Roth
contributions (as defined in section 402A).
---------------------------------------------------------------------------
Qualified production activities income
In general, ``qualified production activities income'' is
equal to domestic production gross receipts (defined by
section 199(c)(4)), reduced by the sum of: (1) the costs of
goods sold that are allocable to such receipts; and (2) other
expenses, losses, or deductions which are properly allocable
to such receipts.
Application of wage limitation to passthrough entities
For purposes of applying the wage limitation, a
shareholder, partner, or similar person who is allocated
components of qualified production activities income from a
passthrough entity also is treated as having been allocated
wages from such entity in an amount that is equal to the
lesser of: (1) such person's allocable share of wages, as
determined under regulations prescribed by the Secretary; or
(2) twice the qualified production activities income that
actually is allocated to such person for the taxable year.

House Bill

No provision.

Senate Amendment

No provision.

Conference Agreement

Under the conference agreement, the wage limitation is
modified such that taxpayers may only include amounts which
are properly allocable to domestic production gross
receipts.\551\ Thus, the wage limitation is 50 percent of
those wages which are deducted in

[[Page 7463]]

arriving at qualified production activities income.
---------------------------------------------------------------------------
\551\As under present law, the Secretary shall provide rules
for the proper allocation of items (including wages) in
determining qualified production activities income. Section
199(c)(2).
---------------------------------------------------------------------------
In addition, the conference agreement repeals the special
limitation on wages treated as allocated to partners or
shareholders of passthrough entities. Accordingly, for
purposes of the wage limitation, a shareholder, partner, or
similar person who is allocated components of qualified
production activities income from a passthrough entity is
treated as having been allocated wages from such entity in an
amount that is equal to such person's allocable share of
wages as determined under regulations prescribed by the
Secretary, even if such amount is more than twice the
qualified production activities income that actually is
allocated to such person for the taxable year. The
shareholder, partner, or similar person will then include in
its wage limitation only those wages which are deducted in
arriving at qualified production activities income.
Effective date.--The conference agreement is effective with
respect to taxable years beginning after the date of
enactment.

E. Modification of Exclusion for Citizens Living Abroad

(Sec. 911 of the Code)

Present Law

In general
U.S. citizens generally are subject to U.S. income tax on
all their income, whether derived in the United States or
elsewhere. A U.S. citizen who earns income in a foreign
country also may be taxed on that income by the foreign
country. The United States generally cedes the primary right
to tax a U.S. citizen's non-U.S. source income to the foreign
country in which the income is derived. This concession is
effected by the allowance of a credit against the U.S. income
tax imposed on foreign-source income for foreign taxes paid
on that income. The amount of the credit for foreign income
tax paid on foreign-source income generally is limited to the
amount of U.S. tax otherwise owed on that income.
Accordingly, if the amount of foreign tax paid on foreign-
source income is less than the amount of U.S. tax owed on
that income, a foreign tax credit generally is allowed in an
amount not exceeding the amount of the foreign tax, and a
residual U.S. tax liability remains.
A U.S. citizen or resident living abroad may be eligible to
exclude from U.S. taxable income certain foreign earned
income and foreign housing costs.\552\ This exclusion applies
regardless of whether any foreign tax is paid on the foreign
earned income or housing costs. To qualify for these
exclusions, an individual (a ``qualified individual'') must
have his or her tax home in a foreign country and must be
either (1) a U.S. citizen\553\ who is a bona fide resident of
a foreign country or countries for an uninterrupted period
that includes an entire taxable year, or (2) a U.S. citizen
or resident present in a foreign country or countries for at
least 330 full days in any 12-consecutive-month period.
---------------------------------------------------------------------------
\552\Sec. 911.
\553\Generally, only U.S. citizens may qualify under the bona
fide residence test. A U.S. resident alien who is a citizen
of a country with which the United States has a tax treaty
may, however, qualify for the section 911 exclusions under
the bona fide residence test by application of a
nondiscrimination provision of the treaty.
---------------------------------------------------------------------------
Exclusion for compensation
The foreign earned income exclusion generally is available
for a qualified individual's non-U.S. source earned income
attributable to personal services performed by that
individual during the period of foreign residence or presence
described above. The maximum exclusion amount for any
calendar year is $80,000 in 2002 through 2007 and is indexed
for inflation after 2007.
Exclusion for housing costs
A qualified individual is allowed an exclusion from gross
income (or, as described below, a deduction) for certain
foreign housing costs paid or incurred by or on behalf of the
individual. The amount of this housing cost exclusion is
equal to the excess of a taxpayer's ``housing expenses'' over
a base housing amount. The term ``housing expenses'' means
the reasonable expenses paid or incurred during the taxable
year for a taxpayer's housing (and, if they live with the
taxpayer, for the housing of the taxpayer's spouse and
dependents) in a foreign country. The term includes expenses
attributable to housing such as utilities and insurance, but
it does not include separately deductible interest and taxes.
If the taxpayer maintains a second household outside the
United States for a spouse or dependents who do not reside
with the taxpayer because of dangerous, unhealthful, or
otherwise adverse living conditions, the housing expenses of
the second household also are eligible for exclusion. The
base housing amount above which costs are eligible for
exclusion in a taxable year is 16 percent of the annual
salary (computed on a daily basis) of a grade GS-14, step 1,
U.S. government employee, multiplied by the number of days of
foreign residence or presence (as described above) in the
taxable year. For 2006 this salary is $77,793; the current
base housing amount therefore is $12,447 (assuming the
taxpayer is a bona fide resident of or is present in a
foreign country every day during the year).
To the extent otherwise excludable housing costs are not
paid or reimbursed by a taxpayer's employer, these costs
generally are allowed as a deduction in computing adjusted
gross income.
Exclusion limitation amounts
The combined foreign earned income exclusion and housing
cost exclusion (including the amount of any deductible
housing costs) may not exceed the taxpayer's total foreign
earned income for the taxable year. The taxpayer's foreign
tax credit is reduced by the amount of the credit that is
attributable to excluded income.
Tax brackets
A taxpayer with excludable income under section 911 is
subject to tax on the taxpayer's other income, after
deductions, starting in the lowest tax rate bracket.

house bill

No provision.

senate amendment

No provision.

conference agreement

Exclusion for compensation
The conference agreement provision adjusts for inflation
the maximum amount of the foreign earned income exclusion in
taxable years beginning in calendar years after 2005 (rather
than, as under present law, after 2007). The limitation in
2006 therefore is $82,400.\554\
---------------------------------------------------------------------------
\554\This $82,400 amount is calculated under section
911(b)(2)(D)(ii), as amended by the conference agreement
provision, using current U.S. Bureau of Labor Statistics
(``BLS'') Consumer Price Index data.
---------------------------------------------------------------------------
Exclusion for housing costs
Under the conference agreement, the base housing amount
used in calculating the foreign housing cost exclusion in a
taxable year is 16 percent of the amount (computed on a daily
basis) of the foreign earned income exclusion limitation
(instead of the present law 16 percent of the grade GS-14,
step 1 amount), multiplied by the number of days of foreign
residence or presence (as previously described) in that year.
Reasonable foreign housing expenses in excess of the base
housing amount remain excluded from gross income (or, if paid
by the taxpayer, are deductible) under the conference
agreement, but the amount of the exclusion is limited to 30
percent of the maximum amount of a taxpayer's foreign earned
income exclusion.\555\ The Secretary is given authority to
issue regulations or other guidance providing for the
adjustment of this 30-percent housing cost limitation based
on geographic differences in housing costs relative to
housing costs in the United States. The conferees intend that
the Secretary be permitted to use publicly available data,
such as the Quarterly Report Indexes published by the U.S.
Department of State or any other information deemed reliable
by the Secretary, in making adjustments. The conferees also
intend that the Secretary may adjust the 30-percent amount
upward or downward. The conferees intend that the Secretary
make adjustments annually.
---------------------------------------------------------------------------
\555\In certain programs including grant-making to subsidize
rents, the U.S. Department of Housing and Urban Development
considers maximum affordable housing costs to be 30 percent
of a household's income. See, e.g., United States Housing Act
of 1937, 42 U.S.C. sec. 1437a (a)(1)(A), as amended.
---------------------------------------------------------------------------
Under the 30-percent rule described above, the maximum
amount of the foreign housing cost exclusion in 2006 is
(assuming foreign residence or presence on all days in the
year) $11,536 (= ($82,400 x 30 percent)--($82,400 x 16
percent)).\556\
---------------------------------------------------------------------------
\556\The $11,536 amount is based on a calculation under
section 911(b)(2)(D)(ii), as amended by the conference
agreement, using the BLS data described above.
---------------------------------------------------------------------------
Tax brackets
Under the conference agreement, if an individual excludes
an amount from income under section 911, any income in excess
of the exclusion amount determined under section 911 is taxed
(under the regular tax and alternative minimum tax) by
applying to that income the tax rates that would have been
applicable had the individual not elected the section 911
exclusion. For example, an individual with $80,000 of foreign
earned income that is excluded under section 911 and with
$20,000 in other taxable income (after deductions) would be
subject to tax on that $20,000 at the rate or rates
applicable to taxable income in the range of $80,000 to
$100,000.
Effective date.--The conference agreement provision is
effective for taxable years beginning after December 31,
2005.

TITLE IX--CORPORATE ESTIMATED TAX PROVISIONS

present law

In general, corporations are required to make quarterly
estimated tax payments of their income tax liability. For a
corporation whose taxable year is a calendar year, these
estimated tax payments must be made by April 15, June 15,
September 15, and December 15.

house bill

No provision.

senate amendment

No provision.

conference agreement

In case of a corporation with assets of at least $1
billion, payments due in July, August, and September, 2006,
shall be increased

[[Page 7464]]

to 105 percent of the payment otherwise due and the next
required payment shall be reduced accordingly.
In case of a corporation with assets of at least $1
billion, the payments due in July, August, and September,
2012, shall be increased to 106.25 percent of the payment
otherwise due and the next required payment shall be reduced
accordingly.
In case of a corporation with assets of at least $1
billion, the payments due in July, August, and September,
2013, shall be increased to 100.75 percent of the payment
otherwise due and the next required payment shall be reduced
accordingly.
With respect to corporate estimated tax payments due on
September 15, 2010, 20.5 percent shall not be due until
October 1, 2010.
With respect to corporate estimated tax payments due on
September 15, 2011, 27.5 percent shall not be due until
October 1, 2011.
Effective date.--The provision is effective on the date of
enactment.

TITLE X--COMPLEXITY ANALYSIS

Section 4022(b) of the Internal Revenue Service Reform and
Restructuring Act of 1998 (the ``IRS Reform Act'') requires
the Joint Committee on Taxation (in consultation with the
Internal Revenue Service (``IRS'') and the Department of the
Treasury) to provide a tax complexity analysis. The
complexity analysis is required for all legislation reported
by the Senate Committee on Finance, the House Committee on
Ways and Means, or any committee of conference if the
legislation includes a provision that directly or indirectly
amends the Internal Revenue Code (the ``Code'') and has
widespread applicability to individuals or small businesses.
For each such provision identified by the staff of the Joint
Committee on Taxation, a summary description of the provision
is provided along with an estimate of the number and type of
affected taxpayers, and a discussion regarding the relevant
complexity and administrative issues.
Following the analysis of the staff of the Joint Committee
on Taxation are the comments of the IRS and Treasury
regarding each of the provisions included in the complexity
analysis.
Capital gain and dividend rate reduction (sec. 102 of the
conference agreement)
Summary description of provision
The conference agreement extends the zero- and 15-percent
capital gain and dividend rates to taxable years beginning in
2009 and 2010.
Number of affected taxpayers
It is estimated that the provision will affect 33 million
individual tax returns.
Discussion
The extension of the provision means that for 2009 and 2010
individual taxpayers and the IRS will continue to use the
same forms for capital gains and dividends.
The extension of the lower rates for net capital gain will
achieve simplification because the extension prevents the
separate five-year holding periods from going into effect in
2009 and 2010. On the other hand, the extension of the lower
rates for dividends will continue requiring dividends to be
classified as qualified dividends and nonqualified dividends
in 2009 and 2010 and will continue to require the tax to be
computed using the capital gains forms.
Increase in the AMT exemption amount (sec. 301 of the
conference agreement)
Summary description of the provision
The alternative minimum tax exemption amounts for 2006 are
increased.
Number of affected taxpayers
It is estimated that the provisions will affect
approximately 19 million individual tax returns.
Discussion
Many individuals will not have to compute their alternative
minimum tax and file the IRS forms relating to that tax.

TITLE XI--UNFUNDED MANDATES

The staff of the Joint Committee on Taxation has reviewed
the tax provisions in the conference agreement for H.R. 4297,
the ``Tax Relief Extension Reconciliation Act of 2005'' as
agreed to by the conferees. This information is provided in
accordance with the requirements of Public Law 104-04, the
Unfunded Mandates Reform Act of 1995, which provides that if
a conference agreement contains (1) a mandate that was not
previously considered by either the House or the Senate, or
(2) an increase in the direct cost of a previously considered
mandate, then the committee of conference is to ensure, to
the greatest extent practicable, that a mandates statement is
prepared.
We have determined that the tax provisions of the
conference agreement contain two unfunded private sector
mandates that were not previously considered by either the
House or the Senate: (1) repeal of FSC-ETI grandfather rule,
and (2) amend section 911 housing exclusion. In addition, the
provision relating to withholding on certain government
payments imposes an intergovernmental mandate not previously
considered by either the House or the Senate.
The costs required to comply with each Federal private
sector mandate and Federal intergovernmental mandate
generally are no greater than the aggregate estimated budget
effects of the provision as indicated on the enclosed revenue
table. Benefits from the provisions include improved
administration of the tax laws and a more accurate
measurement of income for Federal income tax purposes.

[[Page 7465]]

TH09MY06.001

[[Page 7466]]

TH09MY06.002

[[Page 7467]]

TH09MY06.003

[[Page 7468]]

William Thomas,
Jim McCrery,
Dave Camp,
Managers on the Part of the House.

Chuck Grassley,
Jon Kyl,
Managers on the Part of the Senate.

____________________

RECESS

The SPEAKER pro tempore. Pursuant to clause 12(a) of rule I, the
Chair declares the House in recess until approximately 6:30 p.m. today.
Accordingly (at 4 o'clock and 26 minutes p.m.), the House stood in
recess until approximately 6:30 p.m.

____________________

{time} 1832
AFTER RECESS

The recess having expired, the House was called to order by the
Speaker pro tempore (Mr. Porter) at 6 o'clock and 32 minutes p.m.

____________________

APPOINTMENT OF MEMBER TO BOARD OF VISITORS TO UNITED STATES MERCHANT
MARINE ACADEMY

The SPEAKER pro tempore. Pursuant to 46 U.S.C. 1295b(h), and the
order of the House of December 18, 2005, the Chair announces the
Speaker's appointment of the following Member of the House to the Board
of Visitors to the United States Merchant Marine Academy:
Mrs. McCarthy, New York

____________________

ANNOUNCEMENT BY THE SPEAKER PRO TEMPORE

The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, proceedings
will resume on motions to suspend the rules previously postponed.
Votes will be taken in the following order:
H. Res. 803; by the yeas and nays;
H.R. 5037; by the yeas and nays;
H.R. 3829; by the yeas and nays.
The first and third electronic votes will be conducted as 15-minute
votes. The second vote in this series will be conducted as a 5-minute
vote.

____________________

PROVIDING FOR CONCURRENCE BY HOUSE WITH AMENDMENT IN SENATE AMENDMENT
TO H.R. 1499, HEROES EARNED RETIREMENT OPPORTUNITIES ACT

The SPEAKER pro tempore. The pending business is the question of
suspending the rules and agreeing to the resolution, H. Res. 803.
The Clerk read the title of the resolution.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Texas (Mr. Sam Johnson) that the House suspend the rules
and agree to the resolution, H. Res. 803, on which the yeas and nays
are ordered.
The vote was taken by electronic device, and there were--yeas 412,
nays 0, not voting 20, as follows:

[Roll No. 128]

YEAS--412

Abercrombie
Ackerman
Aderholt
Akin
Alexander
Allen
Baca
Bachus
Baird
Baker
Baldwin
Barrett (SC)
Barrow
Bartlett (MD)
Barton (TX)
Bass
Bean
Beauprez
Becerra
Berkley
Berman
Berry
Biggert
Bilirakis
Bishop (GA)
Bishop (NY)
Bishop (UT)
Blackburn
Blumenauer
Blunt
Boehlert
Boehner
Bonilla
Bonner
Bono
Boozman
Boren
Boswell
Boucher
Boustany
Boyd
Bradley (NH)
Brady (PA)
Brady (TX)
Brown (OH)
Brown (SC)
Brown-Waite, Ginny
Burgess
Burton (IN)
Butterfield
Buyer
Calvert
Camp (MI)
Campbell (CA)
Cannon
Cantor
Capito
Capps
Capuano
Cardin
Carnahan
Carson
Carter
Case
Castle
Chabot
Chandler
Chocola
Cleaver
Clyburn
Coble
Cole (OK)
Conaway
Conyers
Cooper
Costa
Costello
Cramer
Crenshaw
Crowley
Cubin
Cuellar
Culberson
Cummings
Davis (AL)
Davis (CA)
Davis (IL)
Davis (TN)
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeFazio
DeGette
Delahunt
DeLauro
DeLay
Dent
Diaz-Balart, L.
Diaz-Balart, M.
Dicks
Dingell
Doggett
Doolittle
Doyle
Drake
Dreier
Duncan
Edwards
Ehlers
Emanuel
Emerson
Engel
English (PA)
Eshoo
Etheridge
Everett
Farr
Fattah
Ferguson
Filner
Fitzpatrick (PA)
Flake
Foley
Forbes
Ford
Fortenberry
Fossella
Foxx
Frank (MA)
Franks (AZ)
Frelinghuysen
Gallegly
Garrett (NJ)
Gerlach
Gibbons
Gilchrest
Gillmor
Gingrey
Gohmert
Gonzalez
Goode
Goodlatte
Gordon
Granger
Graves
Green, Al
Green, Gene
Grijalva
Gutknecht
Hall
Harman
Harris
Hart
Hastings (FL)
Hastings (WA)
Hayes
Hayworth
Hefley
Hensarling
Herger
Herseth
Higgins
Hinchey
Hinojosa
Hobson
Hoekstra
Holden
Holt
Honda
Hooley
Hostettler
Hoyer
Hulshof
Hunter
Hyde
Inglis (SC)
Inslee
Israel
Issa
Istook
Jackson (IL)
Jackson-Lee (TX)
Jefferson
Jenkins
Jindal
Johnson (CT)
Johnson (IL)
Johnson, E. B.
Johnson, Sam
Jones (NC)
Jones (OH)
Kanjorski
Kaptur
Keller
Kelly
Kennedy (MN)
Kildee
Kilpatrick (MI)
Kind
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
Kucinich
Kuhl (NY)
LaHood
Langevin
Lantos
Larson (CT)
Latham
LaTourette
Leach
Lee
Levin
Lewis (CA)
Lewis (GA)
Lewis (KY)
Linder
Lipinski
LoBiondo
Lofgren, Zoe
Lowey
Lucas
Lungren, Daniel E.
Lynch
Mack
Maloney
Manzullo
Marchant
Markey
Marshall
Matheson
Matsui
McCarthy
McCaul (TX)
McCollum (MN)
McCotter
McCrery
McDermott
McGovern
McHenry
McHugh
McIntyre
McKeon
McKinney
McMorris
McNulty
Meek (FL)
Meeks (NY)
Melancon
Mica
Michaud
Millender-McDonald
Miller (FL)
Miller (MI)
Miller (NC)
Miller, Gary
Miller, George
Moore (KS)
Moore (WI)
Moran (KS)
Moran (VA)
Murtha
Musgrave
Myrick
Nadler
Napolitano
Neal (MA)
Neugebauer
Ney
Northup
Norwood
Nunes
Oberstar
Obey
Olver
Ortiz
Otter
Owens
Oxley
Pallone
Pascrell
Pastor
Paul
Pearce
Pelosi
Pence
Peterson (MN)
Peterson (PA)
Petri
Pickering
Pitts
Platts
Poe
Pombo
Pomeroy
Porter
Price (GA)
Price (NC)
Pryce (OH)
Putnam
Radanovich
Rahall
Ramstad
Rangel
Regula
Rehberg
Reichert
Renzi
Reyes
Reynolds
Rogers (AL)
Rogers (KY)
Rogers (MI)
Rohrabacher
Ros-Lehtinen
Ross
Rothman
Roybal-Allard
Royce
Ruppersberger
Rush
Ryan (OH)
Ryan (WI)
Ryun (KS)
Sabo
Salazar
Sanchez, Linda T.
Sanchez, Loretta
Sanders
Saxton
Schakowsky
Schiff
Schmidt
Schwartz (PA)
Schwarz (MI)
Scott (GA)
Scott (VA)
Sensenbrenner
Serrano
Sessions
Shadegg
Shaw
Shays
Sherman
Sherwood
Shimkus
Shuster
Simmons
Simpson
Skelton
Slaughter
Smith (NJ)
Smith (TX)
Snyder
Sodrel
Solis
Souder
Spratt
Stark
Stearns
Stupak
Sullivan
Sweeney
Tancredo
Tanner
Tauscher
Taylor (MS)
Taylor (NC)
Terry
Thomas
Thompson (CA)
Thompson (MS)
Thornberry
Tiahrt
Tiberi
Tierney
Towns
Turner
Udall (CO)
Udall (NM)
Upton
Van Hollen
Velazquez
Visclosky
Walden (OR)
Walsh
Wamp
Wasserman Schultz
Waters
Watson
Watt
Waxman
Weiner
Weldon (FL)
Weldon (PA)
Weller
Westmoreland
Wexler
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Woolsey
Wu
Wynn
Young (AK)
Young (FL)

NOT VOTING--20

Andrews
Brown, Corrine
Cardoza
Clay
Davis (FL)
Davis (KY)
Evans
Feeney
Green (WI)
Gutierrez
Kennedy (RI)
Larsen (WA)
Meehan
Mollohan
Murphy
Nussle
Osborne
Payne
Smith (WA)
Strickland

{time} 1901

So (two-thirds of those voting having responded in the affirmative)
the rules were suspended and the resolution was agreed to.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.

____________________

RESPECT FOR AMERICA'S FALLEN HEROES ACT

The SPEAKER pro tempore. The pending business is the question of
suspending the rules and passing the bill, H.R. 5037.
The Clerk read the title of the bill.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Indiana (Mr. Buyer) that the House suspend the rules and
pass the bill, H.R. 5037, on which the yeas and nays are ordered.

[[Page 7469]]

This will be a 5-minute vote.
The vote was taken by electronic device, and there were--yeas 408,
nays 3, not voting 21, as follows:

[Roll No. 129]

YEAS--408

Abercrombie
Ackerman
Aderholt
Akin
Alexander
Allen
Baca
Bachus
Baird
Baker
Baldwin
Barrow
Bartlett (MD)
Barton (TX)
Bass
Bean
Beauprez
Becerra
Berkley
Berman
Berry
Biggert
Bilirakis
Bishop (GA)
Bishop (NY)
Bishop (UT)
Blackburn
Blumenauer
Blunt
Boehlert
Boehner
Bonilla
Bonner
Bono
Boozman
Boren
Boswell
Boucher
Boustany
Boyd
Bradley (NH)
Brady (PA)
Brady (TX)
Brown (OH)
Brown (SC)
Brown-Waite, Ginny
Burgess
Burton (IN)
Butterfield
Buyer
Calvert
Camp (MI)
Campbell (CA)
Cannon
Cantor
Capito
Capps
Capuano
Cardin
Carnahan
Carson
Carter
Case
Castle
Chabot
Chandler
Chocola
Cleaver
Clyburn
Coble
Cole (OK)
Conaway
Conyers
Cooper
Costa
Costello
Cramer
Crenshaw
Crowley
Cubin
Cuellar
Culberson
Cummings
Davis (AL)
Davis (CA)
Davis (IL)
Davis (TN)
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeFazio
DeGette
Delahunt
DeLauro
DeLay
Dent
Diaz-Balart, L.
Diaz-Balart, M.
Dicks
Dingell
Doggett
Doolittle
Doyle
Drake
Dreier
Duncan
Edwards
Ehlers
Emanuel
Emerson
Engel
English (PA)
Eshoo
Etheridge
Everett
Farr
Fattah
Ferguson
Filner
Fitzpatrick (PA)
Flake
Foley
Forbes
Ford
Fortenberry
Fossella
Foxx
Franks (AZ)
Frelinghuysen
Gallegly
Garrett (NJ)
Gerlach
Gibbons
Gilchrest
Gillmor
Gingrey
Gohmert
Gonzalez
Goode
Goodlatte
Gordon
Granger
Graves
Green, Al
Green, Gene
Grijalva
Gutknecht
Hall
Harman
Harris
Hart
Hastings (FL)
Hastings (WA)
Hayes
Hayworth
Hefley
Hensarling
Herger
Herseth
Higgins
Hinchey
Hinojosa
Hobson
Hoekstra
Holden
Holt
Honda
Hooley
Hostettler
Hoyer
Hulshof
Hunter
Hyde
Inglis (SC)
Inslee
Israel
Issa
Istook
Jackson (IL)
Jackson-Lee (TX)
Jefferson
Jenkins
Jindal
Johnson (CT)
Johnson (IL)
Johnson, E. B.
Johnson, Sam
Jones (NC)
Jones (OH)
Kanjorski
Kaptur
Keller
Kelly
Kennedy (MN)
Kildee
Kilpatrick (MI)
Kind
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
Kucinich
Kuhl (NY)
LaHood
Langevin
Lantos
Larson (CT)
Latham
LaTourette
Leach
Lee
Levin
Lewis (CA)
Lewis (GA)
Lewis (KY)
Linder
Lipinski
LoBiondo
Lofgren, Zoe
Lowey
Lucas
Lungren, Daniel E.
Lynch
Mack
Maloney
Manzullo
Marchant
Markey
Marshall
Matheson
Matsui
McCarthy
McCaul (TX)
McCollum (MN)
McCotter
McCrery
McDermott
McGovern
McHenry
McHugh
McIntyre
McKeon
McKinney
McMorris
McNulty
Meek (FL)
Meeks (NY)
Melancon
Mica
Michaud
Millender-McDonald
Miller (FL)
Miller (MI)
Miller (NC)
Miller, Gary
Miller, George
Moore (KS)
Moore (WI)
Moran (KS)
Moran (VA)
Murtha
Musgrave
Myrick
Nadler
Napolitano
Neal (MA)
Neugebauer
Ney
Northup
Norwood
Nunes
Oberstar
Obey
Olver
Ortiz
Otter
Owens
Oxley
Pallone
Pascrell
Pastor
Pearce
Pelosi
Pence
Peterson (MN)
Peterson (PA)
Petri
Pickering
Pitts
Platts
Poe
Pombo
Pomeroy
Porter
Price (GA)
Price (NC)
Pryce (OH)
Putnam
Radanovich
Rahall
Ramstad
Rangel
Regula
Rehberg
Reichert
Renzi
Reyes
Reynolds
Rogers (AL)
Rogers (KY)
Rogers (MI)
Rohrabacher
Ros-Lehtinen
Ross
Rothman
Roybal-Allard
Royce
Ruppersberger
Rush
Ryan (OH)
Ryan (WI)
Ryun (KS)
Sabo
Salazar
Sanchez, Linda T.
Sanchez, Loretta
Sanders
Saxton
Schakowsky
Schiff
Schmidt
Schwartz (PA)
Schwarz (MI)
Scott (GA)
Scott (VA)
Sensenbrenner
Serrano
Sessions
Shadegg
Shaw
Shays
Sherman
Sherwood
Shimkus
Shuster
Simmons
Simpson
Skelton
Slaughter
Smith (NJ)
Smith (TX)
Snyder
Sodrel
Solis
Souder
Spratt
Stark
Stearns
Stupak
Sullivan
Sweeney
Tancredo
Tanner
Tauscher
Taylor (MS)
Taylor (NC)
Terry
Thomas
Thompson (CA)
Thompson (MS)
Thornberry
Tiahrt
Tiberi
Tierney
Towns
Turner
Udall (CO)
Udall (NM)
Upton
Van Hollen
Velazquez
Visclosky
Walden (OR)
Walsh
Wamp
Wasserman Schultz
Waters
Watson
Watt
Waxman
Weiner
Weldon (FL)
Weldon (PA)
Weller
Westmoreland
Wexler
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Woolsey
Wynn
Young (AK)
Young (FL)

NAYS--3

Frank (MA)
Paul
Wu

NOT VOTING--21

Andrews
Barrett (SC)
Brown, Corrine
Cardoza
Clay
Davis (FL)
Davis (KY)
Evans
Feeney
Green (WI)
Gutierrez
Kennedy (RI)
Larsen (WA)
Meehan
Mollohan
Murphy
Nussle
Osborne
Payne
Smith (WA)
Strickland

{time} 1910

So (two-thirds of those voting having responded in the affirmative)
the rules were suspended and the bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
Stated for:
Mr. BARRETT of South Carolina. Mr. Speaker, on rollcall No. 129 I was
unavoidably detained. Had I been present, I would have voted ``yea.''

____________________

HONORING IKE SKELTON

(Mr. CLEAVER asked and was given permission to address the House for
1 minute.)
Mr. CLEAVER. Mr. Speaker, on this past Friday evening, our colleague,
Ike Skelton, joined an elite group of Americans as he was presented
with the Harry S Truman Public Service Award. He joins Colin Powell,
Madeline Albright, Henry Kissinger and Tom Eagleton, just to name a
few; and so I stand before you, Mr. Speaker and colleagues of Ike
Skelton, to say that we can stand proud of what he has done over his
career and fact that he has now been recognized by the body that
salutes Harry Truman.

____________________

JACK C. MONTGOMERY DEPARTMENT OF VETERANS AFFAIRS MEDICAL CENTER

The SPEAKER pro tempore. The pending business is the question of
suspending the rules and passing the bill, H.R. 3829.
The Clerk read the title of the bill.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Indiana (Mr. Buyer) that the House suspend the rules and
pass the bill, H.R. 3829, on which the yeas and nays are ordered.
The vote was taken by electronic device, and there were--yeas 407,
nays 0, not voting 25, as follows:

[Roll No. 130]

YEAS--407

[[Page 7470]]

Hulshof
Hunter
Hyde
Inglis (SC)
Inslee
Israel
Issa
Istook
Jackson (IL)
Jackson-Lee (TX)
Jefferson
Jenkins
Jindal
Johnson (CT)
Johnson (IL)
Johnson, E. B.
Jones (NC)
Jones (OH)
Kanjorski
Kaptur
Keller
Kelly
Kennedy (MN)
Kildee
Kilpatrick (MI)
Kind
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
Kucinich
Kuhl (NY)
LaHood
Langevin
Lantos
Larson (CT)
Latham
LaTourette
Leach
Lee
Levin
Lewis (CA)
Lewis (GA)
Lewis (KY)
Linder
Lipinski
LoBiondo
Lofgren, Zoe
Lowey
Lucas
Lungren, Daniel E.
Lynch
Mack
Maloney
Manzullo
Marchant
Markey
Marshall
Matheson
Matsui
McCarthy
McCaul (TX)
McCollum (MN)
McCotter
McCrery
McDermott
McGovern
McHenry
McHugh
McIntyre
McKeon
McKinney
McMorris
McNulty
Meehan
Meek (FL)
Meeks (NY)
Melancon
Mica
Michaud
Millender-McDonald
Miller (FL)
Miller (MI)
Miller (NC)
Miller, Gary
Miller, George
Moore (KS)
Moore (WI)
Moran (KS)
Moran (VA)
Murtha
Musgrave
Myrick
Nadler
Napolitano
Neal (MA)
Neugebauer
Ney
Northup
Norwood
Nunes
Oberstar
Obey
Olver
Ortiz
Otter
Owens
Pallone
Pascrell
Pastor
Paul
Pearce
Pelosi
Peterson (MN)
Peterson (PA)
Petri
Pickering
Pitts
Platts
Poe
Pombo
Pomeroy
Porter
Price (GA)
Price (NC)
Pryce (OH)
Putnam
Radanovich
Rahall
Ramstad
Rangel
Regula
Rehberg
Reichert
Renzi
Reyes
Reynolds
Rogers (AL)
Rogers (KY)
Rogers (MI)
Rohrabacher
Ros-Lehtinen
Ross
Rothman
Roybal-Allard
Royce
Ruppersberger
Rush
Ryan (OH)
Ryan (WI)
Ryun (KS)
Sabo
Salazar
Sanchez, Linda T.
Sanchez, Loretta
Sanders
Schakowsky
Schiff
Schmidt
Schwartz (PA)
Schwarz (MI)
Scott (GA)
Scott (VA)
Sensenbrenner
Serrano
Sessions
Shadegg
Shaw
Shays
Sherman
Sherwood
Shimkus
Shuster
Simmons
Simpson
Skelton
Slaughter
Smith (NJ)
Smith (TX)
Snyder
Sodrel
Solis
Souder
Spratt
Stark
Stearns
Stupak
Sullivan
Sweeney
Tancredo
Tanner
Tauscher
Taylor (MS)
Taylor (NC)
Terry
Thomas
Thompson (CA)
Thompson (MS)
Thornberry
Tiahrt
Tiberi
Tierney
Towns
Turner
Udall (CO)
Udall (NM)
Upton
Van Hollen
Velazquez
Visclosky
Walden (OR)
Walsh
Wamp
Wasserman Schultz
Waters
Watson
Watt
Waxman
Weiner
Weldon (FL)
Weldon (PA)
Weller
Westmoreland
Wexler
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Woolsey
Wu
Wynn
Young (AK)
Young (FL)

NOT VOTING--25

Andrews
Brown, Corrine
Butterfield
Cardoza
Clay
Crowley
Davis (FL)
Davis (KY)
Evans
Feeney
Green (WI)
Gutierrez
Johnson, Sam
Kennedy (RI)
Larsen (WA)
Mollohan
Murphy
Nussle
Osborne
Oxley
Payne
Pence
Saxton
Smith (WA)
Strickland

{time} 1929

____________________

PERSONAL EXPLANATION

Mr. MURPHY. Mr. Speaker, I regret that I was unable to be present for
today's rollcall votes due to a death in the family. Had I been
present, let the Record reflect that I would have voted ``yea'' on H.R.
1499, ``yea'' on H.R. 5037, and ``yea'' on H.R. 3829.

____________________

PERSONAL EXPLANATION

Mr. GUTIERREZ. Mr. Speaker, I was unavoidably absent from this
Chamber today. I would like the Record to show that, had I been
present, I would have voted ``yea'' on rollcall votes 128, 129 and 130.

____________________

PERSONAL EXPLANATION

Mr. DAVIS of Kentucky. Mr. Speaker, on Tuesday, May 9, 2006, I was
absent from the House. Had I been present I would have voted: Rollcall
No. 128--``yea''; rollcall No. 129--``yea''; rollcall No. 130--``yea.''

____________________

PERSONAL EXPLANATION

Mr. GREEN of Wisconsin. Mr. Speaker, I was absent from Washington on
Tuesday, May 9, 2006. As a result, I was not recorded for rollcall
votes No. 128, No. 129 and No. 130. Had I been present, I would have
voted ``yea'' on rollcall No. 128, No. 129 and No. 130.

____________________

PRIVILEGED REPORT ON RESOLUTION OF INQUIRY TO THE PRESIDENT

Mr. SHAYS, from the Committee on Government Reform, submitted an
adverse privileged report (Rept. No. 109-457) on the resolution (H.
Res. 752) requesting the President to transmit to the House of
Representatives not later than 14 days after the date of adoption of
this resolution documents in the possession of the President relating
to the receipt and consideration by the Executive Office of the
President of any information concerning the variation between the
version of S. 1932, the Deficit Reduction Act of 2005, that the House
of Representatives passed on February 1, 2006, and the version of the
bill that the President signed on February 8, 2006, which was referred
to the House Calendar and ordered to be printed.

____________________

REMOVAL OF NAME OF MEMBER AS COSPONSOR OF H.R. 5289

Mr. BOREN. Mr. Speaker, I ask unanimous consent that my name be
removed as cosponsor for H.R. 5289.
The SPEAKER pro tempore (Mr. Kuhl of New York). Is there objection to
the request of the gentleman from Oklahoma?
There was no objection.

____________________

MILITARY RECRUITMENT TACTICS

(Mr. BLUMENAUER asked and was given permission to address the House
for 1 minute and to revise and extend his remarks.)
Mr. BLUMENAUER. Mr. Speaker, this weekend the Portland Oregonian
reported a troubling story of an 18-year-old high school student with
autism in my district who, despite his disability, was recruited into
the Army as a cavalry scout, over the strong objection of his parents,
and in violation of military rules.
To place somebody with his disability in a combat role would create
an entirely unnecessary risk of harm, not just to him, but other
members of his unit who would have to rely on him.
I have written to the Secretary of Defense calling for an
investigation in this case, which does not appear to be an isolated
incident. Accusations of recruitment abuse are at record levels as
recruiters face extreme pressure to meet enlistment targets and quotas.
I am concerned that the military has created a situation where
recruiters are pressured to act in unethical and possible illegal ways
in order to successfully fulfill their orders.
I believe we need a real investigation into the breadth of such
requirement practices, and that new safeguards must be put in place to
ensure that what happened to my young constituent doesn't happen to any
other young man or woman.
Our Nation cannot produce the finest fighting force in the world
without also demanding the most rigorous standards of conduct in all
ranks of the military.

____________________

THE SLY FOX OF MEXICO

(Mr. POE asked and was given permission to address the House for 1
minute.)
Mr. POE. Mr. Speaker, let me recite to you an immigration policy.
1. If you migrate to this country you must speak the native language.
2. You have to be a professional or an investor. No unskilled workers
are allowed.
3. There will be no special bilingual programs in the schools, no
special ballots or elections, and all government business will be
conducted in one language.
4. Foreigners will not have the right to vote.
5. Foreigners will never be able to hold public office.
6. Foreigners will not be a burden to taxpayers. There will be no
welfare, no food stamps, no health care or other government assistance
programs.

[[Page 7471]]

7. If foreigners come and want to buy land, that is highly
restricted.
8. Foreigners may not protest. No demonstrations, no foreign flag, no
political organizing, no criticizing the President or the policies. If
you do, you will be sent back to your country.
9. If you come to this country illegally, you will be arrested by our
Federal police and sent to jail.
Mr. Speaker, this is not U.S. immigration policy, but the alleged
policy of President Vicente Fox and Mexico. President Fox is a
hypocrite for trying to dictate to America what we should do in this
country, letting his illegal citizens into the United States, while
apparently demanding tougher immigration laws in his own country. Fox
is nothing more than a fox in fox clothing. And that's just the way it
is.

____________________

SPECIAL ORDERS

The SPEAKER pro tempore. Under the Speaker's announced policy of
January 4, 2005, and under a previous order of the House, the following
Members will be recognized for 5 minutes each.

____________________

HONORING KATLYN MARIE MARCHETTI AND STRESSING THE IMPORTANCE OF
SEATBELTS

The SPEAKER pro tempore. Under a previous order of the House, the
gentleman from Florida (Mr. Bilirakis) is recognized for 5 minutes.
Mr. BILIRAKIS. Mr. Speaker, I rise today to honor the memory of a
young woman whose life tragically was cut short by her decision not to
wear her seatbelt.
Katlyn Marie Marchetti, known as Katie to her family and friends, was
a vibrant, loving, community-oriented high school junior who dreamed of
a career in fashion or interior design. She encouraged other young
women through her participation in the Ophelia Project, a nonprofit
group dedicated to encouraging middle and high school girls to believe
that an individual's true beauty comes from within.
As a junior at Durant High School in Valrico, Florida, Katie planned
to take the SATs in April and spend her summer examining colleges. Her
commitment to academic achievement and hard work guaranteed that she
would succeed in whatever field she chose. Katie's entire future was
ahead of her, and what a bright one it would have been.
But it was not to be. On March 3, 2006, Katie was involved in a car
accident that ended up claiming her life early the following morning.
To the devastation of her loving parents, Vincent and Laura, and her
younger brother, Andrew, she was not wearing her seatbelt. Had she
buckled up, March 4 may have been one day closer to realizing her
dreams. Instead, it was the day when they were ended.
Unfortunately, Katie's decision to forego wearing a seatbelt is not
uncommon. Among the entire population, teenagers are the most likely to
neglect this important lifesaving measure. A study conducted by the
National Highway Traffic Safety Administration in 2002 indicated that
only 69 percent of 16 to 24-year-olds use seatbelts, compared to 82
percent of children and 76 percent of adults. Among 16 to 19-year-olds,
the statistics are more troubling. Only 40 percent use seatbelts
consistently. And the Fatality Analysis Reporting System shows that 63
percent of teens killed in crashes were not wearing seatbelts.
Data also reveals insights into why teens neglect to fasten up when
they get in a vehicle. According to a 2003 survey, only 79 percent of
teen drivers reported that they wear a seatbelt all the time. About 47
percent indicated that safety belts were as likely to harm as to help,
and 30 percent said that crashes close to home were usually not as
serious. Approximately 30 percent affirmed that they would feel self-
conscious if they were going against the group norm in wearing safety
belts.
Mr. Speaker, these statistics are troubling. Seatbelt use has proven
effective time and again in saving lives. According to NHTSA, the
wearing of safety belts saved an estimated 14,164 lives in 2002.
Choosing to buckle up is the best protection against drunk, tired, or
aggressive drivers. And yet people choose not to take this precaution.
What can be done to encourage them to do so?
Studies have shown that highly publicized and visible enforcement of
safety belt laws have increased seatbelt use. Peer-led education and
awareness also hold promise in changing youth norms and attitudes about
seatbelt use. Parental involvement is absolutely critical. Children who
observe their parents using seatbelts and obeying traffic laws are more
likely to adopt these lifesaving habits.
Vincent and Laura Marchetti imparted this wisdom to their daughter
and even prevented her from getting her license until she was 6 months
beyond her 16th birthday. They instilled a sense of responsibility in
her and practiced driving under all sorts of conditions, but it was not
enough.
Technological advances have proven to be one of the most promising
catalysts for increased seatbelt use. A study commissioned by NHTSA
found that while enhanced safety belt reminders such as buzzers, lights
and dashboard messages are aimed at the general population, they may be
particularly effective for teenagers. Because teens tend to forget to
fasten their seatbelts and are less likely than adults to disengage
warning systems, they may be more likely to be persuaded to buckle up
by these annoyances.
Mr. Speaker, I encourage the automobile industry to help address this
problem by increasing and expanding the manufacture of vehicles with
warning systems that do not disengage until the seatbelt is fastened.
These systems may save precious young lives.
Mr. Speaker, I didn't know Katie personally, but through my
discussions with her parents and brother who are in Washington this
week, I know what a special young woman she was. I grieve with them and
the rest of their family for their loss. I admire the strength and
perseverance of the Marchettis to channel this grief into educating
teenagers and their parents about the importance of seatbelt use
through the Katie Marchetti Memorial Foundation. I rise today to join
their call and to plead with all Americans to ``cross it, click it and
live.''

____________________

THE BIG CHILL IN WASHINGTON, D.C.

Mr. McDERMOTT. Mr. Speaker, I ask unanimous consent to speak out of
turn.
The SPEAKER pro tempore. Without objection, the gentleman from
Washington (Mr. McDermott) is recognized for 5 minutes.
There was no objection.
Mr. McDERMOTT. Mr. Speaker, it is awfully cold in Washington, D.C.
these days, and the arrival of spring is not going to change the frigid
temperature beginning to grip the Nation's Capital.
No matter how much we stand in the bright sunlight, Washington, D.C.
is fast becoming a cold, cold place under this President and
administration.
The Big Chill is on and it is becoming an ice age for the ``People's-
Right-to-Know.''
The New York Times and The Washington Post recently won Pulitzer
Prizes for breaking through the administration's secrecy to inform the
American people about secret prisons and secret wiretapping.
In response, the administration wants journalism stopped. It just
gets in the way of the administration telling people only what they
want them to know.
Maintaining this veil of secrecy is so important that the
administration directed the Attorney General to see if he might invoke
the 1917 Espionage Act as a way to make the first amendment disappear.
By controlling what you know, they hope to control what you think.
It is the solution to their Iraq dilemma. You don't have to mislead
the people, as the President did, if the people simply don't know
anything at all. That is what this assault on free speech is all about.
I seek permission to enter into the Record an editorial promoted by
the Washington Times by Nat Hentoff entitled ``Chilling Free Speech.''

[[Page 7472]]

The President and his administration are doing everything possible to
impose censorship. They know that secrecy is the fastest, most
effective way to silence dissent.
If the American people know what they are doing, the American people
could make them accountable for what they are doing. But there is no
accountability for their actions, so they hide them under a blanket of
secrecy.
The President cried ``shameful'' that the Pulitzer Prize-winning
journalism had reunited the American people with the truth about secret
prisons and secret wiretapping ordered by the President and his
administration.
In other words, the truth made it out into the open, and that was not
part of their plan. The only way to account for it was to attack those
responsible for telling us. It is the centerpiece of the Republican
playbook. Attack anyone who disagrees. I know those tactics firsthand.
But the cracks are beginning to show in the Republican wall of silent
acquiescence.

{time} 1945

A rubber stamp is still being used in this Congress by the
Republicans, but many of my colleagues, my Republican colleagues, know
that their mandatory vote at the discretion of the President is not in
the best interest of the American people, and the people are beginning
to listen to other voices, when they can hear them above the clatter of
the Republican noise machine. Here is the proof.
David Wise in the Los Angeles Times recently wrote an article
entitled, ``Secrecy's Shadow Falls on Washington.'' I ask permission to
enter this article in the Record. To help the American people
understand how pervasive secrecy in the administration is, let me read
a short excerpt from Mr. Wise's article, quote, ``The National Archives
and Records Administration have been embarrassed by the revelation that
at least 55,000 documents formerly available to researchers have been
withdrawn and reclassified under secret agreements with the military
and the CIA. The deals were so secretive that the documents simply
disappeared from the shelves.'' That is the end of the quote.
At least temporarily the head of the National Archives has suspended
the disappearance of American history. It doesn't mean the threat has
passed; it just means someone is fighting to keep America free. We have
two choices, the free flow of information or the outright control of
information. America is strong because of the protections within the
free flow of information. It is guaranteed by the first amendment.
But the President and his majority want to tell you what to think
through the outright control of the information. Geoffrey Stone, author
and law professor at the University of Chicago wrote an article in the
New York Times the other day called, ``Scared of Scoops.'' Again, I ask
to enter it in the Record.
As the writer points out, the administration's primary tactic is
intimidation. When in doubt, they try to make you afraid. When
unpopular, they try to make you afraid. When they are losing their hold
on power because of their record, they tend to make you afraid. The
only reason you know this President has no energy policy for America is
because he can't hide the price of gasoline at the pumps. He would make
it a secret if he could.
Don't be surprised if the President tries to classify the price of
gasoline as a national security matter. That is his method of
accountability to the American people. None. In a Nation where free
speech is the last defense against absolute power, they don't want you
to know because the more you know, the worse they look.

[From the Washington Times, May 8, 2006.]

Chilling Free Speech

(By Nat Hentoff)

Beyond the firing of CIA officer Mary O. McCarthy for
leaking classified information to the press is a much larger
story of the administration's increasing investigation of
other such press leaks as a possible prelude to an American
version of Britain's stringent Official Secrets Act. In
February, CIA Director Porter Goss told the Senate
Intelligence Committee of the need for a grand jury
investigation including reporters who receive these leaks.
The charge against Miss McCarthy, which she denies, is that
she was a source of highly classified information for Dana
Priest's report in The Washington Post on CIA secret prisons
in Eastern Europe. Miss Priest, a 2006 winner of a Pulitzer
award for the story, has been writing about the CIA's ``black
sites'' since late 2002; and Sen. Pat Roberts, chairman of
the Senate Intelligence Committee, continually refuses to
authorize an investigation of the CIA's violations of
American and international laws in its prisons wholly hidden
from our rule of law.
Miss Priest is already subject to a Justice Department
investigation, as are New York Times reporters James Risen
and Eric Lichtblau for their disclosure of the president's
secret approval of the National Security Agency's warrantless
surveillance of Americans. (Those reporters have also
received Pulitzers this year, despite the president's
characterization of their reporting as ``shameful.'')
The administration's position has been clearly stated by
FBI spokesman Bill Carter (The Washington Post, April 19):
``Under the law, no private person (including journalists)
may possess classified documents that were illegally provided
to them. These documents remain the property of the
government.''
The law Mr. Carter cited is this administration's expansion
of the Espionage Act of 1917, which is now before the courts
in a case that can greatly diminish the First Amendment
rights of the press--and the right of Americans to receive
information about such lawless government practices as the
CIA's secret interrogation centers and the president's
violation of the Foreign Intelligence Surveillance Act in
unleashing the National Security Agency.
This espionage case--United States of America v. Lawrence
Anthony Franklin, Steven J. Rosen and Keith Weissman--is the
first in which the federal government is charging violations
of the Espionage Act by American citizens--who are not
government officials--for being involved in what until now
have been regarded as First Amendment-protected activities
engaged in by hundreds of American journalists.
Messrs. Rosen and Weissman, former staff members of the
American Israel Public Affairs Committee (AIPAC)--who have
since been fired--are accused of receiving classified
information from Defense Department analyst Franklin
regarding U.S. government Middle East and terrorism strategy.
Messrs. Rosen and Weissman are charged with then providing
that classified information to an Israeli diplomat--and a
journalist.
Government official Franklin has pleaded guilty and been
sentenced to prison. But defense attorneys for Rosen and
Weissman declare: ``Never (until now) has a lobbyist,
reporter or any other nongovernment employee been charged . .
. for receiving oral information the government alleges to be
national-defense material as part of that (accused) person's
normal First Amendment-protected activities.''
In an amicus brief to the U.S. District Court for the
Eastern District of Virginia, the Reporters Committee for the
Freedom of the Press (with which I am affiliated) says:
``These charges potentially eviscerate the primary function
of journalism--to gather and publicize information of public
concern--particularly where the most valuable information to
the public is information that the government wants to
conceal'' so that the public cannot ``participate in and
serve as a check on the government.'' (That's why the First
Amendment's freedom of the press was added to the
Constitution in 1791.)
But the judge now hearing this espionage case, T.S. Ellis
III, already said in March: ``Persons who come into
unauthorized possession of classified information must abide
by the law. That applies to academics, lawyers, journalists,
professors, whatever.'' Recently, the judge appears to be
backing off.
However he decides, and it's uncertain, Steven Aftergood--
head of the Project on Government Secrecy at the Federation
of American Scientists--says: ``To make a crime of the kind
of conversations Rosen and Weissman had with Franklin over
lunch would not be surprising in the People's Republic of
China. But it's utterly foreign to the American political
system.'' (This censorship of the press was cut out of the
Espionage Act of 1917.)
If the Supreme Court agrees with the Bush administration on
this case, we will, as Mr. Aftergood says, have to build many
more jails--and disarm the First Amendment.
____

[From the Los Angeles Times]

Secrecy's Shadow Falls on Washington

(By David Wise)

Unencumbered by a First Amendment, Britain for almost 100
years has had an Official Secrets Act to prevent leaks to the
media and to prosecute offenders, including journalists.
Some Bush administration officials and members of Congress
are casting a longing eye at the British law. If only the
United States had a similar law, their reasoning goes, the
reporters who revealed CIA-run prisons in Eastern Europe and
the National Security Agency's warrantless wiretapping of
terrorism suspects would be prosecuted instead of receiving
Pulitzer Prizes.

[[Page 7473]]

The U.S. Constitution remains a barrier to those who would
restrict the flow of information to the media--and thus to
the public. But administration policies are chipping away at
its protections. The nation is in danger of having an
Official Secrets Act not through passage of a law--although
that is a possibility--but through incremental steps.
The evidence is mounting: Judith Miller, as a reporter for
The New York Times, spent 85 days in jail after refusing to
name a confidential source in the investigation by Special
Prosecutor Patrick J. Fitzgerald into the leak of the name of
CIA officer Valerie Plame. Miller and half a dozen other
reporters have been questioned by the prosecutor.
Two former staff members of the American Israel Public
Affairs Committee, or AIPAC, a pro-Israel lobby, are on trial
in federal court on charges of conspiring to violate
espionage statutes by obtaining defense information from a
Pentagon official. Both lobbyists are civilians, and the
government does not claim they received any documents,
classified or otherwise.
The National Archives and Records Administration has been
embarrassed by the revelation that at least 55,000 documents
formerly available to researchers have been withdrawn and
reclassified under secret agreements with the military and
the CIA. The deals were so secretive that the documents
simply disappeared from the shelves.
Historian Matthew Aid, who discovered the reclassification,
pointed out that because he possesses some of the documents,
he might be in violation of the Espionage Act. Allen
Weinstein, who heads the National Archives, has halted the
documents' reclassification.
The FBI is seeking access to the papers of the late
muckraking columnist Jack Anderson to seize classified
documents in his files. Anderson broke many stories the
government tried to keep secret. His family, citing the First
Amendment, has refused the agency's request. It is unclear
how far the FBI plans to push the matter, or whether the
government will try next to examine the files of other
journalists, dead or alive.
Porter J. Goss, director of the CIA, has testified that
``it is my aim and it is my hope'' that reporters who receive
leaks on intelligence subjects are hauled before a grand jury
and forced ``to reveal who is leaking this information.'' The
CIA dismissed Mary O. McCarthy, a senior official, for
allegedly having unauthorized contacts with the media and
disclosing classified information to reporters. The agency
let stand the impression that she had leaked the story of the
CIA secret prisons for terrorists in Eastern Europe to Dana
Priest of The Washington Post, who won a Pulitzer Prize for
her account. McCarthy's attorney says she was not the source
of the story and has never leaked classified information.
Congress is considering legislation that would enable
intelligence agencies to revoke the pensions of employees who
make unauthorized disclosures. The measure also would allow
the CIA and NSA to arrest suspicious people outside their
gates without a warrant.
Although the indictment of the two lobbyists for the
American Israel Public Affairs Committee is replete with
references to ``classified information,'' the espionage laws,
with one narrow exception, refer only to ``information
relating to the national defense.'' The spy laws were passed
in 1917 during World War I. A 1951 presidential executive
order created the current system of classifying documents.
There is no law prohibiting leaks, so the government has
used the espionage laws to combat the practice. President
Clinton vetoed anti-leak legislation passed in 2000 that
would have made it a crime for a government official to
disclose classified information.
To criminalize leaks of government information simply
because the information is marked ``classified'' is absurd.
In 2004, the most recent year for which figures are
available, the government classified over 15.3 million
documents. It is hardly likely that the government has that
many real secrets to withhold from its citizens.
Unnecessarily classifying documents is a fact of life in
Washington. Many bureaucrats know that unless they stamp a
document ``secret'' or ``top secret,'' their superiors may
not even bother to read it. One agency classified the fact
that water does not flow uphill. During World War II, the
Army labeled the bow and arrow a secret, calling it a
``silent flash less weapon.''
The government's theory in the lobbyists' prosecution
could, if it stands, change the nature of how news is
gathered in Washington and how lobbyists and academics
interact with the government.
``What makes the AIPAC case so alarming,'' said Steven
Aftergood, director of the Project on Government Secrecy of
the Federation of American Scientists, ``is the defendants
are not being charged with being agents of a foreign power
but with receiving classified information without
authorization. Most Americans who read the newspaper are also
in possession of classified information, whether they know it
or not. The scope of the charges is incredibly broad.''
Officials in Washington talk to reporters every day about
matters that may, in some government file cabinet, in some
agency, be stamped with a secrecy classification. How would a
journalist be expected to know that he or she was a
``recipient'' of classified information and, in theory,
subject to prosecution under a law that was meant to catch
spies?
The original British Official Secrets Act, passed in 1911,
allowed the crown to prosecute anyone, even a journalist, who
published a railroad timetable. The act was made less
draconian in 1989, but still carries tough provisions and can
apply to journalists.
Until recently, the U.S. government applied the espionage
laws to officials who leaked, not to the recipients.
``Otherwise,'' Aftergood said, ``Bob Woodward would not be
a wealthy, bestselling author. He would be serving a life
sentence.''
____

[From the New York Times]

Scared of Scoops

(By Geoffrey R. Stone)

While tensions between the federal government and the press
are as old as the Republic itself, presidential
administrations have never been inclined to criminally
prosecute the news media for publishing information they
would rather keep secret. In recent weeks, however, the Bush
administration and its advocates, including Attorney General
Alberto Gonzales, have spoken of prosecuting The Washington
Post and The New York Times for publishing Pulitzer Prize-
winning exposes of the administration's secret prisons in
Eastern Europe and secret National Security Agency
surveillance of Americans.
Specifically, the president and some of his supporters say
reporters and publishers have violated a provision of the
1917 Espionage Act, which provides in part that anyone in
unauthorized possession ``of information relating to the
national defense, which information the possessor has reason
to believe could be used to the injury of the United States''
who willfully communicates it to any person not entitled to
receive it ``shall be fined under this title or imprisoned
not more than 10 years, or both.''
But for at least three reasons, such threats are largely
empty. First, the provision was never intended to be used
against the press. When the Espionage Act was proposed by
President Woodrow Wilson, it included a section that would
expressly have made it a crime for the press to publish
information that the president had declared to be ``of such
character that it is or might be useful to the enemy.''
Congress overwhelmingly rejected that proposal, with members
of both parties characterizing it as ``un-American'' and ``an
instrument of tyranny.''
Second, if the 1917 act were meant to apply to journalists,
it would unquestionably violate the First Amendment. Laws
regulating speech must be precisely tailored to prohibit only
speech that may constitutionally be proscribed. This
requirement addresses the concern that overbroad laws will
chill the willingness of individuals to speak freely.
Not surprisingly, because the act was drafted before the
Supreme Court had ever interpreted the First Amendment in a
relevant manner, it does not incorporate any of the
safeguards the court has since held the Constitution
requires. For example, the provision of the act is not
limited only to published accounts that pose a ``clear and
present danger'' to the nation. For this reason, it seems
clear, any prosecution of the press under it would be
dismissed out of hand by the judiciary.
Third, if Congress today enacted legislation that
incorporated the requirements of the First Amendment, it
could not apply to articles like those published by The Times
and The Post. Such a statute would have to be limited to
articles that, first, do not disclose information of
legitimate and important public interest and, second, pose a
clear and present danger. Nobody could deny that articles
like those on secret prisons and electronic surveillance of
Americans clearly concerned matters of legitimate and
important public interest; nor could the administration show
that such disclosures created a clear and present danger of
serious harm to the national security.
I do not mean to suggest that the government has no
interest in keeping military secrets or that it may never
punish the press for disclosing classified information. To
the contrary, the government may take many steps to keep such
information secret, including (in appropriate circumstances)
firing and even prosecuting public employees who unlawfully
leak such information.
Moreover, in narrowly defined circumstances, the government
may prosecute the press for disclosing classified national
security information. Such a prosecution might be consistent
with the First Amendment, for example, if a newspaper
revealed that the government had secretly broken an important
Qaeda code, thus causing that group to change its cipher. But
revelations like those in The Times and Post revealed
significant government wrongdoing and therefore are essential
to effective self-governance; they are at the very core of
the First Amendment.
Although the threats of the White House are largely
bluster, they must nonetheless be taken seriously. Not
because newspapers are really in danger of being prosecuted,
but because such intimidation is the latest step in this
administration's relentless campaign to

[[Page 7474]]

control the press and keep the American people in the dark.)

____________________

DON FRANCISCO

Ms. ROS-LEHTINEN. Mr. Speaker, I ask unanimous consent to claim Mr.
McHenry's time.
The SPEAKER pro tempore. Without objection, the gentlewoman from
Florida (Ms. Ros-Lehtinen) is recognized for 5 minutes.
There was no objection.
Ms. ROS-LEHTINEN. Mr. Speaker, I am so proud to rise today to honor
the 20th anniversary of the television personality Don Francisco and
his wildly popular show Sabado Gigante.
This show was created and is still hosted by Mr. Mario Kreutzberger,
better known as Don Francisco, and is watched every Saturday evening
by, get this, more than 100 million people worldwide.
Don Francisco's Spanish language international television show Sabado
Gigante was recognized by the Guinness Book of World Records as the
world's longest-running variety program.
After a successful 24-year run in Chile, the show's operations were
moved to the United States in 1986 when it began airing throughout the
Americas, through the prominent U.S.-Spanish television network,
Univision.
By 2001, Don Francisco had already been honored with a star on the
Hollywood Walk of Fame and The New York Times said he was, quote,
``probably the most popular and best-known Hispanic television
personality,'' end quote, and described him as ``a mix of Ed Sullivan,
Regis Philbin, Art Linkletter, Bob Barker, Geraldo Rivera and Phil
Donahue, with a dash of Oprah Winfrey's civic-mindedness.''
Don Francisco, your commitment to the U.S.-Hispanic community helped
bridge the gap between North America and our the Latin American
cultures. Your determination taught newcomers the values and the
endless opportunities that their adopted country has to offer.
Don Francisco, you have had a long and illustrious career that has
spanned many years of service, dedication, hard work and devotion not
only for Hispanics, but for all Americans across our country. Your
leadership throughout the past years has helped our Hispanic community
grow to become one of America's largest-growing populations and the
ideals that it stands for have become an intrinsic part of our country.
A stronger and more educated American population contributes to the
greatness of this wonderful Nation, making us competitive for this new
global economy in this technologically advanced society.
Your commitment to enriching the lives of others is truly
commendable. It is the perseverance and the compassion of people like
you who continue to help in the development of a stronger, healthier
and more successful community for all Hispanics in the United States.
Don Francisco, you have been such an incredible influence for all
Americans across the Americas that this tribute is much well deserved.
Your personality, your charisma, your willingness to help others and
your incredible talent have assured you a prominent place in television
history.
I congratulate Don Francisco wholeheartedly, and I wish him the very
best. Felicidades, Don Francisco and 20 more years.

____________________

JOB DESCRIPTION OF MOTHERS

Mr. EMANUEL. Mr. Speaker, I ask permission to speak out of order.
The SPEAKER pro tempore. Without objection, the gentleman from
Illinois (Mr. Emanuel) is recognized for 5 minutes.
Mr. EMANUEL. Mr. Speaker, with Mother's Day coming up, I had come
across a document on the Internet that was sent around to a number of
women, including some in my office. In honor of all the mothers across
America, I would like to read this, if I could.
A woman, renewing her driver's license at the county clerk's office,
was asked by the woman recorder to state her occupation.
She hesitated, uncertain how to classify herself. ``What I mean is,''
explained the clerk, ``do you have a job or are you just a . . . ?''
``Of course I have a job,'' snapped the woman.
``I'm a Mom.''
``We don't list `Mom' as an occupation, `housewife' covers it,'' said
the recorder emphatically.
I forgot all about her story until one day I found myself in the same
situation, this time at our own town hall. The clerk was obviously a
career woman, poised, efficient and possessed of a high sounding title
like, ``Official Interrogator'' or ``Town Registrar.''
``What is your occupation?'' she probed.
What made me say it? I do not know. The words simply popped out.
``I'm a Research Associate in the field of Child Development and
Human Relations.''
The clerk paused, ball-point pen frozen in midair and looked up as
though she had not heard right. I repeated the title, slowly
emphasizing the most significant words. Then I stared with wonder as my
pronouncement was written in bold, black ink on the official
questionnaire.
``Might I ask,'' said the clerk with new interest, ``just what you do
in your field?''
Coolly, without any trace of fluster in my voice, I heard myself
reply, ``I have a continuing program of research (what mother doesn't),
in the laboratory and in the field (normally I would have said indoors
and out).
``I'm working for my Master's (the whole darned family), and already
have four credits (all daughters). Of course, the job is one of the
most demanding in the humanities (any mother care to disagree?), and I
often work 14 hours a day (24 is more like it). But the job is more
challenging than most run-of-the-mill careers and the rewards are more
of a satisfaction, rather than just money.''
There was an increasing note of respect in the clerk's voice as she
completed the form, stood up and personally ushered me to the door.
As I drove into our driveway, buoyed up by my glamorous new career, I
was greeted by my lab assistants, ages 13, 7, and 3. Upstairs I could
hear our new experimental model (a 6-month-old baby) in the child
development program, testing out a new vocal pattern. I felt I had
scored a beat on bureaucracy. And I had gone on the official records as
someone more distinguished and indispensable to mankind than ``just
another Mom.''
Motherhood. What a glorious career, especially when there's a title
on the door.
Does this make grandmothers ``Senior Research Associates in the Field
of Child Development and Human Relations,'' and great-grandmothers
``Executive Senior Research Associates''? I think so. I also think it
makes aunts ``Associate Research Assistants.''
Please send this on to another mom, grandmother, aunt and any friends
you know.
To all those mothers who will be celebrating Mother's Day, who have
the most important profession, the most satisfying profession and
probably the only title that says in three words what all of us rely
on, to those mothers out there, thank you for what you do every day
making sure our children have a home, a place of warmth, and a place of
great values in honor of all mothers on Mother's Day.

____________________

KARA POE ALEXANDER, PH.D.

Mr. POE. Mr. Speaker, I request permission to take Mr. Jones' place.
The SPEAKER pro tempore. Without objection, the gentleman from Texas
(Mr. Poe) is recognized for 5 minutes.
There was no objection.
Mr. POE. Mr. Speaker, when born in the hot humid heat of a Texas
August in 1976, she was called a bicentennial baby in honor of
America's 200th birthday. She was the second of four children and grew
up with that second child competitive determination.
She was strongly serious as she went to elementary school. While
enjoying playing with her siblings, Kim, Kurt and Kellee Lyn, she also
liked irritating the older next-door-neighbor boy.

[[Page 7475]]

While growing up, Kara learned and liked to plant vegetables and to
take care of a large family garden. But upon entering elementary
school, she spoke some words with difficulty, and her speech patterns
were not really satisfactory. This began to affect her socially and
really bruised her young self-image.
Her third grade teacher at the Oaks Elementary School in Humble,
Texas, was determined to help this little girl and worked with her in
pronouncing those English words correctly. This little girl, Kara,
overcame this issue and speaks perfect English with an exceptional
Texas accent, another of America's dedicated school teachers helping
out one child at a time.
Anyway, Kara played on soccer teams and was on the swim team with her
brother and sisters. They spent those long Saturdays competing at swim
meets all over North Houston. Kara not only took to sports but
academics in high school. She lettered 4 years in basketball, was the
team captain, high scorer her senior year and played in the Texas State
playoffs. Volleyball and cheerleading were also activities she enjoyed
and participated in.
After doing some babysitting jobs at 15, Kara applied to work at a
local Target store while in school. On her job application, she was
asked about her job experiences and reason for leaving her previous
job. So she put, quote, ``last job, baby sitting.'' Reason for leaving,
quote, ``Kids were brats.'' Blunt truth got her the job.
She continued to tell it like it was, even to this day. At Target,
Kara Poe learned how to deal with real people in the real world by
working as a cashier. She doesn't like to admit it, but she even held
the long-time record as the fastest scanner. She has continued her
studies and studied endlessly. She played high school sports, and has
continued to work and save as much money as she possibly can.
By the way, Mr. Speaker, Kara graduated valedictorian from her high
school, Northland Christian High School in Houston, Texas. Kara, like
all the Poe kids, went to Abilene Christian University, and she worked
while in college and still was able to graduate with a grade point
average of 3.88 with a B.S. in interdisciplinary studies, English and
history.
Quite opinionated on all subjects, especially politics and sports,
being an avid Astros fan, she loves the freedoms and loves this
country.
She went on to get her Master's degree at Abilene Christian
University in English, and her GPA was a perfect 4.0. She got married
to a guy by the name of Shane Alexander; I was honored to perform that
wedding. She has a 10-month-old daughter named Elizabeth.
Mr. Speaker, this Saturday that little girl who had trouble with
speech in third grade will receive her doctoral degree from the
University of Louisville in rhetoric and composition. She has a GPA of
3.92.
At 29, she obtained her doctoral degree in less than 4 years, a
marvelous amount of time and a short time for obtaining a doctorate.
She already has a job at Baylor University in Waco, Texas, and she
will be teaching on the tenured track. She will be teaching English,
Mr. Speaker, and she will be a teacher like her mother, both her
grandmothers and her sister, Kim.
So, Kara, as your dad, I am proud of your determination, commitment
and attitude. Congratulations to you for your success in the field and
noble field of education and being a teacher. Congratulations to you
for your success in life.
That's just the way it is.

____________________

{time} 2000
LOSING GROUND ON THE WAR ON TERRORISM

The SPEAKER pro tempore. Under a previous order of the House, the
gentlewoman from California (Ms. Woolsey) is recognized for 5 minutes.
Ms. WOOLSEY. Mr. Speaker, the so-called war on terrorism has been
going on for more than 4\1/2\ years, and it looks like terrorism is
winning.
The U.S. Government released its annual survey of global terrorism
two Fridays ago. Of course, they always save the bad news for Friday,
when they hope everyone will have checked out for the weekend. The
results? The number of terrorists attacks worldwide quadrupled from
2004 to 2005, climbing over 11,000. That is 30 strikes by terrorists
every day, an average of more than one an hour.
Of the 11,000, nearly one-third took place in Iraq, and those Iraqi
attacks led to 8,300 deaths. Keep in mind, these are just civilian
casualties. These numbers don't even include the number of American
troops who have been killed at the hands of the insurgency.
Thank goodness there have been no more attacks on American soil and
nothing on the order of 9/11. Then again, if violent extremists want to
kill Americans, they don't have to infiltrate our borders. They can
make a much easier trip to Iraq, where 130,000 of our bravest men and
women are deployed.
The dirty little secret that you won't find in the report is that the
Iraq war is responsible for the proliferation of terrorism in recent
years. Our preemptive invasion strike on Iraq inspired vicious
animosity towards the United States, the likes of which we have never
seen and the likes of which we will be dealing with for years and years
to come.
The continued occupation is a rallying point for bin Laden and
everyone who already dislikes America. The war has given jihadists the
best possible propaganda tool, turning Iraq into a hotbed of terrorism.
And the way we have conducted the war has only exacerbated the problem.
The abuses at Abu Ghraib, the detention camps at Guantanamo, the secret
gulags around the world, all of these have eroded U.S. moral authority
and further radicalized the Muslim world.
The President has sold the Iraq campaign as some kind of antidote to
terrorism. The truth is just the opposite. Our presence in Iraq is
pouring gasoline on the fire instead of putting it out.
Peter Bergen, a terrorism expert at the New America Foundation, put
it this way: he said, ``The President is right that Iraq is the main
front in the war on terrorism, but this is a front we created.''
There was one part of the terrorism report that I just could not
believe. The Washington Post cites the survey as indicating that bin
Laden and al-Zawahiri are frustrated by their lack of direct control
over terrorist operations. Here is a man who is American public enemy
number one, a sadistic killer who President Bush promised to hunt down
and capture, dead or alive, and the best we can say 4\1/2\ years later
is that we have got him frustrated?
There is only one answer, Mr. Speaker: we must bring our troops home,
and we must do it at once. Every day that we persist with this
occupation is another day that the insurgency gathers strength and
further justifies itself. Every day that we stay in Iraq is a day that
we lose ground in the war on terror.
It is time for a new counterterrorism strategy like the one I have
outlined in my SMART Security proposal; one that is based on strong
intelligence and cooperation with our allies and multilateral
organizations; one that invests in homeland security and enhances
efforts to cut off financing for terrorist organizations.
Defeating terrorism will require more brains and less brawn. It
demands, first and foremost, that we bring our troops home.

____________________

MAINTAINING AIR SUPERIORITY

The SPEAKER pro tempore. Under a previous order of the House, the
gentleman from Utah (Mr. Bishop) is recognized for 5 minutes.
Mr. BISHOP of Utah. Mr. Speaker, in 1781, George Washington, even
though he had won the Revolutionary War, kept the Army intact and on
alert for 2 more years until the signing of the peace treaty, saying,
``There is nothing that will so soon produce a speedy and honorable
peace as a state of preparedness for war.''
Now, this week we will be voting on the Defense Authorization Act,
which

[[Page 7476]]

is not talking about our military in this year or the next year, but 10
and 15 years from now, because those who have our positions 10 and 15
years from now will have their military and their diplomatic options
defined by what we do on the Defense Authorization Act this week.
The United States is superpower because of the quality of the
individuals we have in our military and the technology and weapons
system that back them up. As former general and Secretary of State
Colin Powell said, ``If we go to war, we don't want to be in a fair
fight.''
Now, Operation Desert Storm in the early 1990s illustrated the
awesome air superiority we have. Afghanistan and Iraq clearly
illustrate our air superiority. In fact, the United States has had air
superiority since the Korean War. However, we have flown a military
sortie every day for the past 15 years, and it is starting to take its
toll on our equipment.
A Defense Department study recently said that there has been a 10
percent decline in the mission capable rates of our aircraft since
Desert Storm in the 1990s. Now, this 10 percent reduction is not
because we have maintenance deficiencies or trained personnel
deficiencies. It is because we are still flying the same aircraft, this
time, though, much older and with hundreds of more flight hours on the
same airframe.
In the 1990s, we took a procurement holiday in Congress and wanted to
cash in on the so-called ``peace dividend,'' which simply meant in
practical terms the defense budget was cut in favor of other Federal
spending and the new generation of fighters, the F-22s, the F-35s, were
caught in the cross-hairs of that spending practice and shoved to the
outside years, which meant we are now starting to fall behind. We were
ignoring the leapfrog of technology that is available to our systems.
We are now realizing that the F-22 and the F-35 are going to be that
which closes gaps and helps us to ensure air dominance for the
foreseeable future.
Both the 22 and the 35 employ stealth technology, which provides our
warfighters with a critical edge in any conflict, even in low intensity
battles like Iraq. Those responsible for planning the air campaign need
the protections provided by stealth fighters in protecting other non-
stealth aircraft, as well as ground combat.
The flight range of the 22 is three times the combat radius, and the
35 is projected to have more than double the unrefueled combat radius
of the fighters they would hope to replace. The avionics would allow
them for a longer stand-off, which simply means we, the good guys, can
see, detect, and shoot down the bad guys before they recognize we are
in the area, which is what we want to have in any type of combat.
These weapons systems we are talking about are incorporating high-
tech advances in composite technologies which result in more durable
aircraft parts, reduced corrosion, and lessen the needs of maintenance
in the future. What we are doing, Mr. Speaker, is planning for the
future.
In 2004, we had a program called Cope India, which revealed that
pilots outside the United States are certainly capable of achieving
very high levels of proficiency. While we don't count India as a likely
enemy, this exercise was an eye-opener for the United States in the
sense that it demonstrated the United States can no longer take for
granted that it will always be facing an inferior air adversary, even
amongst Third World nations.
Fifteen years from now we do not know whether we will be fighting a
war of terror or a conventional war. But, as Washington said, we must
be prepared for whatever circumstances may be there. Because at the end
of the day when we are compelled to take up arms to defend our freedom,
we don't want to be in a fair fight. We want our sons and daughters to
have the very best capabilities, and we want to prevail.
We must recommit as a Nation to provide the support and the resources
to properly field the next generation of fighters, the F-22 and the F-
35. We have an oversight responsibility to make sure that these
programs are carried out in a responsible manner. We need to work
together to ensure that they succeed, because they are one of the most
important foundation blocks of our future national defense.
Terrorism does not take a holiday. We cannot. We must look forward to
the future, so that 10 and 15 years down the line we will be able to
defend ourselves in an appropriate way.

____________________

A NEED FOR SELF-MADE LEADERS, NOT DERIVATIVE LEADERS

The SPEAKER pro tempore. Under a previous order of the House, the
gentlewoman from Ohio (Ms. Kaptur) is recognized for 5 minutes.
Ms. KAPTUR. Mr. Speaker, I have been asking myself why the President
of the United States really can't get a grip on policies that would
help America become energy independent here at home. Last week, as we
were looking at rising gasoline prices all across our country, he
suggested that we import, import more ethanol.
I thought about that comment and his whole administration's lack of
attention to energy independence for our country, and I sort of sat
there at my desk and thought, why would the President behave this way?
And I thought a lot about how we form our personalities and when we
take whatever occupation we get into as adults, why we behave the way
we do.
There are some personalities that result from experiences that make
you self-made, and then there are those personalities that I call
derivative personalities, and their behaviors result from a different
set of experiences, so when they get in a job they really can't command
and direct, because they have never really done it themselves.
Here is an example. I grew up in a family where our mother made our
clothing. We didn't have a lot of money, so we learned how to scrimp,
and we learned how to invent and to create. And those are learned
skills.
The President grew up in a family that was extraordinarily wealthy. I
would guess that they bought most of their clothes. In fact, I can
remember when the President, his father, didn't even know how much
socks cost in the store during one of his Presidential races. They
always bought everything. They never made. They had enough assets, he
inherited enough, that they really didn't have to learn how to be self-
made. So he doesn't have a mind that lends itself to creativity
necessarily.
We came from a family where we ran our own small business. Our dad
made his own products. We made our own sausages, our own meatloafs, our
own pickles. Dad had to do everything himself. He had to figure out how
to finance his business.
We have a President who inherited his wealth. Everything that he did,
he had this soft landing pad. He failed a number of times in businesses
that he inherited from his own family, but he never really paid the
consequences, because someone was always there to catch him and to
refinance him, even in the purchase of the baseball team that he owned,
which then he eventually sold and used those dollars to get elected
President of the United States. Most American families don't have that
kind of landing pad.
In our family, we had to earn our way to go to college, and we had to
get good grades, because there was nobody there that was going to save
you. Nobody in our family had ever gone to college before. I had to
keep good grades to keep a scholarship up for the scholarship I did
receive.
But the President's education was paid for by his family. In fact, he
was admitted to schools, based on his grades, that most Americans could
never get admitted to.
I think what these kinds of experiences do is create a different kind
of personality, a personality of people who are self-made and they know
how to create, versus a personality that is more derivative and
sometimes can't solve problems, and they look to someone else to solve
them.
So if we have an energy problem in America, the President would look
to somebody else. And he says, well, let's import the ethanol. He
doesn't really

[[Page 7477]]

think about creating a whole new industry here at home and using the
Government of the United States to help create that industry.
That is why he has proposed cutting programs. At the same time out of
one side of his mouth he talks about energy addiction, but then is
trying to use the Government of the United States to create a new
energy future for America. He really doesn't know what to do with it
when he is in command of it.
It was actually Congress that adopted the first energy title to a
farm bill. It didn't come from the administration. And if you look at
every single budget that he has offered, he talks about energy
independence, and then he cuts the programs that would lead us in that
direction.
What America really needs is a new biofuels industry as a complement
to other forms of power that we can create. But we need self-made
people to help move America in that direction. Many of our farmers are
figuring it out. We need programs to help them finance the development
of the new infrastructure and the production facilities that are
necessary to green up this industry. They need the President's help to
do it so they are not bought out by Big Oil and by companies that
really don't want them to bring up this new industry. But the President
really doesn't know how to create it. His Secretary of Agriculture
isn't doing it.
We could have programs like title IX in USDA funded at $1 billion. We
struggle to even get $25 million or $23 million in our committee, which
is laughable in terms of a trade deficit in oil of over $60 billion and
counting.
The President's Cabinet members are not energy-focused. The Secretary
of Defense said energy isn't his job. He runs the largest instrument in
this country that uses fuel, and energy independence isn't his job? He
said that to us in committee.
Mr. Speaker, we need people in our country and the Presidency and
this Congress who are self-made, not derivative, to lead America to a
new independent energy age.

____________________

{time} 2015
SENATE HEALTH WEEK

Mr. GINGREY. Mr. Speaker, I ask unanimous consent to speak out of
order for 5 minutes.
The SPEAKER pro tempore. Without objection, the gentleman from
Georgia (Mr. Gingrey) is recognized for 5 minutes.
There was no objection.
Mr. GINGREY. Mr. Speaker, I rise tonight to applaud the United States
Senate for bringing to the floor this week three critical pieces of
health care legislation. Unfortunately, only one of the three still
stands a chance to see an actual up-or-down vote on the Senate floor.
The rising cost of health care is an issue the Federal Government can
no longer afford to ignore. The Department of Health and Human Services
reports the cost of medical liability coverage and defensive medicine
alone increases the amount taxpayers must pay for Medicaid, Medicare
and other Federal health programs by as much as $56 billion a year. So
much more than the increased cost of malpractice premiums is the
astronomical cost of defensive medicine.
Mr. Speaker, the Federal Government is seeing, as is every business
and State legislature across America, their budget being crowded out by
the skyrocketing costs of health care. We no longer have the luxury to
pretend that this is not a national crisis, and it demands not only our
full attention, but our resolve to find real solutions.
Each and every year, the House of Representatives has tackled the
tough issue of controlling the cost of health care. In this body, we
have passed medical malpractice liability three times in the last 2
years. Each and every time, that piece of legislation has fallen victim
to the inaction of the Senate, and each year our health care crisis
continues to grow.
When someone we love brings a child into this world, we do not thank
a trial lawyer for his hard work. When a family member is admitted to
the emergency room after a heart attack, we do not feel relieved that
there was a trial lawyer close by. And yet unless we do something soon
to fix our medical liability system, we might discover it is far easier
to find a lawyer in our community than to find a doctor.
Guaranteeing all Americans access to quality health care should be
what drives this debate. Just think: The best medical care in the world
goes to waste if there are not doctors in our community to deliver it.
There are many stories, Mr. Speaker, too numerous to tell, of quality
physicians hanging up their stethoscopes to pursue other careers. When
they are faced with soaring medical malpractice premiums and decreasing
reimbursement, the best and the brightest are pursuing other career
paths.
Ask your neighborhood physician if they would encourage their
children to follow in their footsteps and to become a doctor. All too
often you would get a resounding ``no.''
Unfortunately, there were not enough Senators yesterday who stood on
the side of patients. There were not enough Senators yesterday who put
quality health care above partisan politics. Once again, sensible
medical malpractice reform legislation died in the Senate.
This sensible legislation is based on a proven system that is saving
health care in Texas. H.R. 5, the Health Act, common-sense reform
legislation for which I was the lead sponsor last year in this House is
also based on a successful reform model from the State of California,
that was enacted in 1978, called MICRA.
What we know, looking at these precedents is that reform works. Mr.
Speaker, look at the medical malpractice premiums in 2003 for OB/GYNs
in two different cities. In San Francisco, a city in a reform State,
California, an average OB/GYN physician would pay $40,000 a year for an
annual policy. However, an OB/GYN physician practicing in Chicago,
Illinois, a nonreform State, would pay an annual premium of $139,000.
This is not a situation that can be righted overnight, but there are
sensible reforms that provide necessary steps to transform the American
health care system, and medical malpractice reform is certainly one of
them.
Mr. Speaker, another good step towards transforming health care is
Senate bill 1955, which the Senate is currently debating. The Health
Insurance Marketplace Modernization and Affordability Act is
legislation that is similar to H.R. 525, the Small Business Health
Fairness Act, that we passed in this body. This bill was introduced by
Representative Sam Johnson, and as I say, it passed the House last
year. This legislation will reduce the cost of health benefits for
small business and the self-employed by establishing the new national
Association Health Plans, or AHPs, as they are known.
AHPs currently exist, but they are severely hampered by the
administrative burden and the high cost of having to comply with 50
different sets of State insurance laws and regulations. These barriers
have made it virtually impossible to start new plans, and they have
forced many of these plans to close, thus greatly limiting the
availability of affordable health insurance to small businesses.
Allowing an environment that will permit association or small
business health plans to flourish will strengthen our health insurance
markets by creating greater competition and more choices of health
plans for small business. Greater competition will benefit consumers by
driving down premiums and expanding access to coverage.
H.R. 525 is just another example of House Republicans showing the
American people they get it done when it comes to healthcare reform. In
regards to decreasing the cost of health care, expanding private
insurance coverage to all Americans, and increasing the quality of the
healthcare delivery system; patients across our country deserve our
undivided attention and it's time for the Senate to act, or stand
accountable.

[[Page 7478]]

____________________

ASIAN PACIFIC AMERICAN HERITAGE MONTH

The SPEAKER pro tempore. Under a previous order of the House, the
gentlewoman from California (Ms. Lee) is recognized for 5 minutes.
Ms. LEE. Mr. Speaker, I rise this evening to celebrate Asian Pacific
American Heritage Month.
Mr. Speaker, I would like to thank a great leader, our colleague,
Congressman Honda, and the Asian Pacific American Caucus, of which I am
a very proud member, for organizing later this night a special order to
honor the contributions of Asian Pacific Americans.
Mr. Speaker, I cannot help but first recall and remind us of the
great leadership of our beloved Congressman Bob Matsui, whom we all
knew so well, who led the fight for justice and reparations for
Japanese Americans who were interned in our own country.
And it is in his memory tonight that I hope we will all reflect on
the legacy and great contributions of not only Congressman Matsui, but
so many Asian Pacific Americans who played a tremendous role in the
development of our Nation.
I would like to acknowledge the late Congresswoman Patsy Takemoto
Mink, our first woman of color to serve in the United States House of
Representatives. She was a trailblazer for Asian Pacific Americans and
women and all people of color. And it is wonderful to see that her
impact is felt and that her legacy continues. We miss her tremendously.
APA Heritage Month is especially important to my congressional
district. Asian Pacific Island American culture has a very large impact
in the cities in my district. My district is the birthplace of Amy Tan,
a Chinese American woman, and the New York Times best-selling author of
the Joy Luck Club. Many have read that novel and its subsequent film
adaptation. She has received countless acknowledgments, including the
Bay Area Book Reviewers Award. Tonight, Ms. Tan's novels and short
stories are part of high schools and universities literacy curricula
nationwide.
My district is also the birthplace of Fred Korematsu, born in Oakland
to Japanese immigrants who challenged the World War II internment of
Japanese American citizens. As an American citizen, Mr. Korematsu
refused, he refused to go to an internment camp, but he was arrested.
He was sent to one in 1942 and branded a spy by newspapers. He opposed
the internment policy in the Supreme Court, but in its 1944 decision,
the Supreme Court upheld that policy. Unbelievable.
In 1983, Mr. Korematsu, appealed his conviction which a Federal court
overturned, acknowledging that the government's case at the time had
been based on misleading and racially biased information.
President Bill Clinton awarded Mr. Korematsu the Presidential Medal
of Freedom in 1998, honoring Mr. Korematsu for fighting for human
rights and ensuring the very liberties that created this great Nation.
Today, the legacy of Asian Pacific American leaders such as Ms. Tan
and Mr. Korematsu, Congressman Matsui, Congresswoman Patsy Mink is
apparent in the numerous and remarkable programs and initiatives in our
communities and especially throughout my district.
There are several that I would like to recognize, including Oakland's
Asian Students Educational Services, also known as OASES. As the City
of Oakland is one of three cities in the Bay Area that has the lowest
high school graduation rates for Asian students, this organization
works to decrease cultural gaps in education.
I would also like to recognize the Oakland Asian Cultural Center.
This center works by employing the belief that upholding cultural
traditions and honoring cultural heritage are the core of maintaining
healthy and liveable communities.
My district is also home to several of the Nation's leading health
care providers for the APA community. Asian Community Mental Health
Services, for example, is an organization that offers access to and
increases community acceptance of mental care, in which many APA
communities remain taboo.
Lastly, I would like to bring special attention to Asian Communities
for Reproductive Justice and its executive director, Ms. Eveline Shen.
Founded in 1989, ACRJ has been a long-time leader in ensuring that APA
women and girls are equipped with the tools to make important decisions
about their reproductive health. I commend Ms. Shen and the ACRJ's
dedication to assisting women to obtain America's promise of liberty
and justice for all.
Mr. Speaker, again I would like to thank Mr. Honda and the APA Caucus
for inviting me to participate later tonight in this special order. Let
us continue to unite and pay tribute to Asian Pacific Americans and
remember the importance of their outstanding contributions to our
Nation.

____________________

ASIAN PACIFIC ISLANDER AMERICAN HERITAGE MONTH

The SPEAKER pro tempore. Under a previous order of the House, the
gentlewoman from California (Ms. Roybal-Allard) is recognized for 5
minutes.
Ms. ROYBAL-ALLARD. Mr. Speaker, I am proud to stand with my
colleagues as we celebrate Asian Pacific American Heritage Month. I
thank Congressman Honda and the Congressional Asian Pacific American
Caucus for organizing tonight's special order.
Our theme for this year's festivities, Dreams and Challenges of Asian
Pacific Americans, speaks to the many generations of Asian Pacific
Americans who worked hard to overcome economic hardship, racism and
other barriers in their pursuit of the American dream.
The theme reminds us of the Chinese who endured inhumane conditions
to build our western railroads, and the Koreans who did the back-
breaking work on the sugar plantations in Hawaii. And it reminds us of
the Filipino Americans who fought bravely for our country, and the
courageous Japanese Americans who fought for their country despite the
shameful treatment toward their families in internment camps during
World War II.
This year's theme also reminds us that in spite of these hardships,
the API community has successfully met the challenges it faced and has
enhanced greatly the richness and strength of our American society.
The contributions and cultural imprint of the API community is
especially impressive in Los Angeles where many of the first Asian
American immigrants made their home.
I have the pleasure of representing the Los Angeles communities of
Little Tokyo and parts of Chinatown, and Filipinotown. As is true for
all Angelenos, my life has been enriched by the magnificent culture of
Asian Pacific Islanders and their positive impact on our city and on
our Nation.
Asian Pacific Islanders contribute to our economy in many ways. They
are leaders, for example, in our international trade. They are pioneers
in our fashion industry. They are nonprofit community leaders,
restaurateurs and small business owners. They are patriots who continue
to defend our Nation and our American way of life through the
distinguished service in our Armed Forces.
The API community also enhances our lives throughout the year with
its many cultural celebrations. In my own district of downtown Los
Angeles, I look forward to riding in the annual Nisei parade in Little
Tokyo and the Chinese New Years parade in Chinatown.
Mr. Speaker, Asian Pacific American Heritage Month is a wonderful
opportunity for our country to honor our country's API community and
its many worthy contributions. And it is a wonderful time to explore
their rich and diverse culture, customs and history.
I thank my API constituents who continue to enrich my life, the life
of Angelenos, and our Nation. I am proud to join my congressional
colleagues in paying tribute to the API community as we celebrate Asian
Pacific American Heritage Month.

[[Page 7479]]

____________________

{time} 2030
REPORT ON RESOLUTION WAIVING POINTS OF ORDER AGAINST CONFERENCE REPORT
ON H.R. 4297, TAX INCREASE PREVENTION AND RECONCILIATION ACT OF 2005

Mr. GINGREY, from the Committee on Rules, submitted a privileged
report (Rept. No. 109-458) on the resolution (H. Res. 805) waiving
points of order against the conference report to accompany the bill
(H.R. 4297) to provide for reconciliation pursuant to section 201(b) of
the concurrent resolution on the budget for fiscal year 2006, which was
referred to the House Calendar and ordered to be printed.

____________________

REPORT ON RESOLUTION PROVIDING FOR CONSIDERATION OF H.R. 5122, NATIONAL
DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2007

Mr. GINGREY, from the Committee on Rules, submitted a privileged
report (Rept. No. 109-459) on the resolution (H. Res. 806) providing
for consideration of the bill (H.R. 5122) to authorize appropriations
for fiscal year 2007 for military activities of the Department of
Defense, to prescribe military personnel strengths for fiscal year
2007, and for other purposes, which was referred to the House Calendar
and ordered to be printed.

____________________

SUBURBAN CAUCUS AGENDA

The SPEAKER pro tempore. Under the Speaker's announced policy of
January 4, 2005, the gentleman from Illinois (Mr. Kirk) is recognized
for 60 minutes as the designee of the majority leader.
Mr. KIRK. Mr. Speaker, I want to thank the House and my colleague
from Georgia for arranging for this time to talk about a new suburban
agenda for the country, one that addresses key issues before families
in America and reflects the new suburban reality of the way we live our
lives.
This Congress is well known for being home to a Rural Caucus and an
Urban Affairs Caucus. But to date we have never had a Suburban Caucus
addressing the needs of suburban families. For us at this time we
should recognize not how Americans lived in the 20th century but how
they live now in the 21st century.
In the most recent election, over half of all voters were from
suburban families, and suburban communities are under attack. They are
under attack from gangs moving to the suburbs and taking on suburban
police departments. They are under attack from Internet predators. Over
50,000 of them online at any one time attempting to contact our kids.
We see a growing wave, a disappearance of green and open space that
need to be protected. And there is a general fear held by three-
quarters of the American public that it may be more difficult for their
kids to enter the middle class than it was for them.
Five dozen Members of Congress have gathered together to put together
a suburban agenda to address these needs. And one of those Members is
representing the Atlanta suburbs, Congressman Tom Price, and a member
of Suburban Agenda Caucus, and I yield to him.
Mr. PRICE of Georgia. I thank the gentleman for yielding. I thank the
gentleman for his leadership. I appreciate the leadership allowing us
to bring this agenda forward.
When I go home, I am often times asked, How often do you get back?
How do you get that touchstone? How do you make certain that you are
staying in touch with your district? And most Members do go home every
weekend and that is important because it is important that we keep in
touch with our constituents and hear their views and their concerns.
Like most Members, I go home every week, most of us go home every
weekend, to my district which is the Sixth District of Georgia. It is a
wonderful place to represent. It is the northern suburban Atlanta area.
It is kind of the quintessential suburban district. It is full of
active and productive families, patriotic Americans, hardworking folks.
And when I am at home, yes, my constituents are concerned about the
war on terror, and, yes, they are concerned about the crisis of illegal
immigration; but, Mr. Speaker, they are also concerned about school
safety; and they are also concerned about easing the difficulty of
obtaining health care for themselves and their family and their
parents. And they are also concerned about increasing conservation of
our Nation's resources, and they are also concerned about being able to
afford a college education for their children. So tonight I am honored
to join the gentleman from Illinois. I appreciate his leadership in
this area, for what has been coined the Suburban Agenda.
I am pleased to support this agenda and this activity. I look forward
to assisting the gentleman from Illinois and others in shepherding this
legislation through the House. I am so honored to work with him in this
endeavor. I look forward to the discussion this evening.
Mr. KIRK. I thank the gentleman.
One of the critical problems we have is from powerful social
networking sites like MySpace.com and other sites that have given
online predators powerful tools to reach children. Our leader, the
author of the Delete Online Predators Act, is a Congressman from
Pennsylvania, Mike Fitzpatrick and I want to yield to him.
Mr. FITZPATRICK of Pennsylvania. Mr. Speaker, I am proud to join my
colleagues tonight as we unveil the Suburban Caucus' agenda for
America. Tonight we bring to the House floor strong forward-looking
legislation that would help America's families in some of the fastest
growing areas of our country.
I, along with our fellow caucus members, understand the issues that
suburban families face each day because each one of us lives in the
suburbs. I grew up in a place called Levittown, Pennsylvania, which
sits just a few miles north of Philadelphia. The majority of my
district is situated only 2 hours from New York City. My district
borders the Delaware River right across from Trenton, New Jersey, and I
am proud to represent neighborhoods in Northeast Philadelphia.
These are all suburban areas, places removed from cities, but
impacted by them on a daily basis. The suburbs have held a sentimental
sway in America since the fifties. Thousands of my constituents have
migrated away from New York and Philadelphia to live in my district in
search of a change of pace, the purchase of a new home, more space to
raise a family, a new economic opportunity. However, increased
urbanization has blurred the line between city and suburb, creating new
challenges that were unheard of only a decade before.
My constituents, like millions of other suburbanites, face
transportation challenges, threats from increased crime, environmental
concerns, financial worries, and concern over the state of their
children's education. In many ways they share the same concerns their
neighboring cities have, and those concerns need to be met with
attention from Congress.
The Suburban Caucus is dedicated to addressing these issues, and I am
proud to be a member of the caucus and to take part in tonight's
discussion.
Mr. Speaker, my most important job is my role as a father of six
children. In a world that moves and changes at a dizzying pace, being a
father gets harder all the time. Technology is one of the key concerns
I have as a parent, specifically the Internet and the sites my kids
visit, register with, and use on a daily basis.
The Internet is a wonderful invention. It has opened a window to the
world right in our homes. However, with the limitless possibilities
that window offers, we must be mindful of what we view and let into our
homes. One of the most interest and worrying development of late has
been the growth in what are called ``social networking sites.'' We have
all heard of them in one way or another. Sites like MySpace,
Friendster, and Face Book have literally exploded in popularity in just
a few short years. MySpace alone has just over 76 million users and
ranks as the sixth most popular English language Web site and the
eighth most

[[Page 7480]]

popular site in the world. Everyone can use these sites. Companies and
colleges, teachers and students, young and old all make use of
networking sites to connect with people electronically, to share
pictures, information, course work, and common interests. These sites
have torn down the geographical divide that once prevented long
distance social relationships from forming, allowing instant
communication and connections to take place and a virtual second life
to take hold.
For adults, these sites are fairly benign. For children, they open
the door to many dangers, including online bullying and exposure to
child predators that have turned the Internet into a virtual hunting
ground for children.
Mr. Speaker, the dangers our children are exposed to by these sites
are clear and compelling. A Department of Justice survey found that one
in five children have received an unwanted sexual solicitation from
online interests in the past year alone. Mr. Speaker, one in five
children.
The FBI reports that child pornography cases have increased more than
2,000 percent over the past decade. And MySpace, which is self-
regulated, has removed an estimated 200,00 objectionable profiles since
it started in 2003. Look closely at local and national news stories and
you will see a troubling increase in cases of child sexual assault
where sites like MySpace and Friendster were a key component in the
crime.
That is why just this evening I introduced the Deleting Online
Predators Act, H.R. 5319, as part of the Suburban Caucus agenda.
Parents have the ability to screen their children's Internet access at
home, but this protection ends when their child leaves for school or
for the library. The Deleting Online Predators Act requires schools and
libraries to monitor the Internet activities and implement technology
to protect children from accessing commercial networking sites like
MySpace.com; and chat rooms which allow children to be preyed upon by
individuals seeking to do harm to our children; and visual depictions
that are obscene or child pornography.
Additionally, the legislation would require the Federal Trade
Commission to design and publish a unique Web site to serve as a
clearinghouse and resource for parents, teachers, and children for
information on the dangers of surfing the Internet. The Web site would
include detailed information about commercial networking sites like
MySpace. The FTC would also be responsible for issuing consumer alerts
to parents, teachers, school officials, and others regarding the
potential dangers of Internet child predators and others and their
ability to contact children through MySpace.com and other social
networking sites.
In addition, the bill would require the Federal Communication
Commission to establish an advisory board to review and report
commercial social networking sites like MySpace.com and chat rooms that
have shown to allow sexual predators easy access to personal
information of and contact with our Nation's children.
Make no mistake, our children on the Internet are at risk. Predators
will look for any way to talk to children online, whether through sites
like MySpace, instant messaging, or even online games. The best defense
against these people is to educate parents and children of the dangers
that come along with the Internet and by protecting our children during
the school day. There may be no one silver bullet solution to this
problem, Mr. Speaker, but this legislation takes a strong step forward
in deleting the presence of child predators online.
It is a step that must be taken and an action that families across
the Nation expect and deserve from their United States Congress.
Mr. KIRK. I thank the gentleman who has become the leader on
protecting kids from these new powerful tools online.
Suburban families have told us consistently that they want
congressional action on education, health care, conservation and the
economy; and one of our big reforms in the area of health care is
accelerating health care information technology. I yield to my
colleague from Georgia to talk about that major piece of legislation.
Mr. PRICE of Georgia. I thank the gentleman from Illinois once again
for his leadership and for yielding on this issue.
As you mentioned, right below those top button issues for folks all
across this Nation, but especially in the suburban area, if you ask
them what is important to them, education and health care are truly
right there. They are concerned about being able to have access to
health care. They are concerned about being able to afford health care.
They are concerned about health care for their parents, and they are
concerned about the accuracy of the records that are kept regarding
health care and the portability, moving those records around.
As a physician, I practiced medicine for over 20 years; and so many
things have changed in medicine, the different medications that we use,
the different surgical procedures that we perform. The vast majority of
those were not around 20 years ago, but what is around still, not just
from 20 years ago but from 40 years ago and 60 years ago is the paper
record of one's health care. Most of us go into the doctor and the
paper chart shuffles through the office. That was not all bad in that
time, but today we can cut down on the errors in health care. We can
cut down on the cost of health care. We can improve health care access
to folks, to go from a primary care physician to a special physician by
the use of health information technology.
Our colleague, Nancy Johnson from Connecticut, is introducing, along
with the Suburban Caucus, the Health Information Technology Promotion
Act. It will result in a remarkable incentive to fully promote
electronic medical records that will cut the costs and reduce medical
errors by over 80 percent is what the statistics will tell you.
Civilian patient records in New Orleans were wiped out. One of the
things that made it so was that there was not the portability of health
care for those individuals. But the electronic records for veterans
were fully protected and available at any VA hospital.
This is just a case in point for how much advantage we could gain as
a Nation having health records available in an electronic form. Over 60
percent of Americans support this, and it is imperative that we move in
this direction for safety reasons, for access reasons, and for ease of
availability of health care for all citizens across this Nation, and
especially in our suburban areas.
So I look forward again to working with my colleague from Illinois
and all members of the Suburban Caucus and the House to promote these
positive, positive agenda items in the area of health and elsewhere.

{time} 2045

Mr. KIRK. Mr. Speaker, I thank the gentleman. We saw a dramatic
testament to the value of fully electronic medical records when
Hurricane Katrina hit New Orleans. The many civilian hospitals had not
yet upgraded to fully electronic medical records, and their record
rooms were flooded out. Many of those patients then lost their medical
histories, but the veterans in New Orleans did not have that problem.
Their records were already fully digitized, and so a veteran reporting
to a VA hospital in Houston or in Baton Rouge had their complete
medical history protected.
That is one key issue in the suburban agenda, but another is
protecting kids from predators, especially in schools. We heard of the
great tragedy of Jessica Lunsford, an example of inadequate screening
for people who come in contact with kids, and one of our experts on
this field is my colleague from the State of Florida, and I yield to
her.
Ms. GINNY BROWN-WAITE of Florida. Mr. Speaker, thank you very much.
First of all, I apologize. I have a little bit of laryngitis here, but
I wanted to join you to express my support for the suburban agenda. You
have done a great job, and I know I heard Dr. Price say that he goes
home every weekend, as most of us do.
My district in Florida, the largest city I have is all of 21,000. I
have a lot of suburban areas and areas that we call unincorporated
areas, and the suburban agenda clearly is one that my

[[Page 7481]]

constituents who are not city folk, maybe they used to be but they are
not anymore, can really relate to. One of the concepts clearly is
protecting our children. Whether it is a grandmother who lives in
Florida or whether it is a young family that lives in Florida, they all
want to make sure that children are protected.
February 23 marked the 1-year anniversary of Jessica Lunsford's
death. Her dad, Mark, and her grandparents, Archie and Ruth Lunsford,
live in Citrus County in my district. I actually lived less than 5
miles from Jessica at the time that she was murdered.
If she were still with us today, she would have been in the fifth
grade, learning about decimals and fractions, the solar system and
certainly American government. Instead, her life was taken by a sex
offender who kidnapped, assaulted, and murdered her and then buried her
in his backyard. This tragedy all of America grieved for.
The irony of it is that the perpetrator actually worked at her
school. He was hired by a company that was doing some construction work
at her school.
Congressman Porter introduced the School Safety Acquiring Faculty
Excellence Act, which would permit school districts to access FBI
criminal data before hiring new employees.
My bill, the Jessica Lunsford Act, requires offenders to wear ankle
monitoring devices if they fail to report when they move from area to
area. In addition to the current fines and jail time under the Jessica
Lunsford Act, offenders would have to wear the GPS monitoring device
for 5 years and predators for 10 years.
Probation officers right now are not provided with notification of a
probationer's sex offender status from a previous crime. My legislation
requires that that record be given to the probation officer. I am sure,
Mr. Speaker, that if the probation officer knew of this record that he
never ever would have allowed the predator to work in that school.
We need to make sure that we have this information out there and
available; and, certainly, protecting our children from those who would
do them harm, those who really are the lowest of our society, is so
very, very necessary; and I know that all of the members of the
Suburban Caucus are very, very supportive of protecting our children.
Like Dr. Price and many of you all here tonight, I, too, go home
every weekend. People are surprised to see me, but I tell them that I
do not ever want to start thinking like the Beltway mentality up here.
For that reason, I was delighted to participate and was a bit
encouraged that the Senate passed a version of the bill that we passed
here, actually that we passed to protect children. Whether there is a
conference committee or whether it is just something that is worked out
between the two chairmen of the Judiciary Committees, the Senate
chairman and our chairman here, certainly remains to be seen. But let
us make no mistake: we want to make sure that we protect our children.
I am so glad that you have included that issue in this suburban
agenda. My hat is off to you, and I am sure that all of the suburban
areas that we represent and yours will be very, very happy that we have
taken these issues on.
Mr. KIRK. Mr. Speaker, I thank the gentlewoman who lost Jessica
Lunsford in her own district.
Our leader on this issue is Congressman Jon Porter from Nevada, the
author of the School Safety Acquiring Faculty Excellence Act, and I
want to yield to him.
Mr. PORTER. Mr. Speaker, I want to thank my colleague and friend from
Illinois (Mr. Kirk) for bringing us to together as a caucus that is
focused on, I think, issues that are impacting a lot of moms and dads
across this country, especially in a part of the country, suburbia,
where a lot of these folks are busy taking their kids to school,
getting off to work and do not necessarily have a lot of time to show
up for congressional hearings.
If we look back through the history, our leadership has been very
supportive. I appreciate Mr. Hastert and Mr. Boehner for allowing us
this time tonight on these key issues.
If we look back in time, about 40-some years ago, when I was a young
man in a small Catholic grade school in the Midwest, in the community
of Humbolt, Ohio, a number of challenges for teachers and challenges
for parents and students had a lot to do with spitwads. Maybe showing
up on time for class, making sure we are on time and making sure we got
good grades, of course, was a priority; but think how things have
changed. In those days, in my little Catholic grade school, we could
not wear blue jeans with rivets because we were afraid we would scratch
the desks.
Let us fast forward today into suburbia. Today, we have children in
the classroom that are trying to deal with drive-by shooting drills.
They have drive-by shooting drills in certain schools across the
country. We have children that need our special help more than ever,
with an environment that is ever-changing, and it is not about rivets
and blue jeans. It is about worrying about the Internet, worrying about
predators, worrying about predators that stalk our students, that hang
around the playgrounds.
If you look at suburbia and inner city and communities around the
country, if you look at police files, you will see that on maps they
put dots and marks where sexual predators live and they frequent
schools and hang around classrooms and hang around the ball fields.
Well, being a parent myself, and having two children that graduated
from the public school system in the community of Nevada and southern
Nevada, I trust that when our schools open and when our schools hire
teachers, that they are going to have the best tools available to
screen teachers, to make sure that we hire the best and the brightest
to take care of our children.
We are very fortunate that the bulk of all of our teachers across
this country are absolutely some of the finest. They care about their
children, they care about the school, and they care about educating our
precious resource, that is, our kids.
I cannot imagine the pain of a parent or a child that has been
molested or taken advantage of by a teacher or a faculty member at a
school somewhere across the country. We pick up the paper every day,
and there is a story about someone that slipped through the system, a
teacher or a faculty member somewhere that has applied and has found a
job and is employed with our children and teaching our children. I will
be honest with you, I cannot imagine the pain if my child or a friend
of mine's child was molested or assaulted.
In the late 1990s, 1998, this Congress in its wisdom passed
legislation to allow for complete background checks on teachers. That
was in 1998. Unfortunately, as we fast forward, that bill which was to
provide, again, complete knowledge, complete background checks to make
sure that our teachers are safe, to date, to 2006, only 26 States are
able to use the law that we passed in 1998. Again, that law was passed
as a reason to make sure our principals, our administrators have the
right tools to check the backgrounds of teachers. Like I said,
fortunately, 26 States today are using it; 24 are not. So almost half
are not using this tool that is available.
We use Nevada as an example. Clark County School District in southern
Nevada hires around 2,000 new teachers a year, another 3,000 or 4,000
faculty members, close to 6,000, 7,000 people a year. You go across the
State, you look at our growth, we are one of the fastest growing States
in the country. We need to build 2\1/2\ new schools each month. We also
need about 2,500 new teachers, but we have run into some problems.
Unfortunately, since 1998 only 26 States are using the background
check that is available due to constitutional challenges within their
States, due to bureaucratic challenges in their States. We want to make
sure in Nevada that when we check the background of a teacher that we
have the most up-to-date, up-to-the-minute information without
barriers.

[[Page 7482]]

Well, again, unfortunately, that tool has not been available to all
the States. So I proposed legislation, and it is H.R. 4894, the School
Safety Acquiring Faculty Excellence Act, and what it does is allows
every State to have access to information, both Federal and State
information, on criminal background checks on teachers. Again,
unfortunately, some of the States that we checked with, and we are
trying to hire new teachers, due to different reasons are not able to
provide the information that we need. So I encourage that we pass H.R.
4894.
It does a couple of things. One, it gives the tools to all the States
to check backgrounds through the Federal Bureau of Investigation,
through all that information so they can feel comfortable that they are
getting the latest up-to-date information. Number two, it streamlines
the process. Some States now, although they are doing background
checks, it could take weeks or months to get information on hiring a
new teacher.
So the bill really does two things. It provides immediate access so
there are fewer barriers so our administrators can have the proper
information to make sure our students are safe, and it provides for
those States that cannot currently follow the act of 1998 to gather
that information.
Mr. Speaker, I appreciate this opportunity. There is no more precious
resource than our children. We want to make sure that our parents, our
administrators and our teachers and, most certainly, our children have
the best available to them through the teachers that we are hiring; and
with that, again, I appreciate the time.
Mr. KIRK. Mr. Speaker, I thank the gentleman from Nevada because he
is the author of the lead bill of the suburban agenda, and that will be
coming up shortly in the Congress here.
We know that, for example, in the State of Michigan, schools
unwittingly hired 2,500 people convicted of sexual assault, murder and
other felonies, exactly because these predators fell between the cracks
of the various State registries which have been established and were
not brought together in a single Federal register.
One of the great problems that we have is also the emergence of
international drug gangs moving into suburban communities. There are
over 800,000 members of drug gangs now in America. It would be the
seventh largest army in the world, and we need action to make sure that
these gangs, sometimes suppressed inside large urban cores by capable
police departments like the Chicago Police Department, are now moving
into the suburbs. This is a phenomenon that we are not immune to in
Chicagoland. It is happening all over the country, and I yield to my
colleague from Atlanta to talk about the law enforcement situation that
they face with gangs in that community.
Mr. PRICE of Georgia. Mr. Speaker, I thank my colleague for yielding.
I tell you, one of the things that excites me so about this suburban
agenda is that it addresses real issues of real people, in real life,
in real-time. Oftentimes, we deal with issues and they seem kind of out
there. They are far away, and they are issues that are difficult to get
your arms around; but I tell you, in my community, the issue of gangs
and gang violence has reared its head.

{time} 2100

When we have neighborhood meetings or you get together with PTA
groups and you talk about this, folks just shake their head. They say,
It doesn't make any sense. How can this be going on?
That is why I am so excited about the suburban agenda because what it
does is bring issues that people are talking about every single day in
our districts back at home and saying, Why can't we do something about
that? That is what Congressman Reichert has brought forward. H.R. 5291
is the Gang Elimination Act of 2006.
Will it eliminate gangs? No, but it will go a long, long way because
what it does is charge the Attorney General with identifying those
gangs that are the most egregious, that are the most violent, that are
the most threatening to our communities all across this Nation, a lot
of suburban areas, but all across this Nation and says, Let's get a
strategy down to make certain that we address these and start knocking
these gangs down, start making it so that these gangs are not able to
function in the way that they are able to function right now and not
able to threaten our families and our children.
Mr. KIRK. One of the critical problems we have, we have heard of
gangs like the Latin Kings and the Vice Lords and the Gangster
Disciples, but we have a new gang emerging called MS-13 that may have
reported, we don't know, links to international terror groups coming
out of drug activity south of the border that seem to have no
compunction with killing police officers, both on the West and East
coasts. This is not just a threat to kids in school, it is a homeland
defense issue.
Mr. PRICE of Georgia. You are absolutely right. Apparently, so many
of these gangs have a rite of passage that they institute for their
members. That rite of passage is often very violent. Sometimes it is
the murder of a member of the police force or a member of the
community.
And so this again is real-time issues, real issues that face our
communities all across this Nation each day. I am proud again to stand
with my colleagues here and I am so proud of Congressman Reichert for
his leadership on this issue. We look forward to having it passed.
Mr. KIRK. We all know Dave Reichert from Washington, who was the
national hero who tracked down the Green River killer and is someone
who understands well law enforcement challenges east of the Cascades in
Seattle.
One of the big issues we are also dealing with is a fear among
families in America that it may be more difficult for their children to
reach the middle class than it was for them. Another key item of the
suburban agenda would establish 401-kids, a tax-deferred savings
account for each child.
I want to yield to my colleague who shares Florida with the author of
that legislation, Clay Shaw.
Ms. GINNY BROWN-WAITE of Florida. I thank the gentleman for yielding.
Clay Shaw has introduced a bill called 401-kids. What it does is it
gives young families the opportunity to save for college for the
education expenses of their children tax-free. It is an awfully good
idea and one that many, many people are looking forward to taking
advantage of.
You know, when children are first born, you tend to think, Oh, it's
going to be so long, but as those of us whose children have grown now,
the time does fly by. So the best way to save, certainly whether it is
a parent or a grandparent, is by using a system similar to that which
many working people use, a 401(k) program.
Mr. Shaw's bill is one that allows you to set aside money tax-free so
it can grow, so it can help to pay for the education of our children.
And it is one that I have heard a lot of support for in my district. We
want to make sure that not only parents, but grandparents also can
participate in setting aside some money for the future education of the
generation who will be in college 18 years from now, or sooner.
One of the things that I wanted to also comment on, if you would
allow me, is if you put in the word ``gangs'' and your State into a
search engine, it is absolutely astonishing. Coming from Florida,
people may think that AARP is the only gang in town. I can assure you
that it is not. When we put this information in, we got three-and-a-
half pages of gangs that were listed. This is a problem for local law
enforcement.
Yesterday, I actually spoke to a man whose son was killed by a gang
in Pasco County. I assured him, and he hasn't heard anything from law
enforcement, this happened within the last month, that law enforcement
is not sitting by idly. Certainly they are involved with it, because it
also goes over into the hate crimes area. And the sheriff and the FBI
were all involved in this.
Unfortunately, these gangs have no morals, they have no respect for
life,

[[Page 7483]]

and they are taking the lives and terrorizing many, many communities.
That is an area that the Suburban Caucus is also focusing on and one
that is very, very long overdue.
As I say, if you put in your State and the word ``gangs,'' you would
be absolutely amazed. Who would have thought that this would happen in
Florida?
Mr. KIRK. I thank the gentlelady.
We have seen a number of gangs morph from the view that we had of
them in the 1950s coming out of cartoon images like West Side Story of
the Jets and the Sharks, a group of local toughs that no longer exist.
These gangs are all connected to international drug cartels, many times
having weapons and contacts far exceeding local law enforcement,
especially suburban law enforcement.
And now the view that they have is that they merely need to move
outside of cities where they take on smaller police departments or high
school officials and security officials that are not well experienced
with these groups to continue their operations.
Congressman Reichert's Gang Elimination Act of 2006 makes common
sense. It simply says to the Attorney General, identify the top three
national drug threat gangs and put forward a plan to the Congress to
take them down within 4 years. It sets an example of those gangs that
if you represent a near and present danger to kids and to the homeland
security of the United States, that the U.S. Government is going to
take effective action.
The suburban agenda is very much about the security of families from
gang violence. It is also about financial security. It is building a
nest egg for each child with 401-kids family savings accounts. The
Congress should build success upon success. The creation of the 401(k)
program transformed the culture of the country to promote much greater
savings and investment for people's retirement. In 2001, the Congress
created 529 college savings plans, and over 7 million Americans have
saved over $75 billion in these accounts.
The 401-kids accounts expands the tax-free savings for each child's
college education to also allow the first-time purchase of a home. This
is something that much more greatly ensures access of our children into
the middle class. That opportunity is not just to build a nest egg for
the child, it also gives an opportunity for each parent to sit down
with that child and review how their account is being built, what is
the difference between a stock and a bond and a regular savings
account, how they did this year, to build a culture of savings and
investment for the rest of the child's life.
I yield to my colleague from Georgia.
Mr. PRICE of Georgia. Thank you so much. So much of what you have
just said makes sense. You talked about common sense. We could call
this suburban agenda the common-sense agenda really, because when moms
and dads sit at home and they try to figure out how to take care of
their health or their child's safety or their child's college
education, they want to know whether or not they are going to be able
to make that happen. One of the ways to do that is obviously through
increased savings.
When Congress finds something that works, we ought to do it, we ought
to do more of it, especially when it results in greater savings and
greater prosperity for so many individuals across our land. So with the
success of retirement security and the 401(k) plans and the success of
the 529 plans that you mentioned, we ought to build on that success.
That is exactly what the 401-kids family savings account does. I
think it is important. Education really is a key to advancing in
society.
But a college education isn't right for every single person. What the
401-kids family savings account recognizes is that that money may be
best used for purchasing a first home, or for starting a new business
for a child or with a child. That is expanding the success that we have
had with the 529 plans, common-sense kinds of solutions that I think
will be embraced by this entire House and, frankly, by all of America.
Mr. KIRK. I would say that we welcome Republicans, Democrats,
everyone, to join this agenda, because while this is popular, while
people want this to happen, it hasn't happened yet. This is an
incomplete agenda, where we have not set a national strategy to
eliminate gangs; we have not established 401-kids programs; we have not
interlinked the Federal databases on sexual predators; we have not
taken sufficient action on social networking sites like myspace.com to
protect kids.
All of this, then, builds up to a set of unfinished work which the
Congress should now finish in order to protect the lives of Americans.
One of the other issues that we hear about very often from suburban
families is that we need to take greater action for conservation, that
we support the national park system, we want it to be healthy and we
want it to grow, but we also want to protect green and open space right
near home. Without action by the Federal and State governments, there
might come a day when we would drive to work or school and see an
unending series of strip malls and no green or open space taken to
protect the environment in our local communities.
The suburban agenda also contains two pieces of legislation, one by
Jim Gerlach and the other by Mike Fitzpatrick, both of Pennsylvania,
that encourages donations of open space for conservation purposes and
also protects farmland from being gobbled up in suburban communities. I
think it is critical that we embrace a future in this country of
rapidly expanding suburban communities in which families 10 and 20
years from now also see green and open space and that they do not let
inaction by the government or a climate which does not encourage the
donation of these areas, to let these key properties go.
I yield to my colleague from Georgia.
Mr. PRICE of Georgia. I thank the gentleman for yielding.
You are absolutely right. As the suburban areas expand, they often
eat up the green land and the open space that is available. Before you
know it, there is not enough parkland or open space that is left. And
you can't get it back. It doesn't come back.
I, like so many of my colleagues here in Congress, had the privilege
of serving in the State legislature. One of the bills that I was so
very proud of in the State legislature in Georgia was called the Green
Space bill. What it does is provide State resources to set aside on
future developments a certain percentage of land for open space, green
space.
I am so proud and privileged to be able to join my colleagues here in
the Suburban Caucus and my two colleagues from Pennsylvania, Mr.
Gerlach and Mr. Fitzpatrick, for promoting these bills that will
provide encouragement for the purchase of conservation easements, as it
does with Mr. Gerlach's bill, and increase tax easements to encourage
charitable contributions of real property for conservation and open
space purposes, which is Mr. Fitzpatrick's bill.
These are common-sense solutions. They are not mandates. They aren't
requirements. They aren't the heavy hand of the law. But what they are
are conservative principles being used for conservation.
I am so pleased to be able to stand with my colleagues and support
these positive steps forward.
Mr. KIRK. I thank the gentleman.
It was decisive action of this kind that saved the Wagner Farm in
Glenview, Illinois. We still celebrate the cows in that suburban
community, now intensely built up, but because of foresighted action by
the local community, that farm was preserved and it is helping educate
a number of kids in the area about different ways to live and to
preserve green space in their community.
I want to speak for a second about another bill, a bill that is later
on in the suburban agenda that defends the rights of teachers to be
able to search a child to make sure that their classroom is gun and
drug free.
A number of us, me included, hesitated seeing a child using our
training and our instinct as teachers, knowing that we probably have an
issue with a

[[Page 7484]]

child, but under Federal law and current Supreme Court decisions, we
have to show a specific suspicion toward that child before we can
execute a search of their book bag, their clothes or their locker.
I think that the country is ready to trust teachers, especially
people that are long-experienced, certified, full-time teachers, to use
their intuition and experience to defend a fundamental value, which is
that Americans have a right to a safe and drug-free school and that the
teachers and the administrators in that school know best how to
appreciate danger and handle it immediately.

{time} 2115

I recently talked with two teachers at Stevenson High School in
Lincolnshire, Illinois, where they said that they knew the children,
where they had a problem of a weapon potentially coming into the
school, but they hesitated. They hesitated because many families in the
neighborhood were lawyers, and they would worry about a big lawsuit and
jeopardizing their jobs. That hesitation so far in Lincolnshire,
Illinois, has not led to a tragedy.
But we have seen other tragedies, like at Columbine High School or in
my own district in Winnetka, Illinois, where Laurie Dann led an attack
against school kids with a gun.
Defending the rights of teachers to ensure the safety of their
classroom is what the Teacher Safety Act is all about from Congressman
Geoff Davis, and I think this once again represents commonsense action.
Why do we need to take Federal action on what should be a local
issue? Because the Federal courts have continually ruled on this issue,
and it is only by action of the Federal legislature that we can define
the rights of teachers to protect their classroom.
I yield to my colleague from Georgia.
Mr. PRICE of Georgia. Thank you so much. This is another one of those
items, as you mention, it is just common sense. When moms and dads at
home wonder why their kids are subjected to the kinds of threats that
they are at school, when a teacher stepping in at an appropriate time
could have solved that problem, it just doesn't make any sense to them.
And you mention why it needs to be done at the Federal level. When
individuals have access to Federal courts for these kinds of issues,
then it is imperative that Congress step in and act because the threat
of liability of a teacher ought not get in the way of the safety of our
children.
When you and I were going to school, our parents would say, look, I
don't care what you do, but you ought not upset the teacher. The
teacher is right. The teacher is, in essence, your parent while at
school, in loco parentis. I am not an attorney, but what that means is
that the teacher can act as the parent while the child is at school.
When the child is at home, the parent certainly is able to search the
child. So that ought to be the case at school as well. And it is
important because of the day and time that we live in. Our children are
subjected to risks that you and I never dreamed about, and so it is
imperative that adults that are on the scene, the teachers in the
classroom, administrators in the school, be trusted to make the right
decisions in these areas and not be exposed to liability, not have to
think in the back of their mind, if I do that, will I get sued. That's
just foolishness, and it threatens our children.
So I am proud once again that you brought that forward.
Mr. KIRK. What we want is to give a message to the country's teachers
that when it comes to an issue of the safety and security of kids in
the classroom, do not hesitate. Do not worry about some impending
lawsuit. Make sure that your classroom is secure. We are going to trust
your judgement as a certified teacher, as a full-time employee of the
school, to make that call and to make sure the classroom is secure.
When you look at all of this, we know that the House has long been a
forum for issues on rural issues, and those are very important issues.
We have also been a forum for issues on urban communities, and those
are vital to the future of the country.
But there is a reality in the 21st century and it is that Americans,
a majority of them, live in suburbs. Suburban families face a number of
critical problems. There are drug gangs moving into suburbs that are
seeking to take on suburban law enforcement communities that do not
have the experience of big-city departments.
There are thousands of online predators who are trying to contact our
kids using powerful engines like MySpace.com.
We are watching as green and open space disappear in the suburbs. And
millions of Americans worry that it may be tougher for their children
to enter the middle class than it was for us.
Suburban families are under attack, and they need a voice in the
Congress; and that is why this agenda is coming forward.
These are critical issues in my district of Libertyville, Illinois.
They represent commonsense, practical, grass-roots solutions coming
from the communities to the Congress in a way that we welcome
Republicans and Democrats coming together to move this agenda forward.
We will be outlining all of this in detail tomorrow: a School Safety
Acquiring Faculty Excellence Act, which helps us screen and make sure
that everyone coming into contact with kids is safe and appropriate; a
Delete OnLine Predators Act to make sure that these powerful search
engines are not put in the service of online predators; a Gang
Elimination Act, making the commonsense step forward of identifying the
top gangs that are a threat to kids and the Homeland Security of the
country and to take them down; a Health Information Technology
Promotion Act to accelerate high technology, health information
technology to make sure that your medical record, when appropriately
available, is appropriate to every doctor that you see and is in a
survivable form in case there is a fire or other catastrophe. And,
last, a 401-Kids Tax Deferred Savings Account to have more guaranteed
access of children, not just in the suburbs, but also in cities and in
rural communities into the middle class with tax deferred savings from
the day a child is born.
I yield to my colleague from Georgia to wrap up.
Mr. PRICE of Georgia. I thank you so much for yielding and for your
leadership on this issue. I want to also thank once again our
leadership, the Speaker and majority leader, majority whip, conference
Chair, for allowing us to share with the House and with the American
people tonight this exciting, commonsense suburban agenda. And it's not
just for the suburban area, but the problems and challenges that we
have in suburban America oftentimes precede those that we see
elsewhere. And so it is so very important that we move this forward,
the commonsense suburban agenda.
As I mentioned before, folks in our districts are concerned about all
the big issues, the huge issues, the war on terror, the crisis of
illegal immigration; but they are also concerned about the issues of
school safety. They are also concerned about the issues of making
certain that their children are safe when they go on the Internet. They
are also concerned about the importance of having private personal
medical records and the ease of being able to take them from one doctor
to another. They are terribly concerned about making certain that we
preserve our Nation's open space and green space. And they are
concerned about the ability that they have to assist their children in
succeeding, whether it be through starting a business or providing a
college education for them.
So I commend the gentleman from Illinois so highly for his leadership
on this issue. He has been a champion for the entire length of time,
short time, that I have been in the United States Congress. It is a
privilege to stand with you this evening, and I look forward to
shepherding with you these issues through the United States House and
Congress.
Mr. KIRK. I thank the gentleman. Tomorrow, then, five dozen Members
of Congress come together to unveil the suburban agenda, many of these
pieces

[[Page 7485]]

of legislation already with bipartisan support, and it represents
commonsense solutions addressing real issues before the country,
important issues for all families, and it represents a critical agenda
of key items of legislation addressing problems before American
families that can be done in this session of Congress.

____________________

CONGRESSIONAL ASIAN PACIFIC CAUCUS

The SPEAKER pro tempore (Mr. Inglis of South Carolina). Under the
Speaker's announced policy of January 4, 2005, the gentleman from
California (Mr. Honda) is recognized for 60 minutes as the designee of
the minority leader.
Mr. HONDA. Mr. Speaker, I would like to recognize the gentleman from
Texas, Congressman Al Green.
Mr. AL GREEN of Texas. Mr. Speaker, I rise to celebrate the
contributions of the Asian Pacific Islander American community and to
celebrate Asian Pacific American Heritage Month.
I also want to take this opportunity to thank and commend my good
friend from California, Congressman Honda, for his strong leadership as
Chair of the Congressional Asian Pacific American Caucus.
Mr. Speaker, for over 200 years, Asian Americans have played a
pivotal role in the development of our great Nation. When it was time
to build the transcontinental railroad, they were there. Chinese
immigrants were paid $28 a month to do the very dangerous work of
blasting and laying ties over treacherous terrain. It was their labor
under harsh working conditions, for meager wages, that helped in the
development and progress of our Nation.
When our Nation was drawn into war, they were there. From World War
II through the current wars in Iraq and Afghanistan, Asian Americans
have been on the front lines in our battle to defend and protect our
Nation. There are 32 Asian American Medal of Honor recipients, and
thousands of others who have served and continue to courageously serve
our Nation.
When hundreds of thousands of people were evacuated from Louisiana
and Mississippi after Hurricane Katrina, they were there. The Asian
American community in my home city of Houston joined all Americans
around the country in welcoming Katrina evacuees and assisting the
relief efforts. In Houston, the Asian American community raised more
than $200,000 for the Katrina Relief Fund and took in over 15,000
displaced Americans.
And the contributions of this community will continue far into the
future. Tomorrow, when it is time to cure the diseases of the future,
they will be there. There are more than 105,000 Asian American doctors
in the United States.
Tomorrow, when new worlds are to be explored, they will be there.
There are thousands of Asian Americans working in the space program.
And tomorrow, when it is time to elect the leaders that will guide
our great Nation, they will be there, in Congress, on the Supreme
Court, and as President. If our country is to live up to its promises
in the Declaration of Independence and the Constitution, every ethnic
group will have one of its own to serve as President.
This is why we must protect the voting rights of Asian Americans and
others to vote under the Voting Rights Act. We must win this battle
now, so that the 14 million Asian Americans, together with all
Americans, can have the equitable input that they justly deserve into
our political process.
They helped to make America great. The greatness of America rests on
the shoulders of all Americans, none more so than our Asian American
brothers and sisters.
Mr. HONDA. I want to thank the gentleman from Texas for his wonderful
words, and we shall be there.
Mr. Speaker, I would like to bring up now the gentlewoman from
California, Congresswoman Juanita Millender-McDonald.
Ms. MILLENDER-McDONALD. Mr. Speaker, let me thank my dear friend and
colleague, Congressman Mike Honda, who is just a great leader, not only
for the great State of California, but for this great Nation. He is our
chairman of the Congressional Asian Pacific American Caucus, and I
thank him for convening us here tonight.
It is with great pride and pleasure that I rise as a proud member of
the Congressional Asian Pacific American Caucus, and on behalf of the
over 80,000 Asian Pacific Americans who reside in my district in
commemoration of the Asian Pacific American Heritage Month. I am so
pleased to call him my friend, and all of my Asian friends, and I am
here to celebrate with them this great heritage month because they have
provided so much to this country.
Since the early 1800s, Asian Pacific Americans have played a
significant role in the development of our Nation. They have joined
hands with the many who came to our shores in search of opportunity,
freedom of expression and adventure to make this country what it is
today. Their work has made this country a proud country.
This year marks the centennial celebration of the first wave of
Filipino migrants to the United States. In 1906, Filipino workers came
to the United States, particularly to Hawaii, and later California, to
work in the fields as laborers.
Many Chinese and Japanese laborers who arrived in the mid-19th
century were instrumental in the completion of the transcontinental
railroad on May 10 of 1869.

{time} 2130

These workers and those who followed in their footsteps have thrived
in various fields of endeavor through their work ethic and ingenuity.
They are proud Americans. They have done extremely, extraordinarily
well in showing us what work ethic is all about.
Today, the U.S. Census reports an estimated 14 million or more U.S.
residents classify themselves as Asian Pacific Americans or having
Asian Pacific origins, and many of whom have made extraordinary
contributions to our Nation.
Additionally, the United States Census reports 1.1 million businesses
are owned by Asian Pacific Americans; 312,700 military veterans have
contributed in protecting our democracy and our democratic ideals
around the world. Our Filipino veterans are still waiting for their due
benefits, having served in World War II.
Furthermore, 46 percent of total Asian Americans and 23 percent of
Pacific Islanders' population works in management, professional and
related occupations. I am so pleased to know that they are in our
legislatures. They are judges. Of course, they are business people.
They are teachers. They have made profound progress and extraordinary
contributions to this country.
The figures show that Asian Pacific Americans have attained high
levels of education, employment and high median household incomes.
However, Mr. Speaker, many Asian Pacific Americans have yet to achieve
their American dream. Twenty-three percent of the Asian Pacific
population lives in poverty.
Attention needs to be given to Asian Pacific Americans who, because
of inadequate skills like my Cambodian constituents, find themselves
working just to make ends meet. We must work to provide job training
and other community-based programs that will allow all of our citizens
to fulfill their potential.
Asian Pacific Americans also face significant health disparities.
They account for over half of the 1.4 million chronic hepatitis B cases
in the United States, and they also suffer from high rates of diabetes,
cervical and liver cancers.
Furthermore, the incidence of HIV/AIDS is on the rise in Asian
Pacific women. The work that I do on my HIV/AIDS and my 5K AIDS Walk
with various Asian Pacific organizations seeks to address this.
Some progress has been made in addressing Asian Pacific American
health issues, the availability of Asian and Pacific Islander cancer
education materials; Web tools that provide cancer information
materials in Asian and Pacific Islander languages for those with
limited English is a good start, but more needs to be done to address
access to affordable health care.

[[Page 7486]]

For example, 50 percent of Asian Pacific Americans are medically
underserved since the cost of health insurance is a major barrier to
Asian Pacific Americans who are either self-employed or working for
small businesses that do not provide employee-sponsored health
coverage.
As we celebrate May as Asian Pacific American Heritage Month, we must
celebrate the legacy, the culture, the rich traditions and achievements
of our Asian Pacific Americans, as well as reflect on the challenges
faced by their community. This is an excellent opportunity, Mr.
Speaker, for all of us here in this House to celebrate these rich
cultures, as well as to strive to address the health and education
challenges that confront them in our great Nation.
My commendation to all Asian Pacific community groups, especially
those in my district, that have worked tirelessly to promote, assist
and improve the lives of all Asian Pacific Americans and all Americans.
Mr. Speaker, I would like to thank my dear friend, Congressman Mike
Honda, for putting together this special order tonight and his
outstanding and extraordinary leadership representing Asian American
Pacific Islanders across this country and the profound group of people
whom I call my sisters and brothers. He is the chairman of our caucus,
and I am pleased to be a part that caucus.
Mr. HONDA. I thank my gracious colleague from California for your
wonderful words.
Mr. Speaker, I would like to rise today to recognize the Asian and
Pacific Islander community and to commemorate Asian Pacific American
Heritage Month.
As Chair of the Congressional Asian Pacific American Caucus we call
CAPAC, I feel privileged to be here tonight to speak of the Asian and
Pacific Islander history and accomplishments. Additionally, I will be
highlighting those issues affecting our communities and the priorities
for CAPAC.
Mr. Speaker, I would like to take a moment to acknowledge and
remember extraordinary community leaders, long-time friends of the APIA
community that we have lost this year, Judge Delbert Wong and
journalist Sam Chu Lin.
Sam Chu Lin, who began reporting in the 1960s, worked as a
correspondent for CBS and Fox. Sam Chu Lin was also a respected print
journalist, writing columns and articles on Asian Pacific affairs for
Asian Week, Rafu Shimpo and the San Francisco Examiner.
Judge Delbert Wong was the first Chinese American judge in the
continental United States. Delbert Wong was a fourth generation
American of Chinese heritage. After earning his undergraduate degree in
business at U.C. Berkeley, Wong served in World War II as a B-17
navigator and was awarded numerous medals.
After the war, Judge Wong faced a choice between joining his family's
grocery business or entering law school. This was not met with much
support from his parents, who would say, Who would hire you, a Chinese,
they would constantly say. Undeterred, Wong completed his law degree in
1948, becoming the first Chinese American graduate of Stanford Law
School.
After graduation, he was appointed deputy legislative counsel,
serving the California State legislature in Sacramento and later
appointed deputy attorney general, becoming the first Asian American to
hold those positions.
In 1992, Congress passed a law that officially designated May of each
year as Asian Pacific American Heritage Month.
I want to thank the following people who have worked to designate May
as Asian Pacific Heritage Month: the late Congressman Frank Horton from
New York; my good friend, Secretary of Transportation, Norman Mineta;
Senators Daniel Inouye and the late Senator Spark, or Sparky,
Matsunaga.
Some important dates include the first 10 days of May, which coincide
with two important anniversaries, the arrival of Japanese American
immigrants on May 7, 1843 to California, settling in El Dorado County;
and the completion of the transcontinental railroad on May 10, 1869, by
the Chinese laborers.
The first APIA settlement in this country dates to 1763 when
Filipinos escaped imprisonment aboard Spanish galleons and established
a community near New Orleans.
Today, the APIA community is one of the fastest-growing populations
in the country, with over 13 million APIAs living in the U.S. and
representing 4.5 percent of the total U.S. population.
My home State of California has both the largest APIA population,
approximately 4.6 million, and the largest numerical increase of APIAs
since April of 2000.
Mr. Speaker, this year's theme for Asian Pacific American Heritage
Month, Dreams and Challenges for Asian Pacific Americans, reflects
hardships overcome by the APIA community while highlighting the hope we
maintain as we contribute to the prosperity of this great Nation.
This year, I would like to particularly honor the centennial
celebration of Filipinos in Hawaii and the 50th year since Dalip Singh
Saund became the first Asian American Sikh to be elected to the U.S.
Congress.
On December 20, 1906, a group of Filipino plantation workers arrived
in Hawaii aboard the Doric, leading the first wave of Filipinos to
migrate to Hawaii. The first group of Filipinos was followed by
subsequent waves of Filipino immigrants who came to settle in Hawaii
and, also, other parts of the United States, contributing to a
migration pattern that continues up to this day.
Today, Filipinos with their rich culture and heritage have become a
positive influence on mainstream life in Hawaii, with many of them
succeeding prominently in their respected professions, in business,
politics, government, the academe and the arts.
2006 also marks the 50th year since Dalip Singh Saund became the
first Asian American to be elected to the U.S. Congress. While in
office, Dalip Singh Saund forged a measure that allowed South Asians to
become U.S. citizens.
As our community expands, we must also continue to educate our fellow
citizens about the uniqueness of our experiences.
The APIA community is often misperceived as monolithic. Our community
is extremely diverse in our languages, ethnicities and culture.
Aggregating such a large and diverse group makes it difficult to
understand the unique problems faced by the individual and subgroups,
such as the Southeast Asian Americans, who are refugees that fled their
home countries in the late 1970s and the early 1980s.
As a country, we need to better address the needs of the APIA
community when we discuss disaster preparedness, comprehensive
immigration reform, voting rights, education, health issues and
veterans.
National disasters such as the September 11th terrorist attacks,
Hurricane Rita and Hurricane Katrina, exposed serious gaps in the
delivery of public services to limited-English-proficient communities,
or LEP communities. In fact, the lack of linguistic and culturally
competent services within FEMA and related Federal agencies prevented
many LEP individuals from accessing critical disaster-relief services
such as cash assistance, health care, mental health care, housing and
small business loans.
As a result, at least 15,000 families from the gulf coast suffered
unnecessary hardships. Many of the Asian Americans in the gulf coast
region, hit by Katrina, were shrimpers and fishermen and were
significant contributors to the local economy and fishing industry for
years.
Plaquemines Parish in southern Louisiana is one of the locations of
the main fishing and shrimp sites. Plaquemines Parish commercial
landings average $441,181,891 in retail annually. Plaquemines Parish
has an average annual landing of 28.8 million pounds of shrimp, valued
at $238.3 million in retail value.
Extensive reports from FEMA community relations and local fishermen
determined that all but 20 percent of

[[Page 7487]]

the fishing boats were destroyed in the hurricanes. In order for these
families to go back to their old way of life, approximately 430 boats
must be repaired and in the water before shrimp season begins May 15.
Many of the fishermen, due to cultural and linguistic barriers, were
not accustomed to the American way of accessing public assistance,
navigating the intricacies and bureaucracies of public agencies and
commercial transactions. The fishermen have been denied Small Business
Administration loans, which would help them rebuild their boats, due to
the fact that they need to buy insurance prior to getting a loan. But
one cannot buy insurance for a boat until it is in a working order.
Fishermen must also prove that they can pay back the loan. But
without income, SBA is reluctant to give loans. Due to the
complications of the system and of the linguistic and cultural barriers
that are posed to them, the Asian Pacific community faces an even
bigger struggle.
This month, I will introduce legislation to improve disaster relief
and preparedness services for individuals with limited English
proficiency by requiring the Federal Emergency Management Agency to
bolster Federal resources and outreach to community organizations that
serve the limited-English population.
Mr. Speaker, our Nation was founded by immigrants who valued freedom
and liberty, who sought to be free from persecution, from a tyrant
government. Families fled their home countries to seek refuge in this
great Nation, because they too believed in liberty, justice and freedom
for all.
APIA families who seek to be reunited with their family members
overseas have not seen their dreams come true because of our broken
immigration system. Over 1.5 million Asians are caught in the family
immigration backlog, and immediate family members from overseas wait as
long as 10 years to reunite with their families in the U.S.
Mothers and fathers wait to reunite with their children. But due to
the long years of waiting, their children may have already reached the
age of 18, and their families will have to start the process all over
again.
As we honor the 41st anniversary of the Immigration Nationality Act
of 1965 and the 31st anniversary of the Refugee Act of 1975, we need to
remember that our country was founded and created to protect our
freedom and civil liberties.

{time} 2145

I believe we need comprehensive immigration reform to fix our broken
immigration system.
Mr. Speaker, I would like to take a break in my presentation to offer
the microphone and the floor to our Democratic leader, a great leader
from the State of California, from the great City of San Francisco,
someplace where you always leave your heart, our leader, Nancy Pelosi.
Ms. PELOSI. Thank you very much, my colleague, Congressman Honda, the
distinguished Chair of the Asian Pacific American Caucus. I am pleased
to join you, and I thank you for your leadership in calling this
Special Order to acknowledge Asian Pacific American Heritage Month. It
is a time when we can focus on and sing the praises of the
contributions of the Asian Pacific American community to our great
country. I wish to associate myself with your extensive remarks and
praise of the proud community that you are a part of and thank you for
your leadership in the Congress.
I was interested in your comments, where you talked about Katrina and
what happened at a time of natural disaster. As you acknowledged, I
represent the great City of San Francisco in the Congress, and we are
blessed in our community with a large Asian Pacific American community.
They have built our city. They have been part of its growth and its
success.
This year, we observed the 100th anniversary of the 1906 earthquake.
At that time, it was a sorry, sorry sight to see, San Francisco.
A black mark on that time, but one that was averted, but was
suggested, was when the earthquake came and the city burned, thousands
of people were displaced in downtown San Francisco's Chinatown. It was
a horrible thing. There were those in the press who suggested, who
wrote in the daily metropolitan journals which were published almost
immediately, they suggested that now might be a good time to get rid of
Chinatown, get rid of foreigners and everything that went with it. Of
course, they had their eye on this prime real estate that was Chinatown
right in the heart of downtown San Francisco. But their motivation was
not only commercial; it was also racist, quite frankly.
Fortunately, the city leaders at the time rejected that unfair notion
and Chinatown was rebuilt, and it is such a magnificent part of our
community to this day. It attracts visitors from all over the world and
all over California because it is such a magnificent place. It is so
invigorating to go there. When you do, you are constantly reminded of
the contribution that our Asian Pacific American community makes to
America.
We talk about family values. The Asian Pacific Americans take the
lead. Their coming to our shores, whether it was over a century ago to
build the railroads, whether it is a few days ago, each one of them
brings to our community family values, this wonderful optimism and
determination for a better future for their children, this courage.
Imagine the courage to leave home to come to America, no matter when it
was or is now. And they bring a commitment to community, to academic
success. They make America stronger, and we owe a great debt of
gratitude to the Asian Pacific Americans in this regard. As I say, I
see it firsthand in my own community.
But how similar it was in 1906, when the earthquake came and there
were those, for whatever reason, who thought this was a good idea to
change the community that was San Francisco. Fortunately, it was
rejected.
Sadly, it resembled some of the rhetoric following Katrina in New
Orleans; and hopefully those notions will be rejected as well, because
as we rebuild these cities, we must always remember to rebuild the
communities that strengthen them.
I am proud to pay tribute to AAPI leaders in my City of San Francisco
who have recently passed away since we had this meeting last year, but
leave their legacies. George Wong was a pioneer in the labor movement
who worked until his death to ensure that workers' rights were
protected.
The Godmother of San Francisco's Japantown and a leading community
activist, ``Sox'' Kitashima, she was just fabulous, Sox was, a driving
force behind the Japanese American redress movement.
The late Joe Yuey distinguished himself during his 100 years of life
as Asian art enthusiast, amassing a collection that is part of the
world-renowned San Francisco Asian Art Museum.
Jade Snow Wong was a famous author, ceramicist and businesswoman,
whose book ``Fifth Chinese Daughter'' is included on school reading
lists across our Nation.
The legacy of all these outstanding people is one that must be
carried on as an example for other Americans to follow.
And let us also remember this year as the centennial of Filipino
immigration to the United States. My colleague Mr. Honda has referenced
the magnificent contributions of the Filipino American community.
The first Filipinos arrived on the shores of Hawaii to work on the
sugar plantations in 1906, again, 1906, a year fraught with meaning,
with the belief that a better life could come from hard work and
determination. Filipinos continued migrating to the United States, as
they are now the second largest AAPI population, making remarkable
contributions to our country.
My colleagues have referenced the great contributions, not only the
Chinese, the Japanese, the Vietnamese, Cambodians, people from Laos,
from South Asia, from India and Pakistan and from so many places in
Asia, so different one to the next of these groups, the Korean
Americans, the list

[[Page 7488]]

goes on. They all make a wonderful contribution, and we should
acknowledge all of it.
I am very pleased to share in this Special Order with you, Mr. Honda,
because you, frankly, laid out some of the problems and challenges that
were faced by the community over time.
I am proud to serve with you, and I am proud to serve with Eni
Faleomavaega and our colleagues Congresswoman Matsui and David Wu, with
you and others.
I also want to acknowledge the loss of our dear friend, Bob Matsui,
whom we served with. Over a year-and-a-half ago he left us, but his
inspiration is still with us here. And Patsy Mink. There can be no
discussion of Asian Americans in Congress without mentioning the
exceptional leadership of Congresswoman Patsy Mink, who served from
Hawaii.
The list goes on and on, and the legacy does too. But the future is
brighter because of the contributions of the Asian Pacific American
community, and it is appropriate that this heritage month be
established and be commemorated.
Mr. HONDA. Thank you, madam leader.
Mr. Speaker, if I may just suspend my remarks and invite my colleague
from American Samoa to share his comments with us, the great
Congressman who has been here for quite a few years, Congressman Eni
Faleomavaega.
Mr. FALEOMAVAEGA. Mr. Speaker, I would like to thank my colleague and
dear friend, the gentleman from California, Mr. Honda, who is managing
this Special Order, but more especially also as an outstanding leader
in our Asian Pacific American community and currently serving as
chairman of our Asian Pacific Congressional Caucus.
I want to also commend our Democratic leader, Ms. Nancy Pelosi, for
her outstanding remarks. The fact that she also is a Member who has one
of the largest constituencies in not only the State of California of
our Asian Pacific American community, but, as Ms. Pelosi was making her
statement, I recalled also her predecessor, someone whom I have had the
highest admiration and respect for, a giant of a man not only in his
ways but as an example, with a real great sensitivity and compassion
for the needs of the Asian Pacific American community people, none
other than the late Congressman Phil Burton.
I would also like to commend my colleagues, Congresswoman Juanita
Millender-McDonald and Congressman Al Green, for their outstanding
remarks this evening in this Special Order.
Mr. Speaker, I rise today in celebration of the Asian Pacific
American Heritage Month to acknowledge the contributions of our Asian
Pacific American individuals and communities to the success of our
great Nation. I commend my colleagues who founded this celebration in
1977 by introducing a resolution calling upon the President to proclaim
the first 10 days in May Asian Pacific Heritage Week, former
Representatives Norm Mineta and Frank Horton, and Senators Daniel K.
Inouye and Senator Spark Matsunaga.
I think we need to also understand, Mr. Speaker, the dynamics. Those
of us who are Americans, and we are very, very proud of being
Americans, but whose roots are from the Asian Pacific region, and the
dynamics of why the Asian Pacific region is so important, it is in our
national interests, not only our national security, the economics, just
about every phase of what is really critically important in our Nation
in dealing with this region of the world which, by the way, two-thirds
of the world's population is the Asian Pacific region. Six of the 10
largest armies in the world are in the Asian Pacific region. Our trade
with the Asian Pacific region is four times greater than any other
region in the world, including especially that of Europe.
I am reminded a couple of years ago what Senator Inouye said, for
every one 747 that flies between the Atlantic and the United States,
four 747s fly between the Asian Pacific region and our country.
Mr. Speaker, the Asian Pacific American community is vibrant and
growing with an estimated 14 million Asian American residents and
another 975,000 Pacific Americans. I am proud to be a member of this
Asian Pacific American community, a community that has produced so many
inspiring individuals. In government, in the military, in the sciences,
sports, entertainment, business, you name it, we have it.
In government, for example, especially from the great State of
Hawaii, among the first, I guess you might say, U.S. Senator Hiram
Fong, Senator Daniel Inouye, Senator Daniel Akaka, the first elected
Asian American Governor of any State, Governor George Ariyoshi, our
first native Hawaiian Governor, Governor John Waihee, our first
Filipino American Governor, Governor Ben Cayetano.
We also have Mayor Neal Blaisdell, and the newly elected mayor of the
city and county of Honolulu, Mufi Hannemann. We also have Lieutenant
Governors Jimmy Kealoha and Duke Ainoa. Norm Mineta, a good friend of
mine who is not only partly responsible for initiating this Heritage
Month, but was always the first Asian Pacific American mayor of a major
U.S. city like San Jose, he was also the first Asian Pacific American
to be a member of a Presidential Cabinet when he was appointed as
Secretary of Commerce in the year 2000 by former President Clinton and
now is U.S. Secretary of Transportation appointed by President Bush.
Elaine Chao, another first. Secretary Chao is the first female Asian
American Cabinet member, appointed Secretary of Labor by President
Bush.
Gary Locke, first Asian American Governor on the mainland United
States, elected Governor of the State of Washington in 1996. And I
could never forget and my deepest respect to the late Congresswoman
Patsy Mink, first Asian American female elected to the U.S. Congress
since 1964. Then our late colleague and friend, my dear friend, the
late Congressman Bob Matsui, who inspired me and mentored me throughout
our time here together as a senior member of the House Committee on
Ways and Means.
As a Vietnam veteran, Mr. Speaker, it would be ludicrous for me not
to say something to honor the hundreds of thousands of Asian Pacific
Americans who have and continue to serve in all the branches of the
armed services of our Nation.
I would like to share with you the contributions of tens of thousands
of Japanese American soldiers who volunteered to fight our Nation's
enemies in Europe during World War II.
Mr. Speaker, we are all aware of the fact that after the surprise
attack on Pearl Harbor on December 7, 1941, by the Imperial Army of
Japan, there was such an outrage and cry for an all-out war against
Japan. In days afterwards, our President and the Congress formally
declared war. But caught in this crossfire were hundreds of thousands
of Americans, mind you Americans, who happened to be of Japanese
ancestry.

{time} 2200

Our national government immediately implemented a policy whereby over
100,000 Americans of Japanese ancestry were forced to live in what were
called, supposedly, ``relocation camps''; I call them ``concentration
camps.'' Their lands, their homes, and their properties were
confiscated without due process of law.
It was also a time in our Nation's history that there was so much
hatred and bigotry and racism against our Japanese American community.
And yet despite all of this, leaving their wives, their parents, their
brothers and sisters behind barbed-wire fences in these prison camps,
the White House accepted the requests from tens of thousands of
Japanese Americans who volunteered to join the Army, and as a result,
two combat units were organized.
One was called the 100th Battalion, and the other was known as the
442nd Infantry Combat Group. Both were sent to Europe to fight. And I
might say that I am very, very proud to have been associated and been a
former member of the 100th Battalion, 442nd Infantry Combat Group out
of the State of Hawaii.

[[Page 7489]]

Mr. Speaker, in my humble opinion, history speaks for itself in
documenting that none have shed their blood more valiantly for our
Nation than the Japanese American solders who served in those two
combat units while fighting enemy forces in Europe during World War II.
The military records of the 100th Battalion and the 442nd Infantry
are without equal. Those Japanese American units suffered an
unprecedented casualty rate of 314 percent, and received over 18,000
individual decorations, many awarded posthumously for bravery and
courage in the field of battle.
For your information, Mr. Speaker, 52 Distinguished Service Crosses,
560 Silver Stars, and 9,480 Purple Hearts were awarded to the Japanese
American soldiers of the 100th Battalion and 442nd Infantry Group. I
find it unusual, however, that only one Medal of Honor was given.
Nonetheless, the 442nd Combat Group emerged as the most decorated
combat unit of its size in the history of the United States Army.
President Truman was so moved by their bravery in the field of
battle, as well as the tremendous sacrifices of the African American
soldiers in World War II, that he issued an executive order to finally
desegregate all of the branches of the armed services.
Senator Inouye lost his arm while engaged in battle against two
German machine gun posts, and he was awarded the Distinguished Service
Cross. After a congressional mandate to review again the military
records of these two combat units some 5 years ago, I was privileged to
attend a White House ceremony where President Clinton presented 19, 19
Congressional Medals of Honor to the Japanese American soldiers who
were members of the 100th Battalion and 442nd Combat Infantry. Senator
Inouye was one of those recipients of the Congressional Medal of Honor.
I submit, Mr. Speaker, these Japanese Americans paid their dues in
blood to protect our Nation from its enemies. It is a shameful mark on
the history of our country that when the patriotic survivors of the
100th Battalion and the 442nd Infantry returned to the United States to
be reunited with their families, who were locked up behind barbed wire
fences, living in prison camps, and could not even get a haircut in
downtown San Francisco, simply because they looked Japanese, they were
Japanese, and for that reason alone, even with their uniforms on, they
were not given the privilege of getting a haircut.
My former colleague and now U.S. Secretary of Transportation, Norm
Mineta, and the late Congressman Bob Matsui from Sacramento both spent
some of the early years of their lives in these prison camps. Secretary
Mineta told me one of the interesting features of these prison camps
was posting of machine gun nests all around the camp, and everyone was
told that these machine guns were posted to protect them against
rioters. But then Secretary Mineta observed, if these machine guns were
posted to guard us, why is it that they are all directed inside the
prison camp rather than outside it?
I submit, ladies and gentlemen, my good friends, my colleagues, the
wholesale and arbitrary abolishment of the constitutional rights of
these loyal Japanese Americans should forever serve as a reminder and
testament that this must never be allowed to occur again.
When this miscarriage of justice unfolded during World War II,
Americans of German and Italian ancestry were not similarly jailed en
masse. Some declared the incident as an outright example of racism and
bigotry in its ugliest form.
After viewing the Holocaust Museum in Washington, I understand better
why the genocide of some 6 million Jews has prompted the cry ``Never
again, never again.'' Likewise, I sincerely hope that mass internments
on the basis of race alone will never again darken the pages of the
history of this great Nation.
Now, to those who say, Well, that happened decades ago, we must say
that we have to continue to be on our guard for this kind of thing to
happen again. I remember years ago the case of Bruce Yamashita, the
Japanese American born and raised in the State of Hawaii, who was
discharged from the Marine Corps after a training program as an officer
candidate and an ugly display of racial discrimination.
The Marine Corps superiors taunted Yamashita with ethnic slurs and
told him, We do not want your kind around here, go back to your own
country. The situation was made worse when a leading officer of the
Marine Corps made a statement on the 60 Minutes program who said,
Marine officers who are minorities do not shoot, swim or use compasses
as well as white officers.
The Commandant later apologized for his remarks, but it was a little
too late. And I am really happy to know that after all of the
investigations that the Secretary of the Navy finally awarded Mr.
Yamashita his commission as an officer and a captain in the United
States Marine Corps.
The tradition continues today of the thousands of Asian Pacific
Americans who served in the armed services. Retired General Eric
Shinseki was the first Asian Pacific American four-star general who
served as U.S. Army Chief of Staff.
Our Asian American Pacific Island soldiers are fighting for freedom
in Iraq even as I speak. Just this past weekend I was privileged to
witness in Germany the swearing in of a Samoan soldier by the name of
Command Sergeant Major Iuniasolua Savusa as the Command Sergeant Major
for U.S. Army Europe and the 7th Army.
I am very proud of Command Sergeant Major Savusa for his
accomplishments. He is an inspiration and a great role model for our
youth and other Asian Pacific Americans who currently serve in the
military.
Mr. Speaker, I think at this point I want to defer to my good friend,
the gentleman from California (Mr. Honda) the manager of this special
order this evening. And I am sure that he may want to continue portions
of his statement as well.
Mr. HONDA. Mr. Speaker, I thank the gentleman from American Samoa for
adding so much information to this presentation, because I think that
when people listen and hear what it is that we are sharing with this
country, there may be many, many people out there that say, I did not
know that.
Although we talk about many firsts, accomplishments from members of
our communities, I am sure also, that those who are first expect never
to be last, that they would continue, that we would continue to
contribute to this country. And in order to contribute to our country,
we have to also defend the Constitution.
Defending the Constitution and defending the rights of our people
also entails the voting rights. This past week, H.R. 9, the Voting
Rights Act reauthorization was introduced.
The right to vote is keenly felt by the Asian and Pacific Islander
American community. Chinese Americans could not vote until the Chinese
Exclusion Acts of 1882 and 1892 were repealed in 1943. First-generation
Japanese Americans could not vote until 1952 because of the racial
restrictions contained in the 1790 naturalization law.
With the markup in Judiciary Committee tomorrow, we need to ensure
that important provisions such as section 203, which has been very
vital to the API community's ability to participate in the electoral
process, gets reauthorized in this Congress.
Language-minority citizens were often denied needed assistance at the
polls. In the 1975 amendments to the Voting Rights Act, such assistance
became required in certain situations, and we need to ensure that these
provisions continue to remain in current law.
Mr. Speaker, as Americans, we need to ensure that our children
receive a quality education, but also provide adequate teacher
training, funds for after-school and extracurricular activities and
ensuring that college is affordable for every student that deserves to
receive a higher education.
According to the U.S. Census, 50 percent of Asians age 25 and over
have a Bachelor's degree or higher level of education. However, I would
like to

[[Page 7490]]

emphasize that when we disaggregate the data, when we tease apart the
information for the API subgroups, we find that the model minority
stereotype is in fact a myth.
Only 9.1 percent of Cambodian Americans, 7.4 percent Hmong Americans,
7.6 Lao Americans, 19.5 percent Vietnamese Americans and 16 percent of
native Hawaiians and Pacific Islanders who are 25 years and older have
a Bachelor's degree.
These numbers show that we must do a better job of disaggregating
data and information about our communities to assess the needs of those
hard-working Americans who still falter behind. To address the
disparities between subgroups of the larger APIA community, we need
Congress to pass the Asian American and Pacific Islander Serving
Institutions bill, which my colleague from Oregon, Congressman David
Wu, will be introducing later this month.
This legislation will provide Federal grants to colleges and
universities that have an enrollment of undergraduate students that is
at least 10 percent APIA and at least 50 percent of its degree-seeking
students receive financial assistance.
As a caucus, we will work to increase the availability of loan
assistance, scholarships and programs to allow APIA students to attend
a higher education institution; to ensure full funding for teachers and
bilingual education programs under the No Child Left Behind law; to
support English language learners; and to support full funding of
minority outreach programs for access to higher education, such as the
TRIO programs to expand services to serve APIA students.
Mr. Speaker, a common misperception of APIAs is that, as a group, we
face fewer health problems than other racial and ethnic groups. In
fact, APIAs as a group and specific populations within this group do
experience disparities in health and health care.
For example, APIAs have the highest hepatitis B rates of any racial
group in the United States. APIAs are also five times more likely to
develop cervical and liver cancer than any other ethnic and racial
group.
According to the Census Bureau, 18 percent of APIAs went without
insurance for the entire year in 2000. This means that the uninsured
are not only more likely to go without care for serious medical
conditions, they are also more likely to go without routine care, less
likely to have a regular source of care, less likely to use preventive
services and have fewer visits per year.
At the same time, without appropriate language translation services
or properly translated materials, limited-English-proficient immigrants
cannot receive adequate care, as well as State and Federal benefits for
which they may be eligible.
In the APIA community, 76 percent of Hmong Americans, 61 percent of
Vietnamese Americans, 52 percent of Korean Americans and 39 percent of
Tongans speak limited English. Therefore, eliminating health care
disparities in the APIA community must include data collection,
linguistically appropriate and culturally competent services, and
access to health insurance.
CAPAC has been working with both the Congressional Hispanic and Black
Caucuses on the Health Care Equality and Accountability Act to
eliminate ethnic and racial health disparities for all of our
communities.
I have introduced the Health Care Equality and Accountability Act,
which will address expanding the health care safety net by diversifying
the health care workforce, combating diseases that disproportionately
affect racial and ethnic minorities, emphasizing prevention and
behavioral health and promoting the collection and dissemination of
data and enhanced medical research.
Mr. Speaker, I would also like to extend my gratitude to the
patriotic men and women serving our country in the military, including
the 60,813 APIAs serving on active duty in the U.S. armed services, as
well as the 28,066 in the Reserves and the National Guard.

{time} 2215

I also commend and thank the 351,000 APIA veterans who fought for
this country. I would like to highlight and honor the Filipino veterans
as my colleague had done who have not been compensated and recognized
for their service, which I believe is a national disservice to these
brave veterans.
As a country, it is our duty to ensure that these veterans have equal
access to all the benefits and treatment that other veterans receive.
We believe that our troops should be taken care of when we send them
into battle and that they should be given the respect when they return
home. Therefore, I stand with my colleagues, Congressman Issa and
Congressman Filner, to support their bipartisan legislation, H.R. 4574,
to restore full benefits to these veterans who fought for our Nation
during World War II. With Congressman Issa taking the lead and
Congressman Filner in a leadership position in the Veterans' Affairs
Committee, we have a great chance to get this bill to the floor in
honor of the centennial celebration of Filipinos in Hawaii and to keep
the word of Congress that we gave to these brave veterans of World War
II.
I am proud of our community's accomplishment, Mr. Speaker, and I
would like to recognize many of the APIA firsts in areas of art, film,
sports, sciences, academia, and politics. In each effort, these folks,
who were first, expect that they are not the last:
In 1847, Yung Wing, the first Chinese American graduated from Yale
University and the first APIA to graduate from a U.S. college;
In 1863, William Ah Hang, who was Chinese American, became the first
APIA to enlist in the U.S. Navy during the Civil War;
In 1944, An Wang, a Chinese American who invented the magnetic core
memory revolutionized computing and served as a standard method for
memory retrieval and storage;
In 1946, Wing F. Ong, a Chinese American from Arizona, became the
first APIA to be elected to State office;
In 1948, Victoria Manalo Draves, a Filipino American diver, became
the first woman to win Olympic gold medals in both the 10 meter
platform and the 3 meter spring board events;
In 1956, Dalip Singh Saud, the first Indian American to be elected to
Congress;
In 1965, Patsy Takemoto Mink, the first Japanese woman and woman of
color elected to Congress who championed title IX;
In 1985, Haing Ngor, a Cambodian American, became the first APIA to
win an Academy Award for his role in the movie ``Killing Fields'';
In 1985, Ellison Onizuka, a Japanese American, became the first APIA
astronaut whose life was lost in a launching tragedy.
In conclusion, Mr. Speaker, the Asian American Pacific Islander
American community continues to fight for our civil liberties and our
civil rights as Americans.
Even after the internment of the Japanese Americans during World War
II, we as a community did not grow embittered or cowed by
discrimination; instead, we progressed and moved forward. I am proud to
be a member of the APIA community because we continue to serve as
positive contributors to our many communities by investing in
education, business, and cultural opportunities for all Americans.
In closing, this Asian Pacific American Heritage Month we take pride
in our history, accomplishments, and the promise of our future as we
continue to pave the way for a better tomorrow in the name of dreams
and challenges of Asian Pacific Americans.
Mr. Speaker, the 6 years I have served here I learned that Asian
Americans have a unique contribution to make to this body and to this
country, and that we because of our history in this country uniquely
understand and recognize that our Constitution is never tested in times
of tranquility. Our Constitution is always tested in times of trauma,
terror, tension and tragedy. And to the point where we can internalize
the principles of our Bill of Rights and our Constitution, and to the
point where we understand that defending this Constitution and its
people will we be able to face as Members of this body, face
overwhelming public approval which could be wrong and

[[Page 7491]]

stand up to them, say it is wrong because it does not follow the
Constitution.
These are the kinds of heritage and contributions Asian Americans
have made, will make and continue to make in this country so that we
may fulfill the phrase in the preamble of our Constitution that says
``to form a more perfect union.''
In the words of Congressman Al Green, ``There will be a tomorrow.''
Mr. Speaker, I yield to my friend.
Mr. FALEOMAVAEGA. Mr. Speaker, how much time do we have remaining?
The SPEAKER pro tempore (Mr. Inglis of South Carolina). The gentleman
has 3 minutes remaining.
Mr. FALEOMAVAEGA. Mr. Speaker, I would like to offer my closing
remarks. I say, Mr. Speaker, when I envision America I do not see a
melting pot designed to reduce or removal racial differences. The
America I see is a brilliant rainbow, a rainbow of ethnicities and
cultures with each people proudly contributing in their own distinctive
and unique way a better America for generations to come.
Asian Pacific Americans wish to find a just and equitable place in
our society that will allow, like all Americans, to grow, to succeed,
to achieve and to contribute to the advancements of this great Nation.
I would like to close my remarks by asking all of us here this
evening, What is America all about?
I cannot think of it said better than on the steps of the Lincoln
Memorial in the summer of 1963 when an African American minister by the
name of Martin Luther King, Jr., poured out his heart and soul to every
American who could hear his voice when he uttered these famous words,
``I have a dream. My dream is that one day my children will be judged
not by the color of their skin, but by the content of their
character.''
That is what I believe America is all about, Mr. Speaker. Again, I
thank my colleague and my good friend, the gentleman from California,
for his management of this Special Order honoring all of the Asian
Pacific American community in our country and the contributions that
they have made to make our country to form a more perfect union.
I rise today in celebration of Asian Pacific American Heritage Month,
to acknowledge the contributions of our Asian Pacific American
individuals and communities to the success of our great Nation.
I commend my colleagues who founded this celebration in 1977 by
introducing a resolution calling upon the President to proclaim the
first ten days in May Asian/Pacific Heritage week--Representatives Norm
Mineta and Frank Horton, and Senators Daniel K. Inouye and Spark
Matsunaga.
The Asian Pacific American community is vibrant and growing, with an
estimated 14 million Asian American residents and another 975,000
Pacific Americans.
I am proud to be a member of this Asian Pacific American community, a
community that has produced so many inspiring individuals in
government, the military, the sciences, sports, entertainment, and
business. In government, for example: from Hawaii
Senators Hyrum Fong, Daniel Inouye, Daniel Akaka.
Governors George Ariyoshi, John Waihee, Ben Cayetano.
Mayors Neal Blaisdell and Mufi Hannemann, Lt. Governors Jimmy Kealoha
and Duke Aiona.
Norm Mineta--my good friend was not only partly responsible for
initiating APA Heritage Month, but was also the first Asian Pacific
American mayor of a major U.S. city (San Jose). He was also the first
Asian Pacific American to be a member of the Presidential Cabinet, when
he was appointed as Secretary of Commerce in 2000 by former President
Clinton and five years ago Mr. Mineta was appointed by President Bush
as U.S. Secretary of Transportation.
Elaine Chao--another first, Secretary Chao is the first female Asian-
American cabinet member, appointed Secretary of Labor in 2001, also
appointed by President Bush.
Gary Locke--the first Asian-American governor on the mainland U.S.,
elected governor of Washington, 1996.
Patsy Mink--the first Asian-American female elected to Congress, in
1964 from Hawaii.
Bob Matsui--my dear friend and colleague who inspired me and mentored
me throughout our time together here as a senior member of the House
Committee on Ways and Means.
As a Vietnam Veteran, it would be ludicrous for me not to say
something to honor the hundreds of thousands of Asian-Pacific Americans
who have and continue to serve in all the branches of armed services of
our Nation. I would like to share with you the contributions of the
tens of thousands of Japanese-American soldiers who volunteered to
fight our Nation's enemies in Europe during World War II.
Mr. Speaker, we are well aware of the fact that after the surprise
attack on Pearl Harbor on December 7, 1941, by the Imperial Army of
Japan--there was such an outrage and cry for all-out war against Japan,
and days afterward, our President and the Congress formally declared
war--but caught in this cross-fire were hundreds of thousands of
Americans--Americans mind you who happened to be of Japanese ancestry.
Our national government immediately implemented a policy whereby over
one-hundred thousand Americans of Japanese ancestry, were forced to
live in what were called relocations camps--but were actually more like
prison or concentration camps. Their lands, homes and properties were
confiscated without due process of law.
It was also a time in our Nation's history that there was so much
hatred, bigotry and racism against our Japanese-American community--and
yet despite all this--leaving their wives, their parents, their
brothers and sisters behind barbed wire fences in these prison camps--
the White House accepted the request from tens of thousands of the
Japanese-Americans who volunteered to join the Army. And as a result
two combat units were organized--one was the 100th Battalion and the
other known as the 442nd Infantry Combat Group--both were sent to fight
in Europe.
In my humble opinion, history speaks for itself in documenting that
none have shed their blood more valiantly for our Nation than the
Japanese-Americans soldiers who served in these two combat units while
fighting enemy forces in Europe during World War II.
The military records of the 100th Battalion and 442nd Infantry are
without equal. These Japanese-American units suffered an unprecedented
casualty rate of 314 percent and received over 18,000 individual
decorations, many awarded posthumously, for bravery and courage in the
field of battle.
For your information Mr, Speaker, 52 Distinguished Service Crosses,
560 Silver Stars, and 9,480 Purple Hearts, were awarded to the
Japanese-American soldiers of the 100th Battalion and 442nd Infantry
Group. I find it unusual; however, that only one Medal of Honor was
ever given. Nonetheless, the 442nd Combat Group emerged as the most
decorated combat unit of its size in the history of the United States
Army.
President Truman was so moved by their bravery in the field of
battle, as well as that of African-American soldiers during World War
II, that he issued an executive order to finally desegregate all
branches of the Armed Services.
Senator Inouye lost his arm while engaged in battle against two
German machine gun posts and he was awarded the Distinguished Service
Cross. After a Congressional mandate to review again the military
records of these two combat units 5 years ago--I was privileged to
attend the White House ceremony where President Clinton presented
nineteen Congressional Medals of Honor to the Japanese-American
soldiers who were members of 100th Battalion and 442nd Combat Infantry
group--Senator Inouye was one of those recipients of the Medal of
Honor.
I submit, Mr. Speaker, these Japanese-Americans paid their dues in
blood to protect our Nation from its enemies. It is a shameful mark on
the history of our country that when the patriotic survivors of the
100th Battalion and the 442nd Infantry returned to the United States to
be reunited with their families who were locked-up behind barbed wire
fences, living in prison camps--and could not even get a haircut in
downtown San Francisco because they all looked Japanese--despite the
fact that they too were Americans.
My former colleague and now U.S. Secretary of Transportation, Norman
Mineta, and the late Congressman Bob Matsui from Sacramento both spent
some of the early years of their lives in these prison camps.
Secretary Mineta told of one of the interesting features of these
prison camps were postings of machine gun nests all around the camp and
everyone was told that these machine guns were posted to protect them
against rioters.
But then Secretary Mineta observed--if these machine guns are posted
to guard us, why is it that they are all directed inside the prison
camp compound and not outside?
I submit, ladies and gentlemen, the wholesale and arbitrary
abolishment of the constitutional rights of these loyal Japanese-
Americans should forever serve as a reminder and testament that this
must never be allowed to

[[Page 7492]]

occur again. When this miscarriage of justice unfolded during World War
II, Americans of German and Italian ancestry were not similarly jailed
en masse. Some declare the incident as an example of outright racism
and bigotry in its ugliest form. After viewing the Holocaust Museum in
Washington, I understand better why the genocide of some 6 million Jews
has prompted the cry, ``Never Again, Never Again!'' Likewise, I
sincerely hope that mass internments of the basis of race alone will
never again darken the history of our great nation.
To those that say, well, that occurred decades ago, I say we must
continue to be vigilant in guarding against such evil today.
Not long ago, we had the case of Bruce Yamashita, a Japanese-American
from Hawaii who was discharged from the Marine Corps officer training
program in an ugly display of racial discrimination. Marine Corps
superiors taunted Yamashita with ethnic slurs and told him, ``We don't
want your kind around here. Go back to your own country.'' The
situation was made worse by the Commandant of the Marine Corps, a four
star general, who appeared on television's ``Sixty Minutes'' and
stated: ``Marine officers who are minorities do not shoot, swim, or use
compasses as well as white officers.'' The Commandant later apologized
for his remarks, but it was a little too late.
After years of perseverance and appeals, Mr. Yamashita was vindicated
after proving he was the target of vicious racial harassment during his
officer training program. The Secretary of the Navy's investigation
into whether minorities were deliberately being discouraged from
becoming officers resulted in Bruce Yamashita receiving is commission
as a captain in the Marine Corps.
The tradition continues today of the thousands of Asian-Pacific
Americans who serve in the armed services. Retired General Eric
Shinseki was the first Asian-American four-star general who served as
U.S. Army Chief of Staff. Our Asian-American and Pacific Island
soldiers are fighting for freedom in Iraq even as I speak.
Just this past weekend, I was privileged to witness the swearing in
of the Samoan soldier CSM Iuniasolua Savusa as the Command Sergeant
Major for U.S. Army Europe and the 7th Army. I am very proud of Command
Sergeant Major Iuni Savusa for his accomplishments. He is an
inspiration and a great role model for our youth and other Asian-
Pacific Americans who currently serving in the military.
Other outstanding Asian-Pacific Americans who have made significant
contributions to our nation:
Dr. David Ho--pioneered treatment for HIV/AIDS and named by Time
Magazine as its ``Man of the Year'' in 1996.
Dr. Hideyo Noguchi--isolated the syphilis germ in 1911, leading to a
cure for the deadly disease.
Dr. Subrahmanyan Chandrasekhar--Nobel Prize winner, evolution of
stars, led to modern astrophysics.
Ellison Onizuka--the first Asian-American astronaut, 1985, Died
aboard the Space shuttle Challenger in 1986.
Kalpana Chawla--Astronaut, first Indian American woman in space.
News, Sports, and Entertainment--
Ellen Nakashima--chief reporter for the Washington Post in Southeast
Asia.
Connie Chung--in 1993, became the first Asian American to be a
nightly news anchor for a major network.
Keanu Reeves--internationally renown actor.
Apolo Ohno--Olympic Gold & Silver Medalist, speed skating.
Jet Li--movie actor.
Kristi Yamaguchi--Olympic Gold Medalist, figure skating.
Dwayne Johnson--also known as the ``Rock,'' professional wrestler and
movie star--Scorpion King, Walking Tell, Doomed.
Dr. Sammy Lee, Olympic gold medalist high diver.
Greg Louganis--Olympic gold.
Michelle Kwan: Olympic Silver and Bronze medalist, Figure skating.
Duke Kahanamokee, gold medalist swimmer.
Angela Perez Baraquio: First Asian American Miss America 2001 (Miss
Hawaii).
Sarah Chang: world famous violinist.
Lucy Liu: Actress.
Bruce Lee: Martial Artist and Actor.
Tiger Woods: Golf Professional.
Michelle Wie: Professional Golfer.
Akebono (Chad Rowan): Sumo Wrestler (retired), yokozuna.
Konishiki Salevaia Afigaroe: Sumo wrestler, oyeki.
Musashimaru Peitari, Sumo wrestler, retired, yokozuna.
24 Samoan NFL football players in 2005/2006 season.
9 Native Hawaiian NFL football players.
5 Tongan Americans--NFL football players.
Mr. Speaker, when I envision America, I don't see a melting pot
designed to reduce and remove racial differences. The America I see is
a brilliant rainbow--a rainbow of ethnicities and cultures, with each
people proudly contributing in their own distinctive and unique way--a
better America for a generation of Americans yet unborn.
Asian-Pacific Americans wish to find a just and equitable place in
our society that will allow them--like all Americans--to grow, to
succeed, to achieve and to contribute to the advancement of this great
nation.
Mr. Speaker, first as an American, whose roots are from the Asian
Pacific Region, I would like to close my remarks by asking all of us
here tonight, what is America about? I think it could not have been
said better than on the steps of the Lincoln Memorial in the summer of
1963 when an African-American minister named Martin Luther King Jr.
poured out his heart and soul to every American who could hear his
voice, when he uttered these words: ``I have a dream. My dream is that
one day my children will be judged not by the color of their skin, but
by the content of their character.''
That is what I believe America is all about.

RECOGNIZING THE CONTRIBUTIONS OF ASIAN PACIFIC AMERICANS

Ms. BORDALLO. Mr. Speaker, I rise today in honor of Asian Pacific
American Heritage Month and to recognize the role that Asian and
Pacific Islander Americans play in our nation. I want to thank Mr.
Honda, the Chairman, and Mr. Faleomavaega, the Vice Chairman, of the
Congressional Asian Pacific American Caucus for their commitment to and
leadership of the Caucus and their efforts on behalf of our
communities.
Asian Pacific Islanders are leaders in academia, in the arts, in all
levels of government and the military, and in the private sector. They
contribute to all aspects of American life and, in doing so they enrich
the lives of Americans and make this country stronger. This month is
set aside to honor their successes and contributions.
As we celebrate Asian Pacific Islander traditions this month, we must
remember those pioneers who forged the path on which we walk today.
Their work, their sacrifices, and the impacts they made on America
provided the foundation of understanding of Asian and Pacific Islander
cultures, traditions, and heritage, all of which have opened doors for
current and future generations. True to this record, Asian Pacific
Islander American achievements today will inspire and support future
generations of Asian Pacific Islanders to excel tomorrow.
This year's theme is ``Dreams and Challenges of Asian Pacific
Americans.'' It is through these strong dreams that the Asian Pacific
Islander community has progressed. As we come together to celebrate
another Asian Pacific American Heritage Month, I am reminded of the
many contributions and successes of our community. The importance of
our community has been recognized by the White House. On May 13, 2004,
President Bush signed Executive Order 13339, which created the
President's Advisory Commission on the White House Initiative on Asian
Americans and Pacific Islanders. This was a significant step in voicing
the special needs of the APA community through the Executive branch of
government. One of Guam's very own was chosen to serve on this
Commission.
Martha Cruz Ruth is one of fourteen APAs appointed by the President
to serve on the President's Advisory Commission for the White House
Initiative on Asian Americans and Pacific Islanders. The Commission was
chosen based on their history of involvement with the APA community and
for their expertise in a specific field. Mrs. Cruz's specialties range
from media affairs and marketing to local politics, having served a
term in Guam's Legislature in 1987, and she brings a unique voice to
this Commission.
Asian Pacific Americans have demonstrated a long and distinguished
history of service to this country. Many have served in our armed
forces. On Guam, our men and women volunteer for military service at
higher rates per capita than any state in the union. We owe each and
every one of these servicemen and women a debt of gratitude for their
service and sacrifice.
Through hard work and dedication, Asian-Pacific Americans have risen
through the

[[Page 7493]]

ranks to the top levels of military leadership. General Eric K.
Shinseki, holds the distinction of being the highest-ranking APA in the
U.S. Army. Major General Antonio Taguba, who served as the chief
investigator during the Abu Ghraib prison scandal, is only the second
Filipino American to rise to the position of General in the U.S. Army.
Brigadier General Vicente Tomas (Ben) Blaz, of Guam, had a
distinguished career with the U.S. Marine Corps, and he made our island
proud when he was promoted to Brigadier General in 1977. In 1984, after
retiring from the Marines, General Blaz came here to our nation's
capital to serve as Guam's Delegate to the U.S. House of
Representatives and served in that capacity for eight years.
Among those who have served in the military, I especially want to
remember those who have given their lives to protect our freedom,
including those who lost their lives in the Global War on Terrorism.
Specialist Christopher Jude Rivera Wesley, Lieutenant Michael Aguon
Vega, Specialist Jonathan Pangelinan Santos, Specialist Richard
DeGracia Naputi, Jr., and Specialist Kasper Alan Camacho Dudkiewicz are
five of Guam's sons who were killed in Iraq. In addition, the
Micronesian region has lost six of its own sons. Though their deaths
sadden us, their courage reminds us that freedom is never free.
The Asian Pacific American communities have embraced America as our
home and have thrived through the limitless opportunities this country
has to offer.
Today, as we go forward celebrating ``Dreams and Challenges of Asian
Pacific Americans,'' let us celebrate the unique histories and stories
of our people.
This year the people of Guam will commemorate the 62nd anniversary of
our liberation from enemy occupation by U.S. armed forces during World
War II. As the only American territory with a civilian population
occupied by the enemy during World War II, the people of Guam risked
their lives to protect American servicemen from capture and endured
great hardships and suffering. I want to recognize the people of Guam
for their steadfast loyalty during these trying times.
Guam continues to play an important role in our nation's relations
with Asian countries. Recently, Secretary Donald Rumsfeld announced the
re-location of marines from Okinawa to Guam as part of a major
realignment of forces in Japan. With the impending arrival of 8,000
Marines from Okinawa, our island is planning for a period of tremendous
growth. We look forward to making a significant contribution to peace
and security in the western Pacific and Asia, and we hope that the
realignment of forces will strengthen the U.S.-Japan alliance.
As we celebrate Asian Pacific American Heritage Month, let us honor
the contributions of all Asian and Pacific Islander Americans. Let us
ensure that their stories are known to the younger generation. Let us
celebrate the beauty of our cultures and the richness of our heritage.
And let us celebrate how we help make America the great country it is.
Dangkulo na Si Yu'os Ma'ase.
Ms. MATSUI. Mr. Speaker, this month we continue a nearly three decade
tradition of Asian Pacific American Heritage. Without the sacrifices
and contributions that have been made by Asian Americans, the United
States would not be the world leader that it is.
During this special month we have the opportunity to acknowledge and
pay tribute to the contributions of the 15-million strong Asian Pacific
American community--from I. M. Pei, Maya Lin, and astronaut Ellison
Onizuka, to Amy Tan, Yo Yo Ma, and General Eric Shinseki. Our Nation
would not be what it is today without their immeasurable input. Their
unique contributions enhance the moral fabric and character of this
great Nation.
As we celebrate the contributions of Asian Americans and Pacific
Islanders to the whole of the Nation, we must rededicate our efforts to
ensuring equality and opportunities so that all Americans have a chance
to reach their full potential. Together, we can make the American dream
a reality for all Americans.
Mr. CASE. Mr. Speaker, I am pleased to join Chairman Honda and other
members of the Congressional Asian Pacific American Caucus in
commemorating Asian Pacific American Heritage Month.
I am even more pleased that several Asian Pacific American
organizations or governmental initiatives are holding their annual
conventions in Hawaii this month. This includes the Federal Asian
Pacific American Council and the White House Initiative on Asian
Americans and Pacific Islanders.
There are also several Filipino American organizations that will be
hosting events this year in Hawaii, including the National Federation
of Filipino American Associations, as 2006 marks the centennial of
sustained immigration from the Philippines to the United States.
The Filipino Centennial Celebration Commission in Hawaii, led by
Elias Beniga, and the Smithsonian Filipino American Centennial
Commemoration have done a wonderful job in providing commemorative
activities across the country, including in Hawaii and Washington, D.C.
I was pleased that Congress passed in December, H. Con. Res. 218, my
resolution recognizing the centennial and acknowledging the
contributions of Filipino-Americans to the United States.
While there are many issues of importance, a timely issue I believe
should be considered by Congress is the inclusion of my bill, H.R. 901,
into any comprehensive immigration reform bill moving through Congress.
H.R. 901 would prioritize the permanent immigration petitions of the
sons and daughters of Filipino World War II Veterans who were extended
U.S. citizenship under the Immigration and Nationality Act of 1990.
Most recently, I wrote to President Bush and Congressional leaders
urging their inclusion of this provision in immigration reform
legislation.
I believe my bill fulfills one of the bedrock principles of our
federal immigration policy--family reunification--and warrants special
consideration given the unique history between the United States and
the Philippines, as well as the contributions of our Filipino World War
II veterans to our country and to U.S. national security interests.
As we commemorate Asian Pacific American Heritage Month, I celebrate
the contributions of all Asian Americans and Pacific Islanders who call
our country home, and I congratulate the Filipino American community
for their centennial celebrations this year!
Ms. WATSON. Mr. Speaker, I rise today to celebrate Asian Pacific
American Heritage Month. I want to congratulate my good friend and
colleague, Mr. Honda, for arranging this special order so that we can
celebrate Asian Pacific American Heritage Month and acknowledge the
important contributions of Asian Americans. This year's theme, ``Dreams
and Challenges of Asian Pacific Americans,'' reflects the Asian and
Pacific Islander American community's commitment to fairness and
equality.
I represent California's 33rd congressional district. It is one of
the most ethnically and culturally diverse congressional districts in
the U.S. It is emblematic of the emerging ``majority minority''
demographic of the state of California.
California is home to the largest Korean-American population in the
country. More people of Korean heritage live and work in Los Angeles
than in any place in the world outside Korea; and more Korean-Americans
live and work in the 33rd congressional district than in any other
congressional district in California.
I want to comment briefly on the recent and, in many ways, historic
visit of Super Bowl MVP Hines Ward to Korea last month. His visit, I
believe, embodies this year's theme of fairness and equality. The NFL
hero, who is of mixed Korean and African-American ancestry, traveled to
his native country to express pride in his Korean roots even though he
shunned that side of his heritage after he faced prejudice as a child.
His Korean mother accompanied him.
By all accounts, South Korea warmly embraced Hines Ward and received
him as a hero. The government made him an honorary citizen. Moreover,
his visit not only galvanized the Korean community but also brought
attention to the plight of Koreans of mixed ancestry.
Korea has 35,000 people of mixed race, and many are subjected to
discrimination. 22 percent are unemployed, and only 2 percent have
administrative jobs. The rest are laborers. Statistics suggest that 9.8
percent of mixed-race Koreans leave primary school and 17.5 percent
middle school. The average drop-out rate for Korean middle school
students is 1.1 percent. The Pearl Buck Foundation notes that
international marriages between Koreans and non-Koreans are on the rise
and that the mixed-race population in Korea is estimated to grow to 2
million by 2020.
My home state of California is a leader in the growth of mixed-race
populations in the U.S. In the 2000 Census, 7 million people self-
identified themselves as multiracial. Historically, the West has always
been very multiracial due to high immigration levels, the rich mix of
different ethnic groups, and the historical absence of legal barriers
to interracial marriage. Much work, however, remains to be done as
mixed-race children in the U.S. and their counterparts overseas suffer
from sleights and discrimination.
Hines Ward's visit to Korea has made a positive difference. The
government and the ruling Uri Party recently agreed to grant for the
first time legal status to people having mixed-race backgrounds and
their families. The Ministry of Justice is now reviewing a plan to
grant citizenship or residency status to those

[[Page 7494]]

who marry Koreans. All acknowledge the impact and importance of Hines
Ward's visit.
I want to congratulate Mr. Ward on his triumphal return to his
homeland. He has used his celebrity status to bring attention to an
issue of mutual importance to both the U.S. and Korea. I also want to
congratulate the Korean government for taking positive steps to address
an issue that until now has been largely ignored.
Finally, Mr. Speaker, as we celebrate Asian Pacific Heritage Month,
let us not overlook those Asian-Americans of mixed race who have also
made significant contributions to our nation.
Mr. BACA. Mr. Speaker, I rise today in celebration of Asian Pacific
American Heritage Month and to honor the more than 14 million Asian
Pacific Americans that contribute to the success of tour great nation.
I am proud to be a Representative from the great state of California,
which is home to the largest Asian/Pacific Islander American (API)
community in the United States. I truly believe diversity is what makes
our country great and California benefits greatly from the API
community's presence there.
The theme for this year's Asian Pacific American Heritage Month is
``Dreams and Challenges of Asian Pacific Americans'' and it is an idea
that resonates especially for those of us from the Golden State.
Indeed, much of California's earliest infrastructure and railways were
built by the sweat and labor of Chinese and Japanese immigrants.
Despite grueling work and harsh discrimination, these workers played a
vital role in developing California's early economy and today, Chinese
and Japanese Americans are among the largest, most successful API
groups in the state.
The API community has also been at the heart of some of California's
saddest and darkest hours. During World War II, our state was home to
most of the internment camps that unjustly imprisoned more than 112,000
Japanese Americans between 1942 and 1948. Government-sanctioned racism
forced many of these law abiding citizens to lose everything they owned
and many families remain seared by the memory of this injustice.
However, the suffering and struggle of the API community didn't stop
there. As recently as 1992, Americans witnessed a milestone in Asian
Pacific American history as the streets of Koreatown exploded in
violence during the Los Angeles Riots. Thousands of Korean Americans
watched their American Dream go up in flames and they, too, had no
choice but to rebuild and rise again.
And the list goes on. America is the home of Vietnamese, Cambodian,
Hmong, Filipino, Thai, Malaysian, Native Hawaiian or other API
communities. Each of these groups has overcome heartache, oppression,
discrimination, and intolerance to achieve their goals in America. They
are proud to be Americans and grateful for the opportunity to live
freely and pursue their dreams.
The API community is among the fastest growing minority groups in our
country and is succeeding in every arena. Asian Pacific Americans
proudly serve in our military; they are among some of the most
successful entrepreneurs; and some of them are my esteemed colleagues
here in the halls of Congress.
I am proud to honor the Asian Pacific American community today not
only for their persistence, but also for their accomplishments,
contributions, and leadership.
Ms. LORETTA SANCHEZ of California. Mr. Speaker, I'd like to thank the
gentleman from California for putting together this Special Order to
celebrate Asian Pacific American Heritage Month.
Mr. Speaker, I proudly represent one of the largest Vietnamese
communities in the world outside of Vietnam in Orange County,
California.
Many of them came to the United States only about thirty years ago,
seeking refuge from an oppressive regime in an unknown land and facing
an uncertain future.
These individuals risked everything for a chance to live freely and
provide better opportunities for their children and for their families.
Since their arrival, these Vietnamese refugees have become Americans
in the finest and truest sense of the word--hard working people trying
to create a better future for themselves and their families.
One success story that I love to mention is that of Mr. Chieu Le,
founder and chief executive officer of Lee's Sandwiches in Orange
County, California.
In 1981, one year after immigrating to the United States from
Vietnam, Mr. Le and his family bought their first catering truck and
began serving sandwiches in the community.
Twenty years later, they opened the first Lee's Sandwich Shop in
Garden Grove, California.
Today, Lee's Sandwiches is the fastest-growing restaurant chain in
the West, with over 35 stores in operation or development.
And Mr. Le and his family have given back to the community as well,
raising hundreds of thousands of dollars for victims of the 9/11
attacks and the South Asia tsunami.
But Mr. Le and his family are only one example. Dr. Nguyen-Lam Kim
Oanh of the Garden Grove Unified School District is the first
Vietnamese-American woman elected to a school board in Orange County.
Or actress Kieu Chinh, who has appeared in numerous movies and TV
shows including E.R. and The Joy Luck Club, and was the subject of the
Emmy-award winning 1996 documentary ``Kieu Chinh: A Journey Home.''
And groups such as the Union of Vietnamese Student Associations--a
non-profit, volunteer-run organization that puts together the annual
Tet Festival in Orange County, which draws twenty to thirty thousand
attendees.
Or the Orange County Asian and Pacific Islander Community Alliance--
the largest Pan-Asian Pacific Islander organization in Orange County.
Their health outreach programs, after-school programs, and policy
advocacy programs make a real difference in the lives of Orange County
residents.
Through their hard work and dedication, Vietnamese Americans and
other Asian-Pacific individuals and groups like these have become an
integral part of the Orange County family--as entrepreneurs, as
community leaders, and as activists for worthy causes at home and
abroad. On behalf of all my colleagues in the House, I offer them our
praise and our gratitude.
Ms. EDDIE BERNICE JOHNSON of Texas. Mr. Speaker, I rise today to
honor Asian Pacific American Heritage Month and to pay tribute to the
struggles and enormous contributions of Asian Pacific Americans to our
Nation's culture.
It is an honor to pay tribute to the many achievements and honor the
countless unique contributions to the United States made by Asian
Pacific Americans across our Nation.
May commemorates the arrival of the first Japanese immigrants in
1843. Therefore, it is appropriate that during the month of May we
recognize the contributions made by Asian Pacific Americans to our
communities.
May 10, 1869 marks the completion of the transcontinental railroad
and its completion is greatly credited to the labor of the Chinese
immigrants. Today, there are over 14 million Asian Pacific Americans
living in the United States and this represents 5 percent of the
population.
The rich history associated with the Asian Pacific American
population has been a great contribution to the culture of the United
States.
Over the years, the Asian Pacific American communities have made
significant contributions to Texas's diverse culture.
The United States is a land of immigrants, and the history reflects a
Nation that has greatly benefited from the many contributions of its
immigrants.
The Greater Dallas Asian American Chamber of Commerce (GDAACC) is the
largest Asian American Chamber in the United States with 1,200 members
currently enrolled.
Located in the Asian Trade District in Northwest Dallas, GDAACC, is
the focal point of Asian American economic development and cultural
exchange.
In recent years, due to great efforts to expand the number of
programs that provide assistance to members, sponsors and partners, the
GDAACC initiated the Asian Festival and approximately 15,000 people
were in attendance.
GDAACC is also responsible for initiating the Leadership Tomorrow
Program; the Multi-Ethnic Education and Economic Development Center;
and the Texas Asian American Business Symposium in Dallas, Texas.
The Asian Pacific American community is well deserving of the many
accolades they receive because their contributions have greatly
enriched the culture and history of our Nation.
Mr. McDERMOTT. Mr. Speaker, May is Asian Pacific American Heritage
Month, and I rise to proudly recognize and honor over 78,000 Asian
Pacific Americans who live in my 7th Congressional District in
Washington State. They are the largest minority group in my district,
embracing over 13 percent of the population. They are Japanese, Asian
Indian, Korean, Chinese, Filipino, Cambodian, Laotian, Hmong,
Vietnamese, Pacific Islanders, as well as other Asian American
cultures. Their contributions have helped to make Seattle a richly
textured weave of cultures and people. We all benefit as a result.
Beginning in the late 19th century, Asian Americans immigrated to the
United States to work hard and make a better life for themselves and
their families. Many faced prejudice, racial injustice, and
discrimination, but these new immigrants believed in America,

[[Page 7495]]

and they made our Nation stronger by fighting for American values like
equality. As our Nation again debates the importance and role of
immigration in the early 21st Century, we should consider the
contributions that Asian-Americans have made, and continue to make, to
our Nation, becoming leaders in public and social service, business and
industry.
In Seattle, I am proud to have introduced the legislation that
renamed a United States Courthouse as the William Kenzo Nakamura United
States Courthouse in honor of a Japanese American who was posthumously
awarded the Congressional Medal of Honor for his courage under fire in
World War II. Mr. Nakamura made the ultimate sacrifice in service to
the country he loved, an honor made more poignant by the fact that
William and his family were forcibly relocated to a federal internment
camp at the beginning of the war.
Today, we proudly celebrate Asian Pacific American culture and
heritage, from the Vietnamese Tet in Seattle Lunar New Year celebration
to other local cultural festivals. We also honor Asian Pacific
Americans by preserving the ethnic heritage of our citizens. Places
like the Wing Luke Asian Museum, the Seattle Asian Art Museum, the
Filipino American National Historical Society, and Densho: The Japanese
American Legacy Project keep us in touch with the roots of our
neighbors.
Our pride in and recognition of many Asian American role models has
earned Washington State a global awareness. Just last month Chinese
President Hu Jintao chose Seattle for his inaugural visit to the United
States as head of state, touring a Boeing plant and Microsoft
headquarters and noting the ``good cooperative relations'' between
China and Washington State. One out of every four jobs in Washington
State is directly tied to international trade, and we have a strong and
growing trading relationship with the Asia Pacific region. This
relationship has been established, expanded, and nurtured largely
through cultural awareness first developed in the region by Asian-
American immigrants. We all benefit from the contributions Asian
Pacific Americans make to our community and country.
Asian Pacific American Heritage Month is a celebration of the
American spirit. We are a nation of immigrants, and by honoring Asian
Pacific Americans, we honor all cultures.
Mr. RANGEL. Mr. Speaker, I rise in celebration of Asian/Pacific
Americans and their innumerable contributions to our Nation. The fabric
of American society has benefited from the talent, dedication and
enthusiasm of Asian/Pacific Americans. The month of May is designated
as a time when we all can appreciate and observe diversity in America
by highlighting the contributions of Asian/Pacific Americans.
In June 1977, Representative Frank Horton of New York and Norman Y.
Mineta of California introduced a House Resolution that called upon the
President to designate the first ten days of May as Asian/Pacific
Heritage Week. Subsequently, Senators Daniel Inouye and Spark Matsunaga
introduced a similar bill in the Senate. Both House and Senate Bills
were passed. The first 10 days of May were chosen to coincide with two
important milestones in Asian/Pacific American history. The arrival in
the United States of the first Japanese immigrants on May 7, 1843 and
contributions of Chinese workers to the building of the
transcontinental railroad, completed on May 10, 1869. In 1992, Congress
expanded the observance for the entirety of May.
Asian Pacific American Heritage Month is celebrated with community
festivals, government-sponsored activities, and educational activities
for students. This year's theme is ``Freedom for All--A Nation We Call
Our Own.''
Mr. Speaker, Asian/Pacific Americans are leaders in public service,
business, government, science, law, education, athletics, the arts, and
many other areas. Their love of family, community, and hard work has
helped to uphold our Nation for many generations. Asian/Pacific
American entrepreneurs are helping to strengthen our economy and our
communities through their hard work and ingenuity, and they inspire a
new generation of American innovation through their example. More than
14 million Americans of Asian or Pacific Island Heritage contribute to
the vitality, success, and prosperity of our Nation.
Ms. LEE. Mr. Speaker, I rise today to celebrate Asian Pacific
American Heritage Month. I would like to thank Congressman Honda and
the Asian Pacific American Caucus for organizing a special order
tonight to honor Asian Pacific Americans and the great contributions
they have made to our Nation. I would also like to say that I am very
proud to be a member of the Tri-Caucus, which unites the Congressional
Asian Pacific American Caucus, Congressional Hispanic Caucus and
Congressional Black Caucus. Mr. Speaker, I strongly believe in the
importance of honoring all of our country's unique cultures, and it is
truly a privilege to participate in this special order.
Asian Pacific Americans have played a tremendous role in the
development of our Nation. I would first like to acknowledge the late
Congresswoman Patsy Takemoto Mink, our first woman of color to serve in
the U.S. House of Representatives. She was a trailblazer for Asian
Pacific Americans, and it is wonderful to see that her impact is still
felt and that her legacy continues.
As Representative of California's Ninth U.S. Congressional District,
APA Heritage month is especially important to me. Asian and Pacific
Island American culture has a very large impact in the cities of my
district.
My district is the birthplace of Amy Tan, a Chinese-American woman
and New York Times bestselling author best known for her novel The Joy
Luck Club, and it's subsequent film adaptation. She has received
countless acknowledgments including the Bay Area Book Reviewer's Award.
Today, Ms. Tan's novels and short stories are a part of high schools
and universities' literary curricula nationwide.
My district is also the birthplace of Fred Korematsu, born in Oakland
to Japanese immigrants, who challenged the World War II internment of
Japanese American citizens. As an American citizen Mr. Korematsu
refused to go to an internment camp, but he was arrested, sent to one
in 1942 and branded a spy by newspapers. He opposed the internment
policy in the Supreme Court, but in its ignoble 1944 decision the
Supreme Court upheld the policy. In 1983 Mr. Korematsu appealed his
conviction, which a Federal court overturned acknowledging that the
Government's case at the time had been based on misleading and racially
biased information. President Bill Clinton awarded Mr. Korematsu the
Presidential Medal of Freedom in 1998, honoring Mr. Korematsu for
fighting for human rights and ensuring the very liberties that created
this great Nation.
Today, the legacy of Asian Pacific American leaders such as Ms. Tan
and Mr. Korematsu is apparent in the numerous remarkable programs and
initiatives in APA communities throughout my district. There are
several that I would like to recognize, including Oakland Asian
Students Educational Services also known as OASES. As the city of
Oakland is one of three cities in the Bay Area that has the lowest high
school graduation rates for Asian students, this organization works to
decrease cultural gaps in education. OASES reaches out to all youth
with limited resources and limited educational opportunities,
particularly children of Asian Pacific Islander families.
I would also like to recognize the Oakland Asian Cultural Center.
This center works by employing the belief that upholding cultural
tradition and honoring cultural heritage are at the core of maintaining
healthy and lively communities. The center presents a variety of
cultural festivities and artistic expression in dance, literature,
music and visual arts. The center is an excellent resource for
understanding the legacy of Asian and Pacific Island Americans and
their great influence on the cultural identities of our communities.
My district is also home to several of the nation's leading health
care providers for APA communities. Asian Community Mental Health
Services, for example, is an organization that offers access to and
increases community acceptance of mental healthcare, which in many APA
communities remains taboo. Asian Health Services is another
organization that works to ensure that members of APA communities can
overcome challenges to obtaining high-quality, affordable healthcare
due to language barriers, income, lack of insurance coverage and
cultural differences.
Lastly, I would like to bring special attention to Asian Communities
for Reproductive Justice (ACRJ) and its Executive Director, Ms. Eveline
Shen. Founded in 1989, ACRJ has been a longtime leader in ensuring that
APA women and girls are equipped with the tools to make important
decisions about their reproductive health. Under the leadership of Ms.
Shen, ACRJ places reproductive health and freedom at the center of
promoting social and economic freedom for APA women in the shadows of
patriarchal cultures. During her nearly two decades of community
organizing and eight years at ACRJ, Ms. Shen has become a leader in
building a social justice movement in APA communities, which is one of
the fastest growing constituencies in California and in my district. I
commend Ms. Shen and ACRJ's dedication to assisting APA women to obtain
the American promise of ``liberty and justice for all.''
As our Nation is home to so many people from all over the world, it
is important that we continue to bring attention to the issues that
affect all communities. It is our responsibility to ensure that no one
is ignored and that equal

[[Page 7496]]

attention is given to all groups. It is also our duty to seek justice
for those who are underrepresented. And, lastly, it is our privilege to
come together to celebrate the accomplishments of the many leaders
throughout Ameican history, who have embodied excellence in advancing
the principles of democracy, freedom and justice for all of our
communities and strengthening the foundation of America.
Mr. Speaker, again I would like to thank Mr. Honda and the APA Caucus
for inviting me to participate in this special order. Let us continue
to unite, pay tribute to Asian Pacific Americans and remember the
importance their outstanding contributions to our Nation.
Ms. ZOE LOFGREN of California. Mr. Speaker, today and throughout the
month of May, we celebrate the many contributions Asian Pacific
Americans have made to the fabric of our communities and to this Nation
as a whole.
More than 100 Members of Congress work together in the Congressional
Asian Pacific American Caucus to promote Asian Pacific American issues
and concerns, and I'm pleased that we are led by my long-time friend
and colleague, Congressman Mike Honda.
Congressman Honda and I are proud to represent San Jose, California
and surrounding areas, a community blessed with diversity and culture
from around the world, including close to 350,000 Asian Pacific
Americans.
Some notable Asian Pacific Americans from our area include Norman
Mineta, the longest serving Secretary in the history of the U.S.
Department of Transportation, the first Asian American mayor of a major
U.S. city, and the first Asian American Cabinet member during the
Clinton Administration.
San Jose Councilmember Madison Nguyen is another extraordinary Asian
Pacific American. She is the first Vietnamese American woman elected to
office in the State of California.
Another distinguished Asian Pacific American from the San Jose area
is Dr. Allan Seid who founded Asian Americans for Community Involvement
(AACI), the largest social services nonprofit organization serving the
Asian Pacific American community in Santa Clara County.
Vinod Khosla has contributed immensely to Silicon Valley as a
distinguished venture capitalist and a co-founder of Sun Microsystems,
headquartered in Santa Clara, California, a company that has grown into
one of the largest providers of computers, computer components,
software, and information-technology services.
In this Congress, there are five Asian Pacific Americans serving our
Nation and their communities as members of the House of
Representatives, as well as one delegate from American Samoa and two
Asian Pacific Americans serving in the Senate. I am proud that the
California Democratic Delegation includes two of these Representatives
from the Asian Pacific American community.
In the field of science and technology, Asian Pacific Americans have
long contributed to our country, from Ellison Onizuka, the first Asian-
American in space, to Flossi Wong-Staal and Dr. David D. Ho, for their
work on HIV and AIDS. Moreover, several Asian Pacific Americans have
received Nobel Prizes for their accomplishments in science and
technology.
Hundreds of thousands of Asian Pacific Americans have also loyally
served our Nation in the military willing to give their life for the
United States of America. Asian Pacific American veterans of the Armed
Forces number 312,700.
In sports, Asian Pacific Americans have helped bring home Olympic
gold medals for the United States, including the first woman to win
gold medals in the ten and three meter diving events--Filipina American
Victoria Manalo Draves.
Although it is important for us to celebrate Asian Pacific American
heritage this month, we must not forget the plight that Asian Pacific
Americans endure despite the community's many accomplishments.
The pitfalls of immigration law and the backlog of immigration
applications continue to prevent many Asian Pacific American families
from reuniting for several years.
We must also not forget that the APA community suffers from greater
poverty than non-Hispanic Whites, especially in the Hmong, Laotian,
Cambodian, and Vietnamese American communities.
We must work to ensure that Asian Pacific Americans are appropriately
counted when our government collects data that will be used to
understand the needs of the APA community.
We must make every effort to invite Asian Pacific Americans to
participate in government to ensure that our government meets the needs
of the APA community.
In commemoration of Asian Pacific American Heritage Month, I honor
the contributions of millions of Asian Pacific Americans who have
contributed to our Nation and who I am sure will continue to contribute
in the future. But while I celebrate this month, I also renew my pledge
to address the issues affecting Asian Pacific Americans around the
country.

____________________

IMMIGRATION REFORM

The SPEAKER pro tempore. Under the Speaker's announced policy of
January 4, 2005, the gentleman from Iowa (Mr. King) is recognized for
half the time remaining before midnight.
Mr. KING of Iowa. Mr. Speaker, as always, I very much appreciate the
privilege to address you, Mr. Speaker, and in so doing addressing this
great United States of America House of Representatives.
I am a bit breathless because I hustled over here to arrive at the
appointed time; and I thank my colleagues, hopefully, they filibustered
a few minutes on my behalf as good friends likely would.
Mr. Speaker, I would like to speak to you about a few issues about
border control especially on the southern border and primarily on the
southern border. I have long spoken about the policy that I think we
need to have with regard to the immigration policy across the Nation,
about domestic enforcement and shutting off the jobs magnet, and also
about the need to stop the bleeding at our southern border.
And so I had gone down to the border about a year ago and spent a
long weekend down there, at least 3 days on the ground and in the air,
as a guest of the Border Patrol and some of the other agencies that
operate the security along the border. And I was given a very good tour
and a few rides in helicopters at night and also in the daytime,
shining the night sun down along our border to identify where there
might be illegals that have come across or future illegals preparing to
come across. And I stopped and visited some of the stations and their
equipment and talked to the men. I was impressed with the quality of
the team people that they had assembled, the equipment they had
assembled, and the tactics they had. Yet in that full long weekend, I
did not actually see activity which would indicate to a reasonable
person that there was not activity to be seen.
In spite all of those hours in the air and the hours on the ground
and the night vision equipment, I did not again see any illegal
activities, although I got many reports of the success of the
interdiction of our border patrol and our other agencies.
Well, as I listen to the debate here in the House of Representatives,
Mr. Speaker, and the testimony that comes before the immigration
subcommittee which I sit upon, and I sit in those hearings two, three,
even four times a week and we will have four, sometimes eight witnesses
giving us credible data and good well-informed information on this
issue from both sides of the issue, Mr. Speaker, and always the years,
the cumulative information has built in me after those years of sitting
on the immigration subcommittee, I began to think that I have a pretty
decent broad background on the subject. And yet there was a gap, Mr.
Speaker, there was a gap in that subject because I had not gone down
and spent time on the border more or less unguided, more or less
outside the scope of the Border Patrol, but gone ahead and gone down to
the border and looked under all the stones and met with the people that
were actually more likely to be more frank with me.
So that was my mission this past weekend where I spent perhaps as
much as 4 days on the ground in Arizona. And the goal was to meet with
the people that are enforcing our laws down there, the ones that are
out in the night and those people who have seen this bleeding, this
hemorrhaging at our border firsthand, that can describe to me the scope
of the bleeding in our southern border.
Mr. Speaker, I am here to say tonight that it is astonishing. It is
far worse than I had imagined and my imagination was fairly strong. My
predictions and the numbers that I put out

[[Page 7497]]

were fairly aggressive, at least viewed by some of my critics. But
there is nothing I saw down on the border over the weekend, Mr.
Speaker, that would cause me to believe that I have overstated the
numbers of people who are illegally crossing our border or the amount
of drugs, illegal drugs, that are coming across our border, or the
amount of violence that is visited because of the drug problem both
south of the border, north of the border, and the violence that goes
throughout the drug culture in America and the collateral damage to the
victims that may not be associate with that at all, but happened to be
in the wrong place at the wrong time and are victims of murder, victims
of negligent homicide generally in the form of a car accident where the
driver who was at fault was under the influence of alcohol or drugs.
So what I did, Mr. Speaker, was go down to visit in a region,
starting out on Friday, in a region south of Tucson, south and a little
bit east of Tucson. I first met with a special agent who briefed me on
a lot of information that had been coming by this individual on a
consistent basis. And then I went to Bisbee, Arizona, where I went on
down then to the border there to Naco, Arizona, right on the border
with Mexico. That is a location that has seen a fair amount of violence
and a lot of concentration of illegal traffic going along the border.
They finally decided to establish and build a fence, Mr. Speaker.
I was guided to that location by a retired Border Patrol officer and
a rancher from that region, both with a passion of patriotism for
America, both that have a memory of growing up in an America and that
part of Arizona that was a different kind of country than it is today.
It was then a place that they could feel safe in their streets and safe
in their homes and walk the streets and not lock their homes. And today
that region has been flooded with just thousands and tens of thousands
and perhaps hundreds of thousands of illegals, many of them carrying
illegal drugs through that region.
And cars drive across the border where sometimes there had been an
existing fence that was built originally to contain livestock, that
fence has essentially been systematically broken down, and vehicles
with drugs and illegals in them would drive right through the gaps in
the fence, sometimes drive through the fence, and take off across the
desert or cut across over to a highway and get up on the highway. And
once they were on the highway, for a little ways they were gone, they
were free, they were in America, not ever to be captured again, not
ever to be accountable again unless they were just simply victims of
bad luck.
They realized the magnitude of this problem at Naco, Arizona, and
went in and built a fence through there, Mr. Speaker. It is built out
of interlocking steel that sometimes can be 10 feet high or higher and
then above that in some cases they have welded a kind of wire mesh that
goes up another 4 to 6 feet. And when they originally built the fence,
people said it would not work. It cannot work. People will go over it.
They will go through. They will go under it, or they will go around it.
In fact, they do go around it, Mr. Speaker.
At one point they picked up a cutting torch and cut a hole through it
and made their own gate in that solid steel fence, and that was a
pathway by which people and drugs traveled into the United States, and
some went back through that gate. And the patrol went there and welded
the gate shut, and as they kept some maintenance up on the fence, the
other side essentially gave up on trying to breech the fence.

{time} 2230

Now, the illegal traffic goes around the end as one reason, rather
than trying to find a way through a barrier that is a good solid
barrier that has been very, very effective.
The Border Patrol officer whom I was there with and the rancher whom
I was there with said look at this, and they described the problem they
used to have about the thousands of people pouring across there. They
said: We do not have that problem anymore. This community is safer than
it was. It is more secure than it was. There is far less illegal
traffic going through here. There is far less crime of all kinds, far
less violence, and far fewer illegal drugs in this community because we
built a barrier that kept the elements out that were eroding our
quality of life in Naco, Arizona.
That was an interesting trip, and they took me out along the border
where that fence essentially stops and diminishes in some locations.
There is nothing there, not even a way to define where the border is
between the United States and Mexico, but simply open places where
illegals can walk across the border and one location just in a dry
river bed or they would not be seen by night vision. They were
protected by the shrubbery and vegetation. They could simply walk down
from Mexico into the United States unimpeded, unobstructed, unobserved
and become shadow people here in the United States doing whatever they
do.
They were strong advocates of the border barrier and one that is
solidly built and one that can be efficient and is becoming a tool that
could very much support our law enforcement and let them focus their
energy on plans that could be more effective than riding herd on a
broad length of an unprotected border. It is ridiculous to think that
we could ever hire enough people to sit along the border, especially at
night, and watch people come across and then catch them rather than put
in a fence that would not allow them to come across in the first place.
That was Naco, Arizona, and again, I learned a lot about the culture
and the level of corruption on the south side of the border. It was an
interesting conversation.
From there, I went down then to the reservation and was a guest of a
number of the Shadow Wolves who are part of the Customs and Border
Patrol. Actually, today, they are a part of the Border Patrol. They
have been shifted to that, but it is on the Tohono O'odham Reservation,
and on the reservation the Native Americans control that land. They
have support of the Border Patrol, but they have had an organization
there called the Shadow Wolves. They are Federal employees and their
responsibility is to guard the border and interdict illegal drugs and
illegal aliens. They are focusing on illegal drugs. Their peak
recruitment, the top numbers there, Mr. Speaker; were 22, and when they
were 22 strong, in fact, that does not sound like a very large group
given the size of the reservation and given the miles of border that
they have to protect, and I believe that number is 76 miles of border
protected and controlled by 22 Shadow Wolves, members of the Tohono
O'odham tribe on the reservation; but those 22, in the period of a
year, I have got to dig up the statistics so I will be able to release
those and publish those, Mr. Speaker, but the information I received,
that they had interdicted more illegal drugs in a 12-month period of
time with 22 of their Shadow Wolves than all 2,000 Border Patrol agents
did in that entire sector for the same period of time.
That is an extraordinary example of effectiveness and efficiency, Mr.
Speaker; and it is the kind of thing that we here in this Congress need
to endorse and support and encourage and fund and authorize and protect
and encourage and enhance, do all of things that we can do to identify
the best among us, to encourage them, to grow that culture off beyond
the bounds of the reservation, take that same culture of efficiency and
enforcement on to the other reservations, whether Native American
tribes that control land on our national boundaries with our neighbors,
and the level of success that has been there has not been rewarded. It
has not been encouraged. It has not been enhanced by the Border Patrol
who seems to want to be seeking to undermine their efforts and absorb
them into the broader Border Patrol, in which case, if they did that,
the Shadow Wolves would lose their identity.
These people have an extraordinary amount of character and courage
and conviction and pride in what they do; but like anyone, if they do
not see a reward for that, if they do not see some

[[Page 7498]]

kind of encouragement, if they do not understand that here in Congress
we are supporting them, eventually they will be assimilated into the
Border Patrol and their level of efficiency will be assimilated into
the broader overall level of efficiency in the Border Patrol.
Now, I do not mean to imply that the Border Patrol is not efficient
or that they may not have the kind of personnel that I would like to
see. In fact, they have some very extraordinarily, brave, noble,
hardworking officers, and many of them. The structure has become big
and it has become difficult to be efficient. So I am not here to
discourage them. I am here to encourage them, and I often shake their
hands and thank them for what they do because they are the last line of
defense along our border to protect us from the incursions of millions
that take place in this country every single night, Mr. Speaker.
But what I saw from the Shadow Wolves was not only some of the
history in their legacy and their efficiency and effectiveness, but I
went out in the field with them and watched the way that they follow
the border. When they see that there has been a border crossing there,
they will pick up that sound, that track if you will, and they will
follow that track down and hunt down the illegals. Sometimes they are
carrying backpacks of illegal drugs. Sometimes they are just people
entering the United States illegally, but they will find that track and
get on a trot and follow that track and trace them to where they are,
pick them up and detain them and then process them in a fashion in
accordance with law.
Again, their effort has been extraordinary in some of the things that
they showed and taught me, too much to go in depth here, Mr. Speaker,
on the floor of the House of Representatives, but quite a lot of
extraordinary skill that appears to me would be very constructive if it
could be passed along to other agencies out there, particularly the
broader Border Patrol.
But the culture is there as well as more important the skills to
protect the culture of the Shadow Wolves. It is extraordinary. I was
impressed with what they do, and I intend to support and encourage and
enhance them. I will be looking for a way legislatively to demonstrate
my commitment to their commitment to protect our border and defend us
against the illegal incursions into the United States and the thousands
and thousands of pounds of illegal drugs that come across our border
every single day, many of them still pouring through the Tohono O'odham
Reservation and in spite of the best efforts of the now-shrunken Shadow
Wolves, down from 22 to 16 to cover those 76 miles of border fence. So,
again, I have been extraordinarily impressed, but they have done their
job.
From there, I traveled outside the reservation and went over then to
the Cabeza Prieta National Wildlife Refuge and met with some people
there, some national parks people and Department of the Interior forest
rangers. Seventy-five percent of their work, which they signed up to
do, would be to protect our natural resources, preserve our parks,
enhance our parks, let Mother Nature be enhanced there so that the
visiting public could come into these locations, like the Cabeza Prieta
National Refuge, and be able to appreciate Mother Nature in its purest
form.
That is why our forest rangers and our park officers got into the
business, because they appreciate wildlife. They appreciate our plant
life. They appreciate how the species of nature have balanced in these
regions and how they have grown, and they try to enhance that.
They find that 75 percent of their time, their Border Patrol officers
even, 75 percent of their time is spent protecting the border, 75
percent of the time keeping illegals and illegal drugs out of the park,
not a successful effort I might add, and perhaps a futile effort, but
an effort that needs to be attempted nonetheless.
With dozens and dozens of abandoned vehicles sitting out across the
national wildlife refuge, vehicles that have blazed a trail through
there and hundreds of miles of roads have been carved through that
national wildlife refuge because that was the most expeditious route
for smugglers to drive their suburbans and their 4-wheel drive pickups
and you name your vehicle, there, and there will be somebody else
behind you, and the next night another and another and another. That
formerly pristine desert turns into sometimes a 200-foot wide path
after it has been pounded in the desert with traffic enough times it
turns into what they call moon dust, just loose dust that lays there in
ruts in a way that you can get stuck in that dust, 200 feet wide
perhaps.
Before, this was a few less than 10 years ago, in fact, starting
about 1998, was when these border incursions began and when they began
to create these roads and these trails and tear up our natural
resources. The people that are dying in an attempt to get across the
desert have gone from a couple of years ago or 3 years ago 150, 175 a
year, now across our southern border, as many as 450 a year do not make
it across the desert when they seek to walk into the United States.
They die of hypothermia, they die of exposure, they die of dehydration,
more dehydration than anything else. The desert is not very forgiving,
and some of them are not very well prepared. They are not very well-
guided, and that human tragedy is exacerbated by the damage to our
natural resources which I had a, I will say, less than enhanced
appreciation for.
Mr. Speaker, I really learned to respect and appreciate the work that
is done by our Department of the Interior, as well as the value of the
resources that they are seeking to protect. A case in point I think
illustrates this better than anything else would be a rare species of a
bat, a long nose bat, and this is an endangered species. It only lives
and reproduces in four caves, and those caves are all down in that
region.
One of those caves was a cave that was frequented consistently by the
illegals who would go up into the region, and then their guide and
their track would take them to this cave where the baby bats were born.
They began taking a stop off and temporary residence in the cave to the
point where they scared the bats off and they would not come back in.
The long nose bat, the lesser long nose bat, left the cave, would not
come back to reproduce, and so our National Park Service looked at that
situation, said we have to protect this resource; and if this happens
in the other three caves, there will be no place for these bats to
reproduce, who knows if they will become extinct.
So they put up a wrought iron fence around the opening to this cave,
cost $75,000, and there is other labor that was not tallied in, put the
wrought iron fence around the cave, and it was built in way to keep the
illegals out of the cave. Fortunately, the lesser long nose bats
returned to the cave, and they are in there now living there and
reproducing, but think about it for a moment if you would, Mr. Speaker,
the effect of building a fence just around the entrance of the cave
that provided a deterrent that allowed the bats to come back and live
there again and reproduce and fly out, and they are really essential.
They are essential then to the pollination of certain cactus out there
in the desert, without which the cactus would not survive. It has a
whole set of chain reactions.
I am submitting that we build a fence on the border because it is a
lot cheaper to do than it is to build a fence around everything that is
threatened from the illegals and the drug trade that comes from our
southern border.
That was the lesson there at the Cabeza Prieta National Wildlife
Refuge, that being a second stop or actually a third stop along the
way; and then from there I went on over to Organ Pipe National Cactus
Monument. Organ Pipe is another national monument location, and that is
the location where the National Park Service officer, his name was
Chris Eggle, was killed in a shootout with drug lords near the Mexican
border in the park property.
I went there with his father, Bob. I visited the location where the
shooting took place, where he stood, where the shooter laid, where he
fell, where there is a monument there today that was built and placed
by his father, Bob, and

[[Page 7499]]

his mother, Bonnie. Well, they brought stones from their farm in
Michigan down to place around the monument, and there is a cross and a
picture and a place to remember where this happened, where it happened
that Chris was killed by a drug lord or at least an employee of a drug
lord who had driven across the Mexican border where there was no
barrier. When he was being under hot pursuit by the Mexican police and
his vehicle broke down and collapsed and stopped across the border into
the United States and Chris Eggle and his partner were called in on
that scene, as they split up and converged on the location where the
drug smuggler was, Chris was ambushed with an AK-47 that had been
brought into the United States, illegal, of course, on a vehicle that
was illegal, with drugs that were illegal, across a border that was
undefined, let alone defined with a barrier.

{time} 2245

Had there been a vehicle barrier there, had there been a fence there,
Chris Eggle would be alive today. He is not.
There is a memorial there at the Organ Pipe Cactus National Monument
that memorializes him as well. I talked to many of his coworkers that
were there. His spirit is alive and his spirit is strong today. The
happy Chris Eggle is the one that is remembered. Although he is not
with us, his spirit is with us and his sacrifice is something we need
to remember.
He is not the only one. He is not the first one. I pray he will be
the last one, but I saw nothing down there that would indicate to me,
Mr. Speaker, that he will be the last one.
That tragedy taught them something at Organ Pipe after the tragedy of
Chris' death at the hands of the drug runner whom the Mexicans were
chasing into the United States; and by the way, that drug runner was
subsequently shot and killed by the Mexican police department. He was
in the United States and shot from their side of the border. That is
not an issue with me, but as a matter of full disclosure, I point that
out, Mr. Speaker. The lesson learned from that was to close the border,
at least shut off the vehicle traffic.
So they have built a vehicle barrier along Organ Pipe and it is most
of the way along the Organ Pipe National Monument. It is perhaps 32
miles altogether. As I look at that and travel along the side of that
border, it is built so that steel posts full of concrete set in the
ground, and then it has got horizontal barriers, about two of those,
one about eye height and one about halfway up, designed so that
vehicles can't drive through it, but the desert pronghorn can run
through it and jackrabbits can run through it and any kind of wildlife
can go back and forth through there.
They had trouble with cattle moving in from Mexico, so they stretched
a couple of barbed wires in there to keep the cattle on the Mexican
side. Of course those barbed wires were cut because the people who were
jumping the border thought it was an obstruction to have to climb over
one barbed wire, so they cut the fence.
We drove through and picked a place where the illegal traffic was
going across and they were demonstrating how that tracking takes place
as they did with the Shadow Wolves on their reservation. What I saw in
a number of places, it got to where you could pick it out easily, every
night, traffic coming into the national monument and paths that are
beaten so smooth, one of the officers said, Well, one day we'll shut
off this illegal traffic and it will be a nice path for citizens to
come down here and visit our park, because it is already smoothed out,
it is kind of graded out by all the foot traffic.
In fact, in one of those locations, Mr. Speaker, the traffic goes
across the fence and right by a sign and the sign says, Do not enter
into the United States.
This is a dangerous place. The sun is hot. You can die in the desert.
There isn't water for you. There are snakes. There are scorpions. It's
dangerous. Turn back. Cynically, the path goes right by the sign. The
sign is in Spanish. If they can read, they can read that. But in a way,
I think it is cynically they go by that sign just to send us a message.
Fifty-eight percent of Mexicans believe they have a right to come to
the United States. Mr. Speaker, they are utterly wrong, but we need to
convey that message to them so that they can understand that the United
States needs to be committed to enforcing our borders.
The incidents that happened down there illustrate what I saw. First,
the argument, as I asked the officers, retired Border Patrol or current
officers who were at the point of retiring or quitting and giving up,
those were the kind of people that would talk to me. They were the
people that would open up to me.
One of them was an officer at a station. No one would talk to me
because the orders were, You don't speak to a Member of Congress. You
don't talk to anybody from government. Your job is to do your job, but
not to tell anyone what that job is, what the statistics are in your
area. So they sent me to an individual there who is near retirement and
that individual was willing to speak.
In fact, numbers of those individuals were willing to speak with me,
some ready to quit, some ready to retire, some retired. They would talk
to me straight up and open. They didn't care about the consequences for
that. They care about this country. They care about our border security
and our border control and they understand that you can't be a nation
if you don't have a border. You can't call it a border if you don't
defend your border, Mr. Speaker.
I hear the testimony here in Congress as the Border Patrol testifies
before the Immigration Subcommittee, and consistently it is, we stop 25
to 33-1/3 percent of the illegals that are traveling across our border.
I have used that number consistently in my remarks across this country
and I ask that question of the people that are down there in the line,
on the line, defending our national security, and I would say, What
percentage do you stop? Where do you stand?
They would hesitate in their answer, and I would say, 25 to 33
percent? Do you stop a fourth? Do you stop a third? How many do you
stop? They would laugh and give me a number. One of them burst out in
hysterical laughter when I submitted that they could be successful in
stopping 25 percent of the illegal traffic. He responded back to me,
No, it's more like 3 percent of the illegal traffic, of the illegals
coming into the United States do we stop and perhaps 5 percent of the
illegal drugs. It's not 25 percent. It's not 33 percent. In fact, it's
not 10 percent.
But of the informed answers that I got down there, and I asked it at
every stop, the informed answers that I got, I never got an informed
answer above 10 percent, of anybody that was involved in actual
protection of the border and processing people that were coming through
that border. Ten percent.
Now, think about it for a moment, 10 percent, Mr. Speaker. Last year,
we apprehended about 1,188,000 illegal entrants into the United States
on our southern border, on that 2,000-mile run. 1,188,000. If that
number is correct on 10 percent, if you move that decimal point one
over, that is 11,880,000 attempts to cross the border. You can take
perhaps a couple of million off that if you wanted to be generous and
take it down to 10 million succeeded. I don't think actually 10 million
succeeded coming into the United States, but I do think the number is
far higher than the numbers that we are working with in the media
today.
We have used the number here, 11 million illegals in America. We used
the number for 3 years while 4 million people a year at least were
coming across the border, maybe a lot more than that. And over 3 years
the number didn't accumulate, but about 500,000 a year, even less. So
after 3 years we finally raised the number to 12 million, but no one
now pays attention to that. We are still back stuck in that 11 million
mode of illegals in America.
Mr. Speaker, that number is far higher than 11 million.
Maybe we are successful in stopping 10 percent. Maybe the individual
who

[[Page 7500]]

advised me that 3 percent of illegals and 5 percent of the illegal
drugs, maybe he was off by a factor of, oh, let's say two. Maybe it is
6 percent of the illegals and 10 percent of the illegal drugs. However
you measure this, it is astonishing in its magnitude in the cost to
this country. In fact, we are headed down a path, it won't be very much
longer that everyone who wants to come to the United States will be
here. The message was sent January 6, 2004, when our esteemed commander
in chief gave a speech, it is called in America, ``the amnesty
speech.'' It was the one that said, here is the policy that we want to
have, it is one of a guest worker/temporary worker as the only
solution.
If you have too many illegals in America, I suppose the quickest and
cheapest and the most guaranteed solution one could have, Mr. Speaker,
is simply legalize them all, give them all amnesty, give them a path to
citizenship, voila, no problem. We have fixed the problem because we
have legalized them all by a version of amnesty.
The American people, Mr. Speaker, reject amnesty in this country.
They understand that we have to have a rule of law, that citizenship
must be precious, that you must respect the rule of law. There is more
to being an American than having somebody stamp automatic citizenship
on your green card or on your matricular consular card.
There is more to being an American than that, Mr. Speaker. Being an
American is rooted in and based upon a common culture, an understanding
and a common sense of experience and history, of reverence and respect
for our borders, for the sovereignty of the United States of America,
for the destiny of this country, for the assimilation that has made us
so great, that have been able to take immigrants in from all over the
world, bring them into this great giant melting pot of America, give
them this opportunity and let them reach out and earn and succeed in
this opportunity for success.
The legal immigrants in America have performed extraordinarily well.
In fact, the vigor that they bring to our society and our economy
surpasses much of the vigor that we find in the native-born Americans
that are here.
All of us in this Congress, Mr. Speaker, support a rational
immigration policy that is designed to enhance the economic, social and
cultural well-being of America. But if we have an open borders policy
and the people that advocate for an open borders policy are really
advocating for an unlimited amount of immigration, everyone who might
want to come here to the United States could come here; and if all 6
billion people on the planet want to arrive here in the same year, that
is fine with them.
They don't take a stand that there is such a thing as too much
immigration, even too much illegal immigration. They will not stand in
the way of one of them. They will not stand up and say, The best thing
you can do for your country is to stay in your country, grow its
economy, be part of the solution, bring reform to the governments of
places like Mexico and points south, places that are so utterly corrupt
that the economy is strangled, places that are so corrupt that there
has to be protection paid at every stop along the way, that you can't
get a birth certification when you are born in a country unless you
happen to be born into a family that has the connections and maybe is
willing to pay the kind of funds to pay off the Madrina network that is
there so that you can get your birth certificate and somebody identify
who you are and be able to move around in this society or that society.
The level of corruption is astonishing. It runs deep. I would add to
this that in spite of all the statistics that I could tell you, in
fact, I will go to some of those statistics in a moment, Mr. Speaker,
but first I would like to recount a few incidents that really bring
home the circumstances and reality.
As I was there on the Tohono O'Odham reservation with the Shadow
Wolves, there was a drug smuggler who was pulled over and stopped. We
were out in the desert tracking some illegals and getting a feel for
how that worked and excellently being guided. While this was on, there
was a call to an emergency and a number of the Shadow Wolves mobilized
and they called in a Black Hawk helicopter that was there to aerially
observe a vehicle that was escaping from the ground people. They
followed the vehicle and got it trapped up into a dead-end road and the
driver took off and ran and they followed him and finally apprehended
him.
They brought him and the pickup, the small truck as I would say to
some of my other friends in America, Mr. Speaker, into the compound
there where the Shadow Wolves headquarters is and looked the vehicle
over. It looked like it had been reworked, that they had taken it
through a body shop and created a false floor underneath the bed of
that pickup. The bed itself had a plastic liner in it so you couldn't
see the bodywork that had been done. We looked that over and they
pointed out to me how that work was done. It was done in a chop-shop in
Mexico.
Once they got the clearance to go ahead and search the truck, they
went in with the jaws of life and peeled the bed of that vehicle up and
apart. In there we carried out 18 large bales of marijuana, about 10
pounds or more per bale, at least 180 pounds of marijuana lying
underneath that 6- to 8-inch false floor of that vehicle. The alleged
perpetrator, and I did lay eyes on him and evaluated him, I guess, for
my own perspective, he had a 13 tattooed on his arm, many other tattoos
all over his chest and arms. It was clear to the people there that he
was MS-13, Mara Salxatrucha 13, the most dangerous gang that we have
ever seen in this continent.
That dangerous gang, of course, is smuggling drugs up into the United
States. They had collared one of their members, one of their
perpetrators who was then in that holding cell.
I was there to help unload the drugs from the pickup, there to
observe this entire process. There recorded and there to burn it into
my memory, Mr. Speaker, that we think of a large quantity of drugs
where I come from, it might be, oh, perhaps a few pounds. Occasionally
we get larger loads coming up through Iowa, of course. But when
somebody says a lot of illegal drugs, we are thinking of a quantity
substantially smaller than 180 pounds. They think of 180 pounds or 200
pounds of illegal marijuana as a decoy, a decoy that might be designed
to draw the law enforcement down another path so that when the path
clears, when all the law enforcement pounces on the decoy, then the
larger loads can come through, the 1,000 pounds, the 2,600-pound loads,
the full semi loads can start up the road.
It is a fact that on those drug routes, those highways that flow from
the southern part of Arizona up into the rest of the United States, on
those small mountains that are there, there are lookouts on every
strategic point.

{time} 2300

Those lookouts are manned by two people, and they are supplied
regularly and they stay on that mountain for 2-week stretches at a
time. They are well armed. They have good equipment. They have night
vision goggles. Infrared equipment. For daylight they have top-notch
optical equipment, and they have automatic weapons of all kinds, and
they have good food and good support, and they sit up there. And they
have good communications so that they can radio from mountaintop to
mountaintop and be able to tell each other where our drug enforcement
people, where our Border Patrol are, where the ICE people are, where
the special agents are, where the Park Service people are, so that when
the coast is clear, they can run their large load of drugs up through
the corridors.
Now, this is an astonishing thing to be able to see that military
positions in the United States are occupied by the drug lords and their
troops, and that they are well equipped and well armed and well
maintained and well supplied, and they are manned 24/7 by two people,
and we are sitting down here on the floor of this Congress, Mr.
Speaker, thinking we can get a handle on this some other way. But the
numbers coming across the border, Mr.

[[Page 7501]]

Speaker, are astonishing and the positions that are taken on those
mountaintops where the lookouts are are shocking that we would tolerate
that in this country, know they are there but not go up and take them
out.
The volume of drugs, again, is something beyond my imagination before
going down there. I had never seen such a pile of illegal drugs. Our
Federal agencies report that 90 percent of the illegal drugs in the
United States come across the Mexican border, and the value of those
drugs is in the area of $60 billion a year. And we sit here in the
United States of America, we tolerate such a thing, such a thing that
we would let foreign interests, foreign economic interests, illegal
interests violate our laws and enrich themselves with the wealth of a
Nation.
And the drug addiction that is here in America, of course, feeds it,
Mr. Speaker; and that is another subject for another time. That is
something that we need to address.
That is one incident, the interdiction of about 180 pounds of
marijuana by the Shadow Wolves during a later afternoon down on the
Tohono O'odham Reservation.
But the following evening, as I was looking around, I went down to a
place called Sasabe, and that again is on the border with Mexico. I
visited a port of entry there that is manned by the Border Patrol. They
didn't expect that I was coming. I didn't call in advance. I just drove
down there and got out of the vehicle and began to talk to them. Good
people. They are doing their job there, and they are doing it well as
far as I can see.
As I began to have a conversation with them, there was an emergency
call. There had been a drug deal that had gone bad on the other side of
the border in the Mexican community just on the south side of that port
of entry.
Usually, it is a shooting, Mr. Speaker, but this was a knifing. And
the subject who was knifed had a large wound in his abdomen about 3\1/
2\ inches wide, entered in below the ribs on the right side and up
through and it did end up lacerating his liver. It didn't get his lung
as far as I know.
But the word came that the ambulance was going to cross from Mexico
into the United States. And they prepared for that. They called in a
Medivac from the hospital in Tucson. And the Medivac, by the time it
arrived, there had been two U.S. ambulances that had arrived. The
Mexican ambulance didn't have any oxygen, didn't have bandages, had
only surgical gloves on it was a paramedic that was with me lent
himself right to the task and began to stabilize the patient. When the
oxygen came, they put oxygen on the patient and held him stable until
they could load him onto the helicopter and airlift him out to the
Tucson hospital, all at the cost of the American taxpayer, Mr. Speaker.
And the cost of this I will get compiled over time.
The ambulance that came across from Mexico simply parked on the
United States side. Two ambulances came in, one from near Tucson, one
from 24 miles away. One brought oxygen. The other was there for
support. And all lent a hand to get him loaded on the helicopter and
flew him up to University Hospital in Tucson where they do a great job,
and they have the only trauma center in all of southern Arizona.
It was a real eye opener for me to see this individual who had been
knifed in this fight, covered with tattoos and substantially pierced
and inebriated with alcohol and cocaine, at his own admission, as part
of the contributor, I think, to the violence on the other side.
And I am advised that that kind of incident wasn't just a fluke. And
I kidded the Border Patrol officer, you staged this for me. Of course
he didn't. He didn't know I was going to be there. But it happens about
four times a quarter in that location alone, roughly 16 times a year.
More shootings than stabbings, when we evacuate people out from Mexico
into United States hospitals.
And so I followed up yesterday, Mr. Speaker, and visited the hospital
and visited the patient. And he had been stabilized and his life had
been saved. Without that extraordinary effort, it is likely he would
not have survived the next few hours. But his life appears now that it
has been saved, and I am grateful for that.
But I also met with the hospital administrators and they are eating
millions of dollars of costs in funding the people who are generally
illegals in the United States. They don't separate that cost from those
that are evacuated from an injury or a wound that takes place on the
Mexican side of the border.
But the American taxpayers fund this. The American ratepayers fund
this. And the hospital swallows a fair amount of it. And there have
been occasions where residents and American citizens of Tucson aren't
able to be treated because all the beds are full, full of people who
are illegally in the United States. And so that health care for the
Tucson residents, the Americans occasionally will go to Phoenix, and
then the family members that live in the city have to drive to Phoenix
to visit their family. And just the travel time puts their lives at
risk as well.
That's two incidents, Mr. Speaker. And I did follow up on those, and
I will follow up on the information that comes from it.
I would add the third incident was I went down to the border last
night, down to the San Miguel Gate on the reservation, sat in the dark
for 3 hours and listened. And it wasn't difficult to hear the vehicles
bring the illegals down near the border, drop them off and hear them
talking, hear them hush up and then single file, go through the desert
brush, cross the border into the United States and be off to points
unknown.
I used to believe that it was the illegal traffic into the United
States that was the biggest problem, and that illegal drugs was a
problem that was part of that. And I am informed that when we put the
barriers in there, the vehicle barriers, that since they can't drive
across the border with illegal drugs any longer, Mr. Speaker, in some
of the locations there are many places where they can, they simply put
50 pounds of marijuana in a backpack, on one young male Mexican or
Central American, generally Mexicans, and each one takes a backpack of
50 pounds each. Maybe 10 of them at a time, maybe 25 at a time. They
have caught as many as a hundred at a time, walking each with 50
pounds. And they can walk through 10 or 15 or more miles of desert on
the Mexico side, 25 or more miles of desert on the U.S. side, and
arrive up at a transportation predetermined location, and then drop off
their illegal drugs there. And many of them turn around and walk back
to Mexico where they pick up another load.
So the illegal crossings, many of those illegal crossings are people
coming into the United States with illegal drugs, turning back around
and walking back into Mexico to get another load of illegal drugs.
Sometimes I wonder if we wouldn't be better off in this country if they
would simply stay here and get a job, illegal or not, Mr. Speaker. And
I don't advocate that, certainly.
So as I listened and was there while illegals were creeping across
our border in the dead of the night, not even 24 hours ago, Mr.
Speaker, and it is another dimension entirely, to see the drugs, the
interdiction of the drugs, the violence on the border, the knifing, the
blood, the lack of health care that is there, the incursions on our
border, the volume that is backpacked up into the United States, the
volume that is trucked into the United States, and to understand that
if we can seal this border and seal it with confidence, we could shut
off 90 percent of the illegal drugs that get by in the United States,
at least until they find another route to go around.
But we can build an effective barrier. And as I submitted that to the
people down there working on the border, consistently, they realize
that if we build a good solid barrier, one that couldn't be cut
through, one that couldn't be driven through, one that was solid and
one that would make it easy for them to drive the trail and enforce it,
that it could be the most effective tool that we could have.

[[Page 7502]]

It costs us $6 billion a year, Mr. Speaker, to incarcerate the
illegals here in the United States. Twenty-eight percent of our prison
population are criminal aliens.
That is our city, our county, our State and our Federal
penitentiaries, 28 percent criminal aliens, $6 billion a year. We can
build one tremendous barrier with $6 billion and a one-time
expenditure.
Of course, we wouldn't get it all built in 1 year, so we could spread
it out over 3 or 4 years, and we could concentrate on the areas that
needed it the most. We must do that, stop the bleeding, stop the
bleeding first. Shut off the leaky pipe, and then we can begin to have
a legitimate debate in this country on what to do about the mess it has
left.
But I submit that we shut off the jobs magnet, and we end birthright
citizenship.
Another interesting little anecdote down in that same hospital was a
Mexican national who was pregnant with multiple births. They took care
of her prenatal care out of the hospital in Tucson, and they also set
up the provider in Mexico so that they could have the equipment to
arrange for and give her good care for multiple births.
Instead, she waited until she went into labor, waited close to the
border, came into the United States, went into the hospital in Tucson
and delivered five children there to the tune of six figures times X.
Those children all have birthright citizenship. They all have now the
right and the ability to bring in by chain migration their extended
family members. Who knows what that costs, Mr. Speaker?
Our compassion knows no bounds, I understand; neither do the borders
of the United States of the America, apparently. The United States
Senate needs to pass the legislation 4437 that we passed in this House,
send it to the President for his signature, establish enforcement, Mr.
Speaker, and then we can have a legitimate discussion on whether or not
we might want to have guest workers in this country.

____________________

{time} 2310
THE BLUE DOG COALITION

The SPEAKER pro tempore (Mr. Inglis of South Carolina). Under the
Speaker's announced policy of January 4, 2005, the gentleman from
Arkansas (Mr. Ross) is recognized for the time remaining until
midnight.
Mr. ROSS. Mr. Speaker, I rise on behalf of the 37-member strong,
fiscally conservative Democratic Blue Dog Coalition. There are 37 of us
that are Democrats. We are fiscal conservatives and we are concerned
about the debt and the deficit that plagues this great Nation ours.
In fact, you can see here, the Blue Dog coalition today, the United
States national debt is $8,361,683,340,530 and some change. Now, for
every man, woman and child, including those born today, their share of
this enormous national debt is about $28,000. It is what we call the
debt tax, d-e-b-t. That is one tax that cannot go away until we get our
Nation's fiscal house in order.
It is hard now to believe that from 1998 to 2001 we had a balanced
budget in this country. Things were going pretty well. Now, what do we
have? We have gasoline prices that are up 80 percent, health care up 50
percent, higher education, college costs up 40 percent. Things are not
going so well. Mr. Speaker, I submit to you, it is directly related to
this debt, the largest debt ever in our Nation's history, this deficit,
the largest deficit ever in our Nation's history.
You know, the projected deficit for fiscal year 2007 is $348 billion.
But the reason it is $348 billion is because they are borrowing, our
government is borrowing from the Social Security trust fund. The
projected deficit for fiscal year 2007, not counting the Social
Security surplus; in other words, if the politicians in Washington kept
their hands off the Social Security trust fund, the real deficit for
fiscal year 2007 is $548 billion.
The first bill I filed as a Member of Congress was a bill to tell the
politicians in Washington to keep their hands off the Social Security
trust fund. Now I am beginning to understand why the Republican
leadership would not give me a vote, even a hearing, on this bill,
because they are now using the Social Security trust fund to run our
government to pay for tax cuts to those earning over $400,000 a year in
this manner of reckless spending that we are seeing going on, in fact,
for the sixth year in a row.
The 2006 deficit, $372 billion. Not counting the Social Security
surplus, it was $605 billion. In fiscal year 2005, it was $318 billion;
if you don't count the Social Security surplus, Social Security trust
fund, it was $494 billion. Fiscal year 2004, $412 billion deficit, and
it goes on and on.
My point is this, Mr. Speaker, our Nation is borrowing $1 billion a
day. We are spending $279 million every day to Iraq. But don't ask this
administration for a plan on how that money is being spent. Don't ask
this administration to be accountable for that $279 million a year tax
money going to Iraq every day, because if you do, they will tell you
they are unpatriotic. $57 million every day going to Afghanistan, and
billions more going to pay for tax cuts for folks earning over $400,000
a year.
Mr. Speaker, I submit to you this reckless spending that we are
seeing in this country must end. As members of the Blue Dog Coalition,
we have a plan, we have a 12-point plan for meaningful budget reform
that will get our Nation's fiscal house in order. We will talk more
about that in a little bit. We will talk more about the budget that may
come to the floor of this Chamber in a little bit.
The other point that I want to make is in addition to the billion
dollars a day that our Nation is borrowing, the debt is already $8.3
trillion. It is going up to the tune of about $1 billion every day. So
it is $8.3 trillion and growing.
On that $8.3 trillion in debt, our Nation is spending about half a
billion dollars a day simply paying interest on the debt we already
got. No principal, just interest.
Some people say, well, none of this really matters. But it does, and
it should matter to everybody in America, because that is a half a
billion dollars a day that cannot go to fund America's priorities until
our government gets its fiscal house in order.
In my congressional district, which spans about half of Arkansas, I
have got I-49 on the western side of the State. We need $1.5 billion to
complete that interstate that can create all kinds of jobs and economic
opportunity. That is a lot of money until you look at it this way and
you realize, oh, my goodness, we could finish that interstate with just
3 days' interest on the national debt.
On the eastern and southern part of my district we have I-69 under
way. I need $1.6 billion to finish it. Again, just for 3 days, interest
on the national debt, I could complete I-69 in Arkansas. I could four-
lane U.S. highway 167 from Little Rock to El Dorado on 1 day's interest
on the national debt. Give me a few hours interest of the national
debt, I can finish that expressway around Hot Springs National Park,
Arkansas.
My point is that whether it is education, health care, roads,
whatever it might be, America's priorities continue to go unmet until
we get our Nation's fiscal house in order.
Now, in a little bit, we will be talking more about our foreign debt
and about the Blue Dog 12-point plan to budget reform, which includes a
balanced budget amendment. We will be talking more about the budget
that may come to the floor of this Chamber this week.
But at this time, I am pleased to turn this microphone over to a real
leader within the Blue Dog Coalition, someone that really understands
fiscal discipline and someone that I am very pleased and honored to
have join me this evening. That is the gentleman from Georgia, my
friend, David Scott.
Mr. SCOTT of Georgia. Mr. Ross, it is always a pleasure to come down
on the floor and talk with you about the pressing issues facing our
Nation and the world today.
You know, Mr. Ross, you talked about the debt, and you talked about
the budget. It is the budget that provides us with the blueprint.

[[Page 7503]]

Just this morning, on my way, before I got on the airplane to get up
here, I was talking with one of my constituents out in Cobb County, a
town called Austell.

{time} 2320

I was talking to Ms. Winnie Smith, putting in a yard sign in her
yard. She came up to me and she said, ``Congressman, our country is
moving in the wrong direction. If you could just do four things. The
four things I wish you all could do something about right away, one is
secure our borders. We have a terrible problem with our borders. If we
could just protect this country and protect our porous borders.''
Then she said, ``Bring down these gas prices. Please do something
about the gas prices.''
Then she asked me, she said, ``Lord, if you could just do something
and get our young men and women home out of this mess in Iraq. And
then, Congressman, if you could just do something about this debt.''
I told her, ``Ms. Smith, you hit four things right there on the
button.''
I want to just talk, if I can just take a few brief moments on each
of these little points, and I want to use the budget that we probably
may vote on, I hope we don't, because I truly believe that there are
enough Republicans who are able to look through this smoke and mirrors
of this budget and see that it is not the blueprint, it is not the
direction that we want to go.
Mr. Ross, if we could just take the first item that Ms. Smith, my
constituent down there on Clay Road in Cobb County talked to me about
this morning, and that is our borders. I thought I would get here and I
would try to go through the budget here for a moment, because it is the
blueprint.
There is a howl and a cry the likes of which I have not seen in my
whole 32-year history of being an elected official. For 32 years, every
other year my name has been on the ballot somewhere in Georgia. Thank
God the people of Georgia have voted me in each of those 30-some years,
and I appreciate what the people of Georgia have done.
But the cries from the people of Georgia and all across this Nation,
nothing is as piercing and as meaningful as what they feel about the
insecurity of the borders. Immigration issues, all of the other issues
aside, what we do with the 11 million or 12 million illegals that are
here, how we deal with that, all registers with folks, but the most
important thing is what are we going to do about the borders?
So I got here today and I went to work, and I want to report on
exactly what this Congress, what the President, is proposing to do to
secure the budget.
You can have a lot of talk. I just listened intently to our friend
Mr. King here a few minutes ago talking eloquently and very
passionately about the border and the need to do so, and I concur with
him. But the point is, what are we doing about it?
Well, the American people need to know. I want to point out tonight
what shows the shortcoming in this budget for four of the most pressing
issues facing the American people today.
The 9/11 Commission has given this Congress and this President a D on
collaboration on border security. The 9/11 Commission December 2005
report card, Washington Republicans got a D on international
collaboration on border security. The commission points out that there
has been no systematic, diplomatic effort to work with other countries
on shared terrorist watch lists to ensure terrorists cannot get across
our borders.
I start off with the motive of terrorism rather than immigration so
the people understand that the insecurity of our borders is paramount
in our war on terror.
But as we get down to the immigration fight, and we just look at the
one most important area, there are 1,000 fewer additional Border Patrol
agents than were promised in the 9/11 act. This Congress, under the
leadership of Republicans, and I must say that, not to be partisan,
because I want to correct something immediately here. There are
Republicans and Democrats who are equally concerned about this issue.
That is why that budget has not passed yet. So I don't want this to be
just purely partisan. This is not a Republican or a Democrat issue.
This is an American issue, and this President and the Republican
leadership of this Congress, not all the Republicans in the Congress,
are clearly out of step, for they have broken the promise made on
funding for additional Border Patrol agents. Quite honestly, Mr. Ross,
we need at least three times as many agents.
Immigrant enforcement agents and detention beds. Specifically in 2004
Congress enacted the 9/11 act, the Intelligence Reform Act, for those
watching C-SPAN and want to check it, it is Public Law 108-458, which
mandated an additional 2,000 Border Patrol agents being hired over each
of the next 5 years. Yet for this fiscal year 2006, this Republican-led
Congress has funded only 1,000 additional agents.
Is it any wonder that our own citizens are taking it upon themselves,
called Minutemen, to patrol our borders, because our government is
letting them down, and it is clear in this budget. We funded only
1,000. The 9/11 act also mandated an additional 800 immigration
enforcement agents over the next 5 years. Yet in this FY 2006 budget
the Congress has funded only 350 additional agents. It mandated an
additional 8,000 detention beds, yet in the 2006 budget the Congress
funded only 1,800 additional beds. So it is no wonder that they are
having difficulty getting this budget increased.
Now, let me just say on this point of immigration, because I want
everybody to understand exactly where this Congressman is coming from,
earlier tonight I was watching on TV the Asian Pacific Caucus on this
floor. It was a very moving presentation by them about the
contributions that the Japanese Americans and Asian Americans have
made, and particularly the Japanese Americans, particularly during
World War II as their people were being interned in camps. Yet, similar
to African Americans, they still fought for this country in the face of
tremendous bigotry and odds, because they wanted to show we are
Americans.
That is what this immigration fight is about. Yes, we want to secure
the boarders, but it is about being Americans.
I was just in Miami, Mr. Ross, this past weekend with my wife. I was
down there with the congressional wives and their foundation. I took it
upon myself to visit and to do a little field work there.
While I am at it, I want to give congratulations and kudos to the
hospitality that the people of Miami Beach showed and the leadership
Kendrick Meek and his wife provided for us as the host. It was
wonderful.
But the one interesting thing about Miami Beach that I found was most
everybody is from somewhere else. If you want to see a melting pot,
really want to see immigration and America at work at the same time,
visit Miami Beach. I haven't been there for a while.
I spent 3 days there this weekend. I talked to everybody. Whether
they were Cuban or Mexican or Latin American or Caribbean or Jamaican
or Haitian or Asian, they are all there in different ways.
One of the things I did, Mr. Ross, was every time I would say thank
you, I would add the phrase when I said thank you and shook their hand,
I would say, ``You are a good American.'' And when I said ``you are a
good American,'' a smile came over their face. I ask you to try it
sometime, or anybody in country to try it sometime, and you will see
people in this country understand and they get the point.
This is America. We must translate that to some of those who are
slipping and sneaking into this country to understand this is America,
to understand it is one America, to understand that there is one
language, English, there is one flag, there is one National anthem,
there is one set of values. We have got to work to get that through.
That was the story that came through so passionately on this floor
earlier today with the story of the contributions of the Japanese
Americans, because it says we are a country of immigrants.
But on this issue, we want people to be legal, to pay their taxes and
work

[[Page 7504]]

hard the American way, learn our language, learn our values, as
everybody else did. But the most important thing before we get to all
that point is to secure our borders.
I want to just mention quite quickly what we Democrats are doing,
because a lot of times when we come up here and we talk, we talk about
what the Republicans and the President are doing. Here is what I want
the American people to understand, what we are doing on border
security.

{time} 2330

On border security, since 9/11 House Democrats have repeatedly tried
to increase appropriations for border security. For example,
Representative David Obey, our senior Member on Appropriations offered
a motion to recommit the conference report on the fiscal year 2005
supplemental appropriations bill with instructions to add $284 million
to fund an additional 550 border patrol agents. That is securing your
border.
And also an additional 200 immigration agents. That is dealing with
the immigration problem where it counts, and border aerial vehicles,
using our technology. But Republicans defeated that motion to recommit
by a vote of 201-225.
Senate Democrats on the other side, as far as border security, Senate
Democrats have also repeatedly fought to increase the border security
appropriations. Senator Robert Byrd of West Virginia offered an
amendment to the fiscal year 2005 supplemental appropriations bill to
increase funding for border security by $390 million, providing for the
hiring of additional border patrol agents and the operation of unmanned
aerial vehicles.
With support from 21 Republicans, Democrats succeeded in adopting the
Byrd amendment by a vote of 65-34. That is what I said earlier. It is
not just a Democratic fight, there are Republicans who are working with
us on this.
However, most of this additional border security funding was removed
by the Republicans in conference. That is why when you look at the
polls, when you look at what the American people are seeing, it is not
just us here. The American people are not dumb. They know who is
running this place. They know who is responsible for these high gas
prices. They know who is responsible for the lack of appropriations and
a lack of a budget with a proper blueprint that shows the vision this
country ought to have on these critical areas.
And these Republicans, they have got to plan for the blame for this
bad situation with our budget and our deficit.
Mr. ROSS. Mr. Speaker, I thank the gentleman, Mr. Scott from Georgia
for joining me this evening. I appreciate his leadership within the 37
Member strong fiscally conservative Democratic Blue Dog Coalition. We
are here on the floor talking about the budget, the debt, the deficit
late into the evening on Tuesday because America, America has a debt
that is out of control.
It has a deficit out of control. Mr. Speaker, it is time to restore
some common sense and fiscal discipline to our Nation's Government.
Mr. Scott just talked about priorities, about how this Republican
Congress is clearly in the majority for the first time in well over 50
years. They control the White House, the House, the Senate, and now the
Supreme Court. And they voted against funding border security.
And yet the budget that will be presented on this floor this week
calls for $228 billion, that is with a B, in tax cuts that primarily
benefit those earning over $400,000 a year.
Mr. Scott, I do not know about in your district, but I do not have a
lot of folks in my 150 towns and all the square miles that I represent
that earn $400,000 a year. I yield.
Mr. SCOTT of Georgia. And the people are not asking for these tax
cuts. They are not demanding these tax cuts. They are demanding that
the borders be secure. They are demanding that gas prices come down.
And it is a shame that this budget is not addressing this.
And the President is about tax cuts. Well, they are not really tax
cuts. They are deferred tax increases. Somebody has got to pay for
those. And the tragedy is, Mr. Ross, that we are at the mercy in
borrowing money from foreign governments.
And not just any foreign governments. It is very important that we
take a look at the major players on the international stage now as far
as our basic fiscal insecurity is concerned.
90 percent, 90 percent of everything we are spending to run this
Government of the United States today is on borrowed money. From China,
nearly $300 billion. From Japan, nearly $700 billion. From Taiwan, $118
billion.
From Hong-Kong, $127 billion. From the OPEC nations of Saudi Arabia
and others in the Middle East, staggering, over $200 billion.
You look at those countries, Mr. Ross, and you must realize that
those are some of the same countries that are eating our lunch on this
oil. The other countries that are eating our lunch on oil, Iran, Iraq,
where we are mired, Saudi Arabia, again, where we are, and the Middle
Eastern countries underneath have about 30 to 40 percent of all of the
known oil reserves at this time.
So if on the one hand you are borrowing money from the very same
people who are holding you hostage for oil, that is a bad situation to
be in. And the American people want us to address those issues. And
they realize it takes resources to do that.
Furthermore, we have to pay for these tax cuts, Mr. Ross. It is so
disheartening to me that to pay for those tax cuts on the backs of our
veterans. We are cutting veterans programs by $1.2 billion. We are
raising their copay for their insurance that they use to buy their
medicines over 100 percent.
That is wrong, Mr. Ross. That is not what the American people are
after. And that is why they are expressing it. As I said before, the
American people have had it up to here.
Mr. ROSS. Mr. Speaker, the gentleman makes an excellent point. And
look, I am not against tax cuts. I voted for the biggest tax cut in 20
years back before 9/11. It was back before Iraq, Afghanistan. It was
back when we had a surplus. We were really giving people some of their
money back.
But this notion that you can give tax cuts in times when you do not
have a surplus, in times of deficit spending to provide tax cuts for
those earning over $400,000 a year, and to accomplish that and pay for
that by cutting programs like Medicaid and Medicare and student loans,
and borrowing the rest from places like China and Japan, that may be a
tax cut on these earning over $400,000 dollars a year today, but it is
a tax increase on our kids. It is a tax increase on our children and
our grandchildren.
Mr. Speaker, it is about priorities. We have $3 dollar gasoline.
There is a lot of talk from the Republican leadership. Well, there was
one proposal where they want to give us $100 close to election time.
They want to give us $100 and tell us to get over it and get used to
it.
Mr. SCOTT of Georgia. Mr. Speaker, under today`s prices, that $100
would get you two fill-ups if gas is at $3.25
Mr. ROSS. Let me tell you, as a Member of the House Energy and
Commerce Committee, I can tell you that these are the facts. The
Republican leadership talks a lot about alternative and renewable
fuels. Biomass refineries, grants to create biomass refineries for all
of America for the next 365 days totals $100 million.
We will send nearly three times that much money to Iraq in the next
24 hours. It is about priorities. This President has announced already
that if this supplemental appropriations bill includes funding for
disaster payments for our farm families here in America who have
suffered through one of the worst droughts in this Nation's history
that he will veto it, the first veto of this administration after 6
years.
Again, it is about America's priorities, and America's priorities are
found all over this Republican budget for fiscal year 2007. A budget
that should reflect the priorities and values of our Nation, a budget
that may very well be debated and voted on on the floor of this chamber
sometime this week.

[[Page 7505]]

Well, Mr. Speaker, the Republican majority has had a difficult time
bringing a proposal to the floor for a vote. This is because they
cannot find consensus within their own party about the choices made to
cut programs that are essential to the most vulnerable in our Nation,
while increasing record deficits by providing tax cuts to those making
over $400,000 a year.

{time} 2340

If they fail to pass a budget, it will be the first time in three
decades that the House has not adopted a blueprint, a budget blueprint.
But if they succeed, the damage to our Nation and those we represent
will be devastating.
Since this administration took office, it has requested and this
Republican controlled Congress has provided four increases, four
increases in the statutory debt ceiling totaling $3 trillion. Under
this budget, the statutory debt by 2011 will increase by another $2.3
trillion for a total increase of $5.3 trillion. As you can see, as of
tonight our national debt, $8,351,683,340,530 and some change.
While Republicans say their objective is to restore fiscal discipline
to our Nation, this budget does not lead us in that direction. While
tremendous cuts are made to programs that serve a majority of
Americans, the Republican budget includes $228 billion in new tax cuts
that will benefit only a small few, mostly those earning over $400,000
a year. As a result, their budget resolution continues to deficit spend
over $400 billion for the next 5 years.
These deficits mean that under Republican policies, the five largest
deficits in history will have occurred in the five consecutive years
that they have controlled this Congress, the White House, this Senate,
and the Supreme Court. This is not how the American people want our
government to function.
The American people want a good dose of common sense. They want an
end to all this partisan bickering. They want to see one America again.
Cutting vital programs for those who are most in need to provide a tax
cut to the wealthiest among us is morally unconscionable.
The Republican proposal eliminates 42, 42 education programs
including those that support vocational education, college-readiness
programs for low-income students, and family literacy programs.
Overall, both the President's budget and the House Republican
resolution cut funding for the Department of Education by $2.2 billion
below the comparable 2006 level.
This is the second year in a row that the Republicans will cut
Federal education funding despite the need for school districts to meet
demanding standards under the federally mandated No Child Left Behind
law. This funding level does not meet the educational needs of
America's students. It fails to provide assistance to nearly 4 million
children eligible for title I services and 2 million children eligible
for afterschool services that enhance student achievement.
For the many families that are trying to send their children to
college, their proposal cuts aid for students to help pay for college.
It freezes the maximum Pell grant award at $4,050 right where it has
been since 2003, while the average tuition and fees at 4-year public
colleges have risen nearly $1,400. As a parent with a child who will be
attending college in the next couple of years, I understand firsthand
the increasing costs of tuition and the need to provide assistance to
those seeking higher education
Some of the most egregious cuts in the Republican budget adversely
impact the most vulnerable Americans. The Republican proposal is
largely consistent with the President's budget in its effect on safety
net programs such as housing, child care, and nutrition assistance. The
President's budget eliminates over $100 million for the commodity
supplemental food program which provides nutrient-rich food packaging
for low-income women, infants, children, and senior citizens. The
program serves 420,000 elderly and 50,000 mothers and their children
each month.
The House Republican budget imposes even deeper cuts to these type of
programs than the President's budget. Like the President's budget, the
Republican proposal freezes child care for 2007 at the 2006 level and
cuts funding for the following years. These are just a few examples of
the misplaced priorities that this Republican-controlled Congress has
for our country and why it is important to oppose these cuts.
I urge my colleagues to reject these cuts and take action to begin an
honest dialogue to pass legislation that will provide needed resources
for the majority of our Nation. It is time to pass a budget that
reflects America's priorities. Not the priorities of a divided America,
but the priorities of a united America.
Mr. Speaker, I am convinced we can do that. We can do that, and we
can have a balanced budget. It is about priorities. It is about making
the difficult decisions that will allow us to pay down this debt, to
stop this deficit spending. We can do it. We can do it by beginning
with one of the Blue Dog proposals which requires our Nation to have a
balanced budget, something 49 States are required to do, something I
helped do as a State senator in Arkansas for 10 years.
With that, I yield to my friend, Mr. Scott from Georgia.
Mr. SCOTT of Georgia. Again, Mr. Ross, we must repeat because it is
very important, we are here to do America's business. Every waking
moment this Congress should be preoccupied with the three or four basic
concerns that are threatening the quality of life in this country and
very well threatening our own security, our borders.
We have not heard enough of what we are going to do to secure our
borders. We need to hear from this leadership, and we are hearing it
from Democrats. I assure you, Democrats will control our border.
Democrats will put the military on our borders.
Let me tell you something, Mr. Ross. I worked for a while as a
teacher, and my favorite subject to teach as was history because it
taught you so much. And one of the things that you look back on history
is that history teaches us a couple of things. It teaches us that if
you forget your history, you are doomed to repeat it. And if you forget
the bad parts of your history, they will certainly reoccur.
We are at a very, very serious point in our country of having a very,
very significant time of keeping our progress moving forward on each
level of security.
Let us first of all talk about this Nation's security. History shows
us when we look back and we evaluate how we came about to formulate
what is now called the National Guard was a need to do exactly what the
National Guard was set up to do, guard our Nation. The first order of
business to secure our borders is, number one, to put in the process of
hiring and tripling the number of agents, putting forth the technical
surveillance on our borders. But until we can get up to speed on that,
we need to put our military strategy on our borders and send a message.
We cannot take any more illegal immigrants coming into this country.
It threatens the country. Even our immigrants who are here are saying
the same thing. We can no longer not have our borders secure because of
the war on terror.

{time} 2350

CNN is doing a wonderful report on our borders, and I am not just
talking about the Mexican border. I am talking about the Canadian
border as well, and if I am watching CNN and you are watching CNN, and
Anderson Cooper is doing this wonderful special on CNN, I hope people
will watch it because it is very revealing. I saw it this weekend.
It showed about this little area up in Canada on the Canadian border
somewhere north of Minnesota or something where the border is so porous
up there that a guy comes in, goes into a little shack, opens the
shack, speaks into a microphone, looks into a camera, and says I am so
and so, I am crossing the border, thank you very much, and that is it,
for those who will stop.
I am scratching my head and I am saying, in this time of terror, if I
am watching this, surely al Qaeda's watching it. I am telling you, it
is just a

[[Page 7506]]

matter of time before we get an attack as a result of not checking our
borders.
Some of our law enforcement people who are working some of these
borders are saying that some of that may have already happened. I am
telling you, if we do not check our borders, it is the most significant
thing you can do, and you look at this budget and you show me in this
budget where there has any priority or urgency to close down these
borders. This is why the American people are upset. It is their
security. It is their way of life. It is what we fought for. It is what
generations have fought for.
America, it is on the verge of being threatened out of existence. It
has happened before. History is cluttered with the bleached bones of
many great past civilizations who woke up too late to respond. Go back,
look at your history books, look at Rome, look at the Ottoman Empire,
look at the Netherlands particularly when it came to energy, and to a
degree Great Britain. All of these powers lost because of those four
things: global overreach, and not taking care of home and their border;
dwindling resources at home; and the third thing, you guessed it, debt
in the hands of foreign governments.
We are headed down that path, and the American people are looking for
us to change that direction. That is what my folks down in Georgia are
saying. That is what they want us to do, and we have got to do it. That
is why I am so proud that we are here as Blue Dogs, pointing the way,
showing how we will be fiscally responsible. Nobody can take that away
from us. There has been nobody manning the watch, watching this debt,
long before it was up to this level of priority than the Blue Dog
Coalition who have been at the front, Democrats at the front of the
line, talking about financial responsibility and, foremost, paying down
this debt.
What a tragedy it is for this administration, this Congress to just
lark along, borrowing all of this money, putting this extraordinary tax
increase on the backs of our children and our grandchildren, and
America's getting this.
I was surprised this morning when I was down there in my district in
Cobb County, and she mentioned those four things. Iraq, I knew;
immigration, I knew, that is hot, that is heavy, oil prices, that is
heavy. But then she says: And the debt. America is waking up and
understanding this debt situation is placing this country in a very
precarious position, and we have got to change it and be responsible.
That is why it is important for us to put in pay-as-you-go measures,
measures we have been preaching about for a long time. The American
people are ready for that because if we do not, we, too, can go the way
of so many of those past civilizations who woke up too late.
Mr. ROSS. Mr. Speaker, I appreciate the gentleman from Georgia for
joining me this evening, and he is right. I am concerned, as he is,
about America's security.
Some people will say, well, there has not been another attack in
America since 9/11, and I submit to you that is true and we have been
real lucky. We have been lucky. We have been lucky because it is very
clear that our border is not secure with Mexico or Canada. It is clear
that while we take our shoes off and we go through the metal detectors
at the airport and while our suitcases are X-rayed, the freight which
can take up as much as a quarter to half of the belly of a plane
continues to go unchecked. All the containers, for the most part,
coming into our ports remain unchecked.
I submit to you that instead of having a budget that is going to be
debated on this floor this week that calls for $228 billion in tax cuts
for folks earning over $400,000 a year, let us invest in America's
security. Let us make those ports secure. Let us make our borders
secure. Let us check the freight on the belly of those commercial
airplanes. Let us invest in America again.
Mr. SCOTT of Georgia. This is exactly right. America's not crying out
here for tax cuts for the top 1 percent. As a matter of fact, Bill
Gates and several others said we do not want it; Mr. President, we do
not need it. Those farmers need it for the drought. Those counties need
it for the community block grant programs that is a lifeline of these
counties. The children need it for their student aid programs and their
loans, they need it. Firemen need it. Our first responders need it, and
we need it to provide the incentives in place to help with our patrol.
I want to mention because there was so much we wanted to cover
tonight, but I cannot leave without saying this one thing. It really
points an example of our lack of response, we have talked about it, to
the border security problem, but look at our lack of response properly
in this budget to our gas problem. Every basic issue that needs to be
responded to, American people know we did not get to this point by just
one thing. Oil companies have a lot to do with it, but their profits
are not the real reason.
The real reason is we have a serious shortage because we are being
held hostage by most of the petroleum producing countries and because
we have not planned properly with our refineries and because we have
not planned properly with our automobiles and our guzzlers, and even
when we move to do that, with one example, I just point out to you, the
hybrid cars. The one good program that we could use would be that.
There is nothing in the budget that even approaches what we need to
do to give our American people true incentives, serious tax incentives
to purchase hybrid cars, hybrid cars whose engines are run on a
combination of electric batteries and gasoline. The key to our success,
as far as bringing down these energy crises and stop making us so
dependent on these other volatile Nations for our energy is to lower
our consumption of oil, and to lower our consumption means we need to
go elsewhere to find the fuel mix to do it. We can do it. We have got
the American know-how.
You take the hybrid engine. They have got, what is it, $2,000 for the
tax credit now. It is going up to $3,400, but then there is all kind of
complications in that make it so confounding that dealing with it is
for the first manufacturer to produce 60,000 cars, then it goes down
every quarter. It just gets so complex that the poor American people do
not even have a clear angle with which to attack it and go out and
purchase the automobiles. We need to clear that up.
We need to put in this budget that we will give a 50 percent increase
at least on the tax incentives and make that a going up scale so that
we can get more hybrid cars running. We need to go and start giving
incentives to farmers who are producing corn and soybeans, creating a
new industry with which to produce ethanol, and mix that with our
gasoline to be able to carry our fuel much like Brazil is doing. We
need to enrich conservation programs to conserve our energy, and then,
finally, we have got to do all we can to get the American people out of
their automobiles, the commuter rail and with mass transit.
But where is the will? Where is the direction? Where is the
encouragement? Where is the inspiration to say let us go, America, we
can do it? That is what the American people are waiting on, and we have
got to provide the direction for them to do it. It is not this budget,
and that is why it is not passing.
Mr. ROSS. Mr. Speaker, I thank the gentleman from Georgia. Mr.
Speaker, if you have any comments or concerns or questions for us, you
can e-mail us at [email protected]. That is
[email protected].
Next Tuesday night, Mr. Speaker, I will return to this House floor to
talk about the plight of our farm families across this country, the
disasters they face this year ranging from droughts in parts of the
country to the needs in other parts of the country, to the hurricanes,
a real concern among the Blue Dog Coalition about the plight of the
family farmer. It is every bit as critical to our Nation's security so
that our farm families can provide us with a safe and secure source for
food and fiber. That is just as critical to us as our energy sources
are. We will be talking more about that on the floor next Tuesday
night.

[[Page 7507]]

____________________

LEAVE OF ABSENCE

By unanimous consent, leave of absence was granted to:
Mr. Cardoza (at the request of Ms. Pelosi) for today and the balance
of the week on account of a death in the family.
Mr. Davis of Kentucky (at the request of Mr. Boehner) for today on
account of his wife's surgery.
Mr. Murphy (at the request of Mr. Boehner) for today and May 10 on
account of a death in the family.
Mr. Osborne (at the request of Mr. Boehner) for today and until 5:00
p.m. May 10 on account of business in the district.

____________________

SPECIAL ORDERS GRANTED

By unanimous consent, permission to address the House, following the
legislative program and any special orders heretofore entered, was
granted to:
(The following Members (at the request of Ms. Lee) to revise and
extend their remarks and include extraneous material:)
Mr. DeFazio, for 5 minutes, today.
Mr. McDermott, for 5 minutes, today.
Mr. Pallone, for 5 minutes, today.
Mr. Brown of Ohio, for 5 minutes, today.
Ms. Woolsey, for 5 minutes, today.
Ms. Kaptur, for 5 minutes, today.
Mr. Emanuel, for 5 minutes, today.
Mr. Etheridge, for 5 minutes, today.
Ms. Lee, for 5 minutes, today.
(The following Members (at the request of Mr. Fitzpatrick of
Pennsylvania) to revise and extend their remarks and include extraneous
material:)
Mr. McHenry, for 5 minutes, May 10 and 11.
Mr. Poe, for 5 minutes, today and May 10 and 11.
Mr. Dreier, for 5 minutes, today and May 10 and 11.
Mr. Kennedy of Minnesota, for 5 minutes, May 10.
Mr. Norwood, for 5 minutes, May 11.
Mr. Burton of Indiana, for 5 minutes, today and May 10 and 11.
Mr. Gutknecht, for 5 minutes, May 10.
Mr. Bilirakis, for 5 minutes, May 10 and 16.
Mr. Hunter, for 5 minutes, May 16.
Mr. Bishop of Utah, for 5 minutes, today and May 11.
Mr. Davis of Kentucky, for 5 minutes, May 10.
Mr. Gingrey, for 5 minutes, today.
Mr. Bass, for 5 minutes, May 11.
Mr. Gilchrest, for 5 minutes, May 10 and 11.
(The following Member (at her own request) to revise and extend her
remarks and include extraneous material:)
Ms. Roybal-Allard, for 5 minutes, today.

____________________

ENROLLED BILL SIGNED

Mrs. Haas, Clerk of the House, reported and found truly enrolled a
bill of the House of the following title, which was thereupon signed by
the Speaker:

H.J. Res. 83. Joint resolution to memorialize and honor the
contribution of Chief Justice William H. Rehnquist.

____________________

ADJOURNMENT

Mr. ROSS. Mr. Speaker, I move that the House do now adjourn.
The motion was agreed to; accordingly (at midnight), the House
adjourned until today, Wednesday, May 10, 2006, at 10 a.m.

____________________

EXECUTIVE COMMUNICATIONS, ETC.

Under clause 8 of rule XII, executive communications were taken from
the Speaker's table and referred as follows:

7336. A letter from the Assistant Secretary for Legislative
Affairs, Department of State, transmitting a copy of the
Department's ``Country Reports on Terrorism: 2005,'' pursuant
to 22 U.S.C. 2656f; to the Committee on International
Relations.
7337. A letter from the Deputy Director, Defense Security
Cooperation Agency, transmitting pursuant to the reporting
requirements of Section 36(b)(1) of the Arms Export Control
Act, as amended, Transmittal No. 06-29, concerning the
Department of the Air Force's proposed Letter(s) of Offer and
Acceptance to Japan for defense articles and services; to the
Committee on International Relations.
7338. A letter from the Chairman, United States Sentencing
Commission, transmitting a report of amendments to the
sentencing guidelines together with the reasons for these
amendments, pursuant to 28 U.S.C. 994(o); to the Committee on
the Judiciary.
7339. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone;
Headlands Beach State Park, Mentor, Ohio [CGD09-05-105] (RIN:
1625-AA00) received March 16, 2006, pursuant to 5 U.S.C.
801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7340. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone--
Toledo, OH, Maumee River [CGD09-05-106] (RIN: 1625-AA00)
received March 16, 2006, pursuant to 5 U.S.C. 801(a)(1)(A);
to the Committee on Transportation and Infrastructure.
7341. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone; Erie
Bayfront Ground Breaking Fireworks, Presque Isle Bay, Erie,
PA [CGD09-05-107] (RIN: 1625-AA00) received March 16, 2006,
pursuant to 5 U.S.C. 801(a)(1)(A); to the Committee on
Transportation and Infrastructure.
7342. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone;
Celebrate Erie, Dobbins Landing, Erie, PA [CGD09-05-109]
(RIN: 1625-AA00) received March 16, 2006, pursuant to 5
U.S.C. 801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7343. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone;
Carly's Crossing, Buffalo Outer Harbor, Buffalo, NY [CGD09-
05-110] (RIN: 1625-AA00) received March 16, 2006, pursuant to
5 U.S.C. 801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7344. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone;
Menominee Fireworks Display, Lake Michigan, Menominee, MI
[CGD09-05-111] (RIN: 1625-AA00) received March 16, 2006,
pursuant to 5 U.S.C. 801(a)(1)(A); to the Committee on
Transportation and Infrastructure.
7345. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone;
Calumet-Saginaw River, Chicago, IL [CGD09-05-116] (RIN: 1625-
AA00) received March 16, 2006, pursuant to 5 U.S.C.
801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7346. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone;
Fairport Harbor, Fairport, Ohio [CGD09-05-121] (RIN: 1625-
AA00) received March 16, 2006, pursuant to 5 U.S.C.
801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7347. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone; Port
of Toledo -- Anthony Wayne Bridge, OH, Maumee River [CGD09-
05-124] (RIN: 1625-AA00) received March 16, 2006, pursuant to
5 U.S.C. 801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7348. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone;
Bonneville Power Administration Over Water Cable Operations,
Snake River, WA [CGD13-05-032] (RIN: 1625-AA00) received
March 16, 2006, pursuant to 5 U.S.C. 801(a)(1)(A); to the
Committee on Transportation and Infrastructure.
7349. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone;
Puget Sound Crossing For Kids, Puget Sound, Washington
[CGD13-05-035] (RIN: 1625-AA00) received March 16, 2006,
pursuant to 5 U.S.C. 801(a)(1)(A); to the Committee on
Transportation and Infrastructure.
7350. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Security Zone;
Ribault to St. Johns River [COTP Jacksonville 05-110] (RIN:
1625-AA87) received March 16, 2006, pursuant to 5 U.S.C.
801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7351. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone;
Intra Coastal Waterway, Indian River, Brevard County, FL
[COTP Jacksonville 05-111] (RIN: 1625-AA00) received March
16, 2006, pursuant to 5 U.S.C. 801(a)(1)(A); to the Committee
on Transportation and Infrastructure.

[[Page 7508]]

7352. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Security Zone;
Kings Bay to the Sea Bouy at the Entrance of St. Marys River,
GA [COTP Jacksonville 05-122] (RIN: 1625-AA87) received March
16, 2006, pursuant to 5 U.S.C. 801(a)(1)(A); to the Committee
on Transportation and Infrastructure.
7353. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Security Zone;
Port Canaveral Entrance Channel to Trident Basin, Port
Canaveral, FL [COTP Jacksonville 05-123] (RIN: 1625-AA87)
received March 16, 2006, pursuant to 5 U.S.C. 801(a)(1)(A);
to the Committee on Transportation and Infrastructure.
7354. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone; Port
Canaveral Jetties, Port Canaveral, FL [COTP Jacksonville 05-
124] (RIN: 1625-AA00) received March 16, 2006, pursuant to 5
U.S.C. 801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7355. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Security Zone;
Port Canaveral Entrance Channel to Trident Basin, Port
Canaveral, FL [COTP Jacksonville 05-125] (RIN: 1625-AA87)
received March 16, 2006, pursuant to 5 U.S.C. 801(a)(1)(A);
to the Committee on Transportation and Infrastructure.
7356. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Security Zone;
Trident Basin, Port Canaveral, FL to the Sea Buoy at the
Entrance of the Port Canaveral Channel [COTP Jacksonville 05-
126] (RIN: 1625-AA87) received March 16, 2006, pursuant to 5
U.S.C. 801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7357. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Security Zone;
Trident Basin, Port Canaveral, FL to the Sea Buoy at the
Entrance of the Port Canaveral Channel [COTP Jacksonville 05-
130] (RIN: 1625-AA87) received March 16, 2006, pursuant to 5
U.S.C. 801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7358. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone,
Plantation Key, FL [COTP Key West 05-004] (RIN: 1625-AA00)
received March 16, 2006, pursuant to 5 U.S.C. 801(a)(1)(A);
to the Committee on Transportation and Infrastructure.
7359. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone;
Pensacola Caucus Channel and Pensacola Bay Channel,
Pensacola, FL [COTP Mobile-05-010] (RIN: 1625-AA00) received
March 16, 2006, pursuant to 5 U.S.C. 801(a)(1)(A); to the
Committee on Transportation and Infrastructure.
7360. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone; GICW
MM60 to GICW MM128, Longbeach, MS to Dauphin Island Bridge,
AL [COTP Mobile-05-016] (RIN: 1625-AA00) received March 16,
2006, pursuant to 5 U.S.C. 801(a)(1)(A); to the Committee on
Transportation and Infrastructure.
7361. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone;
Gulfport, MS thru Bayou La Batre, AL [COTP Mobile-05-017]
(RIN: 1625-AA00) received March 16, 2006, pursuant to 5
U.S.C. 801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7362. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone; GICW
MM128 to GICW MM155, Mobile, AL to Gulf Shores, AL [COTP
Mobile-05-018] (RIN: 1625-AA00) received March 16, 2006,
pursuant to 5 U.S.C. 801(a)(1)(A); to the Committee on
Transportation and Infrastructure.
7363. A letter from the Chief, Regulations and
Administrative Law, USCG, Department of Homeland Security,
transmitting the Department's final rule -- Safety Zone; GICW
MM155 to GICW MM251 Orange Beach, AL to Highway 331
Choctawhatchee Bay Bridge, FL [COTP Mobile-05-019] (RIN:
1625-AA00) received March 16, 2006, pursuant to 5 U.S.C.
801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7364. A letter from the Assistant Secretary for Legislative
and Intergovernmental Affairs, Department of Homeland
Security, transmitting the Department's report on
Capabilities and Readiness to Fulfill National Defense
Responsibilites, pursuant to Section 426 of the Maritime
Transportation Security Act of 2002; to the Committee on
Transportation and Infrastructure.
7365. A letter from the Program Analyst, FAA, Department of
Transportation, transmitting the Department's final rule --
Airworthiness Directives; Airbus Model A321-100 Series
Airplanes [Docket No. FAA-2006-23935; Directorate Identifier
2005-NM-060-AD; Amendment 39-14492; AD 2006-04-11] (RIN:
2120-AA64) received April 21, 2006, pursuant to 5 U.S.C.
801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7366. A letter from the Program Analyst, FAA, Department of
Transportation, transmitting the Department's final rule --
Airworthiness Directives; AvCraft Dornier Model 328-100
Airplanes [Docket No. FAA-2005-22813; Directorate Identifier
2002-NM-117-AD; Amendment 39-14493; AD 2000-24-03 R1] (RIN:
2120-AA64) received April 21, 2006, pursuant to 5 U.S.C.
801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7367. A letter from the Program Analyst, FAA, Department of
Transportation, transmitting the Department's final rule --
Airworthiness Directives; Raytheon Aircraft Company Model 390
Airplanes [Docket No. FAA-2005-23221; Directorate Identifier
2005-CE-51-AD; Amendment 39-14459; AD 2006-02-07] (RIN: 2120-
AA64) received April 21, 2006, pursuant to 5 U.S.C.
801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7368. A letter from the Program Analyst, FAA, Department of
Transportation, transmitting the Department's final rule --
Airworthiness Directives; Cessna Model 650 Airplanes [Docket
No. 2002-NM-332-AD; Amendment 39-14158; AD 2005-13-21] (RIN:
2120-AA64) received April 21, 2006, pursuant to 5 U.S.C.
801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7369. A letter from the Program Analyst, FAA, Department of
Transportation, transmitting the Department's final rule --
Airworthiness Directives; The Cessna Aircraft Company Models
208 and 208B Airplanes [Docket No. FAA-2005-21275;
Directorate Identifier 2005-CE-28-AD; Amendment 39-14515; AD
2006-01-11 R1] (RIN: 2120-AA64) received April 21, 2006,
pursuant to 5 U.S.C. 801(a)(1)(A); to the Committee on
Transportation and Infrastructure.
7370. A letter from the Program Analyst, FAA, Department of
Transportation, transmitting the Department's final rule --
Airworthiness Directives; Dassault Model Falcon 2000 and
Falcon 2000EX Airplanes [Docket No. FAA-2006-23716;
Dirctorate Identifier 2006-NM-008-AD; Amendment 39-14466; AD
2006-03-02] (RIN: 2120-AA64) received April 21, 2006,
pursuant to 5 U.S.C. 801(a)(1)(A); to the Committee on
Transportation and Infrastructure.
7371. A letter from the Program Analyst, FAA, Department of
Transportation, transmitting the Department's final rule --
Airworthiness Directives; McDonnel Douglas Model DC-9-14, DC-
9-15, and DC-9-15F Airplanes; Model DC-9-20, DC-9-30, DC-9-
40, and DC-9-50 Series Airplanes; Model DC-9-81 (MD-81), DC-
9-82 (MD-82), DC-9-83 (MD-83), and DC-9-87 (MD-87) Airplanes;
Model MD-88 Airplanes; and Model MD-90-30 Airplanes [Docket
No. 2002-NM-105-AD; Amendment 39-14441; AD 2006-01-02] (RIN:
2120-AA64) received April 21, 2006, pursuant to 5 U.S.C.
801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7372. A letter from the Program Analyst, FAA, Department of
Transportation, transmitting the Department's final rule --
Airworthiness Directives; Pacific Aerospace Corporation Ltd.
Model 750XL Airplanes [Docket No. FAA-2005-23473; Directorate
Identifier 2005-CE-54-AD; Amendment 39-14451; AD 2005-26-53]
(RIN: 2120-AA64) received April 21, 2006, pursuant to 5
U.S.C. 801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7373. A letter from the Program Analyst, FAA, Department of
Transportation, transmitting the Department's final rule --
Airworthiness Directives; The Cessna Aircraft Company Models
208 and 208B Airplanes [Docket No. FAA-2005-21275;
Directorate Identifier 2005-CE-28-AD; Amendment 39-14450; AD
2006-01-11] (RIN: 2120-AA64) received April 21, 2006,
pursuant to 5 U.S.C. 801(a)(1)(A); to the Committee on
Transportation and Infrastructure.
7374. A letter from the Program Analyst, FAA, Department of
Transportation, transmitting the Department's final rule --
Airworthiness Directives; Honeywell International Inc.
(Formerly AlliedSignal, Inc., Formerly Textron Lycoming,
Formerly Avco Lycoming) T3509, T5311, T5313B, T5317A, T5317A-
1, and T5317B Series [Docket No. FAA-2004-18038; Directorate
Identifier 2004-NE-01-AD; Amendment 39-14444; AD 2006-01-05]
(RIN: 2120-AA64) received April 21, 2006, pursuant to 5
U.S.C. 801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7375. A letter from the Program Analyst, FAA, Department of
Transportation, transmitting the Department's final rule --
Airworthiness Directives; Gulfstream Aerospace LP Model
Gulfstream 100 Airplanes; and Model Astra SPX, and 1125
Westwind Astra Airplanes [Docket No. FAA-2005-22511;
Directorate Identifier 2005-NM-120-AD; Amendment 39-14440; AD
2006-01-01] (RIN: 2120-AA64) received April 21, 2006,
pursuant to 5 U.S.C. 801(a)(1)(A); to the Committee on
Transportation and Infrastructure.
7376. A letter from the Program Analyst, FAA, Department of
Transportation, transmitting the Department's final rule --
Airworthiness Directives; Frakes Aviation

[[Page 7509]]

(Gulfstream American) Model G-73 (Mallard) Series Airplanes
and Model G-73 Airplanes That Have Been Converted To Have
Turbine Engines [Docket No. FAA-2005-23440; Directorate
Identifier 2005-NM-256-AD; Amendment 39-14452; AD 2006-01-51]
(RIN: 2120-AA64) received April 21, 2006, pursuant to 5
U.S.C. 801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7377. A letter from the Program Analyst, FAA, Department of
Transportation, transmitting the Department's final rule --
Airworthiness Directives; Boeing Model 747-100, 747-100B,
747-200B, 747-200C, 747-200F, 747-400F, 747SR, and 747SP
Series Airplanes [Docket No. FAA-2005-22289; Directorate
Identifier 2005-NM-101-AD; Amendment 39-14446; AD 2006-01-07]
(RIN: 2120-AA64) received April 21, 2006, pursuant to 5
U.S.C. 801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7378. A letter from the Program Analyst, FAA, Department of
Transportation, transmitting the Department's final rule --
Airworthiness Directives; BAE Systems (Operations) Limited
Model Avro 146-RJ Airplanes [Docket No. FAA-2005-22792;
Directorate Identifier 2005-NM-084-AD; Amendment 39-14447; AD
2006-01-08] (RIN: 2120-AA64) received April 21, 2006,
pursuant to 5 U.S.C. 801(a)(1)(A); to the Committee on
Transportation and Infrastructure.
7379. A letter from the Program Analyst, FAA, Department of
Transportation, transmitting the Department's final rule --
Airworthiness Directives; Airbus Model A300 B2 and B4 Series
Airplanes [Docket No. FAA-2005-22035; Directorate Identifier
2005-NM-016-AD; Amendment 39-14442; AD 2006-01-03] (RIN:
2120-AA64) received April 21, 2006, pursuant to 5 U.S.C.
801(a)(1)(A); to the Committee on Transportation and
Infrastructure.
7380. A letter from the Program Analyst, FAA, Department of
Transportation, transmitting the Department's final rule --
Airworthiness Directives; BAE Systems (Operations) Limited
Model BAe 146-100A and -200A Series Airplanes [Docket No.
FAA-2005-22791; Directorate Identifier 2005-NM-083-AD;
Amendment 39-14448; AD 2006-01-09] (RIN: 2120-AA64) received
April 21, 2006, pursuant to 5 U.S.C. 801(a)(1)(A); to the
Committee on Transportation and Infrastructure.
7381. A letter from the Program Analyst, FAA, Department of
Transportation, transmitting the Department's final rule --
Airworthiness Directives; Airbus Model A300 B4-600, B4-600R,
and F4-600R Series Airplanes, and Model C4-605R Variant F
Airplanes (Collectively Called A300-600 Series Airlanes); and
Airbus Model A310 Series Airplanes [Docket No. FAA-2005-
22053; Directorate Identifier 2004-NM-74-AD; Amendment 39-
14449; AD 2006-01-10] (RIN: 2120-AA64) received April 21,
2006, pursuant to 5 U.S.C. 801(a)(1)(A); to the Committee on
Transportation and Infrastructure.
7382. A letter from the Acting General Counsel, Department
of Defense, transmitting a copy of legislative proposals as
part of the National Defense Authorization Bill for Fiscal
Year 2007; jointly to the Committees on Armed Services and
Financial Services.
7383. A letter from the Secretary, Federal Trade
Commission, transmitting the fifth annual report pursuant to
the College Scholarship Fraud Prevention Act of 2000; jointly
to the Committees on Education and the Workforce and the
Judiciary.
7384. A letter from the Regulations Coordinator, CMS,
Department of Health and Human Services, transmitting the
Department's ``Major'' final rule -- Medicare Program;
Prospective Payment System for Long-Term Care Hospitals RY
2007: Annual Payment Rate Updates, Policy Changes, and
Clarification [CMS-1485-F] (RIN: 0938-AO06) received May 2,
2006, pursuant to 5 U.S.C. 801(a)(1)(A); jointly to the
Committees on Ways and Means and Energy and Commerce.

____________________

REPORTS OF COMMITTEES ON PUBLIC BILLS AND RESOLUTIONS

Under clause 2 of rule XIII, reports of committees were delivered to
the Clerk for printing and reference to the proper calendar, as
follows:

Mr. THOMAS: Committee of Conference. Conference report on
H.R. 4297. A bill to provide for reconciliation pursuant to
section 201(b) of the concurrent resolution on the budget for
fiscal year 2006 (Rept. 109-455). Ordered to be printed.
Mr. BOEHLERT: Committee on Science. H.R. 5143. A bill to
authorize the Secretary of Energy to establish monetary
prizes for achievements in overcoming scientific and
technical barriers associated with hydrogen energy; with an
amendment (Rept. 109-456). Referred to the Committee of the
Whole House on the State of the Union.
Mr. TOM DAVIS of Virginia: Committee on Government Reform.
House Resolution 752. Resolution requesting the President to
transmit to the House of Representatives not later than 14
days after the date of adoption of this resolution documents
in the possession of the President relating to the receipt
and consideration by the Executive Office of the President of
any information concerning the variation between the version
of S. 1932, the Deficit Reduction Act of 2005, that the House
of Representatives passed on February 1, 2006, and the
version of the bill that the President signed on February 8,
2006; adversely (Rept. 109-457). Referred to the House
Calendar.
Mr. HASTINGS of Washington: Committee on Rules. House
Resolution 805. Resolution waiving points of order against
the conference report to accompany the bill (H.R. 4297) to
provide for reconciliation pursuant to section 201(b) of the
concurrent resolution on the budget for fiscal year 2006
(Rept. 109-458). Referred to the House Calendar.
Mr. COLE of Oklahoma: Committee on Rules. House Resolution
806. Resolution providing for consideration of the bill (H.R.
5122) to authorize appropriations for fiscal year 2007 for
military activities of the Department of Defense, to
prescribe military personnel strengths for fiscal year 2007,
and for other purposes (Rept. 109-459). Referred to the House
Calendar.

____________________

PUBLIC BILLS AND RESOLUTIONS

Under clause 2 of rule XII, public bills and resolutions were
introduced and severally referred, as follows:

By Mr. YOUNG of Alaska (for himself, Mr. Hayworth, Mr.
Renzi, Mr. Cole of Oklahoma, Mr. Rahall, Mr.
Oberstar, Mr. Pallone, Mr. Baca, Mr. Case, Ms.
Bordallo, Mr. Honda, Mr. Udall of New Mexico, Mr.
Kildee, and Mr. Waxman):
H.R. 5312. A bill to amend the Indian Health Care
Improvement Act to revise and extend that Act; to the
Committee on Resources, and in addition to the Committees on
Energy and Commerce, and Ways and Means, for a period to be
subsequently determined by the Speaker, in each case for
consideration of such provisions as fall within the
jurisdiction of the committee concerned.
By Mr. GERLACH (for himself, Mr. Kirk, Mrs. Miller of
Michigan, Mrs. Biggert, Mr. Weldon of Pennsylvania,
and Mr. Reichert):
H.R. 5313. A bill to reserve a small percentage of the
amounts made available to the Secretary of Agriculture for
the farmland protection program to fund challenge grants to
encourage the purchase of conservation easements and other
interests in land to be held by a State agency, county, or
other eligible entity, and for other purposes; to the
Committee on Agriculture.
By Mr. SHAW (for himself, Mr. Kirk, Mr. Foley, Mr. Cole
of Oklahoma, Mr. Weller, Mrs. Miller of Michigan,
Mrs. Biggert, Mr. Ramstad, and Mr. Davis of
Kentucky):
H.R. 5314. A bill to amend the Internal Revenue Code of
1986 to improve and expand education savings accounts; to the
Committee on Ways and Means.
By Mr. CARDOZA:
H.R. 5315. A bill to amend the Federal Financial Management
Improvement Act of 1996 to require the head of an agency to
be reconfirmed by the Senate unless the agency is found to be
in compliance with the requirements of such Act, as reported
by the Comptroller General; to the Committee on Government
Reform.
By Mr. YOUNG of Alaska (for himself, Mr. Oberstar, Mr.
Tom Davis of Virginia, Mr. Obey, Mr. Shuster, Ms.
Norton, Mr. Shaw, Mr. Rahall, Mr. Baker, Mr. DeFazio,
Mr. Bachus, Mr. Costello, Mr. Buyer, Mr. Nadler, Mr.
Mica, Ms. Corrine Brown of Florida, Mr. Foley, Mr.
Filner, Mrs. Kelly, Ms. Eddie Bernice Johnson of
Texas, Mr. LaTourette, Mr. Taylor of Mississippi,
Mrs. Myrick, Ms. Millender-McDonald, Mr. Wamp, Mr.
Cummings, Mrs. Emerson, Mr. Blumenauer, Ms. Granger,
Mr. Boswell, Mr. Pickering, Mr. Holden, Mrs. Jo Ann
Davis of Virginia, Mr. Baird, Mr. Miller of Florida,
Ms. Berkley, Mr. Bonner, Mr. Matheson, Mr. Cole of
Oklahoma, Mr. Honda, Mr. Boustany, Mr. Larsen of
Washington, Mr. Jindal, Mr. Capuano, Mr. Kuhl of New
York, Mr. Weiner, Mr. Poe, Ms. Carson, Mr. Bishop of
New York, Mr. Davis of Tennessee, Mr. Chandler, Mr.
Higgins, Mr. Carnahan, Ms. Schwartz of Pennsylvania,
and Mr. Ford):
H.R. 5316. A bill to reestablish the Federal Emergency
Management Agency as a cabinet-level independent
establishment in the executive branch that is responsible for
the Nation's preparedness for, response to, recovery from,
and mitigation against disasters, and for other purposes; to
the Committee on Transportation and Infrastructure, and in
addition to the Committees on Homeland Security, and
Government Reform, for a period to be subsequently determined
by the Speaker, in each case for consideration of such
provisions as fall within the jurisdiction of the committee
concerned.
By Mr. HAYES (for himself, Mrs. Kelly, Mr. McHenry, and
Mr. Wilson of South Carolina):
H.R. 5317. A bill to amend the Internal Revenue Code of
1986 to increase the incentives for E-85 fuel vehicle
refueling property; to the Committee on Ways and Means.
By Mr. SENSENBRENNER (for himself, Mr. Coble, Mr. Smith
of Texas, Mr. Feeney, Mr. Schiff, and Ms. Pryce of
Ohio):
H.R. 5318. A bill to amend title 18, United States Code, to
better assure cyber-security,

[[Page 7510]]

and for other purposes; to the Committee on the Judiciary.
By Mr. FITZPATRICK of Pennsylvania (for himself, Mr.
Kirk, Mrs. Miller of Michigan, Mr. Weldon of
Pennsylvania, Mr. English of Pennsylvania, Mr. Davis
of Kentucky, and Mr. Castle):
H.R. 5319. A bill to amend the Communications Act of 1934
to require recipients of universal service support for
schools and libraries to protect minors from commercial
social networking websites and chat rooms; to the Committee
on Energy and Commerce.
By Mr. ANDREWS:
H.R. 5320. A bill to amend the Occupational Safety and
Health Act of 1970 to provide for coverage under that Act of
employees of States and political subdivisions of States, and
for other purposes; to the Committee on Education and the
Workforce.
By Mr. BASS (for himself, Mr. McDermott, and Mr. Sam
Johnson of Texas):
H.R. 5321. A bill to establish a pilot project to
demonstrate the impact of payment for more frequent
hemodialysis treatment under the Medicare Program; to the
Committee on Energy and Commerce, and in addition to the
Committee on Ways and Means, for a period to be subsequently
determined by the Speaker, in each case for consideration of
such provisions as fall within the jurisdiction of the
committee concerned.
By Ms. GINNY BROWN-WAITE of Florida:
H.R. 5322. A bill to amend the Internal Revenue Code of
1986 to increase the contribution limits for individual
retirement plans, defined contribution plans, and salary
reduction plans, and for other purposes; to the Committee on
Ways and Means.
By Mr. FARR (for himself and Mr. Hobson):
H.R. 5323. A bill to require the Secretary of Homeland
Security to provide for ceremonies on or near Independence
Day for administering oaths of allegiance to legal immigrants
whose applications for naturalization have been approved; to
the Committee on the Judiciary.
By Mrs. CUBIN:
H.R. 5324. A bill to amend title XVIII of the Social
Security Act to provide for the coverage of marriage and
family therapist services and mental health counselor
services under part B of the Medicare Program, and for other
purposes; to the Committee on Energy and Commerce, and in
addition to the Committee on Ways and Means, for a period to
be subsequently determined by the Speaker, in each case for
consideration of such provisions as fall within the
jurisdiction of the committee concerned.
By Mr. DOOLITTLE:
H.R. 5325. A bill to direct the Federal Trade Commission to
revise the do-not-call telemarketing rules to permit
individuals to opt out of receiving telephone calls from
certain political organizations; to the Committee on Energy
and Commerce.
By Mrs. EMERSON (for herself and Mr. Filner):
H.R. 5326. A bill to amend title 10, United States Code, to
increase the amount of educational assistance available to
members of the reserve components called or ordered to active
service for more than nine consecutive months or more than 18
total months during any 24-month period; to the Committee on
Armed Services.
By Mr. ISRAEL (for himself and Mr. Davis of Kentucky):
H.R. 5327. A bill to amend the Servicemembers Civil Relief
Act to protect the credit of servicemembers deployed to an
overseas combat zone and to facilitate awareness of a
servicemember's rights under such Act, and for other
purposes; to the Committee on Veterans' Affairs, and in
addition to the Committee on Financial Services, for a period
to be subsequently determined by the Speaker, in each case
for consideration of such provisions as fall within the
jurisdiction of the committee concerned.
By Ms. MILLENDER-McDONALD (for herself, Ms. Norton, Mr.
Cummings, and Mr. Wynn):
H.R. 5328. A bill to grant certain Library of Congress
employees the same competitive status for appointment granted
to certain employees of the judicial branch, and to extend to
displaced Library employees the same career-transition
assistance extended to employees of the executive branch; to
the Committee on House Administration, and in addition to the
Committee on Government Reform, for a period to be
subsequently determined by the Speaker, in each case for
consideration of such provisions as fall within the
jurisdiction of the committee concerned.
By Mr. GARY G. MILLER of California (for himself, Mr.
Calvert, and Mr. Young of Alaska):
H.R. 5329. A bill to authorize the Secretary of
Transportation to carry out certain transportation projects
in the State of California to relieve congestion on State
Route 91; to the Committee on Transportation and
Infrastructure.
By Mr. GEORGE MILLER of California:
H.R. 5330. A bill to provide coverage under the Railway
Labor Act to employees of certain air and surface
transportation entities; to the Committee on Transportation
and Infrastructure.
By Mr. POMEROY (for himself and Ms. Kaptur):
H.R. 5331. A bill to promote energy production and
conservation, and for other purposes; to the Committee on
Energy and Commerce, and in addition to the Committees on
Ways and Means, Agriculture, Resources, and Science, for a
period to be subsequently determined by the Speaker, in each
case for consideration of such provisions as fall within the
jurisdiction of the committee concerned.
By Mr. ROTHMAN:
H.R. 5332. A bill to authorize grants to carry out projects
to provide education on preventing teen pregnancies, and for
other purposes; to the Committee on Energy and Commerce, and
in addition to the Committee on Education and the Workforce,
for a period to be subsequently determined by the Speaker, in
each case for consideration of such provisions as fall within
the jurisdiction of the committee concerned.
By Mr. ROYCE (for himself, Mr. Sherman, Mr. Weller, Mr.
Lantos, Ms. Ros-Lehtinen, Ms. Watson, Mr. Issa, Mr.
Cardoza, Mr. Poe, Mr. McCotter, Mr. Wilson of South
Carolina, Mr. Israel, and Ms. Bean):
H.R. 5333. A bill to reduce the threat of terrorists
acquiring shoulder-fired missiles; to the Committee on
International Relations.
By Mr. SWEENEY:
H.R. 5334. A bill to provide for low-interest disaster
loans when a small business concern is affected by a small-
scale disaster; to the Committee on Small Business.
By Mrs. JOHNSON of Connecticut:
H. Res. 802. A resolution encouraging all eligible Medicare
beneficiaries who have not yet elected enroll in the new
Medicare Part D benefit to review the available options and
to determine whether enrollment in a Medicare prescription
drug plan best meets their current and future needs for
prescription drug coverage; to the Committee on Energy and
Commerce, and in addition to the Committee on Ways and Means,
for a period to be subsequently determined by the Speaker, in
each case for consideration of such provisions as fall within
the jurisdiction of the committee concerned.
By Ms. FOXX:
H. Res. 803. A resolution providing for the concurrence by
the House with amendments in the amendments of the Senate to
H.R. 1499; considered and agreed to.
By Mr. ENGLISH of Pennsylvania (for himself, Mr.
Sullivan, Mr. Lipinski, Mr. Rohrabacher, Mr. Kennedy
of Minnesota, Mr. McCotter, Mr. Wolf, Mr. Chabot, Mr.
Souder, Ms. Bor-
dallo, Mr. Hyde, and Mr. Radanovich):
H. Res. 804. A resolution condemning the unauthorized,
inappropriate, and coerced ordination of Catholic bishops by
the People's Republic of China; to the Committee on
International Relations.
By Mr. TOM DAVIS of Virginia (for himself, Ms. Loretta
Sanchez of California, and Ms. Zoe Lofgren of
California):
H. Res. 807. A resolution endorsing reforms for freedom and
democracy in Vietnam; to the Committee on International
Relations.
By Mr. KELLER (for himself and Mr. McKeon):
H. Res. 808. A resolution expressing the sense of the House
of Representatives in support of the goals of National One-
Stop Month; to the Committee on Education and the Workforce.
By Ms. SLAUGHTER:
H. Res. 809. A resolution directing the Secretary of the
Department of Homeland Security to transmit to the House of
Representatives not later than 14 days after the date of the
adoption of this resolution documents in the Secretary's
possession relating to any existing or previous agreement
between the Department of Homeland Security and Shirlington
Limousine and Transportation, Incorporated, of Arlington,
Virginia; to the Committee on Homeland Security.

____________________

PRIVATE BILLS AND RESOLUTIONS

Under clause 3 of rule XII,

Mr. SHERMAN introduced a bill (H.R. 5335) for the relief
of Tarveen Kaur Anand; which was referred to the Committee on
the Judiciary.

____________________

ADDITIONAL SPONSORS

Under clause 7 of rule XII, sponsors were added to public bills and
resolutions as follows:

H.R. 9: Mr. Rush, Ms. Millender-McDonald, Mr. Larson of
Connecticut, Mr. Wilson of South Carolina, Mr. Shays, Mr.
Holt, Mr. Keller, Mr. Hayes, Mr. Barrow, Mr. Forbes, Mrs.
Maloney, Mr. Cardin, Mr. Waxman, Mr. Serrano, Mr. Davis of
Florida, Ms. Wasserman Schultz, Mr. Higgins, Ms. Berkley, Mr.
Peterson of Minnesota, Mr. Pence, Mr. Melancon, Mr. Lantos,
Mr. Reyes, Mr. George Miller of California, Mr. Filner, Mr.
Abercrombie, Mr. Udall of Colorado, Ms. Velazquez, Mr. Price
of North Carolina, Mr. Etheridge, Mr. Israel, Mr.

[[Page 7511]]

Kucinich, Mr. Davis of Tennessee, Mr. Pallone, Mr. Schiff,
Mr. Kennedy of Rhode Island, Mr. Ruppersberger, and Mr.
Dingell.
H.R. 49: Mrs. Maloney.
H.R. 176: Mrs. Maloney.
H.R. 198: Mr. Michaud and Mr. Udall of Colorado.
H.R. 215: Mr. Ramstad.
H.R. 309: Ms. Zoe Lofgren of California.
H.R. 408: Mr. Blumenauer.
H.R. 479: Mr. Crenshaw.
H.R. 503: Ms. Millender-McDonald, Ms. Corrine Brown of
Florida, Mr. Keller, and Mr. Bachus.
H.R. 865: Mr. Tom Davis of Virginia and Mr. Walsh.
H.R. 910: Mr. Cleaver.
H.R. 944: Mr. Matheson.
H.R. 997: Mrs. Johnson of Connecticut.
H.R. 1105: Mrs. Jones of Ohio.
H.R. 1298: Mr. Reynolds.
H.R. 1333: Mr. Latham and Mr. Watt.
H.R. 1366: Ms. Berkley.
H.R. 1384: Mr. Istook.
H.R. 1578: Mr. Blunt.
H.R. 1588: Mr. Boswell.
H.R. 1709: Ms. Matsui.
H.R. 1742: Mr. McIntyre.
H.R. 1898: Mr. Fitzpatrick of Pennsylvania.
H.R. 1955: Mr. Miller of North Carolina, and Mr. Filner.
H.R. 2051: Mr. Cummings.
H.R. 2071: Mr. Allen and Mr. Filner.
H.R. 2072: Mr. Boucher and Mr. Davis of Illinois.
H.R. 2076: Mr. Rahall.
H.R. 2088: Ms. Foxx and Mr. Istook.
H.R. 2230: Mr. Rehberg.
H.R. 2238: Mr. Michaud, Mr. Lipinski, and Mr. Farr.
H.R. 2343: Mr. Brown of Ohio.
H.R. 2421: Mr. Larsen of Washington and Mr. Pascrell.
H.R. 2429: Ms. Hooley.
H.R. 2517: Mr. Wynn.
H.R. 2671: Mr. Pastor.
H.R. 3022: Mr. Lincoln Diaz-Balart of Florida.
H.R. 3055: Ms. Baldwin, Ms. Kilpatrick of Michigan, Mr.
Hastings of Florida, Mr. Honda, Mr. Owens, and Mr. Bishop of
Georgia.
H.R. 3072: Mr. Serrano.
H.R. 3151: Mr. Matheson.
H.R. 3194: Mr. Towns.
H.R. 3319: Mr. Costa.
H.R. 3323: Mr. Kline.
H.R. 3352: Mr. Wynn.
H.R. 3385: Mrs. Bono, Mr. Markey, and Mr. Cummings.
H.R. 3420: Mr. Crowley.
H.R. 3427: Mr. Petri, Mr. Holden, and Mr. Fossella.
H.R. 3476: Mrs. Jones of Ohio and Mrs. Wilson of New
Mexico.
H.R. 3478: Mr. Kucinich.
H.R. 3547: Mr. Davis of Tennessee.
H.R. 3575: Ms. Wasserman Schultz.
H.R. 3584: Mr. Wexler.
H.R. 3628: Mr. Hinojosa.
H.R. 3858: Mr. Pallone and Mr. Doyle.
H.R. 3861: Ms. Waters and Mr. Andrews.
H.R. 4059: Mr. Pascrell.
H.R. 4157: Mr. Kirk and Mrs. Miller of Michigan.
H.R. 4158: Ms. Corrine Brown of Florida.
H.R. 4188: Mr. DeFazio and Ms. Berkley.
H.R. 4294: Mr. Baird.
H.R. 4341: Mr. Melancon, Mr. Nunes, Mr. Reynolds, Mr.
Shimkus, Mr. Jindal, and Mr. Hostettler.
H.R. 4347: Mr. Rush and Ms. Norton.
H.R. 4365: Miss McMorris.
H.R. 4429: Mr. McDermott.
H.R. 4542: Mr. Murtha and Mr. Weldon of Pennsylvania.
H.R. 4547: Mr. Istook.
H.R. 4562: Mr. Allen.
H.R. 4613: Ms. Carson and Ms. Loretta Sanchez of
California.
H.R. 4681: Mrs. Biggert, Mr. Hulshof, and Mr. Doyle.
H.R. 4695: Mr. Clay and Mr. Stark.
H.R. 4703: Mr. Weldon of Florida.
H.R. 4705: Mr. Ford and Mr. Boehlert.
H.R. 4730: Mr. Price of Georgia.
H.R. 4753: Mr. McDermott.
H.R. 4761: Mr. Manzullo.
H.R. 4767: Mr. Brown of Ohio, Ms. Eshoo, Mr. Bishop of
Georgia, Mr. Pitts, Mr. Young of Florida, and Mr. Rahall.
H.R. 4790: Mr. Chabot.
H.R. 4856: Mr. Brown of Ohio and Mrs. McCarthy.
H.R. 4860: Mr. Cardin.
H.R. 4894: Mr. Davis of Kentucky.
H.R. 4903: Mr. Pallone.
H.R. 4946: Mr. Taylor of North Carolina and Ms. Herseth.
H.R. 4992: Mr. DeFazio.
H.R. 4993: Mr. Michaud.
H.R. 5005: Mr. Istook.
H.R. 5009: Mr. Bonner.
H.R. 5013: Mr. Istook, Ms. Foxx, Mr. Peterson of Minnesota,
and Mr. Baker.
H.R. 5014: Ms. Jackson-Lee of Texas.
H.R. 5022: Mr. Filner.
H.R. 5037: Mr. Wicker, Mr. Murphy, Mr. Snyder, Ms.
Millender-McDonald, Mr. Shuster, Mr. Pence, Mr. McCaul of
Texas, Mr. McHugh, Mr. LoBiondo, Mr. Pomeroy, Mr. Engel, Mr.
Boyd, Ms. Watson, Mr. McIntyre, Mr. Gutierrez, Mr. Ross, Mr.
McGovern, Mrs. Drake, Mr. Herger, Mr. Cummings, Mr.
Radanovich, Mr. Pascrell, Mr. Jefferson, Mr. Scott of
Georgia, Mrs. Jones of Ohio, Mr. Hayes, Mr. Souder, Mr.
Cantor, Mrs. Schmidt, Mr. Melancon, and Mr. Dent.
H.R. 5052: Mr. Stark, Mr. Pallone, Mr. Israel, Mr. Berman,
Mr. Filner, and Ms. Berkley.
H.R. 5053: Mr. Goode, Mr. Ryan of Ohio, Mr. Souder, Ms.
Norton, Mr. Whitfield, Mrs. Northup, Mrs. Blackburn, Mr.
Davis of Kentucky, Mr. McCotter, and Mr. Rogers of Kentucky.
H.R. 5102: Mr. Lipinski.
H.R. 5113: Mr. Stark and Mr. George Miller of California.
H.R. 5126: Mrs. Schmidt, Mr. Towns, Mr. Case, Mr. Davis of
Kentucky, Mr. Matheson, Mr. Bass, Mr. Dicks, Mrs. Bono, Mr.
Boucher, Mr. Upton, Mr. Bilirakis, Mr. Pickering, Mr.
Gillmor, Mr. Shimkus, Mr. Ferguson, Mrs. Myrick, Mr.
Fossella, Mr. Buyer, and Mr. Burgess.
H.R. 5134: Mr. Ford, Mr. Moran of Kansas, and Mr. Ramstad.
H.R. 5143: Ms. Loretta Sanchez of California, Mr. Reichert,
and Mr. Johnson of Illinois.
H.R. 5148: Mr. Moran of Virginia, Mr. Cummings, Mr. Van
Hollen, Mr. Nadler, Mr. Conyers, Mr. George Miller of
California, Mr. Wynn, Mr. Schiff, Mr. Kennedy of Rhode
Island, Mr. Grijalva, Mr. McNulty, Mr. Jefferson, Ms.
Woolsey, Mr. McGovern, and Ms. Roybal-Allard.
H.R. 5159: Mr. McNulty, Mrs. Capito, Mr. Rogers of
Michigan, Mr. Abercrombie, Mr. Rangel, Mr. Lipinski, Mr.
Sessions, and Mr. Salazar.
H.R. 5166: Mr. Mario Diaz-Balart of Florida, Mr. Price of
North Carolina, Mr. Berry, Mr. Istook, Mr. Davis of Illinois,
and Mr. Price of Georgia.
H.R. 5170: Mrs. Musgrave, Mr. Wicker, Mr. Hensarling, Mr.
Feeney, Mr. Burton of Indiana, Mr. Garrett of New Jersey, Mr.
Weldon of Florida, and Mr. Chabot.
H.R. 5171: Mr. Upton, Mr. Otter, and Mr. Simpson.
H.R. 5200: Mr. Ford, Mr. Lewis of California, Mr. Evans,
Mr. Butterfield, Mr. Alexander, Ms. Hooley, Mr. Holden, Mr.
Ryan of Ohio, Mr. Tanner, Mr. Blumenauer, Mr. Gordon, Mr.
Goode, Mr. Pastor, Mr. Shays, and Mr. Oxley.
H.R. 5201: Mr. Moore of Kansas, Mr. Lynch, Mr. Goode, Mr.
Gerlach, Mr. McNulty, Mr. Serrano, Mr. Higgins, Mr. Clyburn,
Mrs. McCarthy, Mr. Doyle, Ms. Solis, Mr. Walsh, and Mr.
Rahall.
H.R. 5204: Mr. McNulty, Mr. Wynn, Mr. Strickland, Mr.
Melancon, Mr. Conyers, and Mr. Gordon.
H.R. 5216: Mr. Ackerman, Mr. Lewis of Georgia, and Mr.
Skelton.
H.R. 5220: Ms. Harris, Mr. McCotter, Mr. Alexander, and Mr.
Strickland.
H.R. 5230: Mr. Towns.
H.R. 5232: Mr. Dent, Mr. Gerlach, and Mr. Holden.
H.R. 5252: Mr. Clay, Mr. Crowley, Mr. Wilson of South
Carolina, Mr. Baker, Mr. Oxley, Mr. Boyd, Mr. Lewis of
Kentucky, Mr. Jefferson, Mr. Alexander, Mr. Clyburn, Mr.
Lincoln Diaz-Balart of Florida, and Mr. Bonner.
H.R. 5255: Mr. Hunter, Mr. Poe, and Mr. Gary G. Miller of
California.
H.R. 5262: Mr. Paul and Mr. Flake.
H.R. 5278: Mr. Dent, Mr. King of New York, and Mr. Norwood.
H.R. 5279: Ms. Schakowsky.
H.R. 5293: Mr. McKeon, Mr. Regula, Mr. Petri, Mr. Porter,
Miss McMorris, Mr. Fortuno, and Mr. Boustany.
H.R. 5304: Mr. Alexander.
H.J. Res. 53: Mrs. Musgrave and Mr. Tancredo.
H.J. Res. 73: Ms. Matsui.
H. Con. Res. 42: Mr. Markey.
H. Con. Res. 179: Mr. Costello.
H. Con. Res. 254: Mr. Pascrell.
H. Con. Res. 289: Mr. Lipinski.
H. Con. Res. 380: Mr. Gohmert.
H. Res. 158: Mr. Miller of Florida, Ms. Zoe Lofgren of
California, Mr. Porter, Mr. McDermott, Mr. Olver, Mr.
Emanuel, and Mr. Pascrell.
H. Res. 490: Mr. McCotter, Mr. Jefferson, and Mr. Lynch.
H. Res. 498: Mr. Baca.
H. Res. 521: Mr. Markey, Ms. Matsui, and Ms. Schakowsky.
H. Res. 526: Mrs. Lowey.
H. Res. 608: Mr. English of Pennsylvania.
H. Res. 723: Ms. Baldwin, Mr. Dent, and Mr. Allen.
H. Res. 731: Mr. Carter and Mr. Baker.
H. Res. 759: Ms. Norton, Mr. Sanders, and Mr. Bishop of
Georgia.
H. Res. 773: Mr. Etheridge, Mr. Burgess, Mr. Berman, Mrs.
Lowey, and Mr. Ramstad.
H. Res. 777: Mr. Lincoln Diaz-Balart of Florida.
H. Res. 788: Mr. McHugh, Mr. McNulty, Mr. LoBiondo, and Mr.
McCotter.
H. Res. 793: Mr. Kennedy of Minnesota, Mr. Aderholt, Mr.
McHenry, Mr. Gingrey, Mr. Poe, Mr. Dreier, Mr. Sam Johnson of
Texas, Mr. Forbes, and Mr. Miller of Florida.
H. Res. 795: Mr. Saxton, Mr. Foley, Mr. Cole of Oklahoma,
Mr. Pence, Mr. Chocola, Mr. Barrett of South Carolina, Ms.
Hart, Mr. Camp, Mr. Sullivan, Mr. McHenry, Mr. Shuster, Miss
McMorris, Mr. Kuhl of New York, Mr. Pearce, Mr. Bonner, Mr.
Hayes, and Mrs. Kelly.

[[Page 7512]]

____________________

DELETIONS OF SPONSORS FROM PUBLIC BILLS AND RESOLUTIONS

Under clause 7 of rule XII, sponsors were deleted from public bills
and resolutions as follows:

H.R. 5289: Mr. Boren.

____________________

AMENDMENTS

Under the clause 8 of rule XVIII, proposed amendments were submitted
as follows:

H.R. 5122

Offered By: Mr. Cole of Oklahoma

Amendment No. 1: At the end of section 346 (page 98, after
line 11) insert the following new subsection:
(e) Exception for Non-Line-of-Sight Cannon System.--This
section does not apply with respect to the obligation of
funds for systems development and demonstration of the non-
line-of-sight cannon system.

[[Page 7513]]
EXTENSIONS OF REMARKS

____________________

IN RECOGNITION OF NORTHSIDE COLLEGE PREPARATORY HIGH SCHOOL

______

HON. RAHM EMANUEL

of illinois

in the house of representatives

Tuesday, May 9, 2006

Mr. EMANUEL. Mr. Speaker, I rise today in proud recognition of
Northside College Preparatory High School, recently selected by
Newsweek Magazine as one of America's best high schools.
Northside College Preparatory High School, found in 1999, was the
first new Chicago public school to be built in 20 years. This magnet
school on the North Side of Chicago provides a well-rounded education
to bring out the best in the exceptional young adults who fill its
classrooms.
The school achieved the highest score in Illinois for 5 straight
years from 2001-2005 on the Prairie State Achievement Exam. Last year,
415 students at Northside took 905 AP exams, with 83 percent scoring a
three or better. It also has a great deal of National Merit, National
Achievement, Hispanic, and Illinois state scholars. And in 2003,
Northside won the division three National Academic Decathlon
Championship.
Northside College Preparatory High School's exemplary academic
instruction produces world-class graduates: 92 percent of the 2005
graduating class continued on to a 4-year institution. To equip
students for a lifetime of success, the school partners with DePaul
University, Northeastern Illinois University, North Park University;
Mayer, Brown, Row & Maw; OWP&P Architects; and S&C Electric.
Mr. Speaker, Northside College Preparatory High School is a shining
example of public education at its best. I am proud of the students,
faculty, and families of the schools and I wish them continued success
in the coming years.

____________________

TRIBUTE TO LA QUINTA HIGH SCHOOL

______

HON. MARY BONO

of california

in the house of representatives

Tuesday, May 9, 2006

Mrs. BONO. Mr. Speaker, I rise today to honor an exceptional
educational institution in the 45th Congressional District of
California, La Quinta High School. Through the hard work and commitment
of a tremendously talented faculty and staff, La Quinta High School has
been named among the top 600 high schools in the nation by Newsweek
magazine.
La Quinta High School holds the 583th slot on a list of 1,000 of the
top high schools in the United States of America. The high school was
honored for the high number of students who participate in both
International Baccalaureate and Advance Placement classes.
Under the leadership of Principle Donna Salazar, La Quinta High
School has established a record of success in the community by
fostering an environment where students are challenged to excel and
meet their academic dreams. As the highest ranked school in Riverside
County, the Newsweek results are a testament to the high quality of
this academic establishment.
I am impressed by the openness of La Quinta High School to students
wanting the opportunity to learn and to challenge their mind. With an
ethically and socio-economically diverse student body, La Quinta High
School is a model for schools around the state.
Thomas Jefferson said, ``Educate and inform the whole mass of the
people . . . They are the only sure reliance for the preservation of
our liberty.'' Jefferson was a powerful advocate for freedom and his
message of the importance of a knowledge-based population holds great
significance for continuing prosperity of our nation.
An educated public begins with our children and La Quinta High School
is fulfilling our founding father's vision by fostering an educational
environment that challenges today's students and tomorrow's leaders, to
reach their academic potential.
Mr. Speaker, I would like once again to pay tribute to La Quinta High
School for this impressive achievement. I encourage my colleagues to
join me in recognizing and celebrating this exceptional high school.

____________________

IN RECOGNITION OF BILL UTTER FORD

______

HON. MICHAEL C. BURGESS

of texas

in the house of representatives

Tuesday, May 9, 2006

Mr. BURGESS. Mr. Speaker, I rise today to congratulate Bill Utter
Ford for his years of service to North Texas.
Mr. Bill Utter came to Denton, Texas from Amarillo in 1956 when he
purchased the local Ford dealership becoming the fifth Ford dealer in
Denton. Over the years, the Denton Ford dealership under Mr. Utter grew
to employ over 100 people and is now in it's 4th location since 1956.
But Mr. Utter is not known simply for bringing the all-American Ford
Corporation to North Texas, he has been known for his generosity to
many causes and organizations throughout the community.
Bill Utter, Sr., Bill Utter, Jr. and staff have served in important
leadership positions in the Denton Community, including Denton Chamber
of Commerce and the United Way of Denton County. They have also
provided leadership with Ford Motor Company including service on the
Ford Dealer Council. Nationally, Bill Utter Ford has won numerous
community awards and Ford Motor Company Awards including Ford's Highest
Honor, the Fort President's Award.
The Utter men, their legacy and their dealership Bill Utter Ford,
have brought quality automobiles to North Texas but more important
kindness and philanthropic hearts to the community. Their recognition
on the national level has brought prominence and respect to the people
of Denton. May their spirit of entrepreneurship and skills as leaders
be an example to us all.

____________________

IN RECOGNITION OF LINCOLN PARK HIGH SCHOOL

______

HON. RAHM EMANUEL

of illinois

in the house of representatives

Tuesday, May 9, 2006

Mr. EMANUEL. Mr. Speaker, I rise today in proud recognition of
Lincoln Park High School, recently selected by Newsweek Magazine as one
of America's best high schools.
Lincoln Park High School, formerly named Robert A. Waller High
School, has served the students and families of Chicago's North Side
for over 100 years. The students at Lincoln Park High School have
established an impressive record of academic achievement. Eighty-seven
percent of the school's 2004 graduates enrolled in a college or
university. Lincoln Park High School has had the most National Merit
Semi-Finalists out of all the Chicago Public Schools over the last 15
years.
In addition to its academic prowess, the school helps create well-
balanced individuals through its active participation in community
service through donating to schools in Mali, and working for the
National Runaway Switchboard. These activities and experiences teach
students the importance of academic achievement while also providing a
balanced perspective on life that promotes responsibility, justice and
social service.
Students at Lincoln Park High School enjoy the support of strong
parent and alumni associations which take an active role in over 60
extra curricular activities and clubs. Community partnerships with
institutions such as Children's Memorial Hospital and the Lincoln Park
Zoo also provide learning opportunities outside of the classroom in a
wide range of disciplines.
Mr. Speaker, Lincoln Park High School is a shining example of public
education at its best. I am proud of the students, faculty and families
of the schools and I wish them continued success in the coming years.

[[Page 7514]]

____________________

TRIBUTE TO JANICE AND RICHARD OLIPHANT

______

HON. MARY BONO

of california

in the house of representatives

Tuesday, May 9, 2006

Mrs. BONO. Mr. Speaker, I rise today to honor the outstanding
contributions of two individuals in California's 45th Congressional
District--Janice and Richard Oliphant. Jan and Dick are well-known
throughout the Inland Empire for their commitment to bettering the
community and their devotion to education. I am pleased to join the
Indian Wells Rotary Club, which established the ``Dick Oliphant
Scholarship Endowment Fund,'' in recognizing Jan and Dick for their
exemplary work in our community.
Since moving to the desert in 1962, Jan and Dick Oliphant have been
valued members of our community. The time and effort these two
individuals have devoted to the valley is highly commendable and will
have a lasting impact for years to come.
As a leader in the construction and development business, Dick's
projects, including designing golf courses, retirement communities,
apartment complexes, and commercial and medical centers, have earned
him international recognition, including some of the highest awards one
can achieve in the building industry. Among his first projects in the
desert was the development and construction of Palm City, later named
the Palm Desert Country Club, which was California's first retirement
community and winner of 21 National Awards.
Both Jan and Dick Oliphant are firm believers in giving back to their
community and are known for their philanthropic work in Southern
California, especially in the area of education. Their service in
numerous nonprofit organizations and community service projects has
made them invaluable assets to our region. Additionally, Dick has
served over two years as an Indian Wells Planning Commissioner, six
years as a councilman, two years as the vice mayor and eight years as
mayor. He is the founding chairman of the Coachella Valley Economic
Development Conference and State of the Valley, the founder and
chairman of the Coachella Valley Economic Partnership, and the founding
Chairman of the Lincoln Club of the Coachella Valley.
Jan and Dick have truly enhanced our community with their support of
and involvement with education. Jan has served as president and founder
of several parents clubs, including the Katherine Finchy Parents Club
in Palm Springs and the John F. Kennedy Parents Club in Indio. Both Jan
and Dick are actively involved on countless advisory boards and
committees, truly extending themselves to promote education in the
Coachella Valley.
For over sixteen years, Dick has been a member of the California
State University, San Bernardino Advisory Board, and he is also a co-
chair in fundraising for a public/private partnership with the
California State University, San Bernardino, Palm Desert Campus. He has
been named a ``fellow'' by the A. Gary Anderson School of Business at
the University of Riverside, where he spent a year lecturing and
counseling graduate students on campus. Furthermore, nearly every city
in the Coachella Valley has designated a ``Richard R. Oliphant Day''
because of his extensive work on valley-wide issues. For their
outstanding contributions, in 1996, Jan and Dick were named the
``Distinguished Citizens of the Year'' by the Boy Scouts of America.
Both Jan and Dick Oliphant have graciously offered their resources
and services to the benefit of our community and are well-deserving of
our praise. Devoted to their family and to each other, Jan and Dick are
truly exemplary citizens, and I am honored by their friendship and to
serve as their representative in the 45th Congressional District of
California.
Mr. Speaker and colleagues, please join me in honoring and
recognizing Jan and Dick Oliphant, for their unwavering dedication,
integrity, and outstanding public service. Their energy and passion to
build our community and to foster learning and education, continues to
benefit Palm Desert and our entire community.

____________________

IN RECOGNITION OF THE GIRL SCOUTS OF AMERICA CROSS TIMBERS COUNCIL

______

HON. MICHAEL C. BURGESS

of texas

in the house of representatives

Tuesday, May 9, 2006

Mr. BURGESS. Mr. Speaker, I rise today to congratulate the Girl
Scouts of America for their 94 years of dedication to this country.
The Girl Scouts of America are celebrating their 94th anniversary
which was founded by Juliette Gordon Low in 1912 in Savannah, Georgia.
Since then, they have had a long and exceptional history of instilling
young girls with confidence, courage, and integrity.
More than 3.8 million current Girl Scout members and 50 million
veteran members will be partaking in this momentous celebration.
Girl scouting opens all kinds of doors for a young lady's future.
This organization urges these girls to strive for higher goals than
they could have ever possibly imagined. Hence, these young girls are on
the way to becoming women that would make this world a better place.
In addition, I am thrilled to announce that the Cross Timbers
Council, which serves my North Texas district, will be opening an
additional office for the Girl Scouts so that they may better serve our
community.
The Girl Scouts of America, their legacy and their purpose, have
brought joy to North Texas but more important kindness and
philanthropic hearts to the community. The Cross Timbers Girl Scouts
have brought prominence and respect to the communities they serve in my
district including Denton and Cooke counties. May spirit of
perseverance and honor these young ladies bring be an example to us
all.

____________________

HONORING LT. COLONEL RYAN YANTIS

______

HON. RAHM EMANUEL

of illinois

in the house of representatives

Tuesday, May 9, 2006

Mr. EMANUEL. Mr. Speaker, I rise in recognition of Lt. Colonel Ryan
Yantis of the U.S. Army for his important contributions to service
members and civilians alike in his capacity as Director, U.S. Army
Public Affairs, Midwest.
While Colonel Yantis has been helpful to me and my staff on countless
occasions, his assistance with SPC Rene Douroux merits particular
attention and gratitude.
I had the opportunity to meet SPC Rene Douroux on September 13, 2005
when he was in the middle of a 30-day leave from duties in Korea to his
next assignment in Ft. Hood, Texas. Unable to go home to New Orleans in
the wake of Hurricane Katrina, SPC Douroux was at an emergency facility
set up in Chicago to assist those left homeless by the storm. SPC
Douroux was distraught because he was unable to locate family members
and had no idea whether his home was still standing. He was hoping to
have some additional time to find his family, help settle them, and get
his life in order.
Lt. Colonel Yantis responded compassionately, effectively and
immediately to SPC Douroux's plight. Not only did Colonel Yantis
arrange for SPC Douroux to have more time, but he also arranged for a
compassionate reassignment to Ft. Polk, Louisiana. Colonel Yantis
helped reduce the trauma facing this young man and his family as they
undertake the difficult tasks of rebuilding their lives in the wake of
Hurricane Katrina.
I offer my heartfelt thanks to Lt. Colonel Yantis for his service,
and extend my best wishes to him in his future endeavors.

____________________

HONORING DOLLY PARTON

______

HON. MARSHA BLACKBURN

of tennessee

in the house of representatives

Tuesday, May 9, 2006

Mrs. BLACKBURN. Mr. Speaker, Dolly Parton is living proof that the
American Dream is alive and kicking. She worked hard, harnessed her God
given talent, and touched the lives of countless millions.
Not only is Dolly a great entertainer, she's a proven businesswoman
and a philanthropist. She is the embodiment of a value my mama taught
me--that you always work to give back more to your community than you
take. And Dolly has given back so much.
Tennessee is proud of this Smoky Mountain daughter, and that's why we
join the 2006 Southern Women in Public Service Conference to honor her
with the Lindy Boggs Award. As the U.S. Representative who has the
lucky fortune to represent Dolly in Congress, I want to take a moment
to be certain my colleagues here in the House of Representatives know
just how much she has given back to all of us.
Dolly has put the same passion and leadership she used to make it to
the top in business into improving child literacy. In 1996,

[[Page 7515]]

Dolly's vision led to the creation of the Imagination Library--a
program that sends children books each month to help them improve their
reading skills. What began in East Tennessee now includes over 600
communities and spans 41 states. There are hundreds of thousands of
children across this country whose futures have been changed for the
better because of her work.
We simply cannot put a value on the positive effect Dolly has had on
these kids, their communities, and this country.
The Imagination Library is just one example of Dolly's work to help
raise up others. Today we honor Dolly for her passion and her
determination.

____________________

TRIBUTE TO NORTHWEST COLLEGIATE ACADEMY

______

HON. PHIL ENGLISH

of pennsylvania

in the house of representatives

Tuesday, May 9, 2006

Mr. ENGLISH of Pennsylvania. Mr. Speaker, today I rise to commend the
Northwest Collegiate Academy's recent success at the 25th Annual United
States Academic Decathlon, USAD, in San Antonio, TX.
The USAD is a national competition in which teams of nine students,
three from each recognized academic level, compete in 10 separate
academic subjects, including mathematics, language and literature,
social science, economics, art, music, and science. Each team member
has to compete in each of the 10 subjects and their combined scores
determine the overall team winner.
Once again, the Northwest Collegiate Academy made Erie and all of
western Pennsylvania proud by demonstrating the scholastic excellence
of its students. The Academy's team cruised through this year's local
and State competitions, winning all three of the local events and the
final State wide competition. Along the way, individual team members
won numerous awards for excellence in all of the academic subjects and
the team as a whole often took all the awards for a given subject.
However, the team's outstanding run did not end at the State level.
The team scored 38,992.7 points out of a possible 60,000 during the 3-
day national competition in San Antonio. This showing earned the team a
well deserved silver medal in competition. Furthermore, the team
members continued to show their individual brilliance by winning awards
for their proficiency in specific subject areas. Matthew Faytak earned
six different awards at the competition, including a gold medal in art
and a gold medal for being the highest overall scorer at the honors
level. Joining him on the podium was Christina Radder who won the
bronze medal in music and the bronze medal for being third highest
overall scorer at the honors level. Both Matthew and Christina were
also recognized for high scores in economics, mathematics or science,
as were four other team members, Greg Nieder, Dan Juilfs, Shane Kelley,
and Alexandra Talarico.
Mr. Speaker, I hope my fellow members will rise with me at this time
and commend the nine members of the Northwest Collegiate Academy team,
Matthew Faytak, Christina Radder, Alexandra Talarico, Shane Kelley,
Greg Nieder, Caitlyn Pierce, Dan Juilfs, William Steinbaugh, and David
Zielewski. I congratulate each of these students for all of their
academic achievements and wish them continued success in their future
endeavors.

____________________

HONORING DICK KAY

______

HON. RAHM EMANUEL

of illinois

in the house of representatives

Tuesday, May 9, 2006

Mr. EMANUEL. Mr. Speaker, I rise today to recognize the long and
distinguished career of my friend, Mr. Dick Kay, political editor, and
host of the news show ``City Desk.'' Mr. Kay will retire in June 2006,
with the honor of having been the longest-serving reporter in the
history of Chicago's WMAQ-Channel 5 TV.
With 46 years in the business, Dick Kay has unparrelled political
experience, knowledge and perspective. He arrived at WMAQ-Channel 5 in
1968, initially working as a writer/producer but soon switching to
reporting. He later became their political editor as well as the host
of ``City Desk,'' the Sunday morning public service program.
Over the years, Dick Kay has interviewed mayors, Governors,
Congressmen, Senators, and countless other public leaders. Viewers have
come to rely on his thoughtful yet fearless approach to covering
politics and public policy.
Dick Kay's hard work and insightful reporting have been recognized by
numerous awards over the years. Among others, Dick has received a
Peabody Award--the highest honor in TV broadcasting--as well as 11
Emmys, a National Headliner award, and a Jacob Scher award for
investigative reporting. In 2001, he was inducted into the Television
Academy's Silver Circle Hall of Fame, which honors those who have made
major contributions to Chicago broadcasting for 25 years or more.
In addition to his work as a reporter and editor, Dick was the
longtime president of the local unit of the American Federation of
Television and Radio Artists. In this capacity, Dick successfully
persuaded Illinois legislators to ensure that on-air employees had the
freedom to move to competing stations.
I am sure Dick's wife, children and grandchildren will be glad to
enjoy more time with him. The rest of us will miss his hard-hitting
investigative work, insightful commentary, and engaging Sunday morning
discussions.
Mr. Speaker, I wish Dick and his family the best of luck during his
retirement and throughout his future endeavors. Political reporting in
Chicago will not be the same without Dick Kay, dean of Chicago
political reporters.

____________________

INTRODUCTION OF INDIAN HEALTH CARE IMPROVEMENT ACT REAUTHORIZATION

______

HON. DON YOUNG

of alaska

in the house of representatives

Tuesday, May 9, 2006

Mr. YOUNG of Alaska. Mr. Speaker, I am pleased today to introduce
legislation to reauthorize the Indian Health Care Improvement Act
Reauthorization (IHCIA) with my fellow colleagues.
The Indian Health Care Improvement Act (IHCIA) requires
reauthorization. It became Public Law 94-437 in the 94th Congress
(September 30, 1976), and has been amended seven times. The IHCIA
provides for health care delivery to over 2 million American Indians
and Alaska Natives. Congress enacted a one-year extension to extend the
life of the Act through FY 2001 but efforts at further extensions were
interrupted due to the events of 9/11. Appropriations for the Indian
health have continued through authorization of the Snyder Act, a
permanent law authorizing expenditures of funds for a variety of Indian
programs, including health.
This bill responds to the changes that have occurred in the delivery
of Indian Health services in the decade since the last reauthorization
of the IHCIA. In this period, more than half of the tribes in the
United States have exercised their rights under the Indian Self-
Determination and Education Assistance Act to assume responsibility to
carry out programs of the Indian Health Service (lHS) on their own
behalf. This, along with improvements in the IHS direct operations,
have led to hospitals being accredited by the Joint Commission on
Accreditations of the Healthcare Organizations, and health delivery
systems being tailored to expanded outpatient and home and community
based services had become commonplace in the private sector. Medicare,
Medicaid and other third party revenue were important to achieving
these gains and are crucial for retaining them. Equally important is
the need to reinforce the authority provided to tribal health programs
under self-determination and self-governance to establish their own
priorities and to determine the best way to respond to the specific
needs of their tribal members.
Some highlights of the ways this bill addresses these changes:
Section 3. Declaration of Health Policy. Declares that it is the
priority of the United States that the health status of American
Indians and Alaska Natives should be raised by 2010 to the same level
as is set for other Americans, instead of establishing lower thresholds
as has previously been accepted, and establishes a policy requiring
``meaningful consultations'' with Indian tribes, tribal health
organizations and urban Indian programs.
Section 4. Definitions. Modernizes current IHCIA definitions and
makes them consistent with the Indian Self-Determination and Education
Assistance Act. Definitions of ``health promoting'' and ``disease
prevention'' are expanded to encompass the full scope of these
activities as recommended by the World Health Organization. Includes a
definition of

[[Page 7516]]

``traditional health care practices'' that reflects the value of Native
health practices.
Title I, Indian Health, Human Resources, and Development. The purpose
of this title is to increase, to the maximum extent feasible, the
number of Indians entering the health professions and providing health
services, and to assure an optimum supply of health professionals to
the Indian Health programs and Urban Indian Organizations involved in
the provision of health services to Indians.
Title II, Health Services. The purpose of this title is to establish
programs that respond to the health needs of American Indians and
Alaska Natives. For example, American Indians and Alaska Natives have a
disproportionately high rate of diabetes (death rate for this disease
is generally more than 300% of the rate of the U.S. population), so
this title has a specific diabetes provision. It also includes the
Indian Health Care Improvement Fund through which the Appropriation Act
supply funds to eliminate health deficiencies and disparities in
resources made available to American Indians and Alaska Native tribes
and communities.
Title III, Facilities. The purpose of this title relates to the
construction of health facilities including hospitals, clinics, and
health stations necessary for staff quarters, and of sanitation
facilities for Indian communities and homes.
Title IV, Access to Health Services. This title addresses payments to
the IHS and tribes for services covered by the Social Security Act
Health Care programs, and to enable Indian health programs to access
reimbursement from third party collections.
Title V, Health Services for Urban Indians. This title establishes
programs in urban centers to make health services more accessible to
Indians who live in urban areas rather than on reservations or Alaska
Native villages.
Title VI, Organizational Improvements. This title addresses the
establishment of the IHS as an agency of the PHS (Public Health
Service). It also authorizes the Secretary to establish an automated
management information system and authorizes appropriations to carry
out this title.
Title VII, Behavioral Health Programs. This title is revised from
current law (which only addresses substance abuse programs) in order to
focus on behavioral health. It combines all substance abuse, mental
health and social service programs in one title and integrates these
programs to enhance performance and efficiency.
Title VIII, Miscellaneous. This title addresses various topics
including the Secretary's reporting of the progress made in meeting the
objectives of this Act to Congress. It requires the Secretary to
develop IHCIA regulations, describes the eligibility of California
Indians for IHS, establishes a National Bipartisan Commission on Indian
Health Care, and authorizes appropriations.
I urge my esteemed colleagues to act quickly to reauthorize the IHCIA
to ensure we raise the health status of American Indians and Alaska
Natives.

____________________

HONORING THE WINNERS OF THE 2006 CAPITOL HILL STOCK MARKET GAME

______

HON. BART GORDON

of tennessee

in the house of representatives

Tuesday, May 9, 2006

Mr. GORDON. Mr. Speaker, today I rise to recognize the outstanding
achievements of three young men from Blackman High School in my
hometown of Murfreesboro, Tennessee. Samuel Brace, Jeremy Crook, and
Andy Michael beat out 433 teams from across the nation to win the 2006
Capitol Hill Stock Market Game.
I congratulate Sam, Jeremy, and Andy for their tremendous win, and I
commend their accounting teacher, Ken Reed, for engaging the students
in such an innovative and educational competition.
The Stock Market Game helps students learn about saving and investing
by testing their skills with a hypothetical $100,000, which they invest
in the U.S. stock markets. Sam, Jeremy, and Andy dominated the
competition, holding on to the top spot for 8 of the 10 weeks. The
students increased the value of their portfolio by an incredible 50
percent to finish the game with $150,263 and a $15,000 lead over their
nearest competitor.
Today, the students and Mr. Reed are here in Washington, D.C.,
touring the nation's capital as their grand prize.
I congratulate all the participants from Blackman for the school's
strong showing. A second group of students finished in fourth place,
while a third team finished 20th overall. And again, I applaud Ken
Reed, Samuel Brace, Jeremy Crook, and Andy Michael for their impressive
win in this year's competition.

____________________

HONORING LIEUTENANT GENERAL DANIEL JAMES III ON THE OCCASION OF HIS
RETIREMENT

______

HON. STEVE BUYER

of indiana

in the house of representatives

Tuesday, May 9, 2006

Mr. BUYER. Mr. Speaker, June marks the retirement of a great leader
in our military ranks, Lieutenant General Daniel James III. General
James is a distinguished graduate of the University of Arizona's
Reserve Officer Training Corps program. In June 1969, General James
completed Undergraduate Pilot Training and was assigned to Cam Ranh Bay
Air Base, South Vietnam, as a forward air controller and O-1 pilot. A
command pilot with a demonstrated career of exceptionally meritorious
service, General James has over 4,000 hours in fighter and trainer
aircraft, two Distinguished Flying Crosses, and more than 500 combat
hours. His distinguished flying career includes the T-39, T-37, T-38,
O-1E, F-5E, F-4 (C, D, E) and F-16A aircraft.
General James has excelled at every level of service including
squadron flight commander in the 182nd Tactical Fighter Squadron
(Aggressor Squadron) at Nellis Air Force Base, Nevada, and commander of
the 149th Operations Group, Kelly Air Force Base, Texas. In November
1995, General James was appointed by Governor George W. Bush as the
Adjutant General of the State of Texas. A Texas native, he served in
this capacity until being named as the Director, Air National Guard in
June 2002.
His exceptionally meritorious service has resulted in not only
recognition within traditional military circles, but within the
civilian community as well. He has received a wide range of civilian
awards; including the Garvey-Woodson Award, Black United Fund of Texas
(1995), Outstanding Service Award, Texas STARBASE Executive Advisory
Board (1995-1996), Benjamin D. Foulois First Flight Award, Air Force
Association--Texas (1997), Central Texas Combined Federal Campaign
Community Service Award, Texas (1997-1998), Honored Patriot Award,
Selective Service System (1998 and 1999), Commendation for Military
Service, Joint Session of the Texas Legislature (1999) and the Palmetto
Patriot Award, South Carolina (1999). He has served as the Chairman of
the Greater Austin Quality Council and on the Board of Directors of the
Greater Austin Chamber of Commerce.
General James' military service culminates with his assignment as
Director, Air National Guard, and Vice Chief, National Guard Bureau,
Virginia, from June 3, 2002, until June 2, 2006. General James served
during one of the most challenging periods of any previous director of
the Air National Guard. His outstanding achievements and dynamic
leadership and initiative resulted in the development of a bold
strategy for Air National Guard relevance in the 21st Century. His
VANGUARD Engagement Strategy was the impetus for Air National Guard
transformation, ensuring it would remain ``Ready, Reliable and Relevant
. . . now more than ever.'' During his period as the Director, Air
National Guard members flew over 200,000 sorties and more than 600,000
hours in support of the Global War on Terrorism, including well over 50
percent of the fighter, tanker and airlift sorties for Operation Noble
Eagle while postured for Air Sovereignty Alert at 16 of 17 sites;
provided almost one-third of the fighter sorties in Operation Enduring
Freedom; provided over one-third of the fighter and tanker sorties for
Operation Iraqi Freedom. Air National Guard crews supported 75 percent
of the tanker sorties and over 60 percent of the airlift sorties in
other theaters.
This service included humanitarian, disaster relief and civil
support. The Air National Guard support to Hurricane Katrina was
unprecedented. Over 3,000 sorties flown, more than 11,000 passengers
evacuated and in excess of 11,000 tons of cargo was moved in a 4-day
period. One thousand four hundred forty-three lifesaving rescues were
directly attributed to ANG personnel and General James' leadership.
General James will retire and reside in Mount Vernon, Virginia, on
June 2, 2006, with his wife, Mrs. Dana Marie James, and their son,
Daniel Steven James.

[[Page 7517]]

____________________

CELEBRATING THE BIRTH OF MS. CHARLOTTE ALATHEA LLOYD

______

HON. MIKE PENCE

of indiana

in the house of representatives

Tuesday, May 9, 2006

Mr. PENCE. Mr. Speaker, today I am happy to congratulate Matt and Amy
Lloyd of Bowie, MD, on the birth of their daughter, Charlotte Alathea
Lloyd. Charlotte was born April 26, 2006 at 6:28 a.m., weighing 9
pounds, 1 ounce, and measuring 20\1/2\ inches long. Her name has
special meaning for this family. ``Charlotte'' is a family name on the
mother's side and means ``womanly'' or ``feminine'' and ``Alathea'' is
the Greek word that means ``truth.'' God has blessed this child with a
loving home, wonderful parents, and all the freedoms we enjoy in these
United States of America.

____________________

TRIBUTE TO SINAI TEMPLE'S CENTENNIAL

______

HON. HENRY A. WAXMAN

of california

in the house of representatives

Tuesday, May 9, 2006

Mr. WAXMAN. Mr. Speaker, I ask my colleagues to join me in
congratulating Sinai Temple of Los Angeles on celebrating its 100th
year of service to the community. Established in 1906, Sinai Temple is
part of the rich historic fabric of Jewish Los Angeles. First located
at the corner of Valencia Street and 12th Place, it moved in 1956 to
its current site at 10400 Wilshire Boulevard in Los Angeles. It is my
privilege to represent Sinai Temple in Congress.
Sinai Temple is the oldest Conservative congregation west of the
Mississippi. It boasts a membership of 1800 family members whose
origins trace from Europe and the Middle East, making it one of the
largest and most diverse congregations in the United States.
Under the leadership of its current Rabbi, David Wolpe, the synagogue
has developed an impressive array of programs and services for the
Jewish community in Los Angeles. One especially popular program is
Friday Night Live, a social and spiritual Sabbath service drawing
hundreds in the 21 to 39 age group. The monthly event has become a
model for other communities and its success has now been replicated
around the country.
Over the last 100 years, Sinai Temple has become an anchor for the
Jewish community, serving its religious, spiritual, and educational
needs. The synagogue's vision for its next 100 years is to create
Sinai: A Center for Jewish Life and Learning dedicated to the entire
Jewish community through excellence in religious, educational, and
social programming.
I am delighted to recognize the Congregation's remarkable
accomplishments and wish them continued success in their future
endeavors. I ask my colleagues to join me in congratulating Sinai
Temple on its first 100 years in Los Angeles.

____________________

ARMENIAN PLANE CRASH

______

HON. FRANK PALLONE, JR.

of new jersey

in the house of representatives

Tuesday, May 9, 2006

Mr. PALLONE. Mr. Speaker, I rise today to express my sincere
condolence to the families and friends of the passengers and
crewmembers aboard Airbus Airliner A-320, which crashed last Wednesday
morning off of Russia's Black Sea coast. Luckily, investigators do not
suspect foul play or terrorism, stating the crash was due to stormy
weather.
The plane disappeared from radar screens about four miles from shore.
As it was heading for what seemed like an emergency landing at the
Adler Airport near the Southern Russian resort city of Sochi at 2:15
a.m., it crashed into the sea, killing all 113 people on board,
including six children. No passenger was wearing a life jacket,
indicating they did not have sufficient warning to prepare for such a
landing. According to Armavia airline officials, 26 Russians, one
Ukrainian and one Georgian were among the passengers and crewmembers.
The rest were Armenian citizens.
No human should suffer the type of pain that is brought about by this
tragic loss of life. My thoughts and prayers are with the families and
friends of the victims--may you find strength during these trying
times.

____________________

RECOGNIZING THE SESQUICENTENNIAL OF THE FIRST CHRISTIAN CHURCH OF
MONMOUTH, OR

______

HON. DARLENE HOOLEY

of oregon

in the house of representatives

Tuesday, May 9, 2006

Ms. HOOLEY. Mr. Speaker, I rise today to recognize the First
Christian Church of Monmouth. In the past 150 years, the members of
this church have proven again and again the depth of their caring and
giving, not just to their community, but to all those in need.
From 1850 to 1853 pioneers like Elijah Davidson, Ira F.M. Butler and
others came to the Oregon Territory from their homes in Monmouth,
Illinois--the inspiration for what became Monmouth, Oregon. These
settlers, members of the Disciples of Christ Church, came to create a
new community and school steeped in their religion and their values,
tenets that they shared with the long history of pioneers going back to
the beginnings of our nation. In 1856, Monmouth University (present-day
Western Oregon University) was chartered, and it became the first home
for the church.
Just as the buildings that house this faith community have changed
and grown over the years, so has the church's congregation. Active in
the community, their good works include a teen center for local youth
as well as the home for the Monmouth chapter of Meals on Wheels. This
congregation represents the heart of the community and the goodness in
people which we should all strive to achieve.
I want to take this opportunity to honor this church for the efforts
that they have made on behalf of the residents of Monmouth and students
of Western Oregon University. On this, their sesquicentennial
anniversary, I acknowledge and honor the First Christian Church of
Monmouth for their service and dedication to their community.

____________________

TRIBUTE TO MS. JUDY GRUBER AND MR. ROBBIE GREENBLUM

______

HON. HENRY CUELLAR

of texas

in the house of representatives

Tuesday, May 9, 2006

Mr. CUELLAR. Mr. Speaker, I rise today to honor Ms. Judy Gruber and
Mr. Robbie Greenblum for their community service to their religious
community. They will be honored at the Annual L' Chaim celebration on
May 22, 2006.
Judy Gruber is a longtime supporter and member of Chabad Lubavitch of
south Texas. She has served on the Community Relations Council of the
Jewish Federation and on the San Antonio Association for Jewish
Education and Rekindling Tradition committees.
Robbie Greenblum is an immigration attorney in San Antonio, TX, and
has been an ardent supporter of Chabad's outreach efforts in south
Texas. He has been instrumental in organizing Chabad's Torah Study
Group which has been ongoing for the past decade. He was a past chair
of the Community Relations Council of Jewish Education and spearheaded
the Latino and Black Jewish dialog programs.
Mr. Speaker, I am honored to have had this time to recognize Ms. Judy
Gruber's and Mr. Robbie Greenblum's dedication to community service.

____________________

PAYING TRIBUTE TO JELINDO ANGELO ``J.A.'' TIBERTI

______

HON. JON C. PORTER

of nevada

in the house of representatives

Tuesday, May 9, 2006

Mr. PORTER. Mr. Speaker, I rise today to honor the life of Jelindo
Angelo ``J.A.'' Tiberti, who died on Wednesday, May 3, 2006.
J.A. was a piller of the Las Vegas construction industry, patriarch
of Tiberti construction and a civic leader. J.A. came to Las Vegas from
California in 1941 with the U.S. Army Corps of Engineers to build the
runway at what is now Nellis Air Force Base. He formed Waale, Camplan
and Tiberti Construction Co. in 1947 and developed Bonanza Village on
Bonanza Road, before venturing out on his own in 1950. Among his many
prominent works in Las Vegas are the Las Vegas Club, Palace Station,
Sunset Station, Club Bingo and the Gold Coast. He built schools,
hospitals, and public buildings. Not only was he a great craftsman, he
was also a benevolent member of society. J.A.'s charitable
contributions include a $1 million donation to help create the UNLV
College of Engineering in 1979, and he provided the funds to build Camp
Potosi for the Boy Scouts Boulder Dam Area Council. He was also
appointed to the Las

[[Page 7518]]

Vegas City Planning Commission in 1953 and served six consecutive 4-
year terms. J.A. received a number of professional awards as well, such
as the Southern Nevada Engineer of the Year award in 1972, and the
State's Most Distinguished Nevadan in 1987.
Mr. Speaker, I am proud to honor the life of Jelindo Angelo ``J.A.''
Tiberti. His professional success and philanthropic nature should serve
as an example to us all, he will surely be missed by the community.

____________________

HONORING JUDITH POOR

______

HON. GEORGE RADANOVICH

of california

in the house of representatives

Tuesday, May 9, 2006

Mr. RADANOVICH. Mr. Speaker, I rise to recognize posthumously Mrs.
Judith Poor of Mariposa, CA, for her remarkable life and tireless
dedication to her community and family. Her community gathered to
celebrate her life on Sunday, April 23rd, in Mariposa.
A native of Texas, Judy was well-known in her community for her
tremendous generosity and an unmistakable southern charm that was both
delightful and genuine. Judy believed that her family was her top
priority. As a wife, mother and grandmother, Judy led by example,
showing that dedication to the family unit though participation in many
family centered activities was an all-important foundation of the Poor
Family.
Holding Texas close to her heart, Judy remained a devout Dallas
Cowboys fan and enjoyed spending time with her husband, Rod, watching
modified stock car races. In addition, she served as the circulation
manager for her local newspaper for 8 years.
Judy Poor is survived by her husband, Rod; children and their
families, Larry and Tisha Cullens, Diana Poor, Marty Poor, Christy
Nicholson, Megan and Mandy Cullens, Larry Cullens III, Jennifer Poor,
Travis and Randa Poor, Carina Stephens; siblings, Ava Jane Fisher, Jan
Cromeans and David Hodnett.
Mr. Speaker, I rise to honor posthumously the life of Mrs. Judith
Poor of Mariposa, CA. I urge my colleagues to join me in celebrating
the life of Judy Poor.

____________________

TRIBUTE TO U.S. ARMY LIEUTENANT COLONEL PATRICK MULVIHILL

______

HON. DUNCAN HUNTER

of california

in the house of representatives

Tuesday, May 9, 2006

Mr. HUNTER. Mr. Speaker, I rise today to recognize California native
and U.S. Army Lieutenant Colonel Patrick Mulvihill. Mr. Speaker, it is
a pleasure for me to honor Colonel Mulvihill, who will soon be retiring
from the Army after 25 years of distinguished service to our nation.
Colonel Mulvihill began his career with the Army in 1981 upon
receiving an ROTC commission from the University of California, Davis.
Since that time, he has been assigned to commands from California to
Europe, serving as a Battalion S2, Assistant Brigade S2, Tactical
Signals Intelligence Company Commander, Observer-Controller for the
National Training Center, Instructor at Fort Huachuca, Assistant G2 in
Europe, SFOR Intelligence Task Force Commander in Bosnia and the 66th
MI Group S3.
In 2001, Colonel Mulvihill assumed command at the Joint Intelligence
Training Activity Pacific, his current and final duty assignment.
Colonel Mulvihill is known by those who have served beside him, as well
as those he has commanded, as an Intelligence expert and a leader who
has always put the welfare of our nation's soldiers, Marines, airmen
and sailors before his own.
President Ronald Reagan once said, ``I always believed in the
importance of peace through strength. And the military is the provider
of that strength. So we must equip them, train them and support them.
But over the years, America's military leadership has brought us to
even greater heights than we ever could imagine.'' Mr. Speaker,
President Reagan was referring to leaders like Colonel Mulvihill, who
embody the strength of our nation and remain our military's greatest
asset.
As Chairman of the House Committee on Armed Services, I extend my
deepest appreciation and gratitude to Colonel Mulvihill for his 25
years of dedicated military service. Mr. Speaker, I ask that my
colleagues join me in saluting this American hero and wishing him and
his family continued success in their future endeavors.