John Breaux

Mr. BREAUX

Mr. BREAUX. Mr. President, I rise today to introduce tax legislation which proposes only a small technical modification of current law, but, if enacted, would provide significant simplification of routine corporate reorganizations. The legation is identical to S. 773 which I introduced on April 13 of last year. This proposed change is small but very important. It would not alter the substance of current law in any way. It would, however, greatly simplify a common corporate transaction. This small technical change will alone save corporations millions of dollars in unnecessary expenses and economic costs that are incurred when they divide their businesses. Past Treasury Departments have agreed, and I have no reason to believe the current Treasury Department will feel any differently, that this change would bring welcome simplification to section 355 of the Internal Revenue Code. Indeed, the Clinton Administration in its last budget submission to the Congress had proposed this change. The last scoring of this proposal showed no loss of revenue to the U.S. Government, and I am aware of no opposition to its enactment. Corporations, and affiliated groups of corporations, often find it advantageous, or even necessary, to separate two or more businesses. The division of AT&T from its local telephone companies is an example of such a transaction. The reasons for these corporate divisions are many, but probably chief among them is the ability of management to focus on one core business. At the end of the day, when a corporation divides, the stockholders simply have the stock of two corporations, instead of one. The Tax Code recognizes this is not an event that should trigger tax, as it includes corporate divisions among the tax-free reorganization provisions. One requirement the Tax Code imposes on corporate divisions is very awkwardly drafted, however. As a result, an affiliated group of corporations that wishes to divide must often engage in complex and burdensome preliminary reorganizations in order to accomplish what, for a single corporate entity, would be a rather simple and straightforward spinoff of a business to its shareholders. The small technical change I propose today would eliminate the need for these unnecessary transactions, while keeping the statue true to Congress's original purpose. More specifically, section 355, and related provision of the Code, permits a corporation or an affiliated group of corporations to divide on a tax-free basis into two or more separate entities with separate businesses. There are numerous requirements for tax-free treatment of a corporate division, or ``spinoff,'' including continuity of historical shareholder interest, continuity of the business enterprises, business purpose, and absence of any device to distribute earning and profits. In addition, section 355 requires that each of the divided corporate entities be engaged in the active conduct of a trade or business. The proposed change would alter none of these substantive requirements of the Code. Section 355 (b)(2)(A) currently provides an attribution or ``look through'' rule for groups of corporations that operate active businesses under a holding company, which is necessary because a holding company, by definition, is not itself engaged in an active business. This lookthrough rule inexplicably requires, however, that ``substantially all'' of the assets of the holding company consist of stock of active controlled subsidiaries. The practical effect of this language is to prevent holding companies from engaging in spinoffs if they own almost any other assets. This is in sharp contrast to corporations that operate businesses directly, which can own substantial assets unrelated to the business and still engage in tax- free spinoff transactions. In the real world, of course, holding companies may, for many sound business reasons, hold other assets, such as non-controlling, less than 80 percent, interests in subsidiaries, controlled subsidiaries that have been owned for less than five years, which are not considered ``active businesses'' under section 355, or a host of non-business assets. Such holding companies routinely undertake spinoff transactions, but because of the awkward language used in section 355 (b)(2)(A), they must first undertake one or more, often a series of, preliminary reorganizations solely for the purpose of complying with this inexplicable language of the Code. Such preliminary reorganizations are at best costly, burdensome, and without any business purpose, and at worst, they seriously interfere with business operations. In a few cases, they may be so costly as to be prohibitive, and cause the company to abandon an otherwise sound business transaction that is clearly in the best interest of the corporation and the businesses it operates. There is no tax policy reasons, tax advisors agree, to require the reorganization of a consolidated group that is clearly engaged in the active conduct of a trade or business, as a condition to a spinoff. Nor is there any reason to treat affiliated groups differently than single operating companies. Indeed, no one had ever suggested one. The legislative history indicates Congress was concerned about non- controlled subsidiaries, which is elsewhere adequately addressed, no consolidated groups. For many purposes, the Tax Code treats affiliated groups as a single corporation. Therefore, the simple remedy I am proposing today for the problem created by the awkward language of section 355 (b)(2)(A) is to apply the active business test to an affiliated group as if it were a single entity. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. BREAUX

Mr. BREAUX. Mr. President, I rise today to introduce tax legislation which proposes only a small technical modification of current law, but, if enacted, would provide significant simplification of routine corporate reorganizations. The legation is identical to S. 773 which I introduced on April 13 of last year. This proposed change is small but very important. It would not alter the substance of current law in any way. It would, however, greatly simplify a common corporate transaction. This small technical change will alone save corporations millions of dollars in unnecessary expenses and economic costs that are incurred when they divide their businesses. Past Treasury Departments have agreed, and I have no reason to believe the current Treasury Department will feel any differently, that this change would bring welcome simplification to section 355 of the Internal Revenue Code. Indeed, the Clinton Administration in its last budget submission to the Congress had proposed this change. The last scoring of this proposal showed no loss of revenue to the U.S. Government, and I am aware of no opposition to its enactment. Corporations, and affiliated groups of corporations, often find it advantageous, or even necessary, to separate two or more businesses. The division of AT&T from its local telephone companies is an example of such a transaction. The reasons for these corporate divisions are many, but probably chief among them is the ability of management to focus on one core business. At the end of the day, when a corporation divides, the stockholders simply have the stock of two corporations, instead of one. The Tax Code recognizes this is not an event that should trigger tax, as it includes corporate divisions among the tax-free reorganization provisions. One requirement the Tax Code imposes on corporate divisions is very awkwardly drafted, however. As a result, an affiliated group of corporations that wishes to divide must often engage in complex and burdensome preliminary reorganizations in order to accomplish what, for a single corporate entity, would be a rather simple and straightforward spinoff of a business to its shareholders. The small technical change I propose today would eliminate the need for these unnecessary transactions, while keeping the statue true to Congress's original purpose. More specifically, section 355, and related provision of the Code, permits a corporation or an affiliated group of corporations to divide on a tax-free basis into two or more separate entities with separate businesses. There are numerous requirements for tax-free treatment of a corporate division, or ``spinoff,'' including continuity of historical shareholder interest, continuity of the business enterprises, business purpose, and absence of any device to distribute earning and profits. In addition, section 355 requires that each of the divided corporate entities be engaged in the active conduct of a trade or business. The proposed change would alter none of these substantive requirements of the Code. Section 355 (b)(2)(A) currently provides an attribution or ``look through'' rule for groups of corporations that operate active businesses under a holding company, which is necessary because a holding company, by definition, is not itself engaged in an active business. This lookthrough rule inexplicably requires, however, that ``substantially all'' of the assets of the holding company consist of stock of active controlled subsidiaries. The practical effect of this language is to prevent holding companies from engaging in spinoffs if they own almost any other assets. This is in sharp contrast to corporations that operate businesses directly, which can own substantial assets unrelated to the business and still engage in tax- free spinoff transactions. In the real world, of course, holding companies may, for many sound business reasons, hold other assets, such as non-controlling, less than 80 percent, interests in subsidiaries, controlled subsidiaries that have been owned for less than five years, which are not considered ``active businesses'' under section 355, or a host of non-business assets. Such holding companies routinely undertake spinoff transactions, but because of the awkward language used in section 355 (b)(2)(A), they must first undertake one or more, often a series of, preliminary reorganizations solely for the purpose of complying with this inexplicable language of the Code. Such preliminary reorganizations are at best costly, burdensome, and without any business purpose, and at worst, they seriously interfere with business operations. In a few cases, they may be so costly as to be prohibitive, and cause the company to abandon an otherwise sound business transaction that is clearly in the best interest of the corporation and the businesses it operates. There is no tax policy reasons, tax advisors agree, to require the reorganization of a consolidated group that is clearly engaged in the active conduct of a trade or business, as a condition to a spinoff. Nor is there any reason to treat affiliated groups differently than single operating companies. Indeed, no one had ever suggested one. The legislative history indicates Congress was concerned about non- controlled subsidiaries, which is elsewhere adequately addressed, no consolidated groups. For many purposes, the Tax Code treats affiliated groups as a single corporation. Therefore, the simple remedy I am proposing today for the problem created by the awkward language of section 355 (b)(2)(A) is to apply the active business test to an affiliated group as if it were a single entity. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. BREAUX

Mr. BREAUX. Mr. President, today my colleague Senator Smith of Oregon and I have introduced the Railroad Track Modernization Act. As chairman and ranking member of the Surface Transportation and Merchant Marine Subcommittee of the Senate Commerce, Science, and Transportation Committee, the needs of the Nation's small railroads have been brought to our attention by railroad experts during hearings concerning the state of the railroad industry. Our colleagues Senators Schumer, Durbin, and Specter join us in introducing this legislation. Short line railroads have saved tens of thousands of miles of light density rail line from abandonment. In 1980, there were 220 short line railroads in the U.S. Today there are over 500 short line railroads, due in part to the mergers and streamlining of Class I operations which encouraged the larger companies to sell off their little-used or abandoned branch lines. Short line and regional railroads are an important and growing component of the railroad industry. Today they operate and maintain 20 percent of the American railroad industry's route mileage and account for 9 percent of the rail industry's freight revenue and 11 percent of railroad employment. These line railroads employ approximately 25,000 individuals, serve thousands of local and rural shippers and are often the only connection these shippers have to the national rail network. To survive, this infrastructure needs to be upgraded in order to move the heavier cars that are currently being moved by the Class I railroads. The revenues of the smaller railroads are not sufficient to get the job done. Since 1982, the short lines and regional have maintained the track in rural areas where rail service would have been abandoned by the Class I railroad. Because of their relatively low traffic levels, the Class I railroads could not afford to invest in this infrastructure and, as a result, allowed these lines to slowly deteriorate. With a lower cost structure and more flexible service, short line companies that both the track have been able to keep them going. However, the revenue is still not high enough to make up for past years of neglect. Today, two factors have combined to bring this situation to a head. First, the advent of the heavier 286,000-pound cars that are becoming the standard of the Class I industry puts a greater premium on speed and precisely scheduled operations, the short line railroads must meet these higher standards or be cut off from the national system. This legislation does not create a long term program to fix this problem, but instead it creates a one time fix for this problem. While these small railroads have enough traffic to operate profitably on an ongoing basis, they do not earn enough to make the large capital investment required by the advent of the 286,000-pound cars or the need to significantly increase speed. This legislation would authorize a program which could provide grants to the nation's smaller railroads to help them make the improvements needed to stay in business and continue to serve small shippers. This legislation is of vital importance to the economy of Louisiana and the Nation. Louisiana is home to ten small freight railroads that maintain rail service on over 500 miles of track. Without these small railroads, dozens of Louisiana communities and hundreds of employees would be cut off from our national rail network. In addition, small railroads are vital to the safety of our highways. Every loaded rail car keeps as many as four trucks off to our nation's roads. At a time when we face record congestion and unprecedented delays we can ill afford the influx of trucks caused by the failure of the small freight railroad system. Millions of additional trucks per year is not only bad for our interstate highways, but also for the state rural roads in Louisiana. These roads will bear the brunt of damage caused by the trucks, while dramatically increasing our highway costs. The Timber Rock Railroad, TIBR, serves Beauregard Parrish and handles 15,000 carloads of freight per year, of which lumber and coal are the major commodities. Without the existence of TIBR, many major employers in western Louisiana such as Boise Cascade, Louisiana Pacific and Energy Gulf States would be without any rail service at all. The New Orleans and Gulf Coast Railway runs for 24 miles from Gouldsboro Yard in New Orleans through Orleans, Jefferson, and Plaquemine Parishes to Myrtle Grove. New Orleans and Gulf Coast, NOGC, serves shippers such as Chevron Chemical's Oak Point Plant, Harvest States' Myrtle Grove Grain Export Terminal, and TOSCO Petroleum's refinery at Alliance. Rail is the safest mode of transportation for hazardous materials, and by transporting hazardous materials by rail NOGC keeps hundreds of truckloads of dangerous cargoes off of Highway 23 and the streets of New Orleans. The Louisiana & Delta Railroad, L&D, is headquartered in New Iberia, LA and operates 114 miles of track carrying 12,000 carloads of carbon black, sugar, molasses, pipe, rice and paper products. The railroad serves dozens of customers in Lafayette, St. Martin, Vermilion, Iberia, St. Mary, Assumption, and Lafourche Parishes. In order to upgrade the infrastructure of Louisiana's short lines and those around the nation who provide the same kind of local service as the TIER, NOGC, and L&D, the Railroad Track Modernization Act should be passed. I look forward to working with my colleagues on this legislation. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. BREAUX

Mr. BREAUX. Mr. President, today my colleague Senator Smith of Oregon and I have introduced the Railroad Track Modernization Act. As chairman and ranking member of the Surface Transportation and Merchant Marine Subcommittee of the Senate Commerce, Science, and Transportation Committee, the needs of the Nation's small railroads have been brought to our attention by railroad experts during hearings concerning the state of the railroad industry. Our colleagues Senators Schumer, Durbin, and Specter join us in introducing this legislation. Short line railroads have saved tens of thousands of miles of light density rail line from abandonment. In 1980, there were 220 short line railroads in the U.S. Today there are over 500 short line railroads, due in part to the mergers and streamlining of Class I operations which encouraged the larger companies to sell off their little-used or abandoned branch lines. Short line and regional railroads are an important and growing component of the railroad industry. Today they operate and maintain 20 percent of the American railroad industry's route mileage and account for 9 percent of the rail industry's freight revenue and 11 percent of railroad employment. These line railroads employ approximately 25,000 individuals, serve thousands of local and rural shippers and are often the only connection these shippers have to the national rail network. To survive, this infrastructure needs to be upgraded in order to move the heavier cars that are currently being moved by the Class I railroads. The revenues of the smaller railroads are not sufficient to get the job done. Since 1982, the short lines and regional have maintained the track in rural areas where rail service would have been abandoned by the Class I railroad. Because of their relatively low traffic levels, the Class I railroads could not afford to invest in this infrastructure and, as a result, allowed these lines to slowly deteriorate. With a lower cost structure and more flexible service, short line companies that both the track have been able to keep them going. However, the revenue is still not high enough to make up for past years of neglect. Today, two factors have combined to bring this situation to a head. First, the advent of the heavier 286,000-pound cars that are becoming the standard of the Class I industry puts a greater premium on speed and precisely scheduled operations, the short line railroads must meet these higher standards or be cut off from the national system. This legislation does not create a long term program to fix this problem, but instead it creates a one time fix for this problem. While these small railroads have enough traffic to operate profitably on an ongoing basis, they do not earn enough to make the large capital investment required by the advent of the 286,000-pound cars or the need to significantly increase speed. This legislation would authorize a program which could provide grants to the nation's smaller railroads to help them make the improvements needed to stay in business and continue to serve small shippers. This legislation is of vital importance to the economy of Louisiana and the Nation. Louisiana is home to ten small freight railroads that maintain rail service on over 500 miles of track. Without these small railroads, dozens of Louisiana communities and hundreds of employees would be cut off from our national rail network. In addition, small railroads are vital to the safety of our highways. Every loaded rail car keeps as many as four trucks off to our nation's roads. At a time when we face record congestion and unprecedented delays we can ill afford the influx of trucks caused by the failure of the small freight railroad system. Millions of additional trucks per year is not only bad for our interstate highways, but also for the state rural roads in Louisiana. These roads will bear the brunt of damage caused by the trucks, while dramatically increasing our highway costs. The Timber Rock Railroad, TIBR, serves Beauregard Parrish and handles 15,000 carloads of freight per year, of which lumber and coal are the major commodities. Without the existence of TIBR, many major employers in western Louisiana such as Boise Cascade, Louisiana Pacific and Energy Gulf States would be without any rail service at all. The New Orleans and Gulf Coast Railway runs for 24 miles from Gouldsboro Yard in New Orleans through Orleans, Jefferson, and Plaquemine Parishes to Myrtle Grove. New Orleans and Gulf Coast, NOGC, serves shippers such as Chevron Chemical's Oak Point Plant, Harvest States' Myrtle Grove Grain Export Terminal, and TOSCO Petroleum's refinery at Alliance. Rail is the safest mode of transportation for hazardous materials, and by transporting hazardous materials by rail NOGC keeps hundreds of truckloads of dangerous cargoes off of Highway 23 and the streets of New Orleans. The Louisiana & Delta Railroad, L&D, is headquartered in New Iberia, LA and operates 114 miles of track carrying 12,000 carloads of carbon black, sugar, molasses, pipe, rice and paper products. The railroad serves dozens of customers in Lafayette, St. Martin, Vermilion, Iberia, St. Mary, Assumption, and Lafourche Parishes. In order to upgrade the infrastructure of Louisiana's short lines and those around the nation who provide the same kind of local service as the TIER, NOGC, and L&D, the Railroad Track Modernization Act should be passed. I look forward to working with my colleagues on this legislation. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. BREAUX

Mr. BREAUX. I ask for the yeas and nays.

Mr. BREAUX

Mr. BREAUX. Mr. President, I am pleased to introduce with my colleagues, Senators Hatch, Lincoln, and Thompson, the Subchapter S Modernization Act of 2001. This bill is very important to the 2.6 million S Corporations in this country and to the thousands of S Corporations in my own State of Louisiana. The Small Business Administration estimates that small businesses account for seventy-five percent of the employment growth in the United Sates and are the major creators of new jobs. Small businesses employ 52 percent of all private workers and provide 51 percent of the output in the private sector. They have been, in large part, the engine that fuels our economy. S Corporations make up a large number of the Nation's small businesses. In fact, the Joint Committee on Taxation estimates that over ninety-two percent of all S Corporations report less than $1 million in assets. They operate in every sector of the economy, employ millions of Americans and hold over $1.45 trillion in business assets. As such, anything we can do the help S Corporations will help the economy. The Subchapter S Modernization Act does this by encouraging S Corporations to expand, allowing S Corporations to attract more capital, and removing tax traps for the unwary. The legislation expands the list of eligible shareholders to non- resident aliens and some Individual Retirement Accounts held by banks. The bill also permits families to be treated as one shareholder, which not only expands the size of S corporations, but also helps keep family businesses together. In additional, the bill increases the number of permitted shareholders to 150 from the current law limit of 75. All of these important provisions also give S Corporations greater flexibility in attracting new sources of investment and capital. By permitting S Corporations to issue preferred stock, the Subchapter S Modernization Act increases access to capital from investors, such as venture capitalists, who insist on a preferential return. This provision also facilitates family ownership by allowing older generations to relinquish control of the corporation to later generations while maintaining an equity interest in the company. Lastly, the bill removes many complex tax traps and clarifies the law regarding many provisions enacted in 1996. Per the Joint Committee on Taxation's recommendation in its simplification report, our bill repeals the excessive passive investment income rule as a termination event for S corporations and increases the threshold for taxing excess passive investment income from 25 percent to 60 percent. Capital gains are excluded from the definition of passive income. The rules for taxing Electing Small Business Trusts and managing Qualified Subchapter S Subsidiaries are simplified in many ways, thus reducing the possibility that companies will inadvertently terminate their S corporation election. I urge my colleagues to support this bill.

Mr. BREAUX

Mr. BREAUX. Mr. President, I am pleased to introduce with my colleagues, Senators Hatch, Lincoln, and Thompson, the Subchapter S Modernization Act of 2001. This bill is very important to the 2.6 million S Corporations in this country and to the thousands of S Corporations in my own State of Louisiana. The Small Business Administration estimates that small businesses account for seventy-five percent of the employment growth in the United Sates and are the major creators of new jobs. Small businesses employ 52 percent of all private workers and provide 51 percent of the output in the private sector. They have been, in large part, the engine that fuels our economy. S Corporations make up a large number of the Nation's small businesses. In fact, the Joint Committee on Taxation estimates that over ninety-two percent of all S Corporations report less than $1 million in assets. They operate in every sector of the economy, employ millions of Americans and hold over $1.45 trillion in business assets. As such, anything we can do the help S Corporations will help the economy. The Subchapter S Modernization Act does this by encouraging S Corporations to expand, allowing S Corporations to attract more capital, and removing tax traps for the unwary. The legislation expands the list of eligible shareholders to non- resident aliens and some Individual Retirement Accounts held by banks. The bill also permits families to be treated as one shareholder, which not only expands the size of S corporations, but also helps keep family businesses together. In additional, the bill increases the number of permitted shareholders to 150 from the current law limit of 75. All of these important provisions also give S Corporations greater flexibility in attracting new sources of investment and capital. By permitting S Corporations to issue preferred stock, the Subchapter S Modernization Act increases access to capital from investors, such as venture capitalists, who insist on a preferential return. This provision also facilitates family ownership by allowing older generations to relinquish control of the corporation to later generations while maintaining an equity interest in the company. Lastly, the bill removes many complex tax traps and clarifies the law regarding many provisions enacted in 1996. Per the Joint Committee on Taxation's recommendation in its simplification report, our bill repeals the excessive passive investment income rule as a termination event for S corporations and increases the threshold for taxing excess passive investment income from 25 percent to 60 percent. Capital gains are excluded from the definition of passive income. The rules for taxing Electing Small Business Trusts and managing Qualified Subchapter S Subsidiaries are simplified in many ways, thus reducing the possibility that companies will inadvertently terminate their S corporation election. I urge my colleagues to support this bill.

Mr. BREAUX

Mr. BREAUX. Mr. President, I move to reconsider the vote.

Mr. BREAUX

Mr. BREAUX. I yield 1 minute to my colleague from Louisiana.

Mr. BREAUX. How much time do we have remaining?

Mr. BREAUX. I thank the Chair. I bring to the attention of my colleagues, lease sale 181 was proposed by President Bill Clinton. It was this entire tract of area that I show you on this map. Democratic President Bill Clinton proposed it. The Democratic Governor of Florida at the time was Governor Lawton Chiles, our former colleague. He agreed to lease sale 181 because he took into consideration where it was located. They signed off on it. In addition to that, the Democratic energy bill offered by our chairman, Jeff Bingaman, calls for going forward with lease sale 181. The potential natural gas in this lease sale, which has now been reduced in size by 75 percent, could supply 7 years' worth of natural gas to the State of Florida. I ask, if we can't drill for oil and natural gas in the Gulf of Mexico, where in the world are we going to find it? I think we should table the Nelson amendment. It is bad energy policy. It is not appropriate to undermine the carefully balanced proposal by President Clinton and also now by President Bush. We should table the amendment.

Mr. BREAUX

Mr. BREAUX. Madam President, parliamentary inquiry: What is the time sequence and who is in control of the time?

Mr. BREAUX. I yield myself 10 minutes from the time in opposition.

Mr. BREAUX. Madam President, the subject matter is energy. I just came from a meeting with the Vice President and a group of Senators, both Republicans and Democrats, who are trying to see what we can do as a Congress to come up with an energy policy that makes sense for this country. It is very clear that the United States at this time is in dire circumstances with regard to where we get energy, how much we get, and how much it costs. Over the last several weeks and the last couple of months, we have seen the price of gas go up. We have seen people panicking because they cannot afford their electricity bills because of the high price of natural gas. We see the uncertainty of areas of this country suffering blackouts and businesses having to close and suffer economic damage because they don't have enough energy. At the same time, we import 57 percent of the energy we consume every day from foreign sources. Many of these foreign sources are undependable. They are not our allies, and they certainly do not have the best interests of the United States as the premise for their operations. Yet 57 percent of our energy comes from overseas. It comes from organized cartels that regularly do things for which, if done in this country, they would go to the penitentiary. What they do every day is fix prices of energy that we have to buy from them. They tell us how much we are going to have to pay by controlling the amount they produce. Yet we as a nation, in the year 2001, have been comfortable with allowing that type of energy policy to govern how we exist when it comes to energy supplies. If we imported 57 percent of the food we eat, people would be marching on the capital of this country saying that is an unacceptable condition because food obviously is important to our national security and the way we live in America. That is absolutely true. But it is no less true that when we import 57 percent of the energy, that is an unacceptable set of circumstances we must address. How do we address it? Unfortunately, one of the ways that we have, over the years and over several administrations and over several Congresses, was to say what we were not going to do. We have said that we are not going to look for oil in the Outer Continental Shelf, which has some of the most promising resources of any place in the world off the coast of the United States; that we are not going to do anything from Canada to the Florida Keys because those areas are too valuable and should not be touched; and through congressional moratoriums and through Presidential moratoriums, basically everything from Key West to the border of Canada is off limits: Don't touch it. In addition to that, when we look over to the west coast, which happens to have some of the States that consume by far the greatest amount of energy per capita, we have said, through moratoriums, both congressional and Presidential, that we are not going to do anything from Canada on the west coast all the way to Mexico on our southern border because those areas are pristine, they are nice, we should not have the potential for having an oil spill. The only area of our Outer Continental Shelf in which we have had production, which produces the greatest amount of natural gas, the greatest amount of oil and gas, and has done so for the last 60 years, of the offshore areas is the Gulf of Mexico. We have said we are not going to touch ANWR. We are not going to touch the Arctic National Wildlife Refuge. We will not touch the monuments. We will not touch the east coast. We are not going to touch the west coast. But go drill for oil and gas in the Gulf of Mexico. I represent Louisiana. I am happy with that policy because it provides jobs. It provides energy. We make a contribution to solving the energy policy of this country. We understand it. We have developed the industry. We know its faults. We know what it can do and what it cannot do, and we have done it for 60 years. The technology that has been developed in the Gulf of Mexico is the technology that is used worldwide. Less than 2 percent of the oil that is spilled in the oceans of the world comes from offshore exploration and production activities. Where does it come from? It comes from seepage, which is natural. It comes from ballast discharges from ships. And it comes from rusty, leaky tankers that import oil from all over the world. The Senator from Florida mentioned the Exxon Valdez. That was not a drilling accident, that was a ship accident. That was a tanker delivering oil, as they do every day to the ports of the United States, where we import 57 percent of the oil that we use, coming to this country in tankers that have a far greater risk than any risk that possibly could occur from drilling activities in the offshore waters of the United States. The State of Florida, under a Democratic Governor, Lawton Chiles, our good friend and our former colleague with whom I served in the Senate, and a Democratic President of the United States--at that time, President Clinton--reached an agreement on lease sale 181. It was proposed under a Democratic administration, and it was agreed to by a Democratic Governor. The original sale has the potential to supply Florida with as much as 7 years of the natural gas they use every day to cool their homes in the summer and to possibly heat their homes if it gets cold enough in the winter months. That sale can provide 7 years of their natural gas supplies. They import 99 percent of the natural gas they use. Yet now they say: We are going to object to a sale that has been worked out, carefully crafted, proposed by a Democratic administration, approved by a previous Democratic Governor, because it has the potential to damage their coastline. We have done that in Louisiana for 60 years. While the beaches of Florida may be prettier than the beaches of Louisiana, I argue that the value of the coastal estuarial area is no less valuable in Louisiana and Texas and Alabama and Mississippi than it is on the coast of Florida. In fact, I argue that the coastal estuaries of Louisiana are far more important in the sense that they are the habitat for waterfowl, for ducks, and for geese, and for finfish, and for shrimp, and for oysters, and for fur-bearing animals, alligators, everything that is important to an ecosystem. We have been able to preserve those areas and to do so while producing the largest amount of oil and gas for our neighbors in the other 49 States in the history of this country. We have done so successfully. We have done so in a balanced fashion, and we have done so with a minimum impact. Is it perfect? Of course not, but nothing is perfect. It is fine to drive around in battery-operated cars. I am all for that. It is great to have windmills, and it is great to have geothermal power. What is not great is to import 57 percent of our energy from foreign sources which are undependable and unacceptable. What if we start blocking the Gulf of Mexico? Are we going to fight to open up California? Are we going to fight to open up George's Banks? That is not going to happen. I daresay we make a very serious mistake to say: Oh, let them do it over there, but not in my backyard. We will consume; we want it cheap; we want a plentiful supply; but, by golly, don't do it in my backyard. Do it somewhere else. We are too good to have oil and gas production off our coast because our beaches are clean. Well, my beaches and coastline are also very valuable, but we also show that it can be done in a compatible fashion to produce energy needs for this country and at the same time preserve and protect the environment and wetlands. The Democratic bill offered by the chairman, Senator Bingaman, calls for going forward with lease sale 181. A Democratic President proposed lease sale 181, and a previous Democratic Governor of the State of Florida approved lease sale 181. I don't know what has happened, and I don't understand the politics of it, but something has changed. The administration, in an effort to say, all right, we are going to do something--I think what they did was terrible. They took sale 181 and cut it by 75 percent. They said we are going to cut out 75 percent of the size of this lease sale and only allow 25 percent. I think that was a terrible decision. I told them that. For them to now say Congress has to come in and postpone all of that--even the 25 percent remaining--is absolutely, in my opinion, unacceptable. If we are going to have an energy policy in this country that makes sense, we are going to have to have a balanced policy. I suggest that saying ``not in my backyard, never, ever, don't want to see it, let's get it from somebody else'' is unacceptable, not prudent, and is bad public policy. I think it is something that should not be adopted. At the appropriate time, I am sure we will have a vote on this. I hope colleagues will join with me in saying that at least in the Gulf of Mexico--if we can have it nowhere else--we will be willing to have a reasonable exploration program in an area where we have already done it for the past 60 years. I reserve the remainder of my time.

Mr. BREAUX. Madam President, I am not sure who controls the time in opposition. I yield whatever time the Senator needs. Ten minutes?

Mr. BREAUX. I will take 5 minutes off the time.

Mr. BREAUX. Madam President, so that people who may be watching on their monitors in their offices can understand a couple things about lease sale 181, this lease sale did not happen overnight. As I indicated before, when President Clinton was serving in office and negotiating with Governor Lawton Chiles --two Democrats--on this lease sale 181, President Clinton said: We are going to set off limits all the areas in the eastern gulf, but we are going to have lease sale 181. In 1996 when they released the plan, the Governor of Florida, Lawton Chiles, expressed his appreciation for Minerals Management designating lease sale 181 to not be within 100 miles of the coast of Florida. It is 70 miles off the coast of Louisiana. It is much closer to Louisiana, but in no case is it within 100 miles of the coast of Florida. It is 285 miles from Tampa, 213 miles from their coast, 138 miles from Panama City. It is only 70 miles, as I indicated, from the coast of Louisiana. In 1996 when we had a Democratic Governor and a Democratic President, they thought this compromise was fine and agreed to the compromise at that time and said this is something that fits into our plans for energy and thank you very much for making sure it does not come within 100 miles of the coast of Florida. That was their agreement. It has proceeded forward under those terms until, because of opposition of the current Governor of Florida, the administration lopped off 75 percent of the sale in addition to that agreement in 1996. This amendment takes the remaining 25 percent and says we cannot have that either. As the Senator from Oklahoma has indicated, when one is talking about a balanced energy policy in the country, this is something that is not acceptable. The other point I will make is we have done exploration in the eastern Gulf of Mexico for decades. This is not a first movement into the eastern Gulf of Mexico. Drilling for natural gas and oil has occurred in the eastern Gulf of Mexico for more than three decades. For more than three decades we have had activities off the Destin Dome, which I happen to love, which is a beautiful part of the country. I spent many summers on the beautiful beaches in Destin. They have not gotten anything. They have had extensive exploratory wells. Shell had in the past a bunch of dry holes right off Pensacola. We have been drilling in the eastern gulf for three decades. I suggest it has been done without any problems, without any spills or anything of that nature. We have a compromise based on a compromise based on a compromise. Yet today we have an effort to say even those compromises are unacceptable. If you have a State that imports 99 percent of the natural gas they consume, they, too, have an obligation to help contribute to the supply of something that is clearly the cheapest burning fuel in the world. Unfortunately the area they knocked off, the top area, is the area that has the greatest potential for natural gas because the natural gas fields are flowing off the coast of Louisiana, moving in a northeast way. All the activity has been in that area. That is where the natural gas is. Unfortunately, it has already been removed. That is where most of the natural gas potential is. As I indicated, the Minerals Management survey said if you have wholesale gas, that could supply as much as 14 years of the natural gas needs for the State of Florida. With the reduced area, the projection is, even lopping this off, it has enough potential natural gas alone to supply Florida with 7 years of their natural gas needs for cooling, operating their industries and businesses, and also for heating in the winter whenever it might be necessary on those rare days. To say this compromise is still not acceptable is, in fact, unacceptable and the amendment should be tabled.

Mr. BREAUX. I will be happy to yield.

Mr. BREAUX. The Senator makes a very good point. I answer his question with two points. Some in Florida--and I understand their argument--say we have beautiful beaches; we do not want oil to be spilled around our beaches. I do not want it to happen either. I argue the wetlands in Louisiana, which are about 25 percent of all the wetlands in North America, with the wildlife--the birds, the ducks, the geese, fish, shrimp, oysters, fur-bearing animals, alligators--all of that ecosystem which is probably the most complicated anywhere in the world has been able to thrive and do very well in supporting those wildlife features and at the same time support the largest amount of oil and gas production anywhere in the world. In addition to that, the statistics say what the risk is. Advances in technology have made this operation the cleanest activity of finding energy anywhere in the world. For example, for the period between 1980 and 1999, a 20-year period, 7.4 billion barrels of oil have been produced in the Outer Continental Shelf with less than .001 percent spill. That is a 99.999 percent safety record for oil. I dare any industry anywhere to come up with those safety numbers. That shows we can have that kind of activity which produces that amount of oil with that little oil spill. If we had a lousy track record out here, the Senator would be correct in saying do not put it here because it is going to damage our coast. But if one looks at the last 60 years, one can see what has occurred is huge amounts of production and yet a very insignificant amount of spill into the waters of the ocean.

Mr. BREAUX. Yes, I yield.

Mr. BREAUX. We have been doing this for a long time. I say to the Senator from Oklahoma, when I was in the House in the seventies--it seems like the Dark Ages now--we wrote the Outer Continental Shelf Lands Act. We had the National Academy of Sciences--and it has been updated. This is not the National Petroleum Institute; this is not the State of Louisiana, but the National Academy of Sciences said less than 2 percent of the oil that is spilled in the oceans of the world come from offshore drilling activity--less than 2 percent. Most of it comes from tanker discharges with rusty bucket tankers bringing in oil from foreign countries, as we have happening in this country, from natural seepage, from ballast discharges, and from other activities, allowing nonpoint source runoff into the Nation's waters, into rivers, and finding its way into our bodies of water. Less than 2 percent of oil that is spilled in the oceans of the world, the National Academy of Sciences says, comes from OCS activities. I think that is an enviable record for anyone. I yield whatever time the Senator from Alaska requires.

Mr. BREAUX. Mr. President, how much time remains on both sides?

Mr. BREAUX

Mr. BREAUX. Mr. President, I rise today to introduce tax legislation which proposes only a small technical modification of current law, but, if enacted, would provide significant simplification of routine corporate reorganizations. The legation is identical to S. 773 which I introduced on April 13 of last year. This proposed change is small but very important. It would not alter the substance of current law in any way. It would, however, greatly simplify a common corporate transaction. This small technical change will alone save corporations millions of dollars in unnecessary expenses and economic costs that are incurred when they divide their businesses. Past Treasury Departments have agreed, and I have no reason to believe the current Treasury Department will feel any differently, that this change would bring welcome simplification to section 355 of the Internal Revenue Code. Indeed, the Clinton Administration in its last budget submission to the Congress had proposed this change. The last scoring of this proposal showed no loss of revenue to the U.S. Government, and I am aware of no opposition to its enactment. Corporations, and affiliated groups of corporations, often find it advantageous , or even necessary, to separate two or more businesses. The division of AT&T from its local telephone companies is an example of such a transaction. The reasons for these corporate divisions are many, but probably chief among them is the ability of management to focus on one core business. At the end of the day, when a corporation divides, the stockholders simply have the stock of two corporations, instead of one. The Tax Code recognizes this is not an event that should trigger tax, as it includes corporate divisions among the tax- free reorganization provisions. One requirement the Tax Code imposes on corporate divisions is very awkwardly drafted, however. As a result, an affiliated group of corporations that wishes to divide must often engage in complex and burdensome preliminary reorganizations in order to accomplish what, for a single corporate entity, would be a rather simple and straightforward spinoff of a business to its shareholders. The small technical change I propose today would eliminate the need for these unnecessary transactions, while keeping the statue true to Congress's original purpose. More specifically, section 355, and related provision of the Code, permits a corporation or an affiliated group of corporations to divide on a tax-free basis into two or more separate entities with separate businesses. There are numerous requirements for tax-free treatment of a corporate division, or ``spinoff,'' including continuity of historical shareholder interest, continuity of the business enterprises, business purpose, and absence of any device to distribute earning and profits. In addition, section 355 requires that each of the divided corporate entities be engaged in the active conduct of a trade or business. The proposed change would alter none of these substantive requirements of the Code. Section 355(b)(2)(A) currently provides an attribution or ``look through'' rule for groups of corporations that operate active businesses under a holding company, which is necessary because a holding company, by definition, is not itself engaged in an active business. This lookthrough rule inexplicably requires, however, that ``substantially all'' of the assets of the holding company consist of stock of active controlled subsidiaries. The practical effect of this language is to prevent holding companies from engaging in spinoffs if they own almost any other assets. This is in sharp contrast to corporations that operate businesses directly, which can own substantial assets unrelated to the business and still engage in tax- free spinoff transactions. In the real world, of course, holding companies may, for many sound business reasons, hold other assets, such as non-controlling, less than 80 percent, interests in subsidiaries, controlled subsidiaries that have been owned for less than five years, which are not considered ``active businesses'' under section 355, or a host of non-business assets. Such holding companies routinely undertake spinoff transactions, but because of the awkward language used in section 355(b)(2)(A), they must first undertake one or more, often a series of, preliminary reorganizations solely for the purpose of complying with this inexplicable language of the Code. Such preliminary reorganizations are at best costly, burdensome, and without any business purpose, and at worst, they seriously interfere with business operations. In a few cases, they may be so costly as to be prohibitive, and cause the company to abandon an otherwise sound business transaction that is clearly in the best interest of the corporation and the businesses it operates. There is no tax policy reasons, tax advisors agree, to require the reorganization of a consolidated group that is clearly engaged in the active conduct of a trade or business, as a condition to a spinoff. Nor is there any reason to treat affiliated groups differently than single operating companies. Indeed, no one has ever suggested one. The legislative history indicates Congress was concerned about non- controlled subsidiaries, which is elsewhere adequately addressed, no consolidated groups. For many purposes, the Tax Code treats affiliated groups as a single corporation. Therefore, the simple remedy I am proposing today for the problem created by the awkward language of section 355(b)(2)(A) is to apply the active business test to an affiliated group as if it were a single entity. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. BREAUX

Mr. BREAUX. Mr. President, I rise today to introduce tax legislation which proposes only a small technical modification of current law, but, if enacted, would provide significant simplification of routine corporate reorganizations. The legation is identical to S. 773 which I introduced on April 13 of last year. This proposed change is small but very important. It would not alter the substance of current law in any way. It would, however, greatly simplify a common corporate transaction. This small technical change will alone save corporations millions of dollars in unnecessary expenses and economic costs that are incurred when they divide their businesses. Past Treasury Departments have agreed, and I have no reason to believe the current Treasury Department will feel any differently, that this change would bring welcome simplification to section 355 of the Internal Revenue Code. Indeed, the Clinton Administration in its last budget submission to the Congress had proposed this change. The last scoring of this proposal showed no loss of revenue to the U.S. Government, and I am aware of no opposition to its enactment. Corporations, and affiliated groups of corporations, often find it advantageous , or even necessary, to separate two or more businesses. The division of AT&T from its local telephone companies is an example of such a transaction. The reasons for these corporate divisions are many, but probably chief among them is the ability of management to focus on one core business. At the end of the day, when a corporation divides, the stockholders simply have the stock of two corporations, instead of one. The Tax Code recognizes this is not an event that should trigger tax, as it includes corporate divisions among the tax- free reorganization provisions. One requirement the Tax Code imposes on corporate divisions is very awkwardly drafted, however. As a result, an affiliated group of corporations that wishes to divide must often engage in complex and burdensome preliminary reorganizations in order to accomplish what, for a single corporate entity, would be a rather simple and straightforward spinoff of a business to its shareholders. The small technical change I propose today would eliminate the need for these unnecessary transactions, while keeping the statue true to Congress's original purpose. More specifically, section 355, and related provision of the Code, permits a corporation or an affiliated group of corporations to divide on a tax-free basis into two or more separate entities with separate businesses. There are numerous requirements for tax-free treatment of a corporate division, or ``spinoff,'' including continuity of historical shareholder interest, continuity of the business enterprises, business purpose, and absence of any device to distribute earning and profits. In addition, section 355 requires that each of the divided corporate entities be engaged in the active conduct of a trade or business. The proposed change would alter none of these substantive requirements of the Code. Section 355(b)(2)(A) currently provides an attribution or ``look through'' rule for groups of corporations that operate active businesses under a holding company, which is necessary because a holding company, by definition, is not itself engaged in an active business. This lookthrough rule inexplicably requires, however, that ``substantially all'' of the assets of the holding company consist of stock of active controlled subsidiaries. The practical effect of this language is to prevent holding companies from engaging in spinoffs if they own almost any other assets. This is in sharp contrast to corporations that operate businesses directly, which can own substantial assets unrelated to the business and still engage in tax- free spinoff transactions. In the real world, of course, holding companies may, for many sound business reasons, hold other assets, such as non-controlling, less than 80 percent, interests in subsidiaries, controlled subsidiaries that have been owned for less than five years, which are not considered ``active businesses'' under section 355, or a host of non-business assets. Such holding companies routinely undertake spinoff transactions, but because of the awkward language used in section 355(b)(2)(A), they must first undertake one or more, often a series of, preliminary reorganizations solely for the purpose of complying with this inexplicable language of the Code. Such preliminary reorganizations are at best costly, burdensome, and without any business purpose, and at worst, they seriously interfere with business operations. In a few cases, they may be so costly as to be prohibitive, and cause the company to abandon an otherwise sound business transaction that is clearly in the best interest of the corporation and the businesses it operates. There is no tax policy reasons, tax advisors agree, to require the reorganization of a consolidated group that is clearly engaged in the active conduct of a trade or business, as a condition to a spinoff. Nor is there any reason to treat affiliated groups differently than single operating companies. Indeed, no one has ever suggested one. The legislative history indicates Congress was concerned about non- controlled subsidiaries, which is elsewhere adequately addressed, no consolidated groups. For many purposes, the Tax Code treats affiliated groups as a single corporation. Therefore, the simple remedy I am proposing today for the problem created by the awkward language of section 355(b)(2)(A) is to apply the active business test to an affiliated group as if it were a single entity. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. BREAUX

Mr. BREAUX. I was not going to say anything, but the arguments have nothing to do with the substance of the amendment. Everybody ought to realize punitive damages have nothing to do with awarding a person who has been injured. A person who has been injured is compensated for economic losses, and there is no cap on economic losses. They are compensated by pain and suffering. There are no caps on pain and suffering. Punitive damages have one purpose. That is to punish the person who has caused the injury. That is the only purpose for punitive damages, to say to a company or an HMO, your conduct has been so outrageous, so egregious, you will be punished. That has nothing to do with the compensation for the injured plaintiff or child. They have already been taken care of. The concept of taking punitive damages and saying, we will use those damages to help people who do not have insurance, is a novel idea. Other States have done it. It is a good approach. I think we should support it because it has nothing to do with taking away anything to which an injured person is entitled. They have already been compensated in this bill with unlimited, uncapped economic and noneconomic pain and suffering damages. The arguments that I have heard have no merit considering the nature of the amendment.