Bob Graham

Mr. GRAHAM

Mr. GRAHAM. Mr. President, an estimated 200,000 new Floridians every year move into the Sunshine State, making Florida one of the fastest growing States in the Nation. As the population increases, so do the number of people seeking justice from the Federal Courts in our State. Few are more familiar with these demands than the judges and personnel of the United States Courts in Florida's Middle and Southern Districts. The Judicial Conference of the United States has established a benchmark caseload standard of 430 case filings per judgeship. This is a goal that is rarely met in Florida's Middle and Southern Districts. In fact, the number of case filings per judgeship in the Southern District has remained above 500 since 1995; at the end of last year it stood at 609. In the Middle District the courts' weighted caseload with 547 per judgeship at the end of 2001, 27 percent above the Conference standard. In light of this considerable burden on Florida's judges and the outlook for continued growth within the State, the United States Judicial Conference has recommended that Congress add one permanent and one temporary judgeship to the Middle District and one permanent judgeship in the Southern District. It is in accordance with these recommendations that my colleague from Florida and I introduce legislation to establish these needed judgeships. It is my hope that these additional judges will help to alleviate the heavy burden currently placed on Florida's Federal courts. The administration of justice will continue to be a challenge in Florida's Federal courts unless adequate resources are committed. Perhaps the most egregious example of this lack of resources is in the Fort Myers division of the Middle District, where judge's criminal caseloads stand at an astounding ninety percent above the national average. As Florida continues to grow, this burden will only increase. The services provided by the Federal judiciary must grow to meet these demands. I urge the Senate to support this legislation, ensure adequate resources for the administration of justice, and uphold the United States Constitution's guarantee of fair and speedy justice.

Mr. GRAHAM

Mr. GRAHAM. Madam President, today I am introducing legislation that will improve the effectiveness of one of the most effective programs we have to help Americans get affordable housing, the Low Income Housing Tax Credit. I am proud to be joined in this effort by my esteemed colleagues Senator Hatch, Senator Jeffords, Senator Kerry and Senator Torricelli. The Low Income Housing Tax Credit was created in 1986 to attract private sector capital to the affordable housing market. It has been the major engine for financing the production of low income multi- family housing. The program offers developers and investors in affordable housing credit against their Federal income tax in return for their investment. Since its inception, the Low Income Housing Tax Credit has assisted in the development and availability of roughly 850,000 new and rehabilitated units of affordable housing. Last fall, the Internal Revenue Service issued its first guidance in the program's 16 year history. That guidance was issued in the form of several technical advice memoranda, or TAMs, and specified which development costs will be eligible and ineligible for the credit, known as eligible basis. TAMs are not official guidance, reviewed by the Treasury Department, but instead, IRS legal opinion providing direction to IRS agents conducting audits. They are not citable in court proceedings because they are not official guidance. In the absence of official guidance, TAMs could be taken as the official government position. In fact, that is exactly what is happening. The IRS's position is contrary to common industry practice, and eliminates many reasonable, legitimate and necessary costs from the tax credit. This has caused uncertainty among investors as to whether the credits for which they have been paid, will be realized. Moreover, these guidelines could adversely affect the ability of States to target affordable housing to those who need it the most. It is important to understand, this legislation will not increase the number of low-income housing tax credits available. The maximum amount of credits that states may allocate to developers of affordable housing properties is set by the Internal Revenue Code. Thanks to legislation that we enacted in 2000, the amount available to each state has increased from $1.50 to $1.75 times the State's population. That 40 percent increase is expected to produce about 30,000 more units a year. Since the unmet demand for affordable housing is many times greater than what can be built with the help of the credit, our legislation should not affect revenues. In fact, the only way for this legislation to have a revenue impact is if the legislation makes it easier for the States to use the credits we intend for them to have under present law. What this legislation does do, however, is very important. To understand its importance, it may be useful to have a little background on how the low-income housing tax credit works. In economic terms, the credit is equity financing which replaces a portion of debt that would otherwise be necessary to finance a property. By replacing debt, credits work to reduce interest costs. This allows a property owner to offer lower rents than otherwise would be the case. The most unique feature of the program is that State Housing Finance Agencies award Federal tax credits to developers of rental housing. Since these agencies have considerable flexibility in how they distribute the credits, developers compete for the limited number of tax credits by submitting project proposals. The Housing Finance Agencies rate the proposals, and allocate credits to individual properties based on criteria provided in the Internal Revenue Code, and on the State's particular housing needs and priorities. The amount of credits a State may allocate to a particular property is also limited by the Internal Revenue Code. The limit is determined as percentage of the basis of a property. The basis is, generally speaking, the costs of constructing a building that is part of an affordable housing project. Non-federally subsidized new construction may receive a 9-percent credit. Existing buildings and new buildings receiving other Federal subsidies may get a 4-percent credit. The problem at hand is this. The IRS takes the position that certain construction costs should not be included in basis. This position makes a large number of affordable housing properties financially infeasible, and weakens the economics of those that still pass minimum underwriting requirements. The loss of equity would surely affect the properties that serve the lowest income tenants, provide higher levels of service, or operate in high cost areas. The reason that this is problematic is simple. Reducing the amount of credits does not reduce the development costs. It merely removes a source of financing, forcing either higher rents or lower quality construction. Apparently, the Treasury Department and Internal Revenue Service agree that this is an issue worthy of review, as both agencies have included it in their business plan. As recently as this month, the IRS issued new guidance on one of the items addressed by the TAMs, but there does not appear to be a full review of the effect of the positions set forth in the TAMs anytime soon. This legislation would amend Section 42(d) of the Internal Revenue Code to specify that various associated development costs are to be included in eligible basis. In many cases, the largest item excluded from eligible basis under the TAMs is ``impact fees.'' Impact fees are fees required by the Government ``as a condition to the development'' and considered ineligible because they are one-time costs, unlike building permits which need to be renewed each time a building is built. These fees cover a wide range of infrastructure improvements including sewer lines, schools, and roads. Certainly, whether or not they are includible in basis for the purpose of calculating the amount of tax credit, these costs will be incurred and will impact the economics of the property. As I mentioned previously, the IRS has recently addressed the inclusion of impact fees in eligible basis, but not other costs directly related to building construction. Other items that would be severely restricted or excluded from eligible basis under the interpretations expressed in the TAMs are site preparation costs, development fees, professional fees related to developing the property, and construction financing costs. The legislation we are introducing today will clarify that any cost incurred in preparing a site which is reasonably related to the development of a qualified low income housing property, any reasonable fee paid to the developer, any professional fee relating to an item includible in basis, and any cost of financing attributable to construction of the building is includible in basis for the purpose of calculating the maximum amount of credit a state may allocate to a low- income housing property. The intent of these clarifications is simply to codify common industry practice before the issuance of the TAMs. Not only will the legislation allow the low-income tax credit program to provide better quality housing at lower rental rates than would be possible if the positions taken in the TAMs are followed, but clarification will help simplify administration of the credit by giving both taxpayers and the Internal Revenue Service a clearer statement of the standards that apply in calculating credit amounts. Our economy is not doing as well as we would like, and there is a significant likelihood that we are going to need even more affordable housing in the not too distant future. We should be proud that we increased the amount of low-income housing tax credits that will be available to help finance this housing. What we need to do now is to make sure that these credits are used as efficiently as possible to provide housing for those who need it the most. The legislation we are introducing today will help achieve that goal. I ask unanimous consent that the text of this bill be printed in the Record.

Mr. GRAHAM

Mr. GRAHAM. Madam President, today I am introducing legislation that will improve the effectiveness of one of the most effective programs we have to help Americans get affordable housing, the Low Income Housing Tax Credit. I am proud to be joined in this effort by my esteemed colleagues Senator Hatch, Senator Jeffords, Senator Kerry and Senator Torricelli. The Low Income Housing Tax Credit was created in 1986 to attract private sector capital to the affordable housing market. It has been the major engine for financing the production of low income multi- family housing. The program offers developers and investors in affordable housing credit against their Federal income tax in return for their investment. Since its inception, the Low Income Housing Tax Credit has assisted in the development and availability of roughly 850,000 new and rehabilitated units of affordable housing. Last fall, the Internal Revenue Service issued its first guidance in the program's 16 year history. That guidance was issued in the form of several technical advice memoranda, or TAMs, and specified which development costs will be eligible and ineligible for the credit, known as eligible basis. TAMs are not official guidance, reviewed by the Treasury Department, but instead, IRS legal opinion providing direction to IRS agents conducting audits. They are not citable in court proceedings because they are not official guidance. In the absence of official guidance, TAMs could be taken as the official government position. In fact, that is exactly what is happening. The IRS's position is contrary to common industry practice, and eliminates many reasonable, legitimate and necessary costs from the tax credit. This has caused uncertainty among investors as to whether the credits for which they have been paid, will be realized. Moreover, these guidelines could adversely affect the ability of States to target affordable housing to those who need it the most. It is important to understand, this legislation will not increase the number of low-income housing tax credits available. The maximum amount of credits that states may allocate to developers of affordable housing properties is set by the Internal Revenue Code. Thanks to legislation that we enacted in 2000, the amount available to each state has increased from $1.50 to $1.75 times the State's population. That 40 percent increase is expected to produce about 30,000 more units a year. Since the unmet demand for affordable housing is many times greater than what can be built with the help of the credit, our legislation should not affect revenues. In fact, the only way for this legislation to have a revenue impact is if the legislation makes it easier for the States to use the credits we intend for them to have under present law. What this legislation does do, however, is very important. To understand its importance, it may be useful to have a little background on how the low-income housing tax credit works. In economic terms, the credit is equity financing which replaces a portion of debt that would otherwise be necessary to finance a property. By replacing debt, credits work to reduce interest costs. This allows a property owner to offer lower rents than otherwise would be the case. The most unique feature of the program is that State Housing Finance Agencies award Federal tax credits to developers of rental housing. Since these agencies have considerable flexibility in how they distribute the credits, developers compete for the limited number of tax credits by submitting project proposals. The Housing Finance Agencies rate the proposals, and allocate credits to individual properties based on criteria provided in the Internal Revenue Code, and on the State's particular housing needs and priorities. The amount of credits a State may allocate to a particular property is also limited by the Internal Revenue Code. The limit is determined as percentage of the basis of a property. The basis is, generally speaking, the costs of constructing a building that is part of an affordable housing project. Non-federally subsidized new construction may receive a 9-percent credit. Existing buildings and new buildings receiving other Federal subsidies may get a 4-percent credit. The problem at hand is this. The IRS takes the position that certain construction costs should not be included in basis. This position makes a large number of affordable housing properties financially infeasible, and weakens the economics of those that still pass minimum underwriting requirements. The loss of equity would surely affect the properties that serve the lowest income tenants, provide higher levels of service, or operate in high cost areas. The reason that this is problematic is simple. Reducing the amount of credits does not reduce the development costs. It merely removes a source of financing, forcing either higher rents or lower quality construction. Apparently, the Treasury Department and Internal Revenue Service agree that this is an issue worthy of review, as both agencies have included it in their business plan. As recently as this month, the IRS issued new guidance on one of the items addressed by the TAMs, but there does not appear to be a full review of the effect of the positions set forth in the TAMs anytime soon. This legislation would amend Section 42(d) of the Internal Revenue Code to specify that various associated development costs are to be included in eligible basis. In many cases, the largest item excluded from eligible basis under the TAMs is ``impact fees.'' Impact fees are fees required by the Government ``as a condition to the development'' and considered ineligible because they are one-time costs, unlike building permits which need to be renewed each time a building is built. These fees cover a wide range of infrastructure improvements including sewer lines, schools, and roads. Certainly, whether or not they are includible in basis for the purpose of calculating the amount of tax credit, these costs will be incurred and will impact the economics of the property. As I mentioned previously, the IRS has recently addressed the inclusion of impact fees in eligible basis, but not other costs directly related to building construction. Other items that would be severely restricted or excluded from eligible basis under the interpretations expressed in the TAMs are site preparation costs, development fees, professional fees related to developing the property, and construction financing costs. The legislation we are introducing today will clarify that any cost incurred in preparing a site which is reasonably related to the development of a qualified low income housing property, any reasonable fee paid to the developer, any professional fee relating to an item includible in basis, and any cost of financing attributable to construction of the building is includible in basis for the purpose of calculating the maximum amount of credit a state may allocate to a low- income housing property. The intent of these clarifications is simply to codify common industry practice before the issuance of the TAMs. Not only will the legislation allow the low-income tax credit program to provide better quality housing at lower rental rates than would be possible if the positions taken in the TAMs are followed, but clarification will help simplify administration of the credit by giving both taxpayers and the Internal Revenue Service a clearer statement of the standards that apply in calculating credit amounts. Our economy is not doing as well as we would like, and there is a significant likelihood that we are going to need even more affordable housing in the not too distant future. We should be proud that we increased the amount of low-income housing tax credits that will be available to help finance this housing. What we need to do now is to make sure that these credits are used as efficiently as possible to provide housing for those who need it the most. The legislation we are introducing today will help achieve that goal. I ask unanimous consent that the text of this bill be printed in the Record.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I ask that the text of the bill be printed in the Record.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I ask that the text of the bill be printed in the Record.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, as usual, the Senator from Connecticut has found a reasoned way to resolve this issue and avoid some of the concerns that the Senator from Missouri expressed. As we mentioned during the conversation we had in the Senator's office about 10 days ago, Senator Nelson and I are very supportive of the underlying legislation. We do not want to be, in any way, an obstacle to its successful passage. We do have this issue. I might say, Florida is not the only State where there are unresolved allegations of irregularities.

Mr. GRAHAM. Mr. President, we are here this afternoon largely because of the events which surrounded the election in November of 2000. Had there not been the degree of turmoil and controversy and allegations, it is unlikely there would have been the public momentum that led to the development of this very constructive national legislation that I hope we are about to adopt. There have been other arenas which have been touched by the events of November 2000. Many of our State legislatures have adopted new procedures, including voting machines, means by which voters will have an opportunity to have second ballot checks, and other methods, all of which are intended to assure that Americans will have the maximum opportunity within the law to participate in our democracy. There is another forum, as my good friend and colleague has indicated, which has not been functioning as it indicated it would. That is the executive responsibility. In the past, this Congress has adopted a set of laws which represent the national standards for elections. They are particularly sensitive to those voters who, maybe in the past, had a history of not having full access to voting rights. As part of that process, if there are allegations of irregularities, they are referred to the Department of Justice for a review and then what action that review indicates is appropriate. Florida was not the only State that was affected by the turmoil of 2000. But because we happen to be the last State to have its turmoil pacified, we received a particular amount of national attention. So this issue is one especially deeply felt by the citizens of our State. There is concern about what has happened to these allegations of irregularities that were submitted to the Department of Justice that have not yet come to closure. As Senator Nelson has indicated, we have made requests on a number of occasions to try to get an indication of where these reviews were and how close we were to getting a final resolution of these matters, and we have largely been rebuffed. I am disappointed, frankly, that we have to offer this amendment which will require that in all of the areas where there is still an outstanding unresolved allegation of violation of Federal standards of election, and where the Department of Justice has not come to final closure, there be, on a 60-day clock basis, a report to the Congress which wrote these laws that the Department of Justice is supposed to be enforcing, as to what is happening, and how close we are to getting to a completion of this review. This is intended to be a means by which the Congress can carry out its oversight responsibility and protect its laws--laws that, as I said, were particularly designed to protect the voting interests of all Americans, especially those Americans who in the past have not had equal access to our democratic system. I believe this is an appropriate congressional request for information which I hope will have the result of motivating the Department to complete its review, come to closure, and let us close the chapter on the executive responsibility for the election. And I hope the Congress is soon going to, by adoption of this legislation, be closing the chapter on our responsibility for this legislation.

Mr. GRAHAM. The amendment we offered was not State specific. We are requesting wherever there is yet an open file of an allegation of irregularity in the Department of Justice, the Department periodically report as to how they are progressing so that eventually there will be closure. We do not want to get to 2004 and still have open cases from the year 2000 election. The Senator's committee is the committee that has jurisdiction over these issues. Witness the fact you produced this excellent piece of legislation. So if your committee could accomplish what, frankly, Senator Nelson and I have been frustrated in our efforts to do for the last several months, which is to get a status report--I would hope you would be asking for all States, but we would particularly urge that you do it for our State--that would satisfy our goal, which is to get to closure, not to do so in a particular process, whether it is legislation or otherwise. The Senator has suggested a process that seems very reasonable. If you think you would be willing to do so, we will be pleased to accept the Senator's generous offer and leave.

Mr. GRAHAM

Mr. GRAHAM. Accordingly, one of the most important aspects of the nutrition title of this legislation is its sensitivity to the needs of legal immigrants and their families. Immigrants come to this country today for the same reasons that have brought them here throughout our history: to live in freedom and the opportunity to earn a better life for themselves and their families through hard work. Unfortunately, many immigrants, like other workers in this country, will at times find it difficult to obtain work. Others may be unable to work for a period of time because of workplace injuries or family illnesses. To prevent these hard-working, tax-paying families from suffering serious hardship, it is vital that we extend our country's nutritional safety net, the food stamp program, to more legal immigrants, particularly immigrant children. Unlike its counterpart in the other chamber, the nutrition title of this legislation does just that. I am proud to support that effort.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, the city of Miami is constantly changing. New buildings and facilities are being built daily adding to the cosmopolitan and modern flavor of the city. However, while in the process of building for the future, Miami has found a piece of its past, the Miami Circle. Discovered in 1998, the Miami Circle is 38 feet in diameter and has been carved into the underlying bedrock. While its true purpose is unknown, it is thought that the circle was used to support different types of structures. Along with the Circle, myriad other ancient artifacts have been found at the site, making it a treasure trove of archaeological artifacts and a window into the history of the area. The true origin of this site has yet to be determined but it is widely believed it was created by the Tequesta Indians. This piece of Miami's heritage is also part of Florida's as well as the Nation's. It is believed to be the only cut-in-rock prehistoric structural footprint ever found in eastern North America. It is and will be a valuable tool in understanding America's indigenous peoples, their culture, and their technological prowess. In fact, a recent discovery of a Tequesta burial grounds not far from the Miami Circle has made the Miami Circle an even more significant historical site. For these reasons, the site of the Miami Circle needs to be preserved. This legislation will set the preservation process in motion by authorizing a feasibility study to be conducted to determine if Miami Circle should be preserved as part of Biscayne National Park. This important piece of America's heritage deserves the same protection that other American archaeological treasures enjoy. This study will help make that happen.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, the city of Miami is constantly changing. New buildings and facilities are being built daily adding to the cosmopolitan and modern flavor of the city. However, while in the process of building for the future, Miami has found a piece of its past, the Miami Circle. Discovered in 1998, the Miami Circle is 38 feet in diameter and has been carved into the underlying bedrock. While its true purpose is unknown, it is thought that the circle was used to support different types of structures. Along with the Circle, myriad other ancient artifacts have been found at the site, making it a treasure trove of archaeological artifacts and a window into the history of the area. The true origin of this site has yet to be determined but it is widely believed it was created by the Tequesta Indians. This piece of Miami's heritage is also part of Florida's as well as the Nation's. It is believed to be the only cut-in-rock prehistoric structural footprint ever found in eastern North America. It is and will be a valuable tool in understanding America's indigenous peoples, their culture, and their technological prowess. In fact, a recent discovery of a Tequesta burial grounds not far from the Miami Circle has made the Miami Circle an even more significant historical site. For these reasons, the site of the Miami Circle needs to be preserved. This legislation will set the preservation process in motion by authorizing a feasibility study to be conducted to determine if Miami Circle should be preserved as part of Biscayne National Park. This important piece of America's heritage deserves the same protection that other American archaeological treasures enjoy. This study will help make that happen.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, today I pay tribute to a fine humanitarian and Floridian, Dr. Moises Simpser. Throughout his career as a pediatric pulmonologist, Dr. Simpser has worked for the well-being of all sick children; particularly those that are technology dependent and otherwise referred to as ``fragile children.'' Dr. Simpser's goal has been an admirable one--to achieve the best medical care for all children of all economic strata and backgrounds. Since his arrival in Florida in 1984, Dr. Simpser has been an unyielding advocate for the young patient. As Dr. Simpser's patients are technology dependent, they were only cared for in Intensive Care Units of hospitals, where they became virtual prisoners in the unit. He fought diligently for the State of Florida to cover the cost of homecare for a ventilator dependent child. Through this program, even the youngest of children on ventilators were sent home for care in their familiar and familial environments. However, even at home, the children increasingly became isolated within their own four walls. To help free these children, Dr. Simpser developed and founded the first Ventilator Assisted Children's Center Camp or VACC Camp. VACC Camp is a place where both families and technology dependent children can be in an environment that allows these fragile children to do everyday activities that were once unavailable to them. These include activities such as swimming, boating, sailing, visiting malls, and many others. These children, always ventilator dependent and usually wheelchair bound and afflicted with additional diseases, are able to enjoy the wonders of Florida's nature and outdoors at no cost to their families. VACC Camp has allowed both abled and disabled children to come together for a life broadening experience by providing an incentive for abled children to participate. Dr. Simpser has worked with Florida's Miami-Dade County school system to create a 100 percent volunteer staff, with the school board furnishing high school students with service credits for their volunteer efforts. This remarkable camp, now in its 16th year, earned Dr. Simpser the prestigious 1998 Governors Community Service Award from the College of Chest Physicians. In addition to his development of VACC Camp, Dr. Simpser has established a pediatric asthma center for underprivileged children. He received a combined grant which allowed him to demonstrate that providing quality medical care to this population can reduce emergency room visits and hospitalizations in these children by 70 percent. He has also established a Cystic Fibrosis Center in South Florida, the first such center to be associated with the National Cystic Fibrosis Foundation. The Cystic Fibrosis Foundation honored him as the recipient of the first Lucent Technologies Humanitarian of the Year Award. Dr. Simpser's altruism and dedication to quality health care for children regardless of race, gender, and economic status are a positive statement for doctors across America. Dr. Simpser has been honored and should be admired for the good he does every day, for his persistence in always improving the delivery of quality healthcare, and for his vision to meet the needs of severely debilitated children. I am indeed proud to acknowledge the work of Dr. Moises Simpser.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, today I am introducing legislation that will clarify the proper tax treatment of intangible assets transferred to foreign corporations. This bill is necessary to avoid trapping unwary taxpayers who relied on Congressional intent when it made changes to this area of the tax code in 1997. Transfers of intangible property from a U.S. person to a foreign corporation in a transaction that would be tax-free under Code section 351 or 361 are subject to special rules. Pursuant to section 367(d), the U.S. person making such a transfer is treated as 1. having sold the intangible property in exchange for payments that are contingent on the productivity, use, or disposition of such property and 2. receiving amounts that reasonably reflect the amounts that would have been received annually over the useful life of such property. The deemed royalty amounts included in the gross income of the U.S. person by reason of this rule are treated as ordinary income and the earnings and profits of the foreign corporation to which the intangible property was distributed are reduced by such amounts. Prior to the Taxpayer Relief Act of 1997 (the ``1997 Act''), the deemed royalties under section 367(d) were treated as U.S.-source income and therefore were not eligible for foreign tax credits. The 1997 Act eliminated this special ``deemed U.S. source rule'' and provided that deemed royalties under section 367(d) are treated as foreign-source income to the same extent that an actual royalty payment would be so treated. The 1997 Act reflected a recognition that the previous rule was intended to discourage transfers of intangible property to foreign corporations, relative to licenses of such intangible property, but that the enhanced information reporting included in the 1997 Act made it unnecessary to continue to so discourage transfers relative to licenses. The 1997 Act intended to eliminate the penalty provided by the prior- law deemed U.S. source rule under section 367(d) and that had operated to discourage taxpayers from transferring intangible property in a transaction that would be covered by section 367(d). Prior to the 1997 Act, in order to avoid this penalty, taxpayers licensed intangible property to foreign corporations instead of transferring such property in a transaction that would be subject to section 367(d). With the 1997 Act's elimination of the penalty source rule of section 367(d), it was intended that taxpayers could transfer intangible property to a foreign corporation in a transaction that gives rise to deemed royalty payments under section 367(d) instead of having to structure the transaction with the foreign corporation as a license in exchange for actual royalty payments. The 1997 Act's goal of eliminating the penalty treatment of transfers of intangible property under section 367(d) is achieved only if the deemed royalty payments under section 367(d) not only are sourced for foreign tax credit purposes in the same manner as actual royalty payments, but also are characterized for foreign tax credit limitation purposes in the same manner as actual royalty payments. Without a clarification that the deemed royalty payments under section 367(d) are characterized for foreign tax credit limitation purposes in the same manner as an actual royalty, there is a risk in many cases that such deemed royalties would be characterized in a manner that leads to a foreign tax credit result that is equally as disadvantageous as the result that arose under the penalty source rule that was intended to be eliminated by the 1997 Act. The bill I am introducing today provides the needed clarification of the foreign tax credit limitation treatment of a deemed royalty under section 367(d), ensuring that the penalty that was intended to be eliminated with the 1997 Act is in fact eliminated. The bill clarifies that the deemed income inclusions under section 367(d) upon a transfer of intangible property to a foreign corporation are characterized for purposes of the foreign tax credit limitation rules in the same manner as an actual royalty is characterized. The tax treatment of such a transfer of intangible property to a foreign corporation thus would be the same as the tax treatment that applies if the intangible property is made available to the foreign corporation through a license arrangement. The bill's provision would be effective for income inclusions under section 367(d) on or after August 5, 1997, which is the effective date of the 1997 Act provision eliminating the special deemed U.S. source rule under section 367(d). Like the 1997 Act provision, the bill's provision would be effective for transfers made, and for royalties deemed received, on or after August 5, 1997. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, today I am introducing legislation that will clarify the proper tax treatment of intangible assets transferred to foreign corporations. This bill is necessary to avoid trapping unwary taxpayers who relied on Congressional intent when it made changes to this area of the tax code in 1997. Transfers of intangible property from a U.S. person to a foreign corporation in a transaction that would be tax-free under Code section 351 or 361 are subject to special rules. Pursuant to section 367(d), the U.S. person making such a transfer is treated as 1. having sold the intangible property in exchange for payments that are contingent on the productivity, use, or disposition of such property and 2. receiving amounts that reasonably reflect the amounts that would have been received annually over the useful life of such property. The deemed royalty amounts included in the gross income of the U.S. person by reason of this rule are treated as ordinary income and the earnings and profits of the foreign corporation to which the intangible property was distributed are reduced by such amounts. Prior to the Taxpayer Relief Act of 1997 (the ``1997 Act''), the deemed royalties under section 367(d) were treated as U.S.-source income and therefore were not eligible for foreign tax credits. The 1997 Act eliminated this special ``deemed U.S. source rule'' and provided that deemed royalties under section 367(d) are treated as foreign-source income to the same extent that an actual royalty payment would be so treated. The 1997 Act reflected a recognition that the previous rule was intended to discourage transfers of intangible property to foreign corporations, relative to licenses of such intangible property, but that the enhanced information reporting included in the 1997 Act made it unnecessary to continue to so discourage transfers relative to licenses. The 1997 Act intended to eliminate the penalty provided by the prior- law deemed U.S. source rule under section 367(d) and that had operated to discourage taxpayers from transferring intangible property in a transaction that would be covered by section 367(d). Prior to the 1997 Act, in order to avoid this penalty, taxpayers licensed intangible property to foreign corporations instead of transferring such property in a transaction that would be subject to section 367(d). With the 1997 Act's elimination of the penalty source rule of section 367(d), it was intended that taxpayers could transfer intangible property to a foreign corporation in a transaction that gives rise to deemed royalty payments under section 367(d) instead of having to structure the transaction with the foreign corporation as a license in exchange for actual royalty payments. The 1997 Act's goal of eliminating the penalty treatment of transfers of intangible property under section 367(d) is achieved only if the deemed royalty payments under section 367(d) not only are sourced for foreign tax credit purposes in the same manner as actual royalty payments, but also are characterized for foreign tax credit limitation purposes in the same manner as actual royalty payments. Without a clarification that the deemed royalty payments under section 367(d) are characterized for foreign tax credit limitation purposes in the same manner as an actual royalty, there is a risk in many cases that such deemed royalties would be characterized in a manner that leads to a foreign tax credit result that is equally as disadvantageous as the result that arose under the penalty source rule that was intended to be eliminated by the 1997 Act. The bill I am introducing today provides the needed clarification of the foreign tax credit limitation treatment of a deemed royalty under section 367(d), ensuring that the penalty that was intended to be eliminated with the 1997 Act is in fact eliminated. The bill clarifies that the deemed income inclusions under section 367(d) upon a transfer of intangible property to a foreign corporation are characterized for purposes of the foreign tax credit limitation rules in the same manner as an actual royalty is characterized. The tax treatment of such a transfer of intangible property to a foreign corporation thus would be the same as the tax treatment that applies if the intangible property is made available to the foreign corporation through a license arrangement. The bill's provision would be effective for income inclusions under section 367(d) on or after August 5, 1997, which is the effective date of the 1997 Act provision eliminating the special deemed U.S. source rule under section 367(d). Like the 1997 Act provision, the bill's provision would be effective for transfers made, and for royalties deemed received, on or after August 5, 1997. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, this bill would take a significant step toward securing our Nation against future terrorist actions. Just as we have unanimously decided to bolster security at our airports, we must also improve the overall security and cargo processing operations at U.S. seaports. If nothing else, September 11 has demonstrated the need to do more to secure our Nation from terror--whether it comes from land, sky or sea. Before discussing the specifics of this legislation, it is important to describe the circumstances that have caused the security crisis at our seaports. Seaports represent an important component of the Nation's transportation infrastructure. Each year, thousands of ships, and millions of passengers, enter and leave the United States through seaports. It is estimated that 95 percent of the cargo that enters the country from noncontiguous countries does so through the Nation's 361 coastal and inland ports. Alarmingly, less than 2 percent of this enormous number of cargo containers are actually inspected. Over the next 20 years, the total volume of imported and exported goods at seaports is expected to increase threefold. Waterborne cargo alone contributes more than $750 billion to the U.S. gross domestic product and creates employment for 13 million people. Despite the massive volume of cargo that moves through our Nation's ports, there are no Federal security standards or guidelines protecting our citizens from potentially lethal cargo. The Federal Government does not provide the resources for technology that an adequately screen cargo moving through our ports, leaving them vulnerable to criminal activity--from smuggling to cargo theft to terrorism. Security at our maritime borders is given substantially less Federal consideration than airports or land borders. At U.S. seaports, the Federal Government invests nothing in infrastructure, other than the human presence of the U.S. Coast Guard, U.S. Customs Service and the Immigration and Naturalization Service, and whatever equipment those agencies have on-hand to accomplish their mandates. Physical infrastructure is provided by State or local controlled port authorities, or by private sector marine terminal operators. There are no controls, or requirements in place, except for the minimal standards promulgated by the Coast Guard for the protection of cruise ship passenger terminals. Essentially, where seaports are concerned, we have abrogated the Federal responsibility of border control to the State and private sector. In the face of these new challenges, it appears that the U.S. port management system has fallen behind the rest of world. We lack a comprehensive, nation-wide strategy to address the security issues that face our seaport system. In early 1998--in response to the almost daily reports of crime and narcotics trafficking at Florida seaports, and following the day I spent working with the Customs Service at Tampa's Port Manatee on October 14, 1997--I began an investigation of the security situation at seaports throughout the nation. At that time, and perhaps even more so today, I was very concerned that our seaports, unlike our airports, lacked the advanced security procedures and equipment that are necessary to prevent acts of terrorism, cargo theft and drug trafficking. Based on this workday, and subsequent investigation, I asked President Clinton to establish a Federal commission to evaluate both the nature and extent of crime and the overall state of security in seaports and to develop recommendations for improvement. In response to my request, President Clinton established the Interagency Commission on Crime and Security in U.S. Seaports on April 27, 1999. In October 2000, the Commission issued its final report, which outlines many of the common security problems discovered in U.S. seaports. Among other conclusions, the Commission found that: one, intelligence and information sharing among law enforcement agencies needs to be improved at many ports; two, that many ports do not have any idea about the threats they face, because vulnerability assessments are not performed locally; Three, that a lack of minimum security standards at ports and at terminals, warehouses, and trucking firms leaves many ports and port users vulnerable to theft, pilferage, and unauthorized access by criminals; and four, advanced equipment, such as small boats, cameras, vessel tracking devices, and large scale X-rays, are lacking at many high-risk ports. Our legislation addresses the problems of our seaports by instructing the Attorney General to coordinate the reporting of seaport related crimes with State law enforcement officials, so as to harmonize the reporting of data on cargo theft. The bill would also increase the criminal penalties for cargo theft. To address the lack of minimum security standards at America's seaports, the bill would require security programs to be developed by each port or marine terminal. Each security program will be submitted to the Security of Transportation for review and approval. These security programs would require maintenance of both physical and procedure security for passengers, cargoes, crew members, and workers; provisions for establishing secure areas within a waterfront; creation of a credentialing process to limit access to restricted areas so only authorized individuals gain admittance; restriction of vehicular access; development of an evacuation process from port areas in the event of a terrorist attack or other such emergency; and establish security awareness for all employees. Our bill requires the Coast Guard, in consultation with the appropriate public and private sector officials and officials and organizations, develop a system of providing port security-threat assessments for U.S. seaports. The bill would authorize $60 million over 4 years to carry out this provision. The Seaport Commission report found that current inspection levels of containerized cargo are insufficient to counter potential security risks. This bill will authorized $168 million over five yeas, for the Customs Service to purchase non-intrusive screening and detection equipment for use at U.S. seaports. It would also authorize $145 million for 1,200 new customs inspector positions, and 300 new customs agent positions. The bill would also create a research and development grant program to provide grants up to 75 percent of the cost of construction, acquisition or deployment of technology to help develop non-intrusive inspection technologies. The bill would authorize $15 million annually for fiscal year 2002 to fiscal year 2006 for this purpose. Implementing the provisions of the Port and Maritime Security Act of 2001 will produce concrete improvements in the efficiency, safety, and security of our Nation's seaports, and will result in a demonstrable benefit for those who are currently pay tonnage duties. This legislation is long overdue--that became all too apparent the morning of September 11. Not only is it required to facilitate future technological advances and the anticipated increases in international trade, but it would ensure that we have the sort of security controls necessary to protect our borders from threats of illegal aliens, drug smuggling and terrorism. As we work to lift our Nation's fear of travel in our skies, we must also move to guarantee their safety on our seas. This bill does not affect just those states with ports. Each day 16,000 containers arrive in the United States. A single container can hold 30 tons. These containers are either transported by truck or by rail throughout the United States. To illustrate my point, I have a chart here which depicts a normal route of a cargo container entering the Port of Los Angeles and arriving in New York. These containers travel across America, often more than a dozen States before reaching their destination. Our seaports are our first line of defense in preventing a potential tragedy. Seaports play one of the most critical roles in expanding our international trade and protecting our borders from international threats. The ``Port and Maritime Security Act'' recognizes the importance of our seaports and devotes the necessary resources to move ports into the 21st century. I urge my colleagues to look towards the future by supporting this critical legislation--and by taking action to protect one of our most valuable tools for promoting economic growth.

Mr. GRAHAM

Mr. GRAHAM. I ask unanimous consent Tiffany Smith, a fellow in our office, be permitted the privilege of the floor.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I rise today to speak in support of adoption of the conference report on the Fiscal Year 2002 appropriations bill for Foreign Operations H.R. 2506. The annual Foreign Operations appropriations bill is the primary legislative vehicle through which Congress reviews the U.S. foreign aid budget and influences executive branch foreign policy making generally. It contains the largest share--over two-thirds--of total U.S. international affairs spending. I regret that I was forced to vote against the original Senate version of this bill on October 24th, after the Senate rejected my attempts to restore funding for the Andean Regional Initiative to the level which the administration had requested. The Andean Regional Initiative represents our best strategy for fighting terrorism in this hemisphere. President Andres Pastrana and his administration have been leading a valiant fight against the narcotraffickers who have been threatening the economy, the society, the very civilization of the Republic of Colombia for more than two decades now. In 2000, Congress approved the first installment of our commitment to Plan Colombia. President Bush correctly requested $731 million for Fiscal Year 2002, which would have broadened our involvement beyond military support and expanded this assistance to Bolivia, Ecuador and Peru. The Senate bill would have cut this important strategic initiative by 22 percent, from $731 million to $567 million, which would endanger the progress we have made. The conferees have agreed to fund the initiative at $660 million, which represents a reduction of $71 million from the President's request, but that is $93 million above the Senate's level. While I remain concerned about what the impact will be on the program at the level of funding, it is an improvement to the Senate's position, so I am willing to vote for this conference report. I also want to emphasize my support for other important priorities that are funded by this conference report--priorities that I in no way intended to disavow when I voted against the Senate version of the bill. They include $2.04 billion in military grants and $720 million in economic grants for Israel in Fiscal Year 2002. We have no stronger ally in the global war on terrorism than the State of Israel, and this aid recognizes Israel's key role in helping us protect our interests in the Middle East and around the world. I am profoundly grateful for the support and assistance that our good friends have provided, and I have no doubt that their assistance will continue well into the future. They include a 22 percent increase in disaster aid, to $235 million. The Global Fund to Fight HIV/AIDS, Malaria, and Tuberculosis--a new initiative for Fiscal Year 2002--receives $435 million from the Child Survival and Health Programs Fund and $40 million in other accounts. They include $3.5 billion for the Agency for International Development (AID). This is $350 million above the administration's request and $210 million above fiscal year 2001. And finally, there are several terrorism-related issues addressed in the Foreign Operations bill, including direct funding for two counter- terrorism programs; increased resources to meet physical security needs at USAID's overseas missions; aid restrictions for countries engaged in terrorist activities, and aid allocations for nations helping combat terrorism. I am pleased to support the conference report, and I encourage my colleagues to do so.

Mr. GRAHAM

Mr. GRAHAM. I thank Senator Kennedy for the leadership he has given over many years which has brought us to this point today. I am very supportive of this legislation and will vote for it with enthusiasm. I do point out there are some areas where I think further action will be required. As we began this debate, there was an assumption, maybe a tacit assumption, that there was a common set of reasons for school failures. That tacit assumption was reinforced by the suggestion that for every school failure there would be a one-size-fits-all prescription. That was school vouchers. The Senate and the conferees have wisely not adopted this approach. However, there still remains the issue of an intelligent process to determine why schools fail. The reality is, anyone who has spent time in a variety of schools, as I know our Presiding Officer and I have had the opportunity to do, there are a variety of reasons why a school might be considered failing. Some of the reasons have to do with what is happening inside the school. Some of those reasons have to do with the neighborhood, the environment, the circumstances from which the students come and which adverse circumstances they bring to the schools. For instance, it might be that an absence of effective health care causes students to come to school with a limited ability to learn. It may be because of nutritional restrictions. It may be because there are not sufficient activities in the communities to support what is happening inside the school. This legislation recognizes that and provides for a diagnostic process in which, when a school is identified largely based on the testing process, there will be a determination made as to what the reasons were for that specific school failing to educate its students. This will put new responsibilities on a variety of institutions. It will put responsibilities on the community to provide resources through things such as public health services as well as nongovernmental agencies such as the United Way, YMCA, and the Boys and Girls Club, and on the Federal Government to bring to bear its agencies, particularly the Health and Human Services, to provide assistance in dealing with those out of the classroom reasons why schools are failing. Again, I commend the conferees for their good work. I point out that this is an important chapter, but we have more chapters yet to be written. They will require the cooperation of all groups I have referred to in order to see we comprehensively deal and provide the appropriate description to why that specific school is failing.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I rise today in strong support of the farm bill before us. While we have heard about many components of the bill today, I would like to focus my remarks on the title that is of particular importance to me, the nutrition title. it is easy to forget how many people go hungry in the United States. The Department of Agriculture classifies 31 million Americans as ``food insecure,'' meaning that they do not know from month to month whether they will be able to get enough food for themselves and their families. Families with children are disproportionately more likely to experience hunger. Last year, over 3 million children and 6 million adults in the United States were hungry to malnourished. Without the Federal Food Stamp Program, which provided nutrition assistance to over 17 million people, the majority of them children, elderly people and the disable, the number would have been far higher. I am also acutely aware of the role the Food Stamp Program plays in helping families leave welfare for work. The typical mother leaving welfare is earning about $7 an hour and may not be able to get 40 hours of work a week. For a parent like that, food stamps can make a difference between being able to feed the family and having to return to public assistance. A single mother with two children and a typical postwelfare income can double her income if she gets food stamps and the EITC. If she gets both, she can almost reach the Federal poverty line. Without them, she often cannot make ends meet. I supported the 1996 welfare reform law. Some of my original interest in the Food Stamp Program grew out of my desire to see welfare reform succeed. Knowing how important it was for people leaving welfare to stay connected to programs like Food Stamps and Medicaid, I was disturbed to find out that food stamp participation had dropped by more than a third since we passed welfare reform, and the improved economy accounted for only about half of the drop. Among single-parent families with earnings, the most common demographic of people leaving welfare, food stamp participation dropped 12 percentage points between 1995 to 1998. A recent study the General Accounting Office conducted identified a ``growing gap'' between the number of children in poverty and the number of children receiving food assistance. At the same time, emergency food providers reported that their clientele had changed since 1996. On November 14, America's Second Harvest, the organization representing our Nation's food banks, released it's annual ``Hunger in America'' report, its results were chilling. The study found that in 2001, 23.3 million Americans nationwide sought and received emergency hunger relief from our Nation's food bank network. This is nearly 2 million more people than sought similar services in 1997. And this, on the heels of one of the longest periods of economic growth in recent history. In addition to showing increased requests for aid, ``Hunger in America'' report punctures the myth that hunger is only a problem of the inner cities, homeless, or the chronically unemployed. The study found that nearly 40 percent of the households that received assistance from us in 2001 included an adult who was working. Fully 19.7 percent of all the clients served by our network are seniors. This is up from 16 percent in 1997. The facts about children are even more disturbing. More than nine million children received emergency food assistance this year, which is roughly 2 million more people than the total population of New York City. The bill before us today takes steps toward recognizing that America's food banks, churches, synagogues and mosques can play a part in feeding America, they cannot bear the burden alone, the Federal Government must play its part. The nutrition title in the Harkin farm bill allows the Senate to step up to the plate so that we can play a real role on the team fighting hunger in our Nation. Last year, working with many of you, the Agriculture Appropriations Subcommittee, and the former administration we were able to designate $5.5 million to be used for food stamp outreach and education, to get some of these eligible families and children back on the program, $3.5 million has already been awarded to community organizations and emergency food providers across the country. These groups are taking imaginative steps to reach out to families in need, I encourage all of you to find out more about the grantees in your area. Last month, USDA announced that it would award an additional $2 million to State-community partnerships that wanted to test strategies for enrolling more senior citizens in the food stamp program. Currently, only 30 percent of eligible seniors participate. I am here today because outreach, while critical, is only the first step. We need to restore some of the cuts to food stamps made in 1996, and we need to improve the program to make it work better for working families. The Harkin bill provides new funds to do just that. Cuts in food stamp benefits were not part of achieving our basic welfare reform goal of moving people from welfare to work. In fact, many Republican and Democratic Members agree that one of the most disturbing outcomes of the 1996 law is the one-third drop in food stamp participation and what GAO described as the ``growing gap'' between the number of children in need and the number of children getting food assistance. A provision of the 1996 law also cut off food stamps to legal immigrants. This was unnecessary to achieve the goals of the law, since over 90 percent of legal immigrants are working. We have succeeded in restoring eligibility for children and elderly people who were here before 1996, but much more needs to be done. One of the results of the cutoff of adult legal immigrants has been a 74 percent drop in the number of citizen children of immigrants who get food stamps. As we debate this bill, I would urge my colleagues to remember the millions of children and families who depend on the Food Stamp Program to help them purchase the food our farmers grow. Without the Food Stamp Program, it seems likely that the 17 million people currently getting benefits would join the 9 million Americans who are hungry or malnourished. I would also urge my distinguished colleagues to consider the many provisions in this bill that will improve the Food Stamp Program to better assist working families and finish the work of welfare reform by getting families out of poverty. I would call particular attention to would accomplish the following: restoration benefits to legal immigrant children--most of whom are members of working families; making outreach and education a permanent part of the program; reforming the quality control system, making the program simpler and more accessible to working families; and providing 3 more months of transitional food stamps for families moving off welfare for work. This important legislation would improve basic benefits for senior citizens, people with disabilities, and working citizen and legal immigrant families with children. We have an obligation to our Nation to pass this title as it is, in tact. It is the least that we can do to do our part to accomplish our collective goal of abolishing hunger in America once and for all.

Mr. GRAHAM

Mr. GRAHAM. To go even further, that Cuba, under this same report of the State Department in April of 2001, regularly conducts political, social, and economic interactions with other countries listed on the State Department list of terrorists, such as Libya, Iran, Iraq, and through these relationships, Cuba has access to those countries' illegal supplies of weapons and biotech products, what is the reaction of the Senator from New Jersey to this current grip of terrorism that Fidel Castro has placed on his country and is exporting around the world?

Mr. GRAHAM. And well they should be. The U.S. Office of Technical Assessment has included Cuba among the 17 countries in the world which are believed to possess biological weapons. As I believe the Senator said a few moments ago in his statement, the former deputy director of the Soviet Union's biological weapons program, Mr. Ken Alibek, revealed that the Soviet Union had been providing assistance to Castro and that Cuba now has one of the most sophisticated genetic engineering labs in the entire world. Was the Senator from New Jersey aware of that history of preparation for violence through terrorism?

Mr. GRAHAM. Sad to say, we have out of the mouth of Fidel Castro and his minions the most current statement of his attitude toward terrorism and his attitude toward the United States, the Nation which now is being asked to provide U.S. financing for agricultural sales to Cuba. Would the Senator be surprised that when the tragedy of September 11 was made known to Fidel Castro, while he initially offered some words of support to the United States, he also urged United States policymakers to be calm and stated that the attacks against the World Trade Center and the Pentagon and the failed attack that ended up in the fields of western Pennsylvania were a consequence of the United States having applied ``terrorist methods'' for years? He is essentially saying that the United States and Osama bin Laden are mirror images of one another. Those were the statements on the day of the attack. Subsequent statements relative to the attack of September 11 have become even more hostile. A recent press report quoted Cuba's mission to the United Nations as describing the United States' response to the attacks as ``fascist and terrorist,'' so we not only are Osama bin Laden, we have now become Adolf Hitler, and that the United States was using the attack as an excuse to establish ``unrestricted tyranny over all people on Earth.'' Castro himself has said that the U.S. Government is run by extremists and hawks whose response to the attack could result in ``the killing of innocent people.'' Would the Senator believe that?

Mr. GRAHAM. Will the Senator from New Jersey yield?

Mr. GRAHAM. Maybe you might be further illuminated, and our colleagues informed, about these two people who are also part of that large pool of those who are fleeing American justice in Cuba. Mr. Hill and Mr. Finney are accused of murder and airplane hijacking. In 1971, the two were driving a car filled with guns and explosives from California to Louisiana in an operation for the militant Republic of New Afrika, a small organization that seeks a black separatist nation within the United States. As Hill and Finney crossed into New Mexico, they were stopped by a 28-year-old State trooper, Robert Rosenbloom. There was a standoff. Mr. Rosenbloom was tragically shot dead. Nineteen days later, the fugitives scrambled aboard a TWA plane in Albuquerque and hijacked a flight which was bound for Chicago. Interviewed in Havana last year by a U.S. journalist, Hill said when he arrived in Cuba he ``was accepted by Fidel Castro's government as a soldier of the people's revolution.'' Senator Torricelli, were you aware this is the kind of person but for the amendment you are proposing would continue to be harbored in Cuba and would be sheltered from U.S. justice, and for which the family of Robert Rosenbloom, shot dead, would receive no sense of finality in terms of the loss of their loved one?

Mr. GRAHAM. First, the Senator from New Jersey has been so lucid and candid and expansive in his knowledge of these issues that he has responded to most of the questions that I have, I am certain, to the great benefit, certainly, of this Senator and all of our colleagues. My further questioning will be very brief. Yes, I do have some policy statements that would be inappropriate to attempt to deliver in the context of asking questions of the Senator from New Jersey.