Max Baucus

Mr. BAUCUS

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 President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. BAUCUS. I suggest the absence of a quorum.

Mr. BAUCUS. I move to lay that motion on the table. The motion to lay on the table was agreed to.

Mr. BAUCUS. Mr. President, I highly compliment the Senator from Massachusetts. This is an extremely important statement. Millions of people in the world are suffering from HIV/AIDS, and the current patent the companies have, as important it is, is a measure that should be relaxed so people in many parts of the world get assistance. The amendment recognizes the special declaration concerning public health that was adopted last November in Doha. The special declaration provided assurance to poor countries facing the immense challenges of dealing with public health emergencies caused by pandemics of infectious diseases like HIV/AIDS, that measures necessary to address such crises in these countries can be accommodated by the WTO TRIPS Agreement, the Agreement on Trade-Related Aspects of Intellectual Property Rights. This assurance complements the numerous commitments that the United States Government, and its public and private sectors have made to help these countries cope with the HIV/AIDS pandemic. WTO members also used the declaration to reaffirm their commitment to effective intellectual property standards such as those in the TRIPS Agreement. The declaration recognizes that effective intellectual property standards serve an important public health objective of stimulating development of new drugs. I highly recommend this amendment to the Senate.

Mr. BAUCUS. I move to reconsider the vote.

Mr. BAUCUS. I ask for regular order.

Mr. BAUCUS. Madam President, I rise today to discuss U.S. trade remedy laws--antidumping, anti-subsidy, and safeguard laws. Senators Dayton and Craig have offered an amendment on this important issue. I want to say a few words about our trade laws. While much of this year's debate over fast track has centered around labor and environment, there has been less talk about the equally important issue of U.S. trade laws--specifically, how we will ensure that these laws are not weakened in future trade negotiations. This is not an academic issue. In Doha last November, our trade negotiators put U.S. trade laws on the negotiating table. I believe that was a mistake. And I want to make it clear now: This Senate and this Congress will not tolerate weakening changes to our trade laws. It is a grave mistake to suggest that the United States must weaken its trade laws to be a participant in future trade negotiations. There is virtually no political support for such a position. The last tabling motion showed that. There were 61 Senators who voted not to table the underlying amendment. This point was made clear in the letter sent to the President last year by nearly two-thirds of the Senate. I ask unanimous consent that a copy of this letter be printed in the Record.

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

Mr. BAUCUS. Our trading partners should also understand this point. There are many countries that want to weaken U.S. trade laws. Why? Because they want to be able, if you will, to dump subsidized products--ship products that violate the basic principles of WTO-- within the United States. It is very difficult for us to protect ourselves if we don't have our antidumping and countervailing duty and section 201 trade laws. I must say almost every country in the world, and certainly many in South America, are eager to negotiate free trade agreements with the United States. There are many South American countries that want to do so. Unfortunately, a thorn in our side and a thorn in the side of the countries in our joint effort to try to reach agreement on FTAA, for example, I say very respectfully, is the country of Brazil. I think it is important to step back and ask why countries such as Brazil want us to weaken our trade laws. The answer, of course is pretty simple: their companies and their workers will benefit--at the expense of ours. In the last couple of years, there has been considerable debate regarding the use of trade laws in the context of the steel import crisis. Last year, the administration and the Senate Finance Committee worked together to initiate a ``section 201'' investigation, which allows relief where an industry has been seriously injured by imports. The case of steel is well known--international overcapacity and unfair trade practices have been the norm for decades. But unfair trade practices are not limited to the steel industry. Foreign governments have sought to undercut other strategic U.S. industries--including semiconductors, consumer electronics, and supercomputers. That last point is important--so I want to emphasize it again. Foreign governments have sought to harm American companies and workers. Opponents of dumping laws often suggest that if a foreign company wants to sell us a product cheaply we, should take advantage of that. After all isn't that what, competition is all about? But that view is far too simplistic. Companies can succeed in dumping over an extended period of time only if supported by government policies--trade barriers, subsidies, lax enforcement of their own antitrust laws. Profits gained in protected foreign markets allow foreign companies to splash prices in the United States in order to gain market share. Indeed, efficient American mills must compete with foreign mills that produce steel regardless of need. Foreign steel mills often act as little more than subsidized work programs. I might digress slightly. The same is true with subsidized lumber in Canada. They are tantamount to subsidized work programs and subsidized timber production in the lumber industry to such a great degree. In 1999, for example, foreign overcapacity was more than two times as great as the total annual steel consumption in the United States. With other export markets largely closed, there is an overwhelming incentive to send underpriced steel to the open U.S. market. Let me repeat that point. Other countries tend to close their markets to companies and countries that dump steel or subsidize steel production. So what happens? That steel tends to be diverted to the United States because we, by comparison, have such an open market compared with other countries that otherwise import steel. So without fair trade laws, investment dollars would simply not flow to American companies. For example, why would anybody invest in a U.S. company, even a highly efficient one, that could so easily be undercut by unfair foreign competition? So it is not only a matter of workers, employees getting jobs in the United States, but it is also foreign investment and domestic investment in American companies in the United States. A smart investor would invest in a company where its government protected its market share. Still, the point is argued, why not just allow consumers to take advantage of cheap products? It certainly is true there may be a short- term advantage for consumers and consuming industries. But over the long term, we risk gutting our manufacturing base and gutting the technological edge of American companies. Just think about it a second. If other countries dump, how can we invest in the United States to gain and maintain a technological edge? For any consuming industry complaining about the use of our trade laws in the steel industry, just ask yourself what their reaction would be to foreign governments targeting their industry. But beyond economic rationale, we risk losing the political support for trade. Trade laws are part of the political bargain. If free trade is not perceived as fair, Americans will not support it. Why would Americans support free trade if the perception is that it exposes them to foreign governments' unfair trade practices? Consider also the consequences if we do not have effective trade laws. Trade laws ensure uniform treatment. In bad economic times, there will always be calls to take action against imports. Without consistent and transparent trade laws, those calls will come for general trade barriers against imports. The internationally negotiated trade laws we currently follow seek to provide an objective set of criteria. I might add, our trade laws are totally WTO consistent, a point some critics forget to mention. Some have also asked whether we really need to worry about our laws being weakened in international negotiations. Recent history demonstrates why we should be concerned. I might say, NAFTA's dispute resolution procedures under chapter 19 have significantly undermined our enforcement of U.S. trade laws. Both the GATT Tokyo Round and the Uruguay Round weakened our antidumping and safeguard rules; that is, it happens, it is not just theory. It is happening. And our laws continue to be attacked and weakened by dispute panels exceeding their authority. Some have suggested we use negotiations as an opportunity to address due process and transparency concerns in the application of other countries' trade laws. But remember that fast track is only used to change U.S. laws. If we are only looking at the laws of foreign governments, we can resolve those differences outside of the U.S. implementing legislation. As for difficulties encountered by U.S. exporters facing foreign countries' trade remedy actions, those are problems of compliance with the existing WTO rules, not problems requiring us to revisit the rules themselves. Let me now turn to the Senate bill. I want to make sure my colleagues appreciate the strong provisions protecting U.S. trade laws. First, as was the case in the House legislation, our bill provides that the President must not undercut U.S. trade laws and should also seek to put an end to the foreign practices that make trade laws necessary in the first place. Section 2102(c)(9) of the bill states, first, that the President shall: (A) preserve the ability of the United States to enforce rigorously its trade laws, including the antidumping, countervailing duty, and safeguard laws, and avoid agreements that lessen the effectiveness of domestic and international disciplines on unfair trade, especially dumping and subsidies, or that lessen the effectiveness of domestic and international safeguard provisions. . . . Pretty strong stuff. Second, the bill states the President shall--I underline the word ``shall'': (B) address and remedy market distortions that lead to dumping and subsidization including overcapacity, cartelization, and market access barriers. In addition, the Senate bill makes important additions to the House bill. Under this legislation, the Secretary of Commerce must form a strategy to seek improved adherence to WTO dispute settlement panels to the standards of review contained in the WTO agreements or lose fast-track procedures. In findings, the legislation identifies particular concerns regarding recent WTO decisions affecting U.S. trade laws. The Senate bill also requires that the chairmen and the ranking members of the Finance and Ways and Means Committees to separately determine whether any changes to U.S. trade laws are consistent with the negotiated objective of not weakening U.S. trade laws. Another protection: The President must notify the Finance and Ways and Means Committees of any proposed changes to U.S. trade laws; and, following a report by the chairmen and ranking members, the President must separately explain how proposed changes are consistent with the negotiating objectives established in the fast-track legislation. When it comes to protecting U.S. trade laws, I believe the Senate bill is a strong bill. But let me end by emphasizing the importance of these laws. Why do our trade agreements basically work? They work only because there is respect for the agreements themselves, and for the enforcement of those agreements. But how long will Americans support new negotiations or existing agreements if they see foreign governments taking advantage of us? I believe the language in this fast-track bill makes it very clear that Congress will not tolerate weakening changes to U.S. trade laws. And I--and the great majority of my colleagues--will continue to pursue this issue as we move forward in future trade negotiations. I yield the floor.

Mr. BAUCUS

Mr. BAUCUS. It is my understanding that the Senator from Massachusetts will have 5 minutes and the other 5 minutes will be allotted to Senator Grassley and myself. I will take 2\1/2\ minutes of that. I rise once again to urge my colleagues to support the amendment that I laid down yesterday on behalf on myself and Senators Grassley and Wyden. The amendment is a short but very important clarification to the trade bill's negotiating objective on investment. when we negotiate investment agreements, our primary objective is to ensure that U.S. investors abroad have rights and protections comparable to the rights and protections they enjoy in the United States. In fulfilling that objective, we generally undertake reciprocal obligations with respect to foreign investors. Our amendment makes absolutely clear that the rights we extend to foreign investors must not exceed the rights we afford our own citizens. I expect that this is not the end of our debate on investor-state dispute settlement. As the debate goes forward, it is important to understand that we are trying to achieve a balance. In taking steps to protect U.S. investors abroad, we must not sacrifice the sovereignty of Federal, State, and local governments here at home. Striking the right balance is precisely what we have done in the trade bill. When it was brought to our attention that we might improve that balance, we did so in the amendment laid down yesterday. In the days ahead, it is important that we not upend the balance. We have carefully crafted a foundation for future investment agreements. I strongly urge my colleagues to support that foundation and to support the Baucus-Grassley-Wyden amendment. I reserve the remainder of my 2\1/2\ minutes.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I ask an amendment at the desk be called up relating to investor--State relationships with respect to chapter 11.

Mr. BAUCUS. I ask unanimous consent the reading of the amendment be dispensed with.

Mr. BAUCUS. This is an amendment I am offering on behalf of myself, Senator Grassley, and Senator Wyden. Our amendment concerns an investor-State dispute settlement. That is the ``chapter 11 question'' as it has come to be called. It is based on the placement of investor- State provisions in NAFTA. This is not bankruptcy chapter 11. It has nothing to do with bankruptcy. When I say ``chapter 11,'' it sometimes causes confusion, but this is chapter 11 in NAFTA. Our amendment modifies the objective on investment in the trade bill to make clear that foreign investors in the United States should not be accorded a higher level of protection of their rights than U.S. citizens in the United States. There has been a lot of discussion of NAFTA chapter 11 in recent days. In particular, a number of Senators have expressed legitimate concerns about the impact that chapter 11, and other similar provisions in other agreements, may have on the ability of State and local governments to regulate--that is, to adopt and enforce laws that protect the public health, safety, and welfare. There is a growing consensus that we need to make sure that new trade and investment agreements don't give foreign investors in the United States greater rights than we give our own citizens. International agreements must not become a back door for expanded protection of foreign investors at the expense of protection of our environment, health, and safety. This view has been strongly and consistently expressed by various State and local government organizations, as well as environmental organizations, in recent weeks. For example, a resolution adopted by the National Association of Attorneys General at their March meeting encourages Congress: . . . to ensure that in any new legislation providing for international trade agreements foreign investors shall receive no greater rights to financial compensation than those afforded to our citizens. A letter last week from a large coalition of environmental groups, including Defenders of Wildlife, Friends of the Earth, the Sierra Club, and the National Wildlife Federation, urged the Senate to: . . . require that trade and investment agreements do not provide foreign corporations with greater rights than U.S. citizens have under the Constitution. Similarly, a recent letter from the president of the National Wildlife Federation to Ambassador Zoellick states: An important step to restore consensus would be to make clear in fast track legislation and in investment agreements that those brining expropriation challenges under investment rules will not be granted rights greater than those provided under the takings jurisprudence of the U.S. Constitution. The United States Conference of Mayors has expressed its concern that the bill as now drafted: . . . would allow trade officials to include investor protection standards in future trade agreements that go beyond U.S. law and that effectively grant foreign investors greater rights than U.S. citizens enjoy. In another letter, the National Association of Counties expresses its concern that under the trade bill: . . . foreign investors operating in the U.S. would have greater legal rights against our government than our own citizens possess. Each of these organizations makes an excellent point. We have heard their message, and that is why we have offered the present amendment. We want to make sure that in protecting the rights of U.S. citizens abroad, our negotiators do not inadvertently encroach on the prerogatives of Government here at home. This amendment seeks to strike the right balance between these different sets of interests. The bill's objective on investment opens with a statement recognizing that--on the whole--U.S. law provides a level of protection of investment that is: . . . consistent with or greater than the level required by international law. It goes on to state that our negotiators should ensure that: United States investors in the United States are not accorded lesser rights than foreign investors in the United States. Some have read this language to imply that negotiators might seek to give foreign investors more rights than U.S. citizens now enjoy, and then seek to amend U.S. law to enhance the rights of U.S. citizens. In other words, they read this language as a mandate to expand individual property rights in the U.S. through the back door of international negotiations. Let me be very clear in stating that that was not what the language at issue was intended to accomplish. The committee report on the bill emphasizes that obligations the U.S. undertakes in investment agreements: . . . should not result in foreign investors being entitled to compensation for government measures where a similarly situated U.S. investor would not be entitled to relief. In other words, the rights of U.S. investors under U.S. law define the ceiling. Negotiators must not enter into agreements that grant foreign investors rights that breach that ceiling. The amendment we have laid down is intended to foreclose any doubt on this question. It is our objective to negotiate agreements that protect the rights of U.S. persons abroad. But we are not willing to sacrifice the regulatory functions of our own Government in order to obtain that objective. As the letters I quoted attest, getting clarity on this point is the number one priority for many of the organizations that have written about chapter 11. They make a fair point. Given the interests at stake, we must be crystal clear about the ground rules. U.S. negotiators must not conclude agreements that give foreign investors greater protection of their property rights than our own citizens already enjoy. Our well- developed law should define the ceiling. The amendment that we offer today makes that unmistakable. The chapter 11 issues are some of the most challenging to confront us in the fast track debate. Important questions about the needs of Government and the rights of individuals are at stake. I believe that the Finance Committee bill struck a very good balance. I believe that the amendment we have laid down makes that balance even better, and I urge my colleagues to support it. I yield the floor.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I have an amendment at the desk.

Mr. BAUCUS. Mr. President, I suggest the absence of a quorum.

Mr. BAUCUS. Mr. President, I ask unanimous consent reading of the amendment be dispensed with.

Mr. BAUCUS. Mr. President, I am very proud to be able to stand in this Chamber today and say that we have reached a compromise on fast track, trade adjustment assistance, Andean trade, and the Generalized System of Preferences, or GSP. Last night, my good friend and colleague, Senator Grassley and I-- along with the administration--were able to reach an agreement that I believe will gain very broad bipartisan support. As I have said before, this bill, if passed, will be the first major rewrite of international trade legislation in 14 years. It is an historic opportunity for all of us. Last week, I outlined the need for fast track and for renewing and expanding the Andean Trade Preference Act. Those bills are identical to the bills offered last week. Let me outline today the compromise that was reached on trade adjustment assistance. I believe that the TAA legislation will be one of the most important bills to be adopted by the Senate this year. Importantly, this bill makes several changes to the TAAA program to make it more effective. First, it extends the period for which TAA pays out income support from 52 to 78 weeks. This allows TAA recipients to stay in the program long enough to complete training for new jobs. Second, we expand eligibility for TAA benefits to secondary workers. For example, if an automobile producer is affected by imports, displaced workers in supplier companies--tire and windshield manufacturers, for example--will also be covered. We expect that approximately 65,000 additional workers will be eligible for TAA because of this provision. Third, we agreed to extend TAA benefits when a U.S. manufacturing plant moves offshore to any country. In addition, we have codified the provisions covering downstream workers who are currently covered by the NAFTA transitional program. Fourth, we expand TAA benefits. This legislation authorizes $300 million for training--nearly tripling the program. The legislation also helps TAA recipients obtain healthcare insurance. Displaced workers will be eligible for an advanceable, refundable tax credit of 70 percent. That money can be used for COBRA or for the purchase of certain State-based group coverage options. We also provide interim assistance through the National Emergency Grant program. In my opinion, this is most significant bipartisan agreement on health care in many, many years. Fifth, this legislation provides a special TAA program for family farmers, ranchers, and fishermen. And finally, this bill creates a pilot program on wage insurance--a concept that has been endorsed by former USTR Carla Hills and Federal Reserve Chairman Alan Greenspan. In addition to agreeing on a much improved and expanded TAA program, we have also agreed to extend the Generalized System of Preferences through the end of 2006. This important legislaiton extends preferential duty treatment for goods from developing countries. As a part of the deal reached last night, we will update the definition of ``core worker rights'' in GSP to make it consistent with the ILO's 1998 definition of core worker rights. This is important, of course, because in considering countries' eligibility for GSP benefits, the President must consider whether they are taking steps to protect core worker rights. With the updated definition, the President's evaluation will now encompass countries' compliance with the ILO prohibition on the worst forms of child labor and the ILO prohibition on discrimination with respect to employment and occupation. As I said when I began my remarks, I am very proud of this legislation. But it would not have been possible without the help of many of my colleagues. So let me end with some thanks. First, on the TAA bill, Senators Bingaman and Snowe have been instrumental in this process. And on the Andean trade bill, Senator Bob Graham has been a tireless advocate. I also thank Senator Daschle for this support through both the committee process and as we completed negotiations. And finally, I thank two of my colleagues on the Finance Committee, Senator Breaux and Senator Phil Gramm, for their help in reaching consensus on this deal. I look forward to working with all of my colleagues to pass this important legislation. Mr. President, I very shortly expect to go through the procedure where we can lay down this substitute amendment and begin working through various amendments that will be offered to that amendment. That should happen momentarily. In the meantime, I suggest the absence of a quorum.

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

Mr. BAUCUS

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

Mr. BAUCUS

Mr. BAUCUS. Mr. President, Garrison Keillor is quoted as saying, ``I believe in looking reality straight in the eye and denying it.'' That approach is perhaps what some would like us to do with respect to the increasing problem of the use of abusive tax shelters to avoid or evade taxes. But I do not agree. The Tax Shelter Transparency Act that I introduce today doesn't deny reality, rather, it shines some transparency on reality so that we have a better understanding of what is going on out there. Following Enron's bankruptcy, I think that all Americans have a greater appreciation for the need for greater transparency in complex tax transactions. The legislation is the product of over 2 years of review and public comment. The Tax Shelter Transparency Act also incorporates tax shelter proposals released by the Department of the Treasury the day before the Senate Finance Committee's March 21, 2002 hearing on the subject. As I stated at the hearing, ``the Finance Committee is committed to helping combat these carefully engineered transactions. These transactions have little or no economic substance, are designed to achieve unwarranted tax benefits rather than business profit, and place honest corporate competitors at a disadvantage.'' The proliferation of tax shelters has been called ``the most significant compliance problem currently confronting our system of self-assessment.'' Less than 2 years ago, there was a more positive outlook regarding the Government's ability to curb the promotion and use of abusive tax shelters. The Department of the Treasury and the IRS issued regulations requiring disclosure of certain transactions and requiring developers and promoters of tax-engineered transactions to maintain customer lists. Also, the IRS had prevailed in several court cases against the use of transactions lacking in economic substance. Unfortunately, the honesty and integrity of our tax system has suffered significant blows over the past 2 years. Court decisions have shifted from decisions tough on tax avoidance and evasion to court defeats for the IRS. Also, there appears to be a lack of compliance with the disclosure legislation passed in 1997 and the subsequent regulations. The corporate tax returns filed in 2001 are the first returns filed under the new tax shelter disclosure requirements. The administration provided the Finance Committee with the results of their analysis of the disclosure data, including their analysis of what was not disclosed. Only 272 transactions were disclosed by 99 corporate taxpayers. There are approximately 100,000 corporate taxpayers under the Large and Midsize Business Division at the IRS yet only 99 of them made a disclosure under the current regime. Based on the Finance Committee hearing, it is safe to say that the administration, as did Congress, thought the number of disclosures would be much greater. Clearly, the past method of reactive, ad-hoc closing down of abusive transactions does little to discourage the creation and exploitation of many shelters. These transactions may be good for a corporation's bottom line, but they are bad for the economy. Here's why: abusive corporate tax shelters create a tax benefit without any corresponding economic benefit. There's no new product. No technological innovation. Just a tax break. As with the Senate Finance Committee draft legislation released last August, the Tax Shelter Transparency Act emphasizes disclosure. Disclosure is critical to the Government's ability to identify and address abusive tax avoidance and evasion arrangements. Under the bill, if the taxpayer has entered into a questionable transaction and fails to disclose the transaction, then the taxpayer is subject to tough penalties for not disclosing and higher penalties if an understatement results. The legislation separates transactions into one of three types of transactions for purposes of disclosure and penalties: Reportable Listed Transactions, Reportable Avoidance Transactions, and a catch-all category for Other Transactions. The legislation also addresses the role of each of the players involved in abusive tax shelters: including the taxpayer who buys, the promoter who markets, and the tax advisor who provides an opinion ``endorsing'' the tax-engineered arrangement. The legislation focuses on each of these participants and contains proposals to discourage their participation in abusive tax transactions. Reportable Listed Transactions are transactions specifically identified by the Department of the Treasury as ``tax avoidance transactions.'' These are transactions specifically classified by Treasury as bad transactions, essentially the worst of the worst. Failure by the taxpayer to disclose the transaction results in a separate strict liability, nonwaivable flat dollar penalty of $200,000 for large taxpayers and $100,000 for small taxpayers. Additionally, if the taxpayer is required to file with the Securities and Exchange Commission, the penalty must be reported to the SEC. If the taxpayer discloses the questionable transaction, they are not subject to the flat dollar penalty or the SEC reporting. The SEC reporting requirement is a critical element to improving the disclosure of transactions. The amount of tax penalty is relatively insignificant to the tax benefits generated by abusive tax shelter transactions. Corporations, however, have a strong incentive not to trigger a penalty that must be reported to the SEC. Failure to disclose a reportable listed transaction that results in a tax understatement will be subject to a higher, 30 percent, strict liability, nonwaivable accuracy-related penalty which must be reported to the SEC. Reportable Avoidance Transactions are transactions that fall into one of the several objective criteria established by the Department of the Treasury which have a potential for tax avoidance or evasion. Based on current regulations and the proposals put forward by the administration, we anticipate these transactions would include but would not be limited to: significant loss transactions; transactions with brief asset holding periods; transactions marketed under conditions of confidentiality; transactions subject to indemnification agreements; and transactions with a certain amount of book-tax difference. Failure by the taxpayer to disclose the questionable reportable avoidance transaction results in a separate strict liability, nonwaivable flat dollar penalty of $100,000 for large taxpayers and $50,000 for small taxpayers. Reportable Avoidance Transactions are then subject to a filter to determine whether there is a significant purpose of tax avoidance. Transactions entered into with a significant purpose of tax avoidance are subject to harsher treatment in the form of higher penalties. The legislation enhances the Government's ability to enjoin promoters. Most significantly, the legislation increases the penalty imposed on tax shelter promoters who refuse to maintain lists of their tax shelter investors. If a promoter fails to provide the IRS with a list of investors in a reportable transaction within 20 days after receipt of a written request by the IRS to provide such a list, the promoter would be subject to a penalty of $10,000 for each additional business day that the requested information is not provided. The legislation adds a provision authorizing the Treasury Department to censure tax advisors or impose monetary sanctions against tax advisors and firms that participate in tax shelter activities and practice before the IRS. I am pleased that this legislation is the product of working closely with my good friend, and the ranking member of the Finance Committee, Senator Grassley. I appreciate Senator Grassley's cosponsorship of the Tax Shelter Transparency Act and his commitment to work as a bipartisan front to shine some light on these abusive tax shelter transactions. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, Garrison Keillor is quoted as saying, ``I believe in looking reality straight in the eye and denying it.'' That approach is perhaps what some would like us to do with respect to the increasing problem of the use of abusive tax shelters to avoid or evade taxes. But I do not agree. The Tax Shelter Transparency Act that I introduce today doesn't deny reality, rather, it shines some transparency on reality so that we have a better understanding of what is going on out there. Following Enron's bankruptcy, I think that all Americans have a greater appreciation for the need for greater transparency in complex tax transactions. The legislation is the product of over 2 years of review and public comment. The Tax Shelter Transparency Act also incorporates tax shelter proposals released by the Department of the Treasury the day before the Senate Finance Committee's March 21, 2002 hearing on the subject. As I stated at the hearing, ``the Finance Committee is committed to helping combat these carefully engineered transactions. These transactions have little or no economic substance, are designed to achieve unwarranted tax benefits rather than business profit, and place honest corporate competitors at a disadvantage.'' The proliferation of tax shelters has been called ``the most significant compliance problem currently confronting our system of self-assessment.'' Less than 2 years ago, there was a more positive outlook regarding the Government's ability to curb the promotion and use of abusive tax shelters. The Department of the Treasury and the IRS issued regulations requiring disclosure of certain transactions and requiring developers and promoters of tax-engineered transactions to maintain customer lists. Also, the IRS had prevailed in several court cases against the use of transactions lacking in economic substance. Unfortunately, the honesty and integrity of our tax system has suffered significant blows over the past 2 years. Court decisions have shifted from decisions tough on tax avoidance and evasion to court defeats for the IRS. Also, there appears to be a lack of compliance with the disclosure legislation passed in 1997 and the subsequent regulations. The corporate tax returns filed in 2001 are the first returns filed under the new tax shelter disclosure requirements. The administration provided the Finance Committee with the results of their analysis of the disclosure data, including their analysis of what was not disclosed. Only 272 transactions were disclosed by 99 corporate taxpayers. There are approximately 100,000 corporate taxpayers under the Large and Midsize Business Division at the IRS yet only 99 of them made a disclosure under the current regime. Based on the Finance Committee hearing, it is safe to say that the administration, as did Congress, thought the number of disclosures would be much greater. Clearly, the past method of reactive, ad-hoc closing down of abusive transactions does little to discourage the creation and exploitation of many shelters. These transactions may be good for a corporation's bottom line, but they are bad for the economy. Here's why: abusive corporate tax shelters create a tax benefit without any corresponding economic benefit. There's no new product. No technological innovation. Just a tax break. As with the Senate Finance Committee draft legislation released last August, the Tax Shelter Transparency Act emphasizes disclosure. Disclosure is critical to the Government's ability to identify and address abusive tax avoidance and evasion arrangements. Under the bill, if the taxpayer has entered into a questionable transaction and fails to disclose the transaction, then the taxpayer is subject to tough penalties for not disclosing and higher penalties if an understatement results. The legislation separates transactions into one of three types of transactions for purposes of disclosure and penalties: Reportable Listed Transactions, Reportable Avoidance Transactions, and a catch-all category for Other Transactions. The legislation also addresses the role of each of the players involved in abusive tax shelters: including the taxpayer who buys, the promoter who markets, and the tax advisor who provides an opinion ``endorsing'' the tax-engineered arrangement. The legislation focuses on each of these participants and contains proposals to discourage their participation in abusive tax transactions. Reportable Listed Transactions are transactions specifically identified by the Department of the Treasury as ``tax avoidance transactions.'' These are transactions specifically classified by Treasury as bad transactions, essentially the worst of the worst. Failure by the taxpayer to disclose the transaction results in a separate strict liability, nonwaivable flat dollar penalty of $200,000 for large taxpayers and $100,000 for small taxpayers. Additionally, if the taxpayer is required to file with the Securities and Exchange Commission, the penalty must be reported to the SEC. If the taxpayer discloses the questionable transaction, they are not subject to the flat dollar penalty or the SEC reporting. The SEC reporting requirement is a critical element to improving the disclosure of transactions. The amount of tax penalty is relatively insignificant to the tax benefits generated by abusive tax shelter transactions. Corporations, however, have a strong incentive not to trigger a penalty that must be reported to the SEC. Failure to disclose a reportable listed transaction that results in a tax understatement will be subject to a higher, 30 percent, strict liability, nonwaivable accuracy-related penalty which must be reported to the SEC. Reportable Avoidance Transactions are transactions that fall into one of the several objective criteria established by the Department of the Treasury which have a potential for tax avoidance or evasion. Based on current regulations and the proposals put forward by the administration, we anticipate these transactions would include but would not be limited to: significant loss transactions; transactions with brief asset holding periods; transactions marketed under conditions of confidentiality; transactions subject to indemnification agreements; and transactions with a certain amount of book-tax difference. Failure by the taxpayer to disclose the questionable reportable avoidance transaction results in a separate strict liability, nonwaivable flat dollar penalty of $100,000 for large taxpayers and $50,000 for small taxpayers. Reportable Avoidance Transactions are then subject to a filter to determine whether there is a significant purpose of tax avoidance. Transactions entered into with a significant purpose of tax avoidance are subject to harsher treatment in the form of higher penalties. The legislation enhances the Government's ability to enjoin promoters. Most significantly, the legislation increases the penalty imposed on tax shelter promoters who refuse to maintain lists of their tax shelter investors. If a promoter fails to provide the IRS with a list of investors in a reportable transaction within 20 days after receipt of a written request by the IRS to provide such a list, the promoter would be subject to a penalty of $10,000 for each additional business day that the requested information is not provided. The legislation adds a provision authorizing the Treasury Department to censure tax advisors or impose monetary sanctions against tax advisors and firms that participate in tax shelter activities and practice before the IRS. I am pleased that this legislation is the product of working closely with my good friend, and the ranking member of the Finance Committee, Senator Grassley. I appreciate Senator Grassley's cosponsorship of the Tax Shelter Transparency Act and his commitment to work as a bipartisan front to shine some light on these abusive tax shelter transactions. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. BAUCUS

Mr. BAUCUS. I appreciate the chairman helping out.

Mr. BAUCUS. Thank you, Mr. President. I speak today on a matter that touches the lives of every single Montanan. We have experienced 4 years straight in a row of ongoing drought conditions. I rise today not to oppose the farm bill conference--I support it-- but, rather, to express my extreme disappointment that a natural disaster assistance provision which would provide real help to American family farmers suffering from drought is not included in the conference report. Not too long ago, I, along with Senator Enzi, offered a bipartisan amendment to the Senate farm bill that passed by an overwhelming 69 votes. That amendment provided funding for the Crop Disaster Program and for the Livestock Assistance Program. This is not an idle matter. There are some from some States in the country who may not appreciate the gravity of the situation we face in the West. It is severe. Our Nation's agricultural producers are holding their breath, particularly in my State of Montana. I was at home over the weekend. You could feel it. They want to know if this agricultural disaster is going to be in the farm bill. They care about the farm bill. They care much more about whether agricultural disaster assistance is or is not included; that is, the agricultural disaster assistance for last year, 2001, where the crops were devastated. As I mentioned, it is 1 of 4 years in a row of drought. Let me be clear. Without this assistance provision in the farm bill, it really won't matter very much because farms are going to go under. We are talking about saving long-time family farmers and long-time ranchers whose generations have been farming. They just want to make a living. On March 28 of this year, Agriculture Secretary Veneman declared the entire State of Montana a drought disaster. This drought designation came 2 months earlier than the designation in the previous year of 2001 and 8 months earlier than the same designation in the year 2000. While our State picture is dire, it is even worse in some of the individual communities. It is bad enough statewide, but in some areas it is just desperate. In May of 1930, the Knees Weather Station, which is approximately 30 miles from Brady, MT, located in the central part of our State, registered 1.17 inches of precipitation. That is May 1930, the Dust Bowl years--1.17 inches. In May of last year, the year for which drought disaster assistance is so desperately needed, the same station registered 0.16 inches of precipitation--about 10 times less than the 1.17 in the 1930s. I want to graphically show you what drought is doing to my State. These pictures are courtesy of the Great Falls Tribune which has been chronicling this drought for a good period of time. This is the Golden Triangle, the so-called breadbasket of our State. I have gone out many times into the fields and kicked the soil. It is bone dry. There is nothing there. I have talked to ranchers and farmers in farm forums in Shelby, Havre, and Conrad, where the drought is drying up hope, closing down businesses, and forcing bankers to close their lines of credit. It is just getting worse. These pictures show the problem. Some old-timers say it reminds them of the Dust Bowl days in the 1930s. This picture shows Mark Peterson. Mark is a very good farmer. He farms just north of Havre of Hill County. In this picture, he is taking a core sample of soil to look at the moisture in the field he is seeding. This is what Mark said: In the late 1970's and early 1980's, you couldn't do anything wrong. Farming was fun. Right now it's hell. This picture shows the moisture content. He goes down for the soil sample. It is not just the surface, but the subsurface soil content. It is lower than he has ever seen. Here is what the Great Falls Tribune wrote, which is one of the largest papers in our State: Experts are predicting a harvest more disastrous than last year's record-low winter wheat crop. Instead of admiring their seedlings this spring, farmers in north-central Montana's Golden Triangle are watching their topsoil swirl away in the wind. As dust storms blow down Main Street, agriculture-businesses are talking about layoffs and bankers are running out of slack for debt-ridden farm families. Congress has yet to pass a disaster payment to cover last year's failed crops. Many producers are banking on the money to pay off last year's operating loans. Without the Federal assistance and a decent harvest, 2002 could be the end of the line for some producers. This photo shows Mark Peterson seeding winter wheat north of Havre. This picture does not do justice to the problem. I was home last weekend. This is dust blowing all across the highway, which is 20 or 30 miles south of where this picture was taken. I couldn't believe it. I have seen nothing like this. This next picture is a photo that shows a Liberty County employee. Liberty County is supposed to be a very large wheat-producing area in our State. What is Al Green, a Liberty County employee, doing? He is clearing a culvert that is supposed to carry water. It is carrying dust. The culvert is being filled with topsoil. You can barely see the culvert. In fact, he had to dig it out; otherwise, the culvert would be full of soil from the blowing dust. Here is a another example. This chart shows a makeshift fence just south of Chester in Liberty County. That is also in the north-central part of Montana. I was there a short while ago. I walked out in the fields. It pulls at your heart. It is so sad, so tragic to see there is nothing there, to see people not making it. The soil just crumbles in your fingers. As you can see, here are the fences. This fence is about 3\1/2\ to 4 feet high. Why is it there? The farmer is trying to desperately save topsoil from blowing away. Clearly, you can't keep topsoil from blowing away unless you have a crop, unless you have moisture. But in this case, it is gone. He is losing his topsoil. The unrelenting drought in my State has brought economic hardship not only to agricultural producers but to very widespread areas of the State. In 1996--just a few years ago--the year before the 4-year drought kicked in, Montana received $847 million in cash receipts from wheat sales. In 2001, 4 years into the drought, we received not $847 million but $317 million in cash receipts. That is a 62-percent decline. Why? Drought. It is true a lot of farmers have crop insurance. That is a critical risk management tool widely used by Montana producers. But, unfortunately, crop insurance coverage declines during consecutive years of drought because a decline in actual production history means your coverage is less. That is the way the law is written. It is a vicious circle. So the producers maintain their insurance, but they have crop insurance that provides virtually laughable coverage. Agriculture is about 50 percent of Montana's economy. It is the backbone of our State. The drought affects not only farmers and ranchers, it is felt throughout the rural communities. It means a loss of jobs. Small businesses are forced to close their doors. For example, in the first 3 months of 2002, feed sales were down about 20 percent. That is an indication that there are fewer livestock in the area. Take Fort Benton, an average-sized agricultural community. About 80 percent of Fort Benton's businesses are agriculture related. Clearly, producers are suffering. The town suffers. Those who sell agricultural equipment--for example tractor dealers--close their doors. Here is a farmer I would like you to listen to: Dale Schuler, past president of the Montana Grain Growers, and a farmer in Chouteau County, MT. He estimated nearly 2,000 square miles of crop in his area of central Montana have gone unharvested. So 2,000 square miles, in a part of Montana which usually produces tremendous wheat yields, has gone unharvested. That is about equal to the area of your State. An area the size of your State has gone unharvested in Montana. The entire State has gone unharvested. As Dale said: Farmers and our families haven't had the means to repay our operating loans, let alone buy inputs to plant the crop for the coming year. Chouteau County is the largest farming county in Montana. And yet our last farm equipment dealer [in the community] had no choice but to close his doors. Our local co-op closed its tire shop. One farm fuel supplier quit. And the fertilizer dealers and grain elevators are laying off workers. I believe that we are set to see a mass exodus from Montana that has not been seen since the Great Depression of the 1930s. I have talked to a lot of farmers in this area. I asked them to honestly compare this situation to the 1930s. Their answer was, ``worse.'' These are honest people. I asked them, why? They said, because during the 1930s, there was 1 year in between the drought years where it rained. There was moisture. And so some could hang on. We have not had that interval year of moisture. It has been consecutive. So when it does rain now a little bit, were it to rain this year, it sinks down. The moisture just keeps going down. It does not stay in the topsoil. Our creeks and lakes are drying up. They are gone. Some people are wondering: Gee, haven't we all passed a big farm bill? Doesn't that help? The answer is that it does help. It is there to mitigate against future agriculture disaster assistance payments. That is one point of the farm program. But it does not help Montana farmers or other farmers in the Nation. For last year, 2001, there was no farm bill that made any sense whatsoever, there were no payments that made any sense to farmers, and crop insurance didn't work, for the reasons I mentioned. And this is not just in my State of Montana. Mr. President, I wonder if you saw last Friday's New York Times, the front page. There was a photograph of the drought in the West. It was not Montana; it was another State. It was the same situation but in other States. There was a photograph very similar to this one I have in the Chamber. It was on the front page of the New York Times last Friday. I encourage you to look at it. One final point. We in the Congress have helped New York in times of desperate tragedy. We came to the rescue of New York, as we should have, and as we did, without reservation. It was the right thing to do. We are one country. We also have come to the aid and assistance of other needs in this country. There are lots of different examples. I could think of flooding in America. We have come to help out in that regard. It is very important. Here is another disaster we are facing. I know Senators from urban States do not quite understand it, just like we from the western States do not fully appreciate the devastation of New York City. But we are here together. We have helped New York. We will continue to help areas in distress. I urge my colleagues to remember, we are one Nation. In our part of the country, the north-central States desperately need help. A good example of that, this is a map of January of this year. The red indicates severe drought. So it is not just Montana, but it is also Wyoming. I ask unanimous consent to speak for 1 additional minute.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, today, I am introducing the American Indian Welfare Reform Act of 2002, an important step in improving the lives of this country's Native Americans. I am glad to be joined by Senators Johnson and Daschle in this effort. In 1996 we enacted a sweeping welfare reform law. It was a long-past- due fundamental change and ended a failed system for helping low-income families in America. I was a strong supporter of that law. This year, we are reauthorizing it. As we in the Finance Committee have reviewed the evidence I have been struck by how successful it has been. The ranks of those dependent on welfare in this country has been reduced by half in just five years. There is more to be done, of course. Child poverty has declined but not by as much as the fall in the welfare caseload, for example. I am at work with my Finance Committee colleague Senator Grassley on comprehensive legislation to renew and improve the 1996 law. One important aspect of the 1996 law which is often overlooked is that it didn't just devolve authority to States, it also permitted Indian tribes to operate their own welfare programs for the first time. The new welfare program, Temporary Assistance for Needy Families, TANF, is very flexible. Tribes can take advantage of that flexibility to design culturally-appropriate programs to move people from welfare to work. This is smart policy and is consistent with the important value of tribal sovereignty. I support it. My own State of Montana is home to several tribes and I have given much thought to how we can build upon the provisions of the 1996 welfare law to help them and their members. Too often in Montana, and elsewhere, poverty has an Indian face. The numbers are cold and hard. According to the Census Bureau, 25 percent of American Indians live in poverty, more than twice the national poverty rate. The average household income for Indians in 2000 was only 75 percent of that of the rest of Americans. This is simply not right. We must do better. Welfare reform needs to work for everyone. Luckily, the provisions of the 1996 law provide a good start. Now we must build upon them. The legislation I introduce today, the product of extensive dialogue and consultation, does that in several important ways. First, more than 30 tribes, including the Confederated Salish- Kootenai and Fort Belknap tribes of Montana, have taken advantage of the opportunity to operate their own TANF programs. This bill contains provisions to help those tribes improve their programs. For example, tribes operating TANF are not eligible for the TANF high performance bonus or the TANF contingency fund while state TANF programs are. This oversight is rectified by this bill. Second, there are many tribes interested in operating TANF programs which do not believe the current set-up allows them to do so. They want to exercise their sovereignty and adapt their program to better fit the needs of their people. We should help them do so. To that end, I proposed creating a new grant fund to improve tribal governmental capacity. We have funded State administrative capacity for decades, helping states buy computer systems and train workers. We should do the same for tribal human services administration. Under this bill, a tribe which wants to operate TANF but needs to upgrade its computers to do it could receive the funding it needs, which will enable it to take over TANF. Third, there are some tribes not interested in running a TANF program or a long time from being able to do it. Their low-income families will continue to receive assistance from State programs. I have included provisions to facilitate State-tribe dialogue in these cases so that the state can better understand the unique circumstances of each Indian reservation. We must ensure all Indian families are able to get help when they need it. Finally, there is the all-important issue of economic development. A General Accounting Office review of Census Bureau data found that 25 of the 26 counties in the U.S. with a majority of American Indians had poverty rates ``significantly'' higher than average. Welfare reform is about moving people to work. On most of our Indian reservations there is simply far too little work to be had. Like everyone else, Indians want to work. We need to do better in giving them the opportunity. This legislation provides tribes with an expanded authority to issue bonds, which will encourage additional economic activity on reservations, such as housing construction. This means more jobs, as well as a better quality of life. It also includes grants to help tribes improve their own economic development strategies. Tribes with uniform commercial codes and effective micro-enterprise programs can see more business activity on their lands. This bill helps tribes helps themselves. We need to let Indians find their own way to prosperity, not impose top-down strategies. But we must make sure they have the tools to get there. This is an important bill. It includes other key provisions. One is a fine bill originally introduced by Senators Daschle and McCain to allow tribes to receive direct Federal reimbursement for operating foster care programs. Another provision funds research on tribal welfare reform programs so we can learn what works as well as providing funds for ``peer-learning'' so that tribes can learn from one another. I am a strong supporter of welfare reform. We need to make sure it works for everyone. This bill does not. I ask unanimous consent that a summary of the legislation be printed in the Record.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, today, I am introducing the American Indian Welfare Reform Act of 2002, an important step in improving the lives of this country's Native Americans. I am glad to be joined by Senators Johnson and Daschle in this effort. In 1996 we enacted a sweeping welfare reform law. It was a long-past- due fundamental change and ended a failed system for helping low-income families in America. I was a strong supporter of that law. This year, we are reauthorizing it. As we in the Finance Committee have reviewed the evidence I have been struck by how successful it has been. The ranks of those dependent on welfare in this country has been reduced by half in just five years. There is more to be done, of course. Child poverty has declined but not by as much as the fall in the welfare caseload, for example. I am at work with my Finance Committee colleague Senator Grassley on comprehensive legislation to renew and improve the 1996 law. One important aspect of the 1996 law which is often overlooked is that it didn't just devolve authority to States, it also permitted Indian tribes to operate their own welfare programs for the first time. The new welfare program, Temporary Assistance for Needy Families, TANF, is very flexible. Tribes can take advantage of that flexibility to design culturally-appropriate programs to move people from welfare to work. This is smart policy and is consistent with the important value of tribal sovereignty. I support it. My own State of Montana is home to several tribes and I have given much thought to how we can build upon the provisions of the 1996 welfare law to help them and their members. Too often in Montana, and elsewhere, poverty has an Indian face. The numbers are cold and hard. According to the Census Bureau, 25 percent of American Indians live in poverty, more than twice the national poverty rate. The average household income for Indians in 2000 was only 75 percent of that of the rest of Americans. This is simply not right. We must do better. Welfare reform needs to work for everyone. Luckily, the provisions of the 1996 law provide a good start. Now we must build upon them. The legislation I introduce today, the product of extensive dialogue and consultation, does that in several important ways. First, more than 30 tribes, including the Confederated Salish- Kootenai and Fort Belknap tribes of Montana, have taken advantage of the opportunity to operate their own TANF programs. This bill contains provisions to help those tribes improve their programs. For example, tribes operating TANF are not eligible for the TANF high performance bonus or the TANF contingency fund while state TANF programs are. This oversight is rectified by this bill. Second, there are many tribes interested in operating TANF programs which do not believe the current set-up allows them to do so. They want to exercise their sovereignty and adapt their program to better fit the needs of their people. We should help them do so. To that end, I proposed creating a new grant fund to improve tribal governmental capacity. We have funded State administrative capacity for decades, helping states buy computer systems and train workers. We should do the same for tribal human services administration. Under this bill, a tribe which wants to operate TANF but needs to upgrade its computers to do it could receive the funding it needs, which will enable it to take over TANF. Third, there are some tribes not interested in running a TANF program or a long time from being able to do it. Their low-income families will continue to receive assistance from State programs. I have included provisions to facilitate State-tribe dialogue in these cases so that the state can better understand the unique circumstances of each Indian reservation. We must ensure all Indian families are able to get help when they need it. Finally, there is the all-important issue of economic development. A General Accounting Office review of Census Bureau data found that 25 of the 26 counties in the U.S. with a majority of American Indians had poverty rates ``significantly'' higher than average. Welfare reform is about moving people to work. On most of our Indian reservations there is simply far too little work to be had. Like everyone else, Indians want to work. We need to do better in giving them the opportunity. This legislation provides tribes with an expanded authority to issue bonds, which will encourage additional economic activity on reservations, such as housing construction. This means more jobs, as well as a better quality of life. It also includes grants to help tribes improve their own economic development strategies. Tribes with uniform commercial codes and effective micro-enterprise programs can see more business activity on their lands. This bill helps tribes helps themselves. We need to let Indians find their own way to prosperity, not impose top-down strategies. But we must make sure they have the tools to get there. This is an important bill. It includes other key provisions. One is a fine bill originally introduced by Senators Daschle and McCain to allow tribes to receive direct Federal reimbursement for operating foster care programs. Another provision funds research on tribal welfare reform programs so we can learn what works as well as providing funds for ``peer-learning'' so that tribes can learn from one another. I am a strong supporter of welfare reform. We need to make sure it works for everyone. This bill does not. I ask unanimous consent that a summary of the legislation be printed in the Record.