Max Baucus

Mr. BAUCUS

Mr. BAUCUS. I yield to the majority leader.

Mr. BAUCUS. Mr. President, with all due respect, while listening to some speakers, including the previous speaker, I would ask what bill they have been reading. It seems that they are referring to a bill which is not the conference report before us today. They are discussing problems that might occur in the future. But the problems described are based on some other bill, not the bill before us, not the conference report. The fact is that this legislation provides $400 billion for seniors. That is a $400 billion entitlement for U.S. seniors that they do not have today. I think we owe it to our American seniors to give them this $400 billion new entitlement for drug benefits. We are on the brink. We are close to passing it. In each of the last several years, we have come close but we were not able to finish the job. I do not think we are going to have this opportunity again. I do not think the Budget Committee is going to set aside $400 billion again, particularly with the increasing budget deficits and current account deficits. We will not have this opportunity again. This is a good bill. No bill is perfect. We are 535 Members of Congress. There are 535 people who have to work together to get something passed. This product before us today reflect this reality. It is $400 billion for seniors. It is also much closer to the Senate bill than the House bill. I hear complaints that the conference report is not nearly as good as the Senate bill. These critics have not read the conference report. The conference report is better than the Senate bill in many respects. For example, dual eligibles. The conference report covers low-income dual eligibles through Medicare. I think most Senators agree this is a better policy than what was in the Senate bill. We also have a solid fallback. It is wrong when Senators say there is no guaranteed prescription drug benefit to seniors. It is guaranteed in this bill. Fee for service is held harmless in this bill in all respects. So a senior can always get a standard prescription drug benefit under this bill. Whether one takes it from a PDP, a private drug plan, a PPO, or the fallback, this benefit is guaranteed for all seniors. Seniors will get their prescription drug benefits in this bill. It is guaranteed. As I mentioned earlier, this benefit is an entitlement. It is a $400 billion entitlement expansion we have tried to pass in past years but are only able to get passed now. I have heard some Senators claim that this is not the Senate bill because it contains something called premium support, and it has a so- called slush fund. Let me remind Senators, the so-called premium support is extremely watered down from what was in the House bill. It is time limited to 6 years. Only six cities will be demonstration projects. Low-income seniors in each of those six cities will be held harmless. They get full protection. In addition, the premiums for those who are not low income are limited to a 5 percent change. Fee for service Medicare is held harmless in all respects in those six cities where there may be a demonstration project. They are held harmless in all respects, except the Part B premium may go up by no more than 5 percent. Any other change in these demonstration areas has to be enacted by Congress--enacted by to Congress to extend, enacted by Congress to expand, enacted by Congress to change. What has happened in the past when we have had these demos? They have been repealed. They have not been extended. In 1997, Congress set up premium support demonstration projects. Congress then rushed in to repeal them as quickly as they possibly could. They were gone. The same will happen here. Do my colleagues know why? Because the dollars provided to private plans in the premium support demonstration areas will be much less than in other parts in the country. The private plans will not be able to survive. Mark my word, those plans, those physicians, and those providers in the demonstration MSAs are going to come to Congress and ask us to repeal it. Regarding this so-called $14 billion slush fund, $12 billion was in the Senate bill, which seventy-six Senators voted for. This is just $2 million more, and it does not come out of the $400 billion for drug benefits. That $400 billion for drug benefits is still there, but the conference report does have $2 billion more than the Senate bill, for which 76 Senators voted. To close, I will return to my main point. This is a very good bill. We have the opportunity now to provide prescription drug benefits for seniors. We are not going to have this opportunity in the future. Beneficiaries have waited a long time for this benefit. This bill is much closer to the Senate bill than it is to the House bill. If we do not pass this now, I must ask you, what are we going to tell our seniors when they say to us, Mr. Senator, Ms. Senator, you told us you were going to give us prescription drug benefits but you found some reason to say no and you voted against it and did not give it to us; why did you give us the help you promised? We have an obligation to help our seniors pass this legislation.

Mr. BAUCUS. It is important to note that without Senator Murray's efforts and leadership on this issue, we would not be here today. I also thank the Senator from North Dakota for all that he has done to realize this important benefit. And I thank both Senators, as well as the chairman, for working with me to level a Medicare reimbursement playing field that has long been biased against rural patients and providers. We have the most comprehensive rural health package in history in this bill, and I am proud of that. With respect to self-injectable biologics and oral anti-cancer medications, let me provide some background. Under current law, Medicare will cover certain drugs that are administered ``incident to physicians' services.'' but self-injectable biologics which are complete replacements for physician administered drugs are not covered by Medicare. In other words, if a doctor is required to inject the drug, you're covered. If not, you're out of luck. A similar situation exists for oral anti-cancer medications. Coverage is available for oral anti-cancer drugs if they are also available in injectable form. But Medicare coverage is denied for anticancer therapies that are available in oral form only. Many new therapies to treat cancer, as well as many that are in various stages of development and approval, are available only in oral form, and therefore are not covered under the Medicare program.

Mr. BAUCUS. Mr. President, I want to speak for a moment today about the impact on States from this Medicare prescription drug bill. I have long been concerned about our States' fiscal crisis, and I have supported fiscal relief through the so-called ``FMAP'' increase, through increases in SSBG, and through general revenue sharing. And I am pleased that, in the long term, this bill is expected to result in substantial savings to States more than $17 billion by 2013. But I remain concerned about the impact that this bill will have on States in the short term. Before this bill had been finalized, when there were early indications that States could be harmed by the so- called ``holdback'' formula in the first years of the drug benefit, I insisted that the formula be revised. We added $4.5 billion so that the impact on states of the ``woodwork effect,'' new administrative costs, and the ``holdback'' provisions would not ultimately put the States in the red in any year of the drug benefit. As sometimes happens, preliminary budget estimates did not turn out exactly as expected. The overall impact on State Medicaid budgets in the first year of the drug benefit will still result in States spending more than they will save. While I regret that, I firmly believe that, in the long run, this bill will strengthen State budgets and take some pressure off of strained Medicaid programs. If a longer term analysis shows that there are unexpected costs to States in the early years, or the expected costs are higher than we can know today, I pledge to work over the next 2 years to ensure that the States are not harmed when the Medicare drug benefit goes into effect. Mr. President, one of the most important provisions in the rural package in this bill would reauthorize the Rural Hospital Flexibility Grant program for another 5 years. This grant program was created along with the Rural Hospital Flexibility Program, RHFP, in the Balanced Budget Act of 1997. The RHFP is designed to help ensure continued access to medical services in rural and frontier areas of our Nation that otherwise could not sustain hospital services. The BBA created a new category of hospital called a Critical Access Hospital, CAH. In my State of Montana, 36 acute care hospitals have converted to CAH status. The Rural Hospital Flexibility Grant program provides the tools States need to implement the RHFP. The purposes of this grant program are many. First, it provides resources to cash-strapped rural hospitals to help them make the conversion to CAH status. Second, it enables States to provide technical assistance to these facilities as they move through the conversion process. Third, this grant program provides resources to help States further stabilize rural health care by fostering and developing networks of providers in rural areas. Fourth, the program enables States to initiate a variety of other innovative approaches to stabilize and improve health care in rural areas. For example, in my State of Montana, Flex grant funds have enabled the State's CAHs to develop a pioneering quality improvement program. There was strong support for reauthorization of this grant program among the conferees. There was also strong support for clarifying how these funds could be used to ensure that as much of this money as possible was used for the direct benefit of CAHs and other rural providers in the States. In that regard, the bill was intended to specify that no more than 15 percent of a State's grant allocation be used for ``indirect'' administrative costs. However, in drafting the bill, the word ``indirect'' was inadvertently dropped from the language. I would like to clarify the intention of the conference committee that this 15-percent restriction be applied only to the amount of funds that can be used for ``indirect'' administrative expenses.

Mr. BAUCUS. As I understand the conference report, how the bill defines negotiated price is critical to Medicare beneficiaries, prescription drug plans, and Medicare Advantage plans offering prescription drug coverage. More specifically, I understand in section 1860D-2(d)(1)(B) that with respect to drugs purchased under Medicare Part D, the intent is for negotiated prices to include ``any dispensing fees for such drugs.'' I also understand in section 1860D-15(b)(3) that ``gross covered prescription drug costs'' includes ``costs directly related to dispensing.'' The issue for me then is how the conference report intends the Secretary to operationalize the concept of dispensing costs especially with respect to Medicare Advantage plans whose Medicare members do not fill prescriptions at retail pharmacies. I am referring to plans that operate their own pharmacies and take possession of prescription drugs directly from manufacturers and wholesalers. For these plans, is it the intent of the conferees that dispensing costs include all reasonable costs related to plan activities needed to deliver prescription drugs to their Medicare members, including the costs of delivering this benefit? For example, this would include salaries for pharmacists, and facility- and equipment-related costs.

Mr. BAUCUS. Mr. President, there is not a lot to say in 1 minute. I will do the best I can. Essentially, we have $400 billion in prescription drugs for seniors. I do not see how in the world we can let that moment pass by. It was said before that there are not enough low-income benefits for seniors. The previous speakers said that. They are wrong. One-third of our seniors will get such benefits under this bill that 95 percent of their benefits will be paid for. One-third of American seniors will find that 95 percent of their benefits are paid for. The allegation is there is no help for low-income seniors. That is just flat wrong. There were a lot of other statements made by those opposed to this legislation that are flat wrong. Some say 10 million will be affected by premium support. Flat wrong. We asked CBO what the number is. They said 600 to 700 to 1 million. Some people say 6 million were going to be hurt by Medicaid. Flat wrong. It is much less than that. I strongly urge Senators to look at the facts. Vote for the bill and particularly vote against the points of order because those are mere technicalities. They don't go to the substance of the bill. It is important to pass this legislation now for seniors.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I rise today to introduce the Tax Shelter Transparency and Enforcement Act. I am pleased to be joined by my good friend, the Chairman of the Senate Finance Committee, Chairman Grassley. He and I introduced similar legislation in the last Congress. And, just this year, the Finance Committee approved this legislation as part of the CARE Act, the energy bill, the Jobs and Growth Act, and the Jumpstart Our Business Strength Act. But why do we need this legislation? It has been more than 2 years since the collapse of Enron. Since then, numerous other corporate scandals have come to light, thousands of employees have lost their jobs and pension savings, and the after-shock has yet to settle down in the stock market. But there is one thing that has not happened. This Congress has failed to send to the President one single piece of tax legislation designed to shut down the kinds of abusive tax shelters we saw Enron use and that we know many others use. Every day that we fail to address this scandal, honest taxpayers pay the bill. A recent study commissioned by the IRS estimated that abusive corporate tax shelters alone cost honest taxpayers from $14 billion to $18 billion each year. That means up to $180 billion over ten years. Simply put, this abuse of our tax laws has got to stop. Abusive tax shelters are wide-spread--and not new. As early as 1995, the Clinton Administration undertook a comprehensive, multi-faceted effort to tackle the problem of corporate tax shelters. This included legislative proposals to halt the sale and marketing of shelters. Regulatory action to clamp down on illicit activity. And steps to better identify and pursue abusive transactions. The current Administration has added to the list of identified tax shelters and supported legislative proposals to ensure greater disclosure. This is not--and should not be--a partisan issue. The proliferation of abusive tax shelters hurts the entire tax system. Specifically, it places a greater tax burden on those Americans who are honestly and patriotically paying their fair share of taxes-- whether they are republican, democrat, or independent. These shelters undermine the confidence of the American people in the fairness of the tax system. Abusive tax shelters place honest corporate competitors at a disadvantage. And shutting down these abuses presents a great opportunity for Congress to restore fairness in the system. We should do no less. Let me take a few moments to discuss the nature of these tax shelters. Why they are wrong. And how purportedly reputable companies and professional advisors are participating in a disturbing race to the bottom. First, what are these tax shelters? Let me give you just one example of a tax shelter. On October 20th, the Finance Committee held a hearing on tax shelters. This hearing was a follow-up to a hearing earlier this year to review the Committee's investigative report on the collapse of Enron. At our hearing last month, we heard how some American corporations are purportedly buying and then leasing bridges, dams, subway systems, and other infrastructure through corporate tax shelters. It's like the old line: If you think these tax shelter transactions are legitimate--or what Congress intended--have I got a bridge to sell you. A former leasing industry executive, who testified before the Finance Committee, described complex transactions where U.S. companies make a single payment to a municipality to lease a bridge or other public infrastructure. These companies then lease the infrastructure back to the city. All along, the company takes a deduction on its U.S. taxes for the depreciation of the high valued asset. The companies never pay any real lease payments to the cities. And the cities never pay any lease payments to the companies. The cities never risk losing control of the bridge, dam, or subway system. But the companies--who include major banks and Fortune 500 companies--take millions and millions of dollars in deductions for what is essentially a paper transaction. And the American taxpayer is left holding the bill. The witness testified: ``[M]uch of the old and new infrastructure throughout Europe has been leased to, and leased back from, American corporations.'' In essence, in these transactions, the American people, through their tax dollars, are providing these companies a subsidy, part of which the companies pocket, and part of which they transfer to these cities. As Yale law school Professor Michael Graetz once said, a tax shelter is a ``deal done by very smart people, that, absent tax considerations, would be very stupid.'' This is nothing more than an unwarranted tax subsidy to U.S. companies courtesy of honest taxpayers. It is simply wrong. It rewards a transaction with no real economic substance. This has got to stop. And it is up to Congress and the President to put an end to this kind of abuse. So how did this tax shelter industry develop? If there is one thing that we should have learned from the Enron scandal, it is the pervasive role of lawyers and accountants. Why did some of the country's leading professional firms devote so much effort to spinning reported earnings out of nothing? And what does that say about the erosion of ethical standards for accountants and lawyers? In 1908, the American Bar Association adopted its first code of ethics. The preamble to their Model Rules states that a lawyer serves his client, but is also ``an officer of the legal system and a public citizen having special responsibility for the quality of justice.'' It also states that a lawyer should ``further the public's understanding of and confidence in the rule of law and the justice system because legal institutions in a constitutional democracy depend on popular participation and support to maintain their authority.'' In 1946, the Executive Director of the American Institute of Accountants--the predecessor to the American Institute of Certified Public Accountants--stated that: The very existence of the accounting profession depends on public confidence in the determination of certified public accountants to safeguard the public interest. This confidence can be maintained only by evidence of both technical competence and moral obligation. One item of evidence is promulgation and enforcement of rules of professional conduct. So, why did the legal and accounting profession fail to follow their own principles. And, why did they fail to police themselves? Part of the problem stems from the 1990s practices of investment bankers and venture capitalists--taking a piece of the deal or a piece of the upside performance. This behavior spread into almost every public company. And, following their clients, accountants and lawyers also began adopting these practices. Add to this an enormous pressure on company executives to hit revenue and earnings targets on a quarterly basis. Amidst this obsession with short-term results, no one was left to look after the company's long-term survival. At the same time, lawyers and accountants faced their own profit pressures as their compensation was tied to their ``book of business'' and their success in cross-selling different services to their clients. These cultural conflicts presented a threat to professional values. For auditing firms, traditional professional values mean attesting to investors and lenders that the company's financial statements are properly prepared and reflect all material issues. The business culture, however, encouraged the auditor to serve company executives--not only to refrain from pushing back, but also to affirmatively help them achieve their personal goals. Furthermore, audit services themselves became more and more of a low- profit business, as audit firms battled each other to gain the inside audit position--which could help them market high-profit services. The big money was in selling tax-engineered products. Finally, the private interests of the accounting professional and the corporate executive converged on one kind of activity that has proved particularly toxic--the proprietary financial maneuver that boosted reported earnings. That means, manipulate the bottom line of the financial statements. Such maneuvers satisfied the executives' need to feed the markets and keep stock prices afloat. They also satisfied the accountant's need for generating large profits for their firm and for their own bonus formula. Similarly, for law firms, the traditional professional values are associated with loyalty to the client and advocacy of the client's interests within the bounds of the law. Yet, loyalty to the corporate client and attention to corporate risks came to be sorely tested in many instances. A company executive could well be more interested in getting a deal done--and getting the legal opinion needed to support the accounting analysis--than in gaining an accurate understanding of the legal merits of the issue and the associated risks to the company. A law firm might even have its own stake in getting the deal done-- because of a bonus or contingency fee associated with completing the deal--or because of having assisted a promoter in developing the deal. In many accounting and tax schemes, executives simply did not want a frank assessment of legal merits and risks. Instead, what they sought was a professional opinion that would justify hiding the true nature of a transaction from readers of financial reports and tax returns. This was not legal advice on the merits--it was advice that was needed to justify hiding the ball. Clearly, some accounting firms and law firms have abandoned ethics for the big dollar bonus. As an extreme example, there were many people in the Arthur Andersen Houston office who knew about the destruction of Enron documents. Not one appears to have realized that what they were doing was terribly wrong. Apparently, not one of these professionals even thought to check with anyone elsewhere in the firm about whether or not what they were doing was wrong. Professional firms also have been all too willing to let themselves be compartmentalized. This way, they could say ``That wasn't my job'' when things went wrong. Consider the case of prominent law firms that provided tax opinions for investment banks and other promoters to use in selling tax shelter products. These opinions described the consequences of complicated tax maneuvers--based on the assumption that the future tax shelter purchaser would have a valid business purpose. And on the assumption that the transaction would not be tweaked further to reduce financial risk to almost nothing. It may have been true that these firms were asked to provide advice based on those implausible assumptions. But that does not justify allowing the firm's professional reputation to be used to market tax shelters. The lawyers simply must have known that no purchaser could realistically be expected to supply the critical assumed facts. The Enron case of using tax shelters to generate phantom financial earnings also seems to reflect a cycle of ``That wasn't my job'' role- playing. The tax lawyers found a business purpose for the transaction because it generated financial earnings. The accountants found financial earnings because the transaction promised future tax reductions. It all seems a bit circular. And it all assumes that creating misleading earnings reports is in the real business interest of the corporation. Again, the professionals appear to have lost track of who their real client was. Now, what do we need to do about this? Congress and Federal regulators started to address these issues with the Sarbanes-Oxley Act of 2002. For example, Sarbanes-Oxley calls for lawyers practicing before the SEC to report evidence of securities violations ``up the chain'' of their corporate clients--ultimately to corporate boards. And the Act calls for auditors to report directly to the corporate board's audit committee. And, provide a number of safeguards to assure that audit committees have the independence and autonomy needed to represent corporate interests and not personal interests. The Sarbanes-Oxley Act also addresses auditor independence in ways that respond to the business pressures that I described earlier. Audit partners cannot be compensated based on cross-selling. Audit personnel must be rotated periodically. And a one-year cooling off period is required in the case of individuals moving between employment at an audit firm and employment at an audit client. Public companies are prohibited from obtaining certain non-audit services from their auditor, and all other non-audit services require prior approval of the board's audit committee. But these changes just nibble at the edges of the bigger problem. We have to reign in these lawyers, accountants, and investment bankers who are out there manipulating the tax code to come up with tax shelter schemes. The tax shelter legislation that Chairman Grassley and I introduce today goes to the heart of the tax schemes problem. For example, the bill ensures that transactions are done for legitimate business purposes. That means that transactions must have economic substance and are not done merely to avoid taxes. It makes it explicit that achieving a particular kind of financial accounting treatment does not provide the needed ``business purpose'' to satisfy tax requirements. The bill also provides for stiff penalties that are needed to back up Treasury's new shelter disclosure requirements. As a Treasury official pointed out, ``[I]f a promoter is comfortable with selling a transaction. If a practitioner is comfortable with advising that the transaction is proper. And if a taxpayer is comfortable with entering into that transaction. Then they should all be comfortable with the IRS knowing about the transaction.'' Our bill also broadens the IRS's ability to enjoin tax shelter promoters and allows the agency to impose monetary penalties--in addition to suspension or disbarment--on disreputable tax advisors or their firms. And more may be needed, from both government and the private sector. For one thing, we need to also pass Senator Levin's bill, S. 1767, the Auditor Independence and Tax Shelters Act. I am pleased to be an original co-sponsor of that legislation. The Auditor Independence and Tax Shelters Act compliments the legislation that I am introducing today. Senator Levin's legislation shuts down tax shelter promotion from the audit and financial statement side of the equation. Specifically, S. 1767 would strengthen auditor independence by prohibiting them from providing tax shelter services to their audit clients. The legislation would also reduce potential auditor conflicts of interest by codifying four auditor independence principles to guide the audit committees of the Board of Directors of a publicly traded company, when that committee is required by the Sarbanes-Oxley Act to decide whether the company may provide certain non-audit services to the corporation. Next, the SEC and the new Public Accounting Oversight Board should devote significant resources to considering ways to improve the clarity of the tax footnote in the company's financial statements. They should also undertake a comprehensive review of financial reporting of income taxation. These agencies should also ensure that they have tax experts to ensure proper oversight investigations and reviews of the financial statement tax disclosures. The IRS should improve the clarity of the already-required reconciliation between book and tax earnings on the corporate tax return--the Schedule M-1. And we need to have better communication and coordination between the various federal departments and agencies with oversight over lawyers, accountants and investment bankers. The Department of Treasury, the IRS, the Department of Justice, the SEC, and the Public Accounting Oversight Board should talk to each other and not fall into the ``it's not my job'' mindset. The Sarbanes-Oxley Act also empowers the Public Company Accounting Oversight Board to describe new non-audit services that public companies could not acquire from their auditors, even if they are not explicitly described in the statute as a prohibited service. The Accounting Oversight Board should review the record of SEC rulemaking in this area, as well as ongoing business practices, and take action if it is needed to assure the public interest in auditor independence. Finally, professional firms need to cultivate professional cultures. The Enron scandal should serve as a wake-up call to all of us, but particularly the professionals. Law firms and accounting firms must be sure that their members and employees understand the nature of corporate representation and who the client is. Everyone who works at the firm needs to understand that the firm is committed to integrity and quality. And to understand that the firm's leaders will listen and react if legitimate questions arise. Professionals should resist the tendency to avert their eyes to obvious issues on the grounds that they are technically someone else's responsibility. In the best traditions of both the accounting and legal professions, the work of the professional must be guided by commitments to professional duty, fair dealing, and honesty. I hope that the leaders of the accounting and legal professions understand how important this is, and take the actions needed to give new vitality to these great traditions. Every Spring, Americans sit down at the kitchen table, or at their home computer, and figure out their taxes. With quiet patriotism, these Americans step up and pay their fair share. They are counting on us to make sure that sophisticated corporations pay their fair share as well. I am simply unwilling to tell the school teacher in Montana that he needs to pony up a little more because Congress is unwilling to shut down a loophole that is costing tens of billions every year. I look forward to continuing to work with the Chairman of the Finance Committee, Senator Grassley, to see the Tax Shelter Transparency and Enforcement Act through to enactment. I also urge all of my congressional colleagues--in the House and the Senate--to join forces to send tax shelter legislation to the President for his signature. We need to act to close these tax shelters and restore professional ethics. And we need to act before the next big scandal comes. Congress cannot ignore the problem any longer. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I rise today to introduce the Tax Shelter Transparency and Enforcement Act. I am pleased to be joined by my good friend, the Chairman of the Senate Finance Committee, Chairman Grassley. He and I introduced similar legislation in the last Congress. And, just this year, the Finance Committee approved this legislation as part of the CARE Act, the energy bill, the Jobs and Growth Act, and the Jumpstart Our Business Strength Act. But why do we need this legislation? It has been more than 2 years since the collapse of Enron. Since then, numerous other corporate scandals have come to light, thousands of employees have lost their jobs and pension savings, and the after-shock has yet to settle down in the stock market. But there is one thing that has not happened. This Congress has failed to send to the President one single piece of tax legislation designed to shut down the kinds of abusive tax shelters we saw Enron use and that we know many others use. Every day that we fail to address this scandal, honest taxpayers pay the bill. A recent study commissioned by the IRS estimated that abusive corporate tax shelters alone cost honest taxpayers from $14 billion to $18 billion each year. That means up to $180 billion over ten years. Simply put, this abuse of our tax laws has got to stop. Abusive tax shelters are wide-spread--and not new. As early as 1995, the Clinton Administration undertook a comprehensive, multi-faceted effort to tackle the problem of corporate tax shelters. This included legislative proposals to halt the sale and marketing of shelters. Regulatory action to clamp down on illicit activity. And steps to better identify and pursue abusive transactions. The current Administration has added to the list of identified tax shelters and supported legislative proposals to ensure greater disclosure. This is not--and should not be--a partisan issue. The proliferation of abusive tax shelters hurts the entire tax system. Specifically, it places a greater tax burden on those Americans who are honestly and patriotically paying their fair share of taxes-- whether they are republican, democrat, or independent. These shelters undermine the confidence of the American people in the fairness of the tax system. Abusive tax shelters place honest corporate competitors at a disadvantage. And shutting down these abuses presents a great opportunity for Congress to restore fairness in the system. We should do no less. Let me take a few moments to discuss the nature of these tax shelters. Why they are wrong. And how purportedly reputable companies and professional advisors are participating in a disturbing race to the bottom. First, what are these tax shelters? Let me give you just one example of a tax shelter. On October 20th, the Finance Committee held a hearing on tax shelters. This hearing was a follow-up to a hearing earlier this year to review the Committee's investigative report on the collapse of Enron. At our hearing last month, we heard how some American corporations are purportedly buying and then leasing bridges, dams, subway systems, and other infrastructure through corporate tax shelters. It's like the old line: If you think these tax shelter transactions are legitimate--or what Congress intended--have I got a bridge to sell you. A former leasing industry executive, who testified before the Finance Committee, described complex transactions where U.S. companies make a single payment to a municipality to lease a bridge or other public infrastructure. These companies then lease the infrastructure back to the city. All along, the company takes a deduction on its U.S. taxes for the depreciation of the high valued asset. The companies never pay any real lease payments to the cities. And the cities never pay any lease payments to the companies. The cities never risk losing control of the bridge, dam, or subway system. But the companies--who include major banks and Fortune 500 companies--take millions and millions of dollars in deductions for what is essentially a paper transaction. And the American taxpayer is left holding the bill. The witness testified: ``[M]uch of the old and new infrastructure throughout Europe has been leased to, and leased back from, American corporations.'' In essence, in these transactions, the American people, through their tax dollars, are providing these companies a subsidy, part of which the companies pocket, and part of which they transfer to these cities. As Yale law school Professor Michael Graetz once said, a tax shelter is a ``deal done by very smart people, that, absent tax considerations, would be very stupid.'' This is nothing more than an unwarranted tax subsidy to U.S. companies courtesy of honest taxpayers. It is simply wrong. It rewards a transaction with no real economic substance. This has got to stop. And it is up to Congress and the President to put an end to this kind of abuse. So how did this tax shelter industry develop? If there is one thing that we should have learned from the Enron scandal, it is the pervasive role of lawyers and accountants. Why did some of the country's leading professional firms devote so much effort to spinning reported earnings out of nothing? And what does that say about the erosion of ethical standards for accountants and lawyers? In 1908, the American Bar Association adopted its first code of ethics. The preamble to their Model Rules states that a lawyer serves his client, but is also ``an officer of the legal system and a public citizen having special responsibility for the quality of justice.'' It also states that a lawyer should ``further the public's understanding of and confidence in the rule of law and the justice system because legal institutions in a constitutional democracy depend on popular participation and support to maintain their authority.'' In 1946, the Executive Director of the American Institute of Accountants--the predecessor to the American Institute of Certified Public Accountants--stated that: The very existence of the accounting profession depends on public confidence in the determination of certified public accountants to safeguard the public interest. This confidence can be maintained only by evidence of both technical competence and moral obligation. One item of evidence is promulgation and enforcement of rules of professional conduct. So, why did the legal and accounting profession fail to follow their own principles. And, why did they fail to police themselves? Part of the problem stems from the 1990s practices of investment bankers and venture capitalists--taking a piece of the deal or a piece of the upside performance. This behavior spread into almost every public company. And, following their clients, accountants and lawyers also began adopting these practices. Add to this an enormous pressure on company executives to hit revenue and earnings targets on a quarterly basis. Amidst this obsession with short-term results, no one was left to look after the company's long-term survival. At the same time, lawyers and accountants faced their own profit pressures as their compensation was tied to their ``book of business'' and their success in cross-selling different services to their clients. These cultural conflicts presented a threat to professional values. For auditing firms, traditional professional values mean attesting to investors and lenders that the company's financial statements are properly prepared and reflect all material issues. The business culture, however, encouraged the auditor to serve company executives--not only to refrain from pushing back, but also to affirmatively help them achieve their personal goals. Furthermore, audit services themselves became more and more of a low- profit business, as audit firms battled each other to gain the inside audit position--which could help them market high-profit services. The big money was in selling tax-engineered products. Finally, the private interests of the accounting professional and the corporate executive converged on one kind of activity that has proved particularly toxic--the proprietary financial maneuver that boosted reported earnings. That means, manipulate the bottom line of the financial statements. Such maneuvers satisfied the executives' need to feed the markets and keep stock prices afloat. They also satisfied the accountant's need for generating large profits for their firm and for their own bonus formula. Similarly, for law firms, the traditional professional values are associated with loyalty to the client and advocacy of the client's interests within the bounds of the law. Yet, loyalty to the corporate client and attention to corporate risks came to be sorely tested in many instances. A company executive could well be more interested in getting a deal done--and getting the legal opinion needed to support the accounting analysis--than in gaining an accurate understanding of the legal merits of the issue and the associated risks to the company. A law firm might even have its own stake in getting the deal done-- because of a bonus or contingency fee associated with completing the deal--or because of having assisted a promoter in developing the deal. In many accounting and tax schemes, executives simply did not want a frank assessment of legal merits and risks. Instead, what they sought was a professional opinion that would justify hiding the true nature of a transaction from readers of financial reports and tax returns. This was not legal advice on the merits--it was advice that was needed to justify hiding the ball. Clearly, some accounting firms and law firms have abandoned ethics for the big dollar bonus. As an extreme example, there were many people in the Arthur Andersen Houston office who knew about the destruction of Enron documents. Not one appears to have realized that what they were doing was terribly wrong. Apparently, not one of these professionals even thought to check with anyone elsewhere in the firm about whether or not what they were doing was wrong. Professional firms also have been all too willing to let themselves be compartmentalized. This way, they could say ``That wasn't my job'' when things went wrong. Consider the case of prominent law firms that provided tax opinions for investment banks and other promoters to use in selling tax shelter products. These opinions described the consequences of complicated tax maneuvers--based on the assumption that the future tax shelter purchaser would have a valid business purpose. And on the assumption that the transaction would not be tweaked further to reduce financial risk to almost nothing. It may have been true that these firms were asked to provide advice based on those implausible assumptions. But that does not justify allowing the firm's professional reputation to be used to market tax shelters. The lawyers simply must have known that no purchaser could realistically be expected to supply the critical assumed facts. The Enron case of using tax shelters to generate phantom financial earnings also seems to reflect a cycle of ``That wasn't my job'' role- playing. The tax lawyers found a business purpose for the transaction because it generated financial earnings. The accountants found financial earnings because the transaction promised future tax reductions. It all seems a bit circular. And it all assumes that creating misleading earnings reports is in the real business interest of the corporation. Again, the professionals appear to have lost track of who their real client was. Now, what do we need to do about this? Congress and Federal regulators started to address these issues with the Sarbanes-Oxley Act of 2002. For example, Sarbanes-Oxley calls for lawyers practicing before the SEC to report evidence of securities violations ``up the chain'' of their corporate clients--ultimately to corporate boards. And the Act calls for auditors to report directly to the corporate board's audit committee. And, provide a number of safeguards to assure that audit committees have the independence and autonomy needed to represent corporate interests and not personal interests. The Sarbanes-Oxley Act also addresses auditor independence in ways that respond to the business pressures that I described earlier. Audit partners cannot be compensated based on cross-selling. Audit personnel must be rotated periodically. And a one-year cooling off period is required in the case of individuals moving between employment at an audit firm and employment at an audit client. Public companies are prohibited from obtaining certain non-audit services from their auditor, and all other non-audit services require prior approval of the board's audit committee. But these changes just nibble at the edges of the bigger problem. We have to reign in these lawyers, accountants, and investment bankers who are out there manipulating the tax code to come up with tax shelter schemes. The tax shelter legislation that Chairman Grassley and I introduce today goes to the heart of the tax schemes problem. For example, the bill ensures that transactions are done for legitimate business purposes. That means that transactions must have economic substance and are not done merely to avoid taxes. It makes it explicit that achieving a particular kind of financial accounting treatment does not provide the needed ``business purpose'' to satisfy tax requirements. The bill also provides for stiff penalties that are needed to back up Treasury's new shelter disclosure requirements. As a Treasury official pointed out, ``[I]f a promoter is comfortable with selling a transaction. If a practitioner is comfortable with advising that the transaction is proper. And if a taxpayer is comfortable with entering into that transaction. Then they should all be comfortable with the IRS knowing about the transaction.'' Our bill also broadens the IRS's ability to enjoin tax shelter promoters and allows the agency to impose monetary penalties--in addition to suspension or disbarment--on disreputable tax advisors or their firms. And more may be needed, from both government and the private sector. For one thing, we need to also pass Senator Levin's bill, S. 1767, the Auditor Independence and Tax Shelters Act. I am pleased to be an original co-sponsor of that legislation. The Auditor Independence and Tax Shelters Act compliments the legislation that I am introducing today. Senator Levin's legislation shuts down tax shelter promotion from the audit and financial statement side of the equation. Specifically, S. 1767 would strengthen auditor independence by prohibiting them from providing tax shelter services to their audit clients. The legislation would also reduce potential auditor conflicts of interest by codifying four auditor independence principles to guide the audit committees of the Board of Directors of a publicly traded company, when that committee is required by the Sarbanes-Oxley Act to decide whether the company may provide certain non-audit services to the corporation. Next, the SEC and the new Public Accounting Oversight Board should devote significant resources to considering ways to improve the clarity of the tax footnote in the company's financial statements. They should also undertake a comprehensive review of financial reporting of income taxation. These agencies should also ensure that they have tax experts to ensure proper oversight investigations and reviews of the financial statement tax disclosures. The IRS should improve the clarity of the already-required reconciliation between book and tax earnings on the corporate tax return--the Schedule M-1. And we need to have better communication and coordination between the various federal departments and agencies with oversight over lawyers, accountants and investment bankers. The Department of Treasury, the IRS, the Department of Justice, the SEC, and the Public Accounting Oversight Board should talk to each other and not fall into the ``it's not my job'' mindset. The Sarbanes-Oxley Act also empowers the Public Company Accounting Oversight Board to describe new non-audit services that public companies could not acquire from their auditors, even if they are not explicitly described in the statute as a prohibited service. The Accounting Oversight Board should review the record of SEC rulemaking in this area, as well as ongoing business practices, and take action if it is needed to assure the public interest in auditor independence. Finally, professional firms need to cultivate professional cultures. The Enron scandal should serve as a wake-up call to all of us, but particularly the professionals. Law firms and accounting firms must be sure that their members and employees understand the nature of corporate representation and who the client is. Everyone who works at the firm needs to understand that the firm is committed to integrity and quality. And to understand that the firm's leaders will listen and react if legitimate questions arise. Professionals should resist the tendency to avert their eyes to obvious issues on the grounds that they are technically someone else's responsibility. In the best traditions of both the accounting and legal professions, the work of the professional must be guided by commitments to professional duty, fair dealing, and honesty. I hope that the leaders of the accounting and legal professions understand how important this is, and take the actions needed to give new vitality to these great traditions. Every Spring, Americans sit down at the kitchen table, or at their home computer, and figure out their taxes. With quiet patriotism, these Americans step up and pay their fair share. They are counting on us to make sure that sophisticated corporations pay their fair share as well. I am simply unwilling to tell the school teacher in Montana that he needs to pony up a little more because Congress is unwilling to shut down a loophole that is costing tens of billions every year. I look forward to continuing to work with the Chairman of the Finance Committee, Senator Grassley, to see the Tax Shelter Transparency and Enforcement Act through to enactment. I also urge all of my congressional colleagues--in the House and the Senate--to join forces to send tax shelter legislation to the President for his signature. We need to act to close these tax shelters and restore professional ethics. And we need to act before the next big scandal comes. Congress cannot ignore the problem any longer. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. BAUCUS. Mr. President, I am pleased to join my colleague Senator Inhofe, and my other Senate colleagues in introducing the Brownfield Revitalization Act of 2003. Given the nature of this legislation-- establishing tax incentives to encourage cleanup of environmentally contaminated property across the country--it is appropriate that this be a joint introduction between the Chairman of the Senate Environment and Public Works Committee and the Ranking Member of the Senate Finance Committee. This legislation is bipartisan, but it is also bicameral. A companion bill was introduced earlier this week in the House of Representatives by Congresswoman Nancy Johnson and Congressman Xavier Becerra. Across the United States, environmentally contaminated sites endanger public health, impede economic development, and negatively impact tax rolls. The United States has an estimated 1,000,000 such properties scattered across our inner cities and rural areas alike. In my own State of Montana, there are well over 5,000 such sites. This may seem surprising for a state like Montana that is relatively undeveloped and pristine. But we are by no means unaffected by the scourge of environmental contamination. In addition to contamination caused by leaking underground storage tanks and contamination caused by other light industries, Montana also has been impacted by significant contamination left behind by some of the very industries that built our great state. Contaminated sediments can be found along the Clark Fork River from Butte, MT, downstream for 140 miles to Missoula and on into Idaho--a legacy of the copper mining and smelting operations at Butte and Anaconda. Tremolite asbestos contamination is prevalent at numerous sites around Libby, MT, including the local high school and middle school tracks--a legacy from the Zonlite Mine that began operating in the 1920s and produced 80 percent of the world's supply of vermiculite. These industries created wealth and jobs for generations of Montanans. Today, however, contamination from wood processing facilities, abandoned mines, and numerous other activities have harmed human health and the environment and continue to stifle the development of new business in Montana. These sites are well known to Montanans: Sites such as Missoula Sawmill site and the White Pine Sash site in Missoula, the Missouri River Corridor site in Great Falls, and sites in Helena, Bozeman, Billings and numerous other communities all across Montana. We can and must do more to help revitalize these important areas. Congress has undertaken a number of initiatives to address the brownfield problem in this country. I am proud to have been able to play a leadership role in passing the Brownfields Revitalization and Reinvestment Act of 2001. That bill has helped provide new Federal funds for evaluation and remediation of brownfield sites and has helped to resolve some of the liability issues that were inhibiting remediation of these contaminated properties. But, We must do more. The U.S. Chamber of Commerce has estimated that at the current rate of cleanup, it will take 10,000 years for us to remediate all of the contaminated sites in America. The United States Environmental Protection Agency, in an analysis conducted with George Washington University, concluded that the remediation ``costs for all of the brownfields located within the United States have been estimated to exceed $650 billion,'' and that, consequently, ``it is imperative that private capital be attracted to the redevelopment of brownfields.'' Late last year, Senator Grassley and I entered a colloquy in the Congressional Record expressing our concern that certain provisions in the tax code are having the unintended consequence of discouraging investment in the remediation and redevelopment of our nation's polluted sites. In that colloquy, we pledged to get our arms around this issue and to draft legislation to correct this problem. I am pleased that we are standing here today to introduce legislation to do just that. Let me briefly describe the basis for this bill and the means by which this legislation will dramatically accelerate the remediation of contaminated lands in America. Today, tax-exempt investors such as university endowments, private pension funds, and charitable foundations can invest their capital in the stock market and certain real estate transactions that do not clean the environment without fear of incurring an Unrelated Business Income Tax, or UBIT, on any gains they make from their investments. Because UBIT-sensitive entities hold over $6 trillion dollars in financial assets and routinely deploy more capital in real estate projects than any other category of investor, the unintended consequence of UBIT has been to drive our nation's biggest and most active real estate investors away from projects focused on the remediation and redevelopment of polluted properties. This bill seeks to address this problem by allowing eligible tax- exempt entities to invest in the cleanup and redevelopment of qualified contaminated properties without incurring unrelated business income tax at the time they sell the property. The legislation accomplishes this goal by concentrating on three basic tasks: 1. focus investment on moderately and heavily polluted properties, 2. require taxpayers to work with the State authorities and the public to ensure adequate clean up, and 3. ensure that the legislation is tightly crafted to prevent abuse. First, this bill focuses on moderately and heavily polluted properties. Section 198 of the tax code contains a structure under which designated state environmental agencies certify contaminated property that is eligible for special rules concerning deductions of remediation costs. This bill uses this existing structure to identify and certify contaminated sites that are eligible for inclusion within this bill. Prior to requesting certification from a state agency, the taxpayer is required to provide the agency with site characterizations, assessments and other documentation illustrating the scope and character of the pollution problem at the target site. The legislation maintains its focus on moderately and heavily contaminated properties by requiring taxpayers to expend on remediation of each site the greater of $550,000 or 12 percent of the fair market value of the site, assessed as though the site were not contaminated. These remediation thresholds have intentionally been set higher than he typical range of costs reported to the Environmental Protection Agency to clean up brownfield sites nationwide. By establishing such high remediation thresholds, the legislation excludes incidentally or trivially contaminated property and focuses new capital investment on those sites most in need of additional assistance. Second, this bill requires taxpayers to work with affected states and the public to ensure adequate clean up. In addition to requiring high levels of remediation expenditures on each site, the legislation contains numerous other safeguards designed to ensure that remediation of each site is performed to state specifications and with full public involvement. Similar to the front-end certification that is required to classify properties as truly contaminated, the legislation requires the taxpayer to obtain a tail-end certification from the state agency indicating that the site has been cleaned up and is no longer considered a brownfield. Prior to applying for this certification, the taxpayer must provide the State agency with sufficient information and documentation to allow the state agency to make this determination. In particular, the taxpayer must certify and provide documentation that: there are no longer hazardous substances, pollutants or contaminants on the property that are complicating the redevelopment or reuse of the site, environmental remediation is complete or substantially complete in conformance with all applicable federal, state and local environmental laws and regulations, the property is suitable for more economically productive or environmentally beneficial uses than at the time of acquisition, if additional activities are required to complete remediation, sufficient financial assurances and institutional controls are in place to complete the remediation in as short a time as possible, and the public was notified and given the opportunity to comment on the remedial actions taken to clean up the property and, if necessary, on any longer-term remediation activities. The provisions in this legislation are designed to create substantive thresholds that the tax-exempt entity must meet in order to qualify for the exemption from UBIT. This legislation does not alter the complex web of existing federal, state or local environmental laws, regulations or standards. Third, this bill ensures that the legislation is tightly crafted to prevent abuse. It is worth noting that this legislation has been drafted to contain numerous safeguards to prevent abuse of this program. The anti-abuse examples include the following. The taxpayer cannot be the party that has caused the pollution and cannot be otherwise related to the polluter. Also, all transactions, purchase of the property, sale of the property, expenditure of remediation funds, etc., must be arms-length transactions with parties unrelated to the taxpayer. Further, the taxpayer is not allowed to count any Federal funds, e.g. grants, etc., or other types of government payments and benefits toward and required remediation thresholds. There are also restrictions on how the taxpayer may treat costs across multiple properties, requiring that an election be made specifying when and which properties are considered for such purposes; this is intended to prevent cherry-picking among different properties once the election has been made. Moreover, the legislation contains special restrictions addressing the use of the legislation's provisions by partnerships and other pass-through entities including requiring that all partnerships under the bill be fractions-rule compliant. Because this legislation is narrowly crafted, and because tax-exempt entities are not currently investing in these sites, and thus are not paying UBIT, the Joint Committee on Taxation has concluded that this legislation will actually generate revenue for the Federal treasury during the first three years after enactment and that it will cost $10 million over five years and $192 million over ten years. Further, because the legislation will accelerate cleanup of brownfield sites, create jobs, stimulate the economy, reduce blight and public health concerns, and because the bill has an acceptable fiscal impact, this legislative approach has been endorsed by Environmental Defense, the U.S. Chamber of Commerce, the National Taxpayers Union, and the U.S. Conference of Mayors, as well as numerous local, state and regional organizations and municipalities. Passage of this bill will dramatically increase the speed at which our country's contaminated properties are remediated and brought back into productive taxable use. This narrowly crafted legislation will create jobs, increase tax revenues, and protect the environment--all accomplished without creating new government programs or regulations and all at a minimal cost to the Federal treasury. I am pleased to be introducing this legislation with my colleague from Oklahoma. I look forward to working together to enact this legislation into law. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I am pleased to join my colleague Senator Inhofe, and my other Senate colleagues in introducing the Brownfield Revitalization Act of 2003. Given the nature of this legislation-- establishing tax incentives to encourage cleanup of environmentally contaminated property across the country--it is appropriate that this be a joint introduction between the Chairman of the Senate Environment and Public Works Committee and the Ranking Member of the Senate Finance Committee. This legislation is bipartisan, but it is also bicameral. A companion bill was introduced earlier this week in the House of Representatives by Congresswoman Nancy Johnson and Congressman Xavier Becerra. Across the United States, environmentally contaminated sites endanger public health, impede economic development, and negatively impact tax rolls. The United States has an estimated 1,000,000 such properties scattered across our inner cities and rural areas alike. In my own State of Montana, there are well over 5,000 such sites. This may seem surprising for a state like Montana that is relatively undeveloped and pristine. But we are by no means unaffected by the scourge of environmental contamination. In addition to contamination caused by leaking underground storage tanks and contamination caused by other light industries, Montana also has been impacted by significant contamination left behind by some of the very industries that built our great state. Contaminated sediments can be found along the Clark Fork River from Butte, MT, downstream for 140 miles to Missoula and on into Idaho--a legacy of the copper mining and smelting operations at Butte and Anaconda. Tremolite asbestos contamination is prevalent at numerous sites around Libby, MT, including the local high school and middle school tracks--a legacy from the Zonlite Mine that began operating in the 1920s and produced 80 percent of the world's supply of vermiculite. These industries created wealth and jobs for generations of Montanans. Today, however, contamination from wood processing facilities, abandoned mines, and numerous other activities have harmed human health and the environment and continue to stifle the development of new business in Montana. These sites are well known to Montanans: Sites such as Missoula Sawmill site and the White Pine Sash site in Missoula, the Missouri River Corridor site in Great Falls, and sites in Helena, Bozeman, Billings and numerous other communities all across Montana. We can and must do more to help revitalize these important areas. Congress has undertaken a number of initiatives to address the brownfield problem in this country. I am proud to have been able to play a leadership role in passing the Brownfields Revitalization and Reinvestment Act of 2001. That bill has helped provide new Federal funds for evaluation and remediation of brownfield sites and has helped to resolve some of the liability issues that were inhibiting remediation of these contaminated properties. But, We must do more. The U.S. Chamber of Commerce has estimated that at the current rate of cleanup, it will take 10,000 years for us to remediate all of the contaminated sites in America. The United States Environmental Protection Agency, in an analysis conducted with George Washington University, concluded that the remediation ``costs for all of the brownfields located within the United States have been estimated to exceed $650 billion,'' and that, consequently, ``it is imperative that private capital be attracted to the redevelopment of brownfields.'' Late last year, Senator Grassley and I entered a colloquy in the Congressional Record expressing our concern that certain provisions in the tax code are having the unintended consequence of discouraging investment in the remediation and redevelopment of our nation's polluted sites. In that colloquy, we pledged to get our arms around this issue and to draft legislation to correct this problem. I am pleased that we are standing here today to introduce legislation to do just that. Let me briefly describe the basis for this bill and the means by which this legislation will dramatically accelerate the remediation of contaminated lands in America. Today, tax-exempt investors such as university endowments, private pension funds, and charitable foundations can invest their capital in the stock market and certain real estate transactions that do not clean the environment without fear of incurring an Unrelated Business Income Tax, or UBIT, on any gains they make from their investments. Because UBIT-sensitive entities hold over $6 trillion dollars in financial assets and routinely deploy more capital in real estate projects than any other category of investor, the unintended consequence of UBIT has been to drive our nation's biggest and most active real estate investors away from projects focused on the remediation and redevelopment of polluted properties. This bill seeks to address this problem by allowing eligible tax- exempt entities to invest in the cleanup and redevelopment of qualified contaminated properties without incurring unrelated business income tax at the time they sell the property. The legislation accomplishes this goal by concentrating on three basic tasks: 1. focus investment on moderately and heavily polluted properties, 2. require taxpayers to work with the State authorities and the public to ensure adequate clean up, and 3. ensure that the legislation is tightly crafted to prevent abuse. First, this bill focuses on moderately and heavily polluted properties. Section 198 of the tax code contains a structure under which designated state environmental agencies certify contaminated property that is eligible for special rules concerning deductions of remediation costs. This bill uses this existing structure to identify and certify contaminated sites that are eligible for inclusion within this bill. Prior to requesting certification from a state agency, the taxpayer is required to provide the agency with site characterizations, assessments and other documentation illustrating the scope and character of the pollution problem at the target site. The legislation maintains its focus on moderately and heavily contaminated properties by requiring taxpayers to expend on remediation of each site the greater of $550,000 or 12 percent of the fair market value of the site, assessed as though the site were not contaminated. These remediation thresholds have intentionally been set higher than he typical range of costs reported to the Environmental Protection Agency to clean up brownfield sites nationwide. By establishing such high remediation thresholds, the legislation excludes incidentally or trivially contaminated property and focuses new capital investment on those sites most in need of additional assistance. Second, this bill requires taxpayers to work with affected states and the public to ensure adequate clean up. In addition to requiring high levels of remediation expenditures on each site, the legislation contains numerous other safeguards designed to ensure that remediation of each site is performed to state specifications and with full public involvement. Similar to the front-end certification that is required to classify properties as truly contaminated, the legislation requires the taxpayer to obtain a tail-end certification from the state agency indicating that the site has been cleaned up and is no longer considered a brownfield. Prior to applying for this certification, the taxpayer must provide the State agency with sufficient information and documentation to allow the state agency to make this determination. In particular, the taxpayer must certify and provide documentation that: there are no longer hazardous substances, pollutants or contaminants on the property that are complicating the redevelopment or reuse of the site, environmental remediation is complete or substantially complete in conformance with all applicable federal, state and local environmental laws and regulations, the property is suitable for more economically productive or environmentally beneficial uses than at the time of acquisition, if additional activities are required to complete remediation, sufficient financial assurances and institutional controls are in place to complete the remediation in as short a time as possible, and the public was notified and given the opportunity to comment on the remedial actions taken to clean up the property and, if necessary, on any longer-term remediation activities. The provisions in this legislation are designed to create substantive thresholds that the tax-exempt entity must meet in order to qualify for the exemption from UBIT. This legislation does not alter the complex web of existing federal, state or local environmental laws, regulations or standards. Third, this bill ensures that the legislation is tightly crafted to prevent abuse. It is worth noting that this legislation has been drafted to contain numerous safeguards to prevent abuse of this program. The anti-abuse examples include the following. The taxpayer cannot be the party that has caused the pollution and cannot be otherwise related to the polluter. Also, all transactions, purchase of the property, sale of the property, expenditure of remediation funds, etc., must be arms-length transactions with parties unrelated to the taxpayer. Further, the taxpayer is not allowed to count any Federal funds, e.g. grants, etc., or other types of government payments and benefits toward and required remediation thresholds. There are also restrictions on how the taxpayer may treat costs across multiple properties, requiring that an election be made specifying when and which properties are considered for such purposes; this is intended to prevent cherry-picking among different properties once the election has been made. Moreover, the legislation contains special restrictions addressing the use of the legislation's provisions by partnerships and other pass-through entities including requiring that all partnerships under the bill be fractions-rule compliant. Because this legislation is narrowly crafted, and because tax-exempt entities are not currently investing in these sites, and thus are not paying UBIT, the Joint Committee on Taxation has concluded that this legislation will actually generate revenue for the Federal treasury during the first three years after enactment and that it will cost $10 million over five years and $192 million over ten years. Further, because the legislation will accelerate cleanup of brownfield sites, create jobs, stimulate the economy, reduce blight and public health concerns, and because the bill has an acceptable fiscal impact, this legislative approach has been endorsed by Environmental Defense, the U.S. Chamber of Commerce, the National Taxpayers Union, and the U.S. Conference of Mayors, as well as numerous local, state and regional organizations and municipalities. Passage of this bill will dramatically increase the speed at which our country's contaminated properties are remediated and brought back into productive taxable use. This narrowly crafted legislation will create jobs, increase tax revenues, and protect the environment--all accomplished without creating new government programs or regulations and all at a minimal cost to the Federal treasury. I am pleased to be introducing this legislation with my colleague from Oklahoma. I look forward to working together to enact this legislation into law. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. BAUCUS

Mr. BAUCUS. If I could just have 1 minute?

Mr. BAUCUS. Mr. President, I will just sum up by saying, I have spent a lot of time on this legislation. I am not going to do anything to hurt senior citizens. It would be foolhardy, foolish, stupid. And this bill does not hurt senior citizens, it helps them. There have been a lot of charges against this bill. It is very easy to be negative. It is very easy to find fault with anything. This bill is not perfect, but it is very good. I urge all of us to remember, this is a very good bill. It gives great assistance to our seniors. We have subsequent years to work on it, build upon it, and to make changes. But if we do not pass it now, the chances are very slim we will be able to pass prescription drug benefits for seniors again. So I strongly urge my colleagues to support this bill and oppose procedural motions which will impede passage of this bill.

Mr. BAUCUS. Mr. President, may I ask for a few more minutes?

Mr. BAUCUS. Mr. President, first I deeply thank my good friend from Iowa, Senator Grassley. I know people in his home State greatly respect him. I read somewhere that he has the highest approval rating of any politician in the State of Iowa. I am sure that is true and I can understand why. It is because he is straight, down to Earth, and honest. He tells it like he sees it, no guile. I want Senators to know that this is my impression, as well. I say this because when he explains the provisions of this bill, I hope people listen. Senator Grassley is not one to gild the lily, not one to indulge in inflammatory rhetoric, not one to exaggerate. He is someone who tells it like it is. This is a very important personal quality of his, and one that I revere deeply. I thank the Senator for allowing me to work with him as the chairman of the Senate Finance Committee. I would like to take a few minutes to discuss the Medicare conference report before us. I am sure a lot of people across the country have heard statements by many Senators and House Members and are wondering who is telling the truth. They hear a set of allegations from one side and lots of responses from the other side. It must be incredibly difficult to determine the truth. A few days ago, Senator Breaux and I met with 20 or 25 House Democrats. The group is known as the New Democrats. Senator Breaux and I explained to them what was in the bill. Over and over again, the New Democrats asked: What is going on here? Our leadership tells us one thing and you are telling us something else. Whom are we to believe? Senator Breaux and I explained the bill to the best of our ability. We tried to be honest and straight with the facts. It is my belief that the facts are usually controlling. Once people understand the facts of a bill or legislation, they can make up their own minds. It was our intention to just give the facts so these House Members could make up their own minds. I suspect that a lot of them were in a difficult place: stuck between their leadership, which was pressuring them to do one thing, and the facts which were inclining them in the other direction. I further suspect that many people watching across the country tonight are wondering the same thing. There are compelling speeches on both sides of this debate. Who is telling the truth? After all, that is what it is all about. I am going to do the best I can to explain why I am supporting this Medicare legislation, why I personally think it is a good bill. I am going to use the facts, as opposed to rhetoric. I am not a great rhetorical speaker. As with the Senator from Iowa, I tend not to embellish. Maybe it is because we are from agricultural states. We have learned to accept that we cannot control everything--we cannot control the weather for the crops and the livestock; we cannot control the market price. We accept reality for what it is and tell it like it is because that is the way we have grown up. I will do my very best to give a fair take on facts of this bill. Why do I support this bill? For many years, Congress has been trying to pass legislation that gives prescription drug benefits to seniors. For many years we have been talking about it. Some years we have come pretty close. Last year, for example, we were very close. I can remember a meeting I had convened in my office with the key Senators: Olympia Snowe, Ted Kennedy, Chuck Grassley, Senator Graham, and four or five or six other Senators from both sides of the aisle--liberals and conservatives. We came very close. But in the end, partisan politics dominated--I think because some wanted an issue, not a solution. We were pulled apart, and in the last moments, we were unable to pass a prescription drug bill. Here we are again today. We are even closer this year because we have actual legislation that has passed both bodies of the Congress, and a conference report before us. It is not possible to get any closer. If we do not pass legislation this time, I do not know if we ever will. And this would be a tragedy. This bill provides $400 billion over 10 years to create a prescription drug benefits for seniors. This is what the debate comes down to. We know the importance of this bill because drug prices are increasing rapidly, while at the same time, drugs are becoming ever- more important. They oftentimes replace expensive hospital procedures. And new medications are constantly being developed. New, so-called miracle drugs are being developed today that will help treat many different illnesses in the future. Many of our seniors with low incomes and fixed incomes simply cannot afford the drugs they depend on. It is critical that we pass this legislation. Every other country in the industrialized world provides prescription drug benefits for their seniors. We are the United States of America. Why in the world do we not provide prescription drug benefits for our seniors? We should. And we now have the opportunity before us. I do not know when we are going to get this opportunity again. If we do not act now, the chances of passing prescription drug benefits for seniors in the next several years is very slim. Next year we will be faced with higher budget pressures: The national debt is increasing; our deficits are rising due primarily to uncertainties overseas--Iraq and Iran; due to terrorism; and due to greater domestic needs. If we do not pass prescription drug benefits now, we are unlikely to have another opportunity again. If we do not act today, the $400 billion will not be there next year. I also support this legislation because of its very generous low- income subsidies for one-third of all senior citizens. These senior citizens, one-third of all senior citizens, will have 90 percent of their drug costs paid for. Under this legislation, 90 percent of their drug costs are going to be paid for by the federal government. This is a very important measure in this bill. It provides very strong low-income protections. I do not know if we are going to have these protections again in future Medicare legislation, if we even have future Medicare bills. When are we going to again have such generous assistance for our low-income seniors? An additional reason I support this legislation is that it contains a strong government fall-back plan. This is a technical term which means that when there are not two private drug plans available in any region, a senior is able to access a guaranteed government fall-back plan for their drug benefits. The only question is: Are there two private plans in any given region of the country? If there are, your prescription drug benefits are covered through the private plan with all of the guarantees that are written in the legislation to ensure that seniors are not taken advantage of. If there are not two private plans in the area, then the Government fall-back plan goes into effect. The bottom line is that all seniors in America will get a prescription drug benefit. All seniors in America are covered by this bill, whether it is in a private drug plan or through the government fall-back plan. This is what we mean by a strong Government fall-back-- all seniors will get the prescription drug benefit. It is true that the House bill did not include a strong government fallback. But we are talking about the Conference report. And in this legislation, all seniors will have access to the drug benefit. The fourth reason I support this legislation is rural payment equalization, as well as other strong provider provisions. During the many years I have been in this body, I have worked hard to make sure that Montana and other rural States get the same payments for hospitals and doctors as urban States, as the big States. We have been fighting for this for years. Finally this legislation addresses this inequity. If this bill does not pass, I do not know when we are going to be able to address this issue. Nothing is guaranteed in the future. Times change. Congresses changes. It is difficult to predict the future. A bird in the hand is worth two in the bush. We have a bird in the hand now. We have strong rural provisions in this legislation. If it does not pass now, the chances of rural areas getting a square deal and a level playing field are going to be in serious jeopardy. I say to those Senators from rural states, how can you vote against a bill and deny increased payments to your home states when you are probably not going to get them again, when you have been fighting so hard to get them for so many years? I would now like to turn to another issue that has been discussed frequently and which is of great concern to many Senators, and well it should be. As indicated on this chart, employer-sponsored retiree coverage is declining. Eighty percent of companies offered retiree health care coverage in 1991. In 1996, it fell to 71 percent. In 1999, it fell to 66 percent. In 2001, it fell to 62 percent, and 2003, 61 percent. There is a steady decline of companies dropping or reducing their retiree coverage. You might ask, Why is that happening? It is happening because of competitive pressures. Companies want to cut back on costs wherever they can to maximize their profits. Retiree health benefits is one area where they are cutting down their costs. They are reducing coverage for their retirees. It is inevitable and it is happening. Why do I mention this? What does this bill do to address this phenomenon? This is an extremely important point, and I hope Senators and staff are listening. This bill discourages employer retiree droppage; discourages, not encourages, it. It provides tax-free subsidies for companies to discourage them from dropping their retiree benefits. This bill provides $88 billion--$88 billion--to companies for their retiree plans. Eighty-eight billion dollars is going to companies to discourage them from dropping their retiree plans. The Congressional Budget Office said under the Senate bill that there would be about a 37-percent droppage rate; in the House bill, about 32 percent. But in this Conference report, we have provided additional funding. The rate is now down to about 22 percent. But that 22 percent would be higher if this additional money was not provided. The actual number in the conference report is 17 percent. This number reflects a more accurate calculation. 22 percent is apples to apples to the 37 and 32 percent in the Senate and House bills. The 17 percent is a more accurate figure. The net effect is the droppage rate is about 50 percent less as a consequence of the provisions in the conference report. Companies are getting $88 billion to maintain their retiree coverage. I ask my colleagues, if you vote against this bill, what are you going to say to those employees who lose their retiree coverage when you had the opportunity to vote for a bill that would have provided funding to address this problem? What are you going to say to those retirees when you tell them you voted against a bill which would have discouraged retiree droppage? What are you going say to them? I don't know; it wasn't perfect. This bill has the effect of discouraging--not encouraging--retiree droppage. I hope Senators pay very close attention to this point. This issue concerns many Senators. I would like to address another issue--the impact of this bill on dual eligibles. We have heard criticism that the effect of this bill is to make drugs more expensive than current law for dual eligible senior citizens. This is completely inaccurate. The assumption behind this argument is that this bill has a $1 and $3 copay for drugs for dual eligibles. For seniors who are under 100 percent of poverty, this bill has a $1 copay for generic drugs, and a $3 copay for brand-name prescription drugs. The assumption behind the argument that the 6 or 7 million dual eligibles will be worse off is that these seniors do not currently have copays under Medicaid. That is not true. Most States, at least 38 States, already have Medicaid copays. The 6 or 7 million worse off is simply a false figure. In fact, most States are under tremendous pressure to reduce the costs of their Medicaid programs. One of the ways they decrease costs is through increasing copays. For those Senators who have been claiming that 6 or 7 million will be worse off, please look at the Medicaid copays in many States and anticipate what will be the situation in the year 2006. It will be worse; 38 States have copays. Not all are greater than $1 in $3 now, but if States continue to cut back on Medicaid to balance their budgets, then the copays will rise. Today, Illinois already has $1 and $3 copay. The bill does not hurt low-income seniors in Illinois. In Maryland, there is a $2 co-pay for brand-name prescription drugs. In Massachusetts, it is for all drugs. The same is true for Nevada. I see my good friend Senator Reid is here. He knows more about Nevada than I hope to know. North Dakota is $3 for a prescription. South Dakota, about the same. And these are just some examples. If you look at the facts, the 7 million figure is closer to about 1 million. Another inaccurate criticism is premium support. There has been a lot of talk that premium support will undermine Medicare as we know it. I would never vote for a bill that I thought would undermine fee-for- service Medicare. I would not do that because I know how important it is to seniors, certainly in my State of Montana. In the year 2010 there will be six demonstration projects. That is far better than the House bill which wanted a full-blown nationwide premium support. We have heard a lot of horror stories about premium support, but that is based upon the House bill, which had full-blown, nationwide premium support. This is not a fair criticism. People are talking about another bill, not the Conference report before the Senate. What is before the Senate is a bill which says in the year 2010 there will be up to six MSAs, metropolitan statistical areas, that could test this concept of premium support. I might add, as I have said before, that Medicare fee for service is held harmless. People in these areas who want to stay in fee for service can. There is no requirement they get out of fee for service. Remember, the President earlier proposed legislation that would have required people to join private plans to get a drug benefit. That was then. This is now. This bill does not say that. This bill says, if you want to stay in fee for service, that is fine. You do not have to join a private plans. Some Senators also worry that Part B premiums might rise because the private plans will take the healthiest seniors, forcing up the fee-for- service Part B premium. This argument is not true. All low-income people are held harmless in Medicare fee for service. Their Part B premium cannot go up. They are held totally harmless. As I mentioned earlier, a third of America is classified as low income in this bill. What about those who are not low income? This bill limits any premium increase to 5 percent. This is significant. Part B premiums for next year, 2004, are going up about 13 percent for all senior citizens. Why is that? Because this Congress, using its best judgment, has decided to increase dollars to doctors. Seniors pay for 25 percent of this increase through higher Part B premiums. In this bill, the premiums cannot go up by more than 5 percent in the premium support areas. Another point: A maximum of 1 million beneficiaries may be affected. I mention this number because there are a lot of other figures being discussed, including that 10 million senior citizens will be affected by premium support. Ten million is not an accurate figure. It is not true. We went to an objective source to find out what is true and accurate. We went to the CBO. CBO told us that between 670,000 and 1 million people could be affected by this bill in the six areas. Even so, these people can stay in standard fee for service. They are not required to go into private plans. There is no incentive, unless a premium support plan does offer a much better package, much more in benefits, much lower in costs. That is possible. I don't think it is likely, but it is possible. The main point is that very few people could be affected by premium support. It is not the 10 million figure we have heard. Take the figure of 10 million, cross out the zero, and you get the real figure of 1 million or fewer. Next, this legislation limits the number of sites to six. There can be no more than six MSAs in the Nation. The Secretary has no discretion to add more. In addition, this legislation says these demonstrations are limited to 6 years. That is in statute. That is not regulation. The Secretary cannot change that at his discretion. It takes an act of Congress to extend or expand these six. After 6 years, the issue will be before Congress to decide what to do: Do we want to extend the premium support areas? Do we want to eliminate them? Do we want to change them? This cannot, by regulation or the Secretary's decision or by the President's decision, be changed; it takes an act of Congress to change. I might add, as well, that there are payments in this legislation that go to preferred provider organizations to see if they can work. But preferred provider organizations have to be regionwide. They have to serve the whole region. They cannot pick and choose individual MSAs. As we know of today, HMOs pick and choose. They go to the counties they like and avoid the counties they do not like. They cherry-pick the healthiest people. They do not go to the counties they don't like, those with the less healthy people. This is not the American way. This legislation provides for additional funding for the regionwide PPOs which go into existence in the year 2006. There is a $12 billion fund which helps get these plans up and started. But again----

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I rise to urge my colleagues to support the Healthy Forests Restoration Act of 2003. This bill is extremely important to the west and to my constituents as we look for ways to reduce the risk of large and dangerous wildfires that threaten our homes and communities. You just have to look at the devastating fire season Montana went through this past summer to understand why we feel so strongly about this issue. I have said that a healthy forests bill must first allow Federal agencies and communities to address dangerous fuel loadings on a local level, quickly and efficiently. Second, it must support small, independent mills and put local people to work in the forests and the mills. Third, it must promote and protect citizen involvement and be fair to the principals underlying the federal judicial system. And finally, it must protect special and sensitive places. We have achieved that with this legislation. My one disappointment is that the conference committee stripped out the Rural Community Forestry Enterprise Program. I worked together with Senators Crapo and Leahy to include this program in the Senate bill, first in the Agriculture Committee and then as part of the Senate- passed bill. The Rural Community Forestry Enterprise Program would bring much needed support for building and maintaining a thriving forest industry in rural communities. Just as this industry is important to maintaining the economic vitality of these small and often remote communities, it is vital to meeting the objectives of this legislation. We cannot afford to lose more mills and highly skilled forest industry workers in Montana. We cannot accomplish needed hazardous fuel reduction work without them. I would like to share with you concerns I heard today about the removal of the Community Enterprise Program from a friend, Jim Hurst, the owner and operator of a small family-owned mill called Owens and Hurst, in Eureka, Montana. He said: Small mill owners like myself and Ron Buentemeier, the General Manager of F.H. Stoltze Land and Lumber Company in Columbia Falls, told you we needed this type of help to make the Small Business Set-Aside program more responsive to the needs of small, independent and mostly family-owned mills across Montana. You responded with the Community Enterprise program. This is an important program and should be put back into the Healthy Forests Bill. Independents have been under long- time family ownership and because of that my family and the other families who own mills know that we each have one heck of a responsibility to our communities. This Community Enterprise program would help the independents who have been impacted the hardest by reduced federal timber supply. They have shown their mettle and have been courageous. We need to keep fighting for small mill owners, operators and the rural communities who depend on these small mills for their livelihood. While I will continue to work with my colleagues on both sides of the aisle to ensure a thriving forest industry in our rural communities, it is imperative to pass this legislation now. I believe we do have a serious problem with the buildup of hazardous forest fuels and that we need to do a better job of addressing it now. The legislation has the elements necessary to allow local citizens and leaders to make wise decisions that address this problem efficiently and effectively and I urge my colleagues to support it. I would like to thank several Senators for their hard work on this bill, including Senators Wyden, Feinstein, Crapo, Lincoln and Cochran. Without their dedicated efforts and leadership that I was very pleased to support, we would not be the close to passing this bill today.

Mr. BAUCUS. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, for several years now I have worked with the highway community to hold the Highway Trust Fund harmless with respect to the ethanol subsidy. While it is good agriculture and energy policy to encourage alternative fuels, it should not be the Highway Trust Fund, and therefore the Nation's transportation system, that bears the burden of the ethanol subsidy. A few years ago I introduced a bill that transferred revenue from the general fund to the Trust Fund so it could be the general fund that would bear the responsibility rather than the Trust Fund. This Congress, Senator Grassley and I introduced a bill, S. 1548, that replaced the ethanol exemption with a credit and that transferred the 2.5 cents, currently retained by the general fund to the Highway Trust Fund. Although other provisions in S. 1548 are now contained in the energy bill conference agreement, including the new ethanol credit, the provisions most important to me did not make it in. I appreciate your commitment and that of Speaker Hastert and Ways and Means Chairman Thomas to ensure that the provisions in S. 1548, regarding the Highway Trust Fund will be enacted no later than February 29, 2004 which is the day that the TEA 21 extension expires. In fact, Speaker Hastert sent out a press release today that confirms his commitment to enacting these important provisions from S. 1548. I thank Senator Frist for working with me to ensure that the Highway Trust Fund will receive all the taxes due to it and that our Nation's transportation program will thrive.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I would like to speak a few minutes about the upcoming Medicare conference report that will be before this body-- I don't know when--maybe Sunday, Monday, Tuesday. Before I do so, I would like to thank and compliment many people who helped bring this legislation to this point. For many years, many of us in Congress have urged the passage of prescription drug benefits legislation for seniors. We have been close to passage many times in the last several years. I remember last year, for example, about this time when Congress was close to adjournment. I called a meeting together in my office for one last chance--Senator Kennedy, Senator Snowe, myself, Senator Hatch, and other Senators who were vitally concerned about passing prescription drug legislation. We worked mightily. We worked very hard. At the very end, the talks collapsed. It didn't work, largely for political, partisan reasons, I might add, and we were not able to get a bill passed. Here we are again. We are at the brink. We are on the verge. We are very close to getting prescription drug legislation passed. This time I very much hope that all of us--as Senators and House Members--put partisan differences aside and suspend judgment. That is, we should look at the legislation, look at the facts, and not listen to the rhetoric from various groups, to see what really makes sense. There are a number of people I wish to thank at this time--the chairman of the committee, Senator Chuck Grassley, who has worked very hard; Senator Breaux, also a member of the committee; Senator Olympia Snowe, a member of the committee. In addition, Congressman Bill Thomas, chairman of the Ways and Means Committee, has worked extremely diligently. The Speaker of the House, the majority leader of the House, Tom DeLay; the majority leader of the Senate, Bill Frist--there are many people who have worked very hard. I thank them very much for their efforts and for their work. One person I also wish to thank is Senator Ted Kennedy. Senator Kennedy worked very hard to help us pass prescription drug legislation in the Senate not too many weeks ago. He worked very hard. He worked with me. He worked with the minority leader. He worked with the majority leader. He worked with various Members of the Senate who were critical to passage of the bill. I thank Senator Kennedy for his yeoman's work to help pass prescription drug benefits legislation in the Senate. He also worked very hard to help get a conference report put together. He spent a good deal of time with the conferees, with myself, with the Senator from South Dakota, Mr. Daschle, the Senator from Tennessee, Mr. Frist, and many other people trying to help get prescription drug legislation passed. I regret at this point that he and I have a different view of this bill. He believes there are certain flaws in this bill. I think this is a good bill and should be passed. Nevertheless, Senators should know that Senator Ted Kennedy has done a great job in helping move this legislation to the point it is today. Without his efforts, this bill would be flawed in many areas. He helped make this, in my judgment, quite a good bill. Why should we pass prescription drug benefits legislation? I suppose the main reason is that times have changed so dramatically. In 1965, when Medicare was enacted--and it was enacted by a large vote margin-- prescription drugs were not necessary. Most senior citizens were more concerned with doctors, office calls, and hospital visits for their medical concerns, rather than prescription drugs. Look what has happened in the last 38 years since the Medicare Act passed. Prescription drugs and generic drugs are so vitally important today. They replace procedures. They help prevent the onset of disease. Often times, the medications people take tend to prevent, forestall, and delay all kinds of maladies. They are really important, much more important today and getting more important every day. In addition, prescription drugs are becoming more expensive--much more expensive--and it is putting seniors in a bind. Many low-income seniors are in a real bind. I worked at a pharmacy during one of my work days at home. I have worked at many different jobs in Montana. I show up at 8 o'clock in the morning with a sack lunch. I have worked in sawmills, I have waited tables. One day I was working in a pharmacy in Montana. I saw senior citizens walk up to the pharmacist in a quiet voice and ask how perhaps they could change their medication or what prescription should they cut back on because they couldn't afford to pay for them all. Seniors couldn't afford to pay it. It was stunning, and it was sad. It was a revelation to me. You hear about it, but when you see it, it has a real effect. It happens. Many low-income seniors are having a very difficult time trying to make ends meet. Sometimes it is a tradeoff between buying prescription drugs, buying food, and paying the rent. It happens way too frequently, and it is just not right for our country, the United States of America, to let this happen. This legislation does a good job in remedying this situation. First of all, it is $400 billion of prescription drug benefits for seniors spread out over 10 years--$400 billion. That is a lot of money, but we have a lot of seniors who have great needs. Under this legislation, seniors will find they will not have to pay all the cost of the drug but, rather, 25 percent, and the rest will be picked up by Medicare, the Federal Government, through the mechanism that is designed in this bill. They will only pay a quarter. But if you are a low-income senior, you are in a much better position under this legislation. One-third of United States seniors are classified as low-income. A full one-third are low-income. Under this bill, low-income citizens will find that 90 percent of their benefits are covered--90 percent. That means low-income people can get the prescription drugs they need and will not have to walk up to that pharmacist and, in a hushed, quiet tone, ask what tradeoff, what drugs that person should cut back on because he or she cannot afford them. If you are a low-income senior--and one-third of Americans are low- income. In my State, that is about 46,000 seniors who will be affected; there are about 46,000 seniors in the State of Montana who are low- income, out of about 140,000 seniors statewide. The general rule for all seniors is 75 percent of your prescription drug costs; if you are low-income, 90 percent of your prescription drugs will be paid for. This is good legislation. We are here at a time when people in our country are asking us, Should we help our seniors or should we not? Let me mention a couple additional reasons why I support this bill. First of all, it helps rural America. Mr. President, there is an extra $25 billion in this bill for rural health care. The $400 billion I mentioned earlier all goes to benefits for seniors, either directly or indirectly. But $25 billion extra goes for providers and $25 billion is for rural America. Why is that so important? It is so important because of the cost and the strain of the practice of medicine in rural America. We run the risk of not having good, adequate health care in rural parts of our country. We have all talked to many doctors and nurses who practice in rural parts of our country. They talk about the hours. They want to serve their patients. Believe me, they want to serve their patients, but after a while there comes a time when they are just worn out. In rural parts of America, there are often pathologists--or pulmonologists or other specialists--who have to be on call all the time or on call every second or third day. Why? Because there are fewer of them in rural America than in urban America. The costs, believe it or not, are also very high in rural America--in many cases higher than in cities. There are the transportation costs, the cost of distances, the travel costs, for patients, doctors, and suppliers. Our State of Montana is a low-income State, unfortunately. Our per capita income in Montana is low, but we are in the middle of all the States when it comes to cost of living. We are about the bottom when it comes to family income, but we are in the middle when it comes to costs. It is because we are a rural State, and this is true for rural parts of all States. This bill finally helps address the unlevel playing field that has existed between urban and rural America. Now rural America, finally after many years, gets its fair share. When I first came to the Senate years ago, I realized just how hard it was for rural America to get a square deal, particularly in health care. It was stunning. Every year since I have been here, I have been working to try to get rural America a square deal compared with urban America. I was part of an organization--and I still am--called the Rural Medicare Caucus. In fact, I chaired it for a few years. Every year I am here, I have--as I know my good friend from Montana, the Presiding Officer has--worked to help to make sure that rural parts of the country are getting a fair deal. This is not rhetoric. This is real. After all of these years, finally rural America gets a fair deal. I also support this legislation and strongly advocate for its passage because it makes sure that senior citizens, wherever they live in our country, get a universal Medicare prescription drug benefit. Now, this certainly is true in the first years after this legislation is effective, but it is also true in the future. It is also true when preferred provider organization plans are designed to come into effect. It is also true in the year 2010 when in six regions of the country, there may be demonstration projects selected to test a new system called premium support. In all respects, all seniors in all parts of the country, in all years, will have access to the same prescription drug benefit as any other senior, in any other part of the country, in any other year. This bill does not undermine traditional Medicare fee-for-service. The drug benefit is universal and nationwide in all respects. The bill does not undermine traditional Medicare--that is, Part A and B--during the years in which it is in effect. In a few moments I will return to this and will explain in greater detail. This bill also very much helps address an issue that is on the minds of a lot of Senators--retiree coverage. When the bill was debated in the Senate, the prediction was that companies, States, municipalities, and nonprofit organizations might drop their retiree coverage because the bill, when passed, would provide government drug benefits to seniors. The thinking was why should companies not just go ahead and drop their retiree coverage. Well, when the Senate took up this legislation, the CBO, which is the organization we rely upon for estimates, said that the drop rate might be about 37 percent. Since then, they have revised their numbers and they have come up with other figures. In short, if one compares apples with apples, the conference report that will soon be before this body results in a retiree droppage rate that is about 50 percent less than the bill that passed this body by a vote of 76 to 21. Maybe it is 45 percent. Stop and think about that for a moment. For Senators who voted for the Senate bill, they can be comforted and relieved that retiree droppage rate is estimated by CBO to be about half of what it was in the Senate bill. Let's focus a little bit on the retiree provisions. Essentially, companies receive about $88 billion under this bill for their retiree benefits. The net effect is that it will discourage companies from dropping--not encourage droppage. We all are very concerned that companies across America are beginning to cut back, and have cut back, on the number of retirees who have health care benefits or on the nature of the benefits. It is happening in America. It is happening in America as the world becomes even more competitive with global competition and as companies strive to cut down on their costs to increase their profit margins. One of the ways they can do so is cut back on employee and retiree benefits. This is happening. We know it is happening. This legislation tends to discourage companies from cutting back. It tends to help companies keep coverage. It discourages dropping retiree coverage--it does not accelerate it. Again, it is because of the additional dollars that are going to companies. The companies still get the tax deduction for their health benefit plans. That is unchanged. In addition, under this legislation, the payments to the companies for retiree coverage are tax free. One could even say perhaps there is a little double-dipping because the assistance is tax free. This is a tremendous additional financial benefit to companies, to nonprofits, to cities, and other plans to encourage them to keep their coverage. It is a bonus. It is an incentive. This is another reason passage of this legislation is important--because it helps companies keep their retiree health plans. As a result, employers will tend less to drop retiree coverage. They will probably tend to maintain and increase it. There is also a myth about this bill that is there is a coverage gap on prescription drug coverage that will leave seniors out in the cold. Well, the truth about this so-called donut hole gap is the majority of seniors will never reach the spending level where they would not have coverage. Even more important, seniors who are low-income get full coverage in the benefit gap. Of course, we wish we had more money to give a complete benefit to everyone without any donut hole, but we do not have an infinite number of dollars. We only have $400 billion. It sounds like a lot, and it is a lot, but if we are going to give a universal drug benefit to seniors that is honest, that makes sense, that does something, not over the top but that makes sense for all seniors, it would cost a lot more than $400 billion. We have limited ourselves to $400 billion, and at $400 billion there are going to be some people who will not get quite the same benefit as other people, but they will all get the benefit. I might add that if we looked at each State, the number of seniors who have coverage for prescription drugs varies. In some States it is very high. In some States it is low. Compare that with the passage of this bill, every State gets about 96.6 percent. That is virtually 100- percent coverage. That is a big improvement. Let's take the State of Delaware, for example. I know the Senators from Delaware know their State a lot better than I. Today, about 27 percent of seniors in Delaware have no drug coverage. Only 3.4 percent will be without coverage once this bill is enacted. Let me restate this positively; 27 percent of seniors in Delaware today do not have drug coverage. When this bill passes, virtually every Delawarean will have drug coverage. The same is true of the State of California. Now about 21 percent of California's seniors and disabled live without prescription drug benefits. This bill will reduce this number to 5 percent. Again, most seniors, in California and in every other State, would benefit as a consequence of this legislation. I would like to address some concerns others have raised regarding this bill. The concerns are that this legislation undermines traditional fee-for-service Medicare--that this is the beginning of undermining Medicare, the camel's nose under the tent. This is the charge. What are the facts? The bottom line: Fee-for-service Medicare, traditional fee-for-service Medicare as we know it today, is held harmless under this bill. This is the bottom line. So if you are a senior in the United States of America you can decide that you want to keep traditional Medicare and that you do not want to join a private plan--any of the plans that may or may not exist in the future. That is, it is voluntary. A senior can either join or not join. It depends on what he or she wants to do. It is an honest choice because fee-for- service traditional Medicare remain what it is today. It is held harmless. That is, the deductible doesn't change, the copay doesn't change, the benefits don't change. What exists today is what exists under this legislation. I hope Senators listen to that. I hope staffs of Senators listen to that. I hope the others who are listening, who are concerned about the bill, listen to that. Let me explain this in greater detail. The bill finally provides a prescription drug benefit for senior citizens. We have had this opportunity many times in the past. We now have the chance to seize this opportunity. The bill also makes some changes in the general Medicare structure in terms of setting up some health care plans in the future, assuming the plans actually take shape, form, and come into existence. They don't exist today. I am referring to regional PPOs; that is, regional preferred provider organizations. They don't exist today. There are other managed care companies called HMOs in many cities. They exist in the cities primarily because they can cherry-pick counties. They can pick the counties in which they want to provide service, and if they do not want to pick one county because it is less profitable, they do not have to. If they want to serve another county because it is more profitable for them, they do. This is the way HMOs operate today. This is the system today. This legislation says, beginning in the year 2006, our country will be divided up into various regions. Insurance companies will be allowed to offer Medicare services, including drugs, in any of the regions. The question remains, What about traditional fee-for-service? What happens to traditional fee-for-service in an area where a company sets up a plan? What if one wants to remain in traditional Medicare? The answer is, fee-for-service is held harmless. There is no change in fee-for- service. If regional PPOs serve a region, it has to serve the entire region. It can't choose this part of this State and that part of that State. It has to serve the entire region--people in the cities, people in the rural parts of that region. Everybody has to get the same deal. The senior living in one of these regions has a choice. The senior can stay in traditional fee-for-service Medicare or can join the plan. But fee-for-service Medicare is held harmless. There is no change to traditional Medicare. Obviously, this does not undermine traditional Medicare as we know it. This bill builds up and strengthens Medicare. There are additional dollars here for hospitals, for doctors, for providers who will provide traditional Medicare. So this bill does not in any way undermine traditional fee for service. In fact, Medicare is held harmless under this legislation. Some people say: That's OK, Max, we understand that, but what we are really concerned about is the so-called premium support demonstration areas. Their argument is, in those areas, traditional fee-for-service is undermined. Private plans will pull away seniors, and it will be unfair to seniors who remain in Medicare. It is the beginning of the demise of traditional fee-for-service Medicare, they argue. That is not true. It is nonsense. Look at the facts. Look at what is in the legislation. Let me just remind Senators that this legislation is now available for Senators to look at. Thank goodness, because when they look at it, they are going to see what is and is not included. I just ask Senators to trust me long enough to suspend judgment on it so they can go look at the legislation and make up their own minds. That is what the Senators are supposed to do--make up their own minds. I am urging Senators to suspend judgment for a little while, listen to what I am saying, because I think when they do look at the legislation, they will see that what I am saying is true. But you do not have to take it on my account. Just please do not make up your minds until you read what is actually in the legislation. You will see, even in the supposed premium support demos, and there might be up to six cities in the country, that fee-for-service Medicare is held harmless. There is no change in fee- for-service in any respect, deductibles and on--except for one. That one possible change is the Part B premium. However, this legislation ensures that seniors who happen to live in one of the six demonstration areas can keep the same fee-for-service Medicare. If it happens that your Part B premium goes up as a result of the demonstration--it may or may not go up--but if it does, the legislation says there can be no more than a 5 percent increase on your Part B premium. This is the only possible way a senior citizen could be adversely affected in these demonstration projects. Another point regarding these demonstrations. I have heard various figures that the demos are going to affect 10 million fee-for-service beneficiaries. We have all heard the 10 million figure. It is what some Senators suggest. It is not true; it is untrue. How many seniors might possibly be affected? Let's get an unbiased, objective opinion. We asked the CBO, the Congressional Budget Office: Mr. CBO, what is the answer? How many seniors may potentially be in an area where they would be faced with a choice, stay in fee-for-service Medicare or join one of these premium support organizations? How many could be adversely affected? The answer is not 10 million. CBO says: We think it is between 670,000 and 1 million. 10 million is the figure of scare rhetoric. The actual facts are 670,000 to 1 million. There are many other instances where there is a lot of rhetoric floating around. But if you look at the facts, if you read the legislation that is now available, you will find it is really good legislation and all these worries and exaggerated claims about the bill are just not true. I have a couple of additional points regarding premium support. It is a time-limited demonstration. It exists only for 6 years, starting in 2010. It would take an act of Congress to change it, an act to expand it. It cannot be extended or expanded by the Secretary or anybody else. Fact No. 2, the demonstration will only affect limited areas of the country--up to six areas of the country only. Fact No. 3, low-income beneficiaries are totally protected in any of these areas where premium support might occur. Facts No. 4 and No. 5. There is no requirement for beneficiaries to enroll in the private plans. None. There is no inducement to enroll in any of these plans unless the plan happens to be a lot better than traditional fee-for-service Medicare which this bill strengthens. How does this bill undermine traditional fee-for-service Medicare? How? The fact is, it doesn't. I will close by saying this is a good bill. It provides prescription drug benefits for seniors. Seniors need and deserve this help. It provides $400 billion of help. We are not going to have this opportunity again. It is true that this bill is not perfect. But I think on the whole it is a very good. This bill is much closer to the Senate bill than it is to the House bill. It is about one-quarter away from the Senate bill. It is about three-quarters away from the House bill. Seventy-six Senators voted for the Senate bill. I think that the 76 Senators who voted for the Senate bill will find that in many respects, this bill is better than the Senate bill they supported. Additionally, when my colleagues look at the facts of this bill, they are going to find that this is pretty good legislation. It is something we should pass. I hope people will look at the actual language and look at the facts and will support this bill.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, it is my great pleasure and pride to rise today to honor a true Montana hero--MAJ Firman Ray. Major Ray grew up in Butte and Stevensville. He attended the University of Montana. To this day, he remains a staunch Grizzly fan. His mother Tempie Ray is a retired high school librarian in Stevensville. Firman is the nephew of Carl and Martha Davis from Dillon. At the Montana Constitutional Convention, I was Carl's intern. Furthermore, Firman's wife Sheila Hall Ray was my son's babysitter when we lived in Missoula. Firman and his family are 100 percent Montana. MAJ Firman Ray has a distinguished career with the Army and he is only getting started. He has excelled in each of his positions since he was commissioned in 1991. Firman also survived the 9/11 attack on the Pentagon where his office was hit by the terrorists. Today, we recognize MAJ Firman Ray to receive the Silver Star for distinguished gallantry in action against the enemy in Somalia in 1993. The Silver Star is the third highest medal awarded for combat service and the fourth highest medal that a soldier may receive. The Silver Star is awarded to a person who, while serving in any capacity with the U.S. Army, is cited for gallantry in action against an enemy of the United States while engaged in military operations involving conflict with an opposing foreign force, or while serving with friendly foreign forces engaged in conflict against an opposing armed force in which the United States is not a belligerent party. For those reasons and so many more, I am honored to announce that today MAJ Firman Ray will finally receive the distinguished Silver Star award for his valorous performance of duty with the U.S. Army in Somalia that is long overdue. Many of you may remember the movie, ``Black Hawk Down.'' MAJ Firman Ray, then Lieutenant Ray, was part of the team that the movie, Black Hawk Down, portrayed. It was during the predawn hours of September 25, 1993, that a U.S. Army UH-60 Blackhawk helicopter was shot down in Mogadishu, Somalia. Lieutenant Ray was part of AT Platoon that was given the mission to conduct a search and rescue operation at the helicopter crash site. Clearly understanding the urgency of the situation, Lieutenant Ray took his two lead MK-19 gun vehicles and instructed them to quickly advance to the crash site. Upon entering the site, intense small arms fire and sporadic rocket propelled grenade fire erupted. The gunners under Lieutenant Ray's command were able to destroy three enemy positions in a building just north of the crash site. While attempting to again secure the site, another firefight ensued on the west side. Lieutenant Ray dismounted and on the run, dodged under considerable fire to position the gun vehicles to establish security. Lieutenant Ray's unit was again under fire two more times where Firman moved the gun vehicles into strategic positions that were vital to suppressing enemy fire. Once the perimeter was finally secured, Lieutenant Ray assisted in collecting the remains of the soldiers killed in the helicopter crash. Shortly afterwards, the stillness was broken by yet another attack and a firefight resumed. During the next 30 minutes of battle and under fire, Lieutenant Ray ran to and from each gun vehicle's position, directing counter fire and ensuring adequate ammunition. The mission was complete and all personnel and sensitive equipment attempted to withdraw to the airfield. Lieutenant Ray directed his rear security gun vehicle to assume the lead and, again, enemy militia began firing with small arms and RPG's, inflicting casualties. With four blocks to go, Lieutenant Ray remained dismounted and slowly moved south, deftly crossing intersections proven treacherous by prior American casualties. From the onset to outcome, Lieutenant Ray was first in and last out. He performed his duty with bravery and poise. He is a decisive leader who inspires fierce soldier loyalty, trust, and cohesiveness. Because of his quick and intelligent decisions, and due to his confident direction, Lieutenant Ray's platoon, under the most extreme battle conditions, provided the decisive ingredient to the success of the mission. Due to his combat performance, Firman Ray is deserving of the Silver Star for distinctive recognition as an exceptional soldier and leader of men. I commend Major Ray for his heroic efforts in Operation Restoration Hope and I am proud that he receives the Silver Star today. He exemplifies valor, bravery, and courage. Major Ray put his life on the line to defend our country. He put his life on the line to save his men. For that, we all owe him a huge debt of gratitude. We are proud to call MAJ Firman Ray a Montanan. And as Montanans and Americans, we are eternally grateful for his selfless service to our country, which has made our Nation a safer place and has helped to promote and defend democracy across the globe. Firman, as you know, receiving a Silver Star Medal is quite an accomplishment. I can think of no one more deserving than you. From one Montanan to another, thank you for your commitment to your country, service to your community, and for making America safer for each and every one of us.

Mr. BAUCUS

Mr. BAUCUS. I add my comments in support of the Congressional Award Program. This excellent program is open to all 14- to 23-year-olds. Participants earn bronze, silver, and gold congressional award certificates and bronze, silver, and gold congressional award medals. Each level involves setting goals in four program areas: volunteer/ public service, personal development, physical fitness, and expedition/ exploration. Earning the award is a fun and interesting way to get more involved in something young men and women already enjoy or something they might like to try for the first time. Regardless of an individual's situation, he or she can earn this award. The congressional award has no minimum grade point average requirements. It accommodates young people with special needs or disabilities who are willing to take the challenge. The award is open to all. We consider this to be a valuable priority within a fiscally responsible appropriations bill. Mr. President, this is a program that all of us want to see grow and flourish. It is not just another program. It is not just another foundation pursuing a worthy cause. It is our award--a unique program created by the Congress to recognize and encourage leadership and voluntary service to the community by our young people. It requires and deserves our support.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I rise today to state my support for country-of-origin labeling. Manufactured goods sold in the United States have carried mandatory country-of-origin labels since the 1930s. Most of our major trading partners, including Europe and Japan, already require American producers to provide this information on our agricultural exports. Today as the landscape of international trade continues to change and expand, our Nation's fruits, vegetables and meats need to carry the same important information. Country-of-origin labeling will have two primary benefits. First, it will add value to our domestic commodities. American agriculture produces the highest quality products in the world, and they should be rewarded for that. Second, it will enable consumers to be knowledgeable about their purchases at the grocery store. I am very concerned that the House eliminated funding for the implementation of country-of-origin labeling in their version of the 2004 Agriculture appropriations bill. It is important that the Senate conferees insist that no limits on the use of funds to enforce country- of-origin labeling requirements be included in the conference report. I urge my colleagues to support this sense-of-the-Senate resolution. I understand that there are concerns about the implementation of country-of-origin labeling. I think country-of-origin labeling can and should be done in a way that does not overburden the retailer, the packer, or the producer. And although the USDA's proposed rules for the implementation of country-of-origin labeling are an improvement over the previously proposed guidelines, I still believe that the proposed rules make country-of-origin more burdensome than it needs to be. We need to let this implementation to go through so we can all work together to create a program that is simple, cost-efficient, and does not overburden the parties involved.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I ask for the yeas and nays.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I would like to thank Senator Dayton for offering this amendment to secure emergency agricultural disaster assistance for our drought stricken agricultural producers. I worked the past 2 years to pass meaningful disaster assistance. For 2 years, I worked to attach a disaster assistance package onto every piece of legislation I could. It passed twice in the Senate--once with 70 votes. Unfortunately, the House and the administration failed to see the necessity of disaster assistance for our Nation's agricultural producers. A disaster package was eventually signed into law, but this package was a mere ghost of the original disaster package and did little to help those who were hurt the most by drought. Producers in my State of Montana experienced devastating drought in 2001 and 2002, but the package that was signed into law only provided relief for one of those years. I don't know many businessmen who would stay in business after 2 years of more than 35 percent losses. Our Nation's agricultural producers are still hurting. I can count on one hand how many days it has rained in Billings, MT since June. The lack of moisture in my State combined with consecutive days of 100-plus temperatures during the summer exasperated the multiyear drought conditions. The effects of the drought have gone beyond our farmers and ranchers. Businesses are closing their doors, employees are being laid off, and main streets are literally drying up. When drought hits, it affects everyone in the area. In Geraldine, MT, which is located in Choteau County--right in the heart of the drought-- students who qualify for free and reduced meals increased from 47 percent to 64 percent over the past year. This signals a dramatic fall in income for this area. Farmers who grow food for a living are asking for help to feed their families. As a Nation, we provide emergency assistance when a hurricane smashes into the East Coast, when a tornado rips through the Midwest, or when a flood destroys southern communities. We step in and help our neighbors who are in need and offsets are not required. There is no reason that a double standard should apply to drought. The agricultural producers in Montana hung on to strings of hope last year as we were fighting for disaster assistance for drought. After witnessing the atrocity of a package that passed, many of them were forced to sell their farms, their livelihood, their way of life. It was heartbreaking. Many people are still hanging on by their fingertips though and that is why I support this amendment. We need to save these producers--the people who wake up at the crack of dawn every day to ensure that our Nation has a safe, abundant, and inexpensive food supply. This is about providing relief for the small businessmen and women who raise our food and experienced a natural disaster. I urge my colleagues to do what is right and what is fair and to vote for this amendment.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I rise today in support of this amendment to the Fallen Patriots Tax Benefit Act of 2003. The bill that we received from the House includes two important provisions that the Senate has already approved this year. However, it does not include the numerous other provisions that the Senate has passed to ensure equity for military personnel. This amendment would add these important provisions. First, the House bill doubles the amount of the death gratuity payments for members of our military. Under current law, the families of military personnel receive a death gratuity benefit of $6,000. This bill would increase that amount to $12,000. The Senate included this provision in the defense authorization bill that is currently in conference. Second, the House bill ensures that these payments will not be subject to taxation. Under current law, death gratuity benefits are excludable from income only to the extent they were as of September 9, 1986, which was $3,000. In 1991, the benefit was increased to $6,000, but the Tax Code was never adjusted to exclude the additional $3,000 from income. Because of this oversight, the U.S. Government has been taxing families for the death of a family member who died in combat. The House bill would make the entire $12,000 death gratuity benefit tax-free, and ensure that families are not hit with a tax bill during their most difficult hour. This provision was included in the Senate passed Armed Forces Tax Fairness Act. That is what this bill does. Now let me talk about what the House bill does not do. This bill does not include the numerous other provisions for military personnel that were included in the Armed Forces Tax Fairness Act of 2003, which was passed by the Senate in May. These provisions are vital to ensuring tax equity for our active duty military and reservists. Let me explain these provisions. First, the House bill does not include the exclusion of gain on the sale of a principal residence. In 1997, Congress passed legislation revising the taxation of capital gains on the sale of a person's principal residence. The new law provides that up to $250,000--or $500,000 for a married couple--is excluded on the sale of a principal residence if the individual has lived in the house for at least 2 of the previous 5 years. However, when enacted, Congress failed to provide a special rule for military and Foreign Service personnel who are required to move either within the U.S. or abroad. Our proposal in the Armed Forces Tax Fairness Act would permit service personnel and members of the Foreign Service to suspend the 5- year period while away on assignment. That means that those years would not count toward either the 2 years or the 5-year periods. Senators McCain, Graham, and Lincoln proposed a bill in the last session to correct this. Second, the House bill does not allow for the exclusion from taxable income of amounts received under the Military Housing Assistance Program. The Department of Defense provides payments to members of the Armed Services to offset diminution in housing values due to military base realignment or closure. For example, if a house near a base was worth $140,000 prior to the base closure and $100,000 after the base closure, DOD may provide the owner with a payment to offset some, but not all, of the $40,000 diminution in value. Under current law, those amounts are taxable as compensation. We should ensure that those men and women losing value in their homes due to a Federal Government decision are not adversely affected financially. The proposal in the Armed Forces Tax Fairness Act would provide that payments for this type of lost value are not includible into income. Third, the House bill does not expand the combat zone filing rules to include contingency operations. Under current law, military personnel in a combat zone are afforded an extended period for filing tax returns. However, this does not apply to contingency operations. This proposal in the Armed Forces Taxes Fairness Act would extend the same benefits to military personnel assigned to contingency operations. It cannot be easy trying to figure out our complicated tax system while you are overseas and protecting our nation's freedom. Those men and women who are sent to uphold democracy and freedom in other countries are confronted with the same filing complications as combat zone personnel. Contingency operations are just as demanding as combat zone deployment, although not always in the same manner. For example, in our current war on terrorism, this proposal would help members of our Special Forces in the Philippines supporting Operation Enduring Freedom. These troops are just as focused on accomplishing their critical mission as our troops in the Iraqi combat zone. Fourth, the House bill does not provide an above-the-line deduction for overnight travel expenses of National Guard and Reserve members. Some reservists who travel one weekend per month and two weeks in the summer for Reserve duty incur significant travel and lodging expenses. For the most part, these expenses are not reimbursed. Under current law, these are deductible as itemized deductions but must exceed 2 percent of adjusted gross income. For lower income reservists, this deduction does not provide a benefit, because they do not itemize. For higher income reservists, the 2 percent floor limits the amount of the benefit of the deductions. In my home State of Montana, we have approximately 3,500 reservists-- 800 of whom travel each month across the State for their training. These 800 reservists pay travel and lodging expenses out of their own pocket. Montana ranks 48th in the Nation for per capita personal income. So that $200 expense for Reserve duty every month means a lot to the Montana reservist. Yet, they continue selflessly to provide their services to our country at their own expense. For those reservists who travel out of State for their training, this expense is even higher. The proposal in the Armed Forces Tax Fairness Act would provide an above the line deduction for overnight travel costs and would be available for all reservists and members of the National Guard. Fifth, the House bill does not expand the rules to qualify for membership of veterans organizations. Currently, qualified veterans organizations under section 501(c)(19) of the tax code both tax-exempt and contributions to the organization are tax deductible. In order to qualify under 501(c)(19), the organization must meet several tests. For example, 75 percent of the members must be current or former military, and substantially all of the other members must be either spouses, widows, or widowers of current or former military. The proposal in the Armed Forces Tax Fairness Act would permit lineal descendants and ancestors to qualify as eligible members of these important groups. It is important that our veterans organizations continue the good work that they do. But, as the organizations age, they are in danger of losing tax-exempt status. The Armed Forces Tax Fairness Act helps ensure the vitality of these organizations. Sixth, the House bill does not clarify the tax treatment of childcare subsidies. I want to ensure that parents in the military can continue their dedicated service with the knowledge that their children are well taken care of. The military provides extensive childcare benefits to its employees. Employees at DoD-owned facilities provide childcare services while other areas with non-DoD owned facilities contract out their childcare. When Congress passed the Tax Reform Act of 1986, we included a provision stating that qualified military benefits are excluded from income. It is not absolutely clear whether childcare provisions are covered under this provision. The proposal in the Armed Forces Tax Fairness Act would clarify that any childcare benefit provided to military personnel would be excludable from income. Seventh, the House bill does not allow students at the Service Academies to use their education savings account funds. In contrast, the Armed Forces Tax Fairness Act does permit penalty-free withdrawals from education savings accounts and qualified tuition programs made on account of the attendance of the account holder or beneficiary at any of the Service Academies. The amount of the funds that can be withdrawn penalty-free is limited to the costs of advanced education in that calendar year. Eighth, the House does not allow the IRS to suspend the tax-exempt status of terrorist organizations. Under current law, there is no procedure for the IRS to suspend the tax-exempt status of an organization. The Armed Forces Tax Fairness Act would allow the suspension of the tax-exempt status of an organization for any period during which the organization is designated or identified by Executive Order as a terrorist organization. Ninth, the House bill does not provide tax relief for families of those killed in the Space Shuttle Columbia. Current law provides for income tax, estate tax, and death benefit relief to soldiers who are killed in a combat zone, victims of the September 11 attacks, the Oklahoma City bombing victims, and the victims of the anthrax attacks. The crew of the Space Shuttle Columbia was heroic in every sense of the word. We have a duty to those who lost their lives for the advancement of science and increasing our knowledge of the world we live in. The Armed Forces Tax Fairness Act would make all of the above benefits available to the families of the Columbia crew. The tenth and final difference between the House bill before us and the Armed Forces Tax Fairness Act is that the bill before us is not offset. In contrast, the Armed Forces Tax Fairness Act is completely offset by strengthening the collection of taxes from people who have renounced their U.S. citizenship in order to avoid U.S. taxes. However, some of our colleagues in the House have objected to this provision. So in the interest of enacting these important military tax provisions as quickly as possible, the Senate changed the offset to a simple extension of the present law customs user fees. The Senate amendment to the House bill would add these very important nine provisions. In addition, it would add an offset that the House has not opposed this offset in the past. We hope that this compromise on our part will allow them to pass the provisions from the Armed Forces Tax Fairness Act that we have included in this amendment. The passage of the death gratuity payments provision is an important first step. However, there are thousands of men and women in uniform that are depending on us to pass the other ten provisions included in the Armed Forces Tax Fairness Act. Simply put, there is absolutely no excuse if Congress fails to pass the Armed Forces Tax Fairness Act this year. Everyday, our military men and women fight for our freedom and the freedom of every American. Their sacrifices are great. Passing the other ten provisions included in the Armed Forces Tax Fairness Act is not a lot for them to ask of Congress. I urge my colleagues in the House to pass the Senate amendment to the Fallen Patriots Act of 2003.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I rise today to support the conference report accompanying H.R. 2691, the Interior Appropriations bill of 2004, because of the $2.5 billion for firefighting, $400 million to pay back Federal agencies for fire costs in 2003, and $50 million included for important Montana projects. These important funds will help care for Montana's public lands, parks and wildlife and they will help boost our state's economy. This bill also provides a good step towards establishing a permanent firefighting fund so Federal agencies don't have to borrow from other accounts to pay for firefighting costs, which halts important restoration and salvage projects. This fire season alone the Forest Service was forced to take $695 million from other accounts, the Department of the Interior $165 million, to fight fires after the agencies' firefighting budgets dried up for fiscal year 2003. I must support this conference report to ensure that Montana lands are conserved for future generations and protected from unnecessarily high fire threats. However, my support for this bill is not without reservation. The historical accounting language included in this conference report essentially states that the Department of Interior may not comply with Judge Lamberth's order without consequence for one year. I am not happy about how this came about though. Riders--especially on an issue this important--are no way to legislate. Indian trust accounting must be resolved in a collaborative way, in the light of day where all parties can come to the table. Eight years ago, Eloise Cobell started her battle to champion the cause for accountability of Indian Trust monies. Ultimately she won when Federal District Court ruled that the United States government had breached its trust obligations to hundreds of thousands of American Indians and that the government should be compelled to provide a comprehensive historical accounting. While indeed the cost of the accounting is expensive, it is crucial to balance the cost with due respect for the District Court order. This rider now attempts to modify the court order Eloise Cobell fought so hard to win. Legislating away the district court decision may only invite further litigation. Hopefully, there will be a meaningful settlement in the interim. I am committed to working together to get this resolved. And in the coming days and weeks, I will be doing all I can to ensure Montana tribes are at the table as these talks continue.