Chuck Grassley

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I have 3 minutes left, I have been told. First of all, I think the Senator from Massachusetts was doing a good job reading from a letter Secretary Chertoff sent to me. I sent back a rebuttal letter, and I would like to provide the letter for the Senator from Massachusetts to read. It is a point-by-point rebuttal of what is wrong with Secretary Chertoff's analysis of my amendment. One of the criticisms that Senator Kyl gave against my amendment is we are not going to force employers to look through 160 million workers to find illegal workers. Let's look at the basic legislation. The legislation legalizes people who are here already illegally. So if they are illegally working, and this bill legalizes them, don't you see how ridiculous it is that we are going to tell people to go out and find people who are here illegally when the bill has already legalized them? The second point is that we eliminate the requirement of a photograph for identification. My amendment requires every U.S. citizen to present a passport or driver's license and every noncitizen to present a legal permanent resident card or work authorization card. Each of these documents is required to contain an individual's photograph. Moreover, my amendment requires workers to submit their passport number, driver's license number, or employment authorization number in addition to their Social Security number through the employment verification system. Without that information, there is no guarantee that Homeland Security will be able to contact the issuing agencies or determine which document was issued. This is the very same problem that has prevented Homeland Security from utilizing Social Security Administration data in the past. My amendment further requires the Social Security Administration, the State Department, and the State departments of motor vehicles to establish a reliable and secure method to allow the Department of Homeland Security to verify the identity document of each issuing agency. On another point Senator Kyl made saying it eliminates after 5 years the information sharing among Government departments, which is critical to making this work, a sunset is standard practice when we compromise the protection for the individual taxpayer, that the taxpayer's income tax information will be private so that, like President Johnson and President Nixon, it cannot be used to violate your privacy for political reasons. That is why that law was passed. Mr. President, I ask unanimous consent to have printed in the Record several letters regarding this issue.

Mr. GRASSLEY. Yes, we presented that to you that day in April----

Mr. GRASSLEY. I reserve my time.

Mr. GRASSLEY. Thank you. I am not going to talk about the substance of my amendment. I want to remind people before the amendment comes up that, No. 1, I was promised by the Senator from Pennsylvania and, in turn, his talking to the Senator from Massachusetts, that I would have an opportunity to offer an amendment. Now I have that opportunity to offer the amendment, so that promise has been kept. I have tried to clear it with my Republican colleagues who have been objecting all afternoon so that they would not object to my efforts to offer and debate my amendment. So I hope you realize it doesn't do much good to make a promise for me to offer my amendment if I don't have an opportunity to debate the amendment. That is the first point. The second point is that I should not even be here having to offer this amendment. If you go back to that Thursday afternoon in April when there were rump sessions in S. 219, I was invited by some of the people to the rump session who were working on this compromise--to come in and offer a compromise on Social Security identification, employer identification, or verification. I went to that meeting and sat there for a long time and explained a compromise. I had no objections to the compromise at that particular time, but 3 weeks later, the document comes out and it is not the compromise I had presented, which I assumed was agreed to. That doesn't surprise me because going back to January or February, Senator Kyl had met with me and some other people, because this is in the jurisdiction of the Finance Committee--we have jurisdiction over IRS and over the Social Security system--saying that they were very strongly in favor of having something that went way beyond protecting the privacy of Internal Revenue tax records and Social Security information and were hellbent on going down a route of giving the Department of Homeland Security any sort of information they want, not within the tradition of protecting the privacy of income tax records. So that is why my amendment is being offered, because I am going back to that compromise which I presented to the committee in the rump session back in April which I thought was OK. I find out now that it is not. That is why I am going to offer my amendment. How much time do I have?

Mr. GRASSLEY. Would you mind if I said why I ought to be able to bring my amendment up?

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I urge my colleagues to vote ``no'' on cloture on the check card bill. I urge them to do this because a secret ballot is not only a part of the political process in the United States, but a part of a process in many organizations to make sure that people vote their convictions and not their emotions or emotions that have been forced upon them. I want to use a personal example of why I think, in union elections in particular, a secret ballot is so important. I have told some of my colleagues, not very often, but in past debates on the floor of the Senate that while I was a member of the State legislature, I worked at a factory in Cedar Falls, IA, called Waterloo Register Company. We made furnace registers. I had the glorious job for those 10 years of putting screw holes with a small punch in those registers. I worked there from September of 1961 until the plant shut down in March of 1971. During that period of time, from February of 1962 until the plant shut down, I was a member of the International Association of Machinists. Everything was going all right for that plant until about 1967, 1968, 1969, when our products made by the International Association of Machinists were not being installed by the Sheet Metal Workers Union members in Pennsylvania, is what I was told at the time. Our company wanted us to change from the International Association of Machinists to Sheet Metal Workers. This is not an instance of the company trying to keep a union out. There was already a union there. The company was getting behind the Sheet Metal Workers Union in a dispute that involved an illegal secondary boycott against our products. So our management thought if we were part of the Sheet Metal Workers Union we would get our products installed easier around the country by sheet metal worker installers. Presumably, we were one of the few companies making registers at that particular time that was a member of the International Association of Machinists, as opposed to being a member of the Sheet Metal Workers. So our company and that union pushed to have an election to change unions from International Association of Machinists to Sheet Metal Workers. It was highly debated. Obviously, machinists and their members loyal to them wanted the machinists union to stay. The company and some workers who were sympathetic to the company point of view would rather have the Sheet Metal Workers Union because we were told they would not stay in business if the Sheet Metal Workers were not there. We had an election. I forget the exact date. I tried to look up newspaper stories for this debate, and I couldn't find them. My recollection is that in March of 1969 or March of 1970, we had an election. I remember driving 100 miles from Des Moines where the legislature was in session to my factory--I had a leave of absence--to vote in that election. I don't mind telling people how I voted. I voted to keep the International Association of Machinists because I had been a member for 6 or 7 years. I thought they were serving my interests right. I wanted to keep them in there, and I didn't believe the story of the management and I didn't believe we should ratify an illegal secondary boycott. In the meantime, we obviously got a lot of pressure both ways--from the machinists to keep the machinists, and we got a lot of pressure from management to change the union. There was a lot of intimidation. But we could go into that secret voting booth and cast our ballot, and nobody knew how we voted. We did vote, and we kept the International Association of Machinists in that particular election. I know the overall reasons haven't changed in the last 40 years to have a secret ballot. They have been debated well here. But I thought I would share with my colleagues a personal story about the intimidation that can come from management, not necessarily from the union, to vote a certain way. Consequently, I was fortunate we were able to keep our International Association of Machinists, and everybody went on happily until the plant finally closed down a couple years later. So, I urge colleagues to vote against cloture and preserve the secret ballot to ensure that the intimidation that can be active by management as well as labor isn't used.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I want to address why we should have cloture on this bill to get to finality--and that is going to take 60 votes--and why you should not support the Kyl amendment. In the debate on some of this bill, particularly in committee, we had the issue of, well, we are taxing oil companies to promote renewable fuels; that this is an industrial policy, and it is bad for Congress to be involved in industrial policy. Basically, I agree. But, remember, throughout the history of this country, Congress has been involved in a lot of industrial policy. There would not be a farmstead today that would have electricity if we did not have rural electric cooperatives. Railroads would have a monopoly on hauling things if we did not have river improvements so that barges could work as well. Railroads would still be hauling most of our commerce if we had not built an interstate system. Airports and airlines are all about the Government promoting competition. Also, we are involved in where we are, taxing the oil industry to get a renewable energy industry started--as we have been for 20 years now just with ethanol, and expanding it beyond ethanol, but we would not have an ethanol industry today if we had not had tax incentives over the last few years. There will be, someday-- just like we are saying to the oil companies today: You got your start because of tax policy, a lot of tax benefits, because the oil industry was infant at one time and needed to get started. The same thing is true of alternative energy. If we do not give some tax incentives to get alternative energy--and I mean beyond ethanol: biodiesel, wind energy, things that maybe we do not even have on our mind today--we are talking a little bit about cellulosic ethanol, but it is around the corner yet--we are not going to develop these industries to the strong capability they need to be when there is less and less and less transportation provided by petroleum products. So I think we ought to look at the reality of how a gigantic oil industry got started in the United States--through tax incentives. We are talking about tax incentives to get alternative energy started. That is why I hope you will abide by the decisions the Committee on Finance made to have these situations where there is some tax on oil companies for the benefit of tax credits for alternative energy. I hope you also appreciate the fact that maybe a lot of us would like to have the tax incentives without offsets, but we are in an environment of pay-go. We are not in a reconciliation situation. We are in a situation where we have to provide the necessary offsets in order to get this legislation through. So I hope you will think of the history of where we have been with tax policies to promote an industry that is out there now. I hope you will understand that God only made so much fossil fuel and there has to be a follow-on if we are going to have the growth of our economy. I would like to state this one last point that I have heard the President of the United States make many times when I have been to the White House in the Oval Office to talk energy. The President has said many times that with these high prices of oil the way they are, we do not need any more incentives for the oil companies to get more energy. The President has been a friend of alternative energy, most often expressing his support of ethanol, but a supporter of alternative energy, and I hope he is in support of this legislation as well. Mr. President, I yield the floor because I think the Senator's time is about up. Thank you.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I yield myself the 1 minute I have left. First of all, there is no $3 billion to corn farmers, when corn is $4 a bushel or $3.50 a bushel. Second, as to the point made by Senator Kyl, as well as Senator Gregg, that consumers want lower prices and somehow ethanol is driving up that price, let me tell you that ethanol today, this very day, if you check the market, is cheaper in the Northeast and the east coast than gasoline is. The spot market price for ethanol is $2.10 compared to the spot price for gasoline at $2.21 at the New York Harbor. There is no shortage of ethanol. There are no gasoline marketers unable to get ethanol supplies in the Northeast or the east coast. Ethanol is blended today in the RFT area, along the east coast, including Boston, New York, Philadelphia, Baltimore, and Washington. There is imported ethanol shipped into New York and Baltimore Harbor today. Mr. President, I ask unanimous consent to have printed in the Record a letter from seven agricultural groups, including the American Farm Bureau Federation and the National Farmers Union, in opposition to the Gregg amendment.

Mr. GRASSLEY. Will you yield on this point, please, not to make a statement?

Mr. GRASSLEY. Mr. President, I do ask this question: Does the Senator from New Hampshire know that the President of the United States, when he was in Brazil, was quoted in the paper as telling President Lulu that the ethanol export--the import credit would not be repealed while he is President of the United States?

Mr. GRASSLEY. I asked you a question.

Mr. GRASSLEY. Mr. President, I yield 5 minutes to Senator Thune.

Mr. GRASSLEY. I raise a point of order that the pending amendment violates section 201 of S. Con. Res. 21, the concurrent resolution on the budget for fiscal year 2008.

Mr. GRASSLEY. Mr. President, I yield 1 minute to the Senator from New Mexico and then 5 minutes to the Senator from South Dakota.

Mr. GRASSLEY. Mr. President, I hope Senator Thune is here. I was going to yield time to him first. I yield myself a couple minutes while we are waiting for Senator Thune. Mr. President, first of all, to change direction from where Senator Gregg was, today corn is $3.50 in central Iowa, and it is down 25 cents from yesterday because it rained in Illinois in the last 48 hours. So weather is affecting the price of grain quite a bit. If city slickers are worried about the price of corn flakes going up, just remember that a farmer only gets a nickel out of every box of corn flakes that is half filled with air anyway. There are events that are affecting the price of corn a lot different from just ethanol. But the impression one gets around here when reading the papers is that there is so much corn going into ethanol that it is driving up the price of food for city people around this country. The other issue is that the Senator from New Hampshire said corn is being subsidized $3 billion. When corn is above roughly $2 in the Midwest, there is no loan deficiency payment being paid out for that corn. So at the price corn is today, there is no subsidy for corn. Another issue we ought to think about is, whether we are importing ethanol or importing oil--don't forget, a few years ago, we started a program of tax incentives for ethanol and other renewables so we would be energy independent. Do we want to be dependent on imported ethanol as we are dependent on imported oil? What is involved is an infant industry that is just now being able to come to a peak with great advancement in the future but still infant from the standpoint that the next step in ethanol production is cellulosic ethanol, to get ethanol not from grain corn but from wood chips, from switchgrass, or from corn stover. It will be 3 to 5 years before the scientific process of enzymes is efficient enough for that production to come about. Even though we are now having a massive production of ethanol from grain corn, we cannot sustain this beyond 15 billion gallons of ethanol coming from grain corn or corn getting above that figure. And the underlying bill from the Senate Energy Committee recognizes that point because they have a 15-billion-gallon limit of grain corn producing ethanol. Beyond that, it is going to have to come from wood chips, switchgrass, corn stover--anything that has cellulose in it from which they can make ethanol. Just because all of a sudden we have a burgeoning production of ethanol from grain corn doesn't mean this industry is mature to a point where we are going to be as energy efficient as we should be, as energy independent as we should be, and that is why it is still necessary to keep the tax incentives. That is why it is still necessary to have this import duty. I am going to continue to yield time to myself until Senator Thune arrives. I wish to make a statement in opposition to the amendment offered by the distinguished Senator from New Hampshire. With today's gas prices, many in Congress are looking for solutions and for someone to blame. Unfortunately, some have chosen to pinpoint ethanol as the culprit. Because of new demand for ethanol, some of my colleagues have begun to argue that there is a shortage and that it is responsible for the rising cost of gasoline. They look to increased imports of ethanol and the lifting of the import tariff as a solution, and that is the substance of the amendment that is before us. But increased imports would have little impact on the price of gasoline. Let me emphasize because that is the basis of the amendment and I am saying the amendment is not going to accomplish its goal. Increased imports will not reduce the price of gasoline. This is the case because ethanol is such a tiny fraction of the cost of gasoline. In fact, in Iowa, you can buy a gallon of ethanol gasoline mixture--90 percent gasoline, 10 percent ethanol--for 8 to 10 cents under what the price of 100 percent of ethanol costs. In regard to not changing the price of gasoline, I quote Guy Caruso, Administrator of the Energy Information Administration of the Department of Energy, last year saying that the 10-percent blend of ethanol is affecting price by ``just a few pennies.'' Ethanol's role in gasoline prices is a tiny fraction of the overall increase. In addition, it is important to point out that the United States already provides significant opportunities for countries to ship ethanol into our market duty free. Numerous countries do not pay the U.S. ethanol tariff at all. Through our free-trade agreements and trade preference programs, some 73 countries currently have duty-free access to U.S. markets for ethanol fully produced in those countries. For all other countries, including Brazil, the world's major exporter of ethanol, the United States provides duty-free access through a carve- out in the Caribbean Basin Initiative. Get it right: Brazilian ethanol exporters don't have to pay the U.S. tariff today. Under this CBI, ethanol produced in Brazil and other countries that is merely dehydrated in a Caribbean country can enter the United States duty free up to 7 percent of the U.S. ethanol market, a very generous access, and it has been on the books for 20 years. Yet Brazil and other countries have never come close to hitting this 7- percent cap of ethanol that can come into our country duty free already. In fact, we are almost halfway through 2007, and this duty- free cap has been filled only 23 percent for this year. Moreover, this cap grows every year because this 7 percent is 7 percent of a higher figure because of higher production of domestic ethanol every year. And it isn't that the Caribbean countries don't have the capacity to dehydrate more ethanol. They do have that capacity. So we are already providing duty-free access for Brazilian ethanol that is shipped through the Caribbean countries. Much of this duty-free ethanol is being exported to the East Coast, the part of the country that Senator Gregg contends would benefit from the complete lifting of the U.S. tariff on ethanol. The fact of the matter is that Brazil isn't taking full advantage of duty-free treatment currently available to them. I don't know why we should bend over backward to provide more duty-free access for Brazil. In fact, I would offer to the authors of this amendment that when this 7 percent loophole gets filled and that much ethanol has come into the country, I would be glad to sit down and see if there is a need to lift the cap totally. I especially don't know why we should do this, given Brazil's stance in the Doha Round negotiations of the World Trade Organization. Brazil is the leader of the G20 negotiating group in the WTO negotiations, a group that is resisting our efforts to obtain improved market access for U.S. products, both manufactured and agricultural, throughout the entire world. In addition, the Brazilian Government intervenes extensively in the price and supply of ethanol in that country. But the U.S. tariff on ethanol operates as an offset to a U.S. excise tax credit that applies to both domestically produced as well as imported ethanol. So by lifting the tariff, we would, in effect, be giving the benefits of this tax credit to subsidize the Brazilian production of ethanol. Providing yet more duty-free treatment for subsidized Brazilian ethanol would send the wrong signal to those Americans who are devoting their careers to helping America become more energy independent. The U.S. ethanol industry is working every day to lessen our dependence upon foreign oil. This is a virtue that President Bush has touted again and again. Last year, the President restated his goal to replace oil around the world by expanding the production of ethanol. The President stated: The Federal Government has got a role to play to encourage new industries that will help this Nation diversify away from oil. And so we are strongly committed to corn-based ethanol produced in America. And today the President would add to that we are committed to doing more in cellulosic production of ethanol as well. The President clearly understands the need to assist our infant domestic ethanol industry so we can get a foothold and we can succeed. Why would the United States now want to send a signal that we are backing away from our efforts to seek energy independence? We are already dependent upon foreign oil. Surely we don't want our country to go down the path of eventually becoming dependent upon foreign ethanol as well. Providing yet more duty-free treatment would be a step in the wrong direction, discouraging the advancement of investment in biorefineries for ethanol and biodiesel. It would be bad for energy independence and, obviously, bad for our national security. So I hope my colleagues will oppose the Gregg amendment.

Mr. GRASSLEY. Yes.

Mr. GRASSLEY. Mr. President, how much time do I have remaining?

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I thank the Senator for yielding. I am glad to come to the floor to speak about renewables. I am going to speak against the Kyl amendment. I think we ought to put things in perspective. For two decades, maybe longer than that, this country has been seeking various approaches to alternative energy so that we are not dependent upon foreign sources and, more recently, violent and unpredictable sources of energy for the United States for reasons of national security, for reasons of our economy. There are a lot of good reasons we shouldn't be so dependent upon fossil fuels and foreign sources of energy. So we have had two or three decades, starting out with ethanol and now going into other things such as biodiesel, wind, Sun, and things of that nature. Now we are finding that the things this country was so united on, such as the need for renewables, the need for helping agriculture, the need for lowering our trade deficit, the needs of national security, the needs of a cleaner environment--everybody was united that we ought to be doing it, and now we are being somewhat successful. It used to be we would have to listen to all of the excuses of big oil, fight big oil, why we shouldn't have renewables. Now we are finding out about the high price of food, the high price of animal feed, just as if all of the problems of our country are on the backs of the American farmers, which is very unfair. Now we are finding some dissension from other industries being affected. We are still in the infancy of these industries, whether it is ethanol after a couple of decades or whether it is biodiesel after 3 or 4 years. We are in a state of infancy yet in renewables. We ought to be as united today as we were over the past two decades on what is right for this country, good for agriculture, good for the environment, good for our national defense, good for good-paying jobs in parts of rural America where it has never been before. Everything about it is good, good, good. We better stick together because otherwise we will continue to be dependent upon those violent regions of the world for energy; we are going to be dependent on something God made a finite quantity of, such as fossil fuels. We need to move forward, united. This is the second amendment today and, who knows, we may have 10 other amendments which are very detrimental to the causes of getting this infant industry of renewables off the ground. Having said that as a backdrop, I wish to speak specifically about what is wrong with the amendment that is before us. I can't replace the good things--or I can only add to the good things which the Senator from Montana has already spoken to. But there is no cap on any biodiesel production. They may go forth and produce and meet their specific chemical standards. They have the right to produce as many gallons of biodiesel as they like, and it will be qualified for the excise tax credit through the end of 2010. Now, people will argue that it ought to be longer, but you have to fit things into what we have offsets for, so it is the year of 2010. If they are a small producer, they will be able to receive the credit until December 2012. If you are a noncoprocessing facility and do 100 percent biomass, not including chemicals, catalysts, and the like, they have the same rules as biodiesel. If you coprocess at a facility, your total credit is limited to 60 million gallons. If you claim a renewable diesel credit, the 60 million gallons is the current definition of a small producer. So a coprocessor facility will not be able to receive any more tax benefits than the small producer. For example, if you have a 100-million-gallon facility that you are concerned about, they have a built-in $40 million advantage over any coprocessing facility. Obviously, a barrel of vegetable oil or animal oil is substantially more expensive than a barrel of crude oil, and the credit by law is limited to only the volumetric amount of the biomass. I hope this makes it clear that we should not support the amendment of the Senator from Arizona. I yield the floor.

Mr. GRASSLEY. Mr. President, this is the third amendment today that has been very detrimental to the future of ethanol and other renewable fuels. If we had had this attitude expressed 20 years ago when we started, in a very elementary way, down the road to a successful renewable fuels industry that we are now developing, and it is still an infant industry, we would never be here today, where we could say that we have a strong opportunity of renewable fuels. This is the third amendment that raises questions about whether we are going to continue to have investment in renewable fuel production and everything that is connected with it. Something that bothers me more than anything else, and I have expressed it on previous amendments today, is throughout the development of renewable fuels, and particularly agriculture being the production of the renewable feedstock, we have always had agriculture very much united between renewable fuels. Within the last 4 or 5 months, because corn has gone from $2 to $4 a bushel, we now have beef producers raising questions about whether we ought to have an ethanol industry. You have the pork producers--and evidently we have the poultry people--raising the same question. If agriculture is not going to be united, if they had not been united, we would never have gotten here. I do not know what happens in a matter of 4 or 5 months, that after 20 years, all of a sudden things are bad about renewable fuels, and the farmer is being blamed for everything, $4 corn, food going up, energy prices going up. You know, food prices, a farmer gets a nickel out of a big box of Corn Flakes that is half full of air when you buy it for $4. The farmer is being blamed for $4 corn, raising the price of food, raising the price of energy, causing livestock feed to go up. You know, for the last 40 years, we have had a principle in agriculture that we call the hog-corn ratio. It was never felt, during the corn-hog ratio, when you use that, that the high price of corn was bad for livestock because, you know, livestock prices would soon rise, and it was considered good, good, good. Everything about ethanol has been considered good, good, good: Good for the farmers, good for the environment, good for high- paying jobs in the small towns of rural America, good for national defense because of less dependence upon violent parts of the world for petroleum to be delivered, good for our balance of trade. Everything is good, good, good about renewable energy. Now, in the last 4 or 5 months--do you think the price of corn is going to be $3.50 or $4 forever? This fall at harvest time, we might find corn at $2.50. We had 77 million acres of corn planted last year. We have 91.5 million acres believed to be planted this year. When June 30 comes and the USDA makes their next report, it may be 95 million acres of corn--the most acres planted since 1944. When you have that supply of grain coming in, the fact that the price is going to be where it is today is a dream. In 1995, we had a drought. Corn got to $4 or $5. Everybody thought it was going to be $4 or $5 for the next 5 years. The next harvest season, it was down to $1.60 a bushel. Here we have people raising questions about the stock ratio, the stock on hand that we have of grain, that when it gets down to a certain level, we are not going to use grain for renewable fuels. What are you going to do? Are you going to go shut down every ethanol plant that is operating in the United States? What other amendment comes to the floor with the idea that we are going to shut down an industry under certain circumstances? It never happens. This is not a very good approach, particularly the use of stock ratios as proposed in this amendment. There are even questions about the use of that among economists at this point. This is a very bad amendment for renewable fuels, for agriculture. All that is good about renewable fuels, and you shut down the whole industry, it is for naught. You can't do that. I ask Members to vote against the amendment.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent that Paul Keppy, Anne Freeman, and Lynda Simmons of my Senate Committee Finance staff be given the privilege of the floor during the debate on the Energy bill.

Mr. GRASSLEY. Additionally, Mr. President, I ask unanimous consent that John Kalitka, who is on detail to my staff from the Commerce Department, be granted the privilege of the floor during the debate on the Energy bill.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, this legislation that Senator Baucus and I are introducing addresses an important issue--preserving the integrity of the Tax Code. Recent public offerings, effected and announced, by private equity and hedge fund management firms have raised serious tax concerns that if left unaddressed have the potential to fundamentally reduce the corporate tax base over the long run, leading other individuals and business taxpayers with a greater share of the Nation's tax burden. Congress enacted the publicly traded partnership rules in 1987 out of concern with erosion of the corporate tax base. Given the ease with which taxpayers can choose the type of entity for their business, an appropriate ``bright line'' to define entities that should be subject to a corporate level tax was considered to be those entities that are publicly traded. A hallmark of corporate status is access to public markets. Another concern was that the ability to be publicly traded without paying an entity level tax would create an unwarranted competitive advantage over publicly traded corporations. These concerns--corporate tax base erosion and a tax-created competitive advantage--were not considered to be implicated in cases where the partnership's income is from passive investments because investors could earn such income directly--e.g., interest--or because the income is already subject to a corporate level tax--e.g., dividends. The following key quote from the legislative history illustrates this point: In general, the purpose of distinguishing between passive- type income and other income is to distinguish those partnerships that are engaged in activities commonly considered as essentially no more than investments, and those activities more typically conducted in corporate form that are in the nature of active business activities. The recent and proposed public offerings of private equity and hedge fund management firms claim to qualify for partnership tax treatment, even though virtually all of their income is derived from providing asset management and financial advisory services. This result is claimed to be accomplished by structuring service fees in a way that purports to characterize those fees as passive-type income. Whether or not these structures comply with the letter of the law, they are inconsistent with the purposes of the publicly traded partnership rules. This legislation clarifies the purpose of the publicly traded partnership rules by denying the ability of an active financial advisory and asset management business to go public and avoid a corporate level tax on a significant amount of its income. Senator Baucus and I have asked Treasury for their views on these structures, how they plan to address this issue, and whether they think additional statutory changes are necessary to clarify the intent of the publicly traded partnership rules. If a change is necessary, this legislation will accomplish that change. If a change isn't necessary, this legislation does not alter the ability of Treasury and the Internal Revenue Service to issue guidance and enforce Congressional intent. In his introductory remarks, Senator Baucus gave a technical description of this legislation and reasons for change, which reflects my understanding and intent in introducing this bill.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, today I would like to recognize the accomplishment of a particularly talented student from my home State of Iowa. Rebekah Frese has been chosen to present her National History Day documentary, ``Boarding the Freedom Train: The Underground Railroad in Iowa,'' at the Smithsonian American Art Museum. I congratulate her on this achievement and commend her for her hard work and determination in creating such a wonderful project. Rebekah's documentary highlights the significant role Iowa and Iowans played in the effort to ensure the safety of escaped slaves prior to the American Civil War. She is a student at the Lenihan Intermediate School in Melbourne, IA and was selected as one of 22 presenters out of 2000 finalists that attended the National History Day national contest at the University of Maryland June 10 to 14. In Iowa, we take great pride in our educational system, and it is personally rewarding when one of our students sets themselves apart at the national level. Programs such as National History Day give students opportunities to succeed through hard work and determination, encouraging what is at the heart of the American spirit. I appreciate National History Day and its commitment to improving the teaching and learning of American history in our schools. I would also like to take this opportunity to make special mention of teachers Millie Frese and Karen Roessler, who offered their assistance and encouragement to Rebekah while undertaking this difficult project. Quality teachers like these motivate and inspire students to push themselves to realize their potential. By helping to shape citizens and future leaders, teachers like Millie Frese and Karen Roessler are indispensable parts of our democracy. Once again, congratulations, Rebekah, for your first-class work bringing greater awareness to Iowa's role in the Underground Railroad.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, this legislation that Senator Baucus and I are introducing addresses an important issue--preserving the integrity of the Tax Code. Recent public offerings, effected and announced, by private equity and hedge fund management firms have raised serious tax concerns that if left unaddressed have the potential to fundamentally reduce the corporate tax base over the long run, leading other individuals and business taxpayers with a greater share of the Nation's tax burden. Congress enacted the publicly traded partnership rules in 1987 out of concern with erosion of the corporate tax base. Given the ease with which taxpayers can choose the type of entity for their business, an appropriate ``bright line'' to define entities that should be subject to a corporate level tax was considered to be those entities that are publicly traded. A hallmark of corporate status is access to public markets. Another concern was that the ability to be publicly traded without paying an entity level tax would create an unwarranted competitive advantage over publicly traded corporations. These concerns--corporate tax base erosion and a tax-created competitive advantage--were not considered to be implicated in cases where the partnership's income is from passive investments because investors could earn such income directly--e.g., interest--or because the income is already subject to a corporate level tax--e.g., dividends. The following key quote from the legislative history illustrates this point: In general, the purpose of distinguishing between passive- type income and other income is to distinguish those partnerships that are engaged in activities commonly considered as essentially no more than investments, and those activities more typically conducted in corporate form that are in the nature of active business activities. The recent and proposed public offerings of private equity and hedge fund management firms claim to qualify for partnership tax treatment, even though virtually all of their income is derived from providing asset management and financial advisory services. This result is claimed to be accomplished by structuring service fees in a way that purports to characterize those fees as passive-type income. Whether or not these structures comply with the letter of the law, they are inconsistent with the purposes of the publicly traded partnership rules. This legislation clarifies the purpose of the publicly traded partnership rules by denying the ability of an active financial advisory and asset management business to go public and avoid a corporate level tax on a significant amount of its income. Senator Baucus and I have asked Treasury for their views on these structures, how they plan to address this issue, and whether they think additional statutory changes are necessary to clarify the intent of the publicly traded partnership rules. If a change is necessary, this legislation will accomplish that change. If a change isn't necessary, this legislation does not alter the ability of Treasury and the Internal Revenue Service to issue guidance and enforce Congressional intent. In his introductory remarks, Senator Baucus gave a technical description of this legislation and reasons for change, which reflects my understanding and intent in introducing this bill.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, once again, as a leader of our party on the Finance Committee, I come to the floor to discuss one of the important tax issues that must come before Congress. That is the alternative minimum tax. I am sure many have noticed that the alternative minimum tax is frequently the subject of my many speeches. They may be wondering how long I intend to keep talking about it. The simple answer is I intend to keep talking about it--meaning the alternative minimum tax--until this Congress actually takes some action. Instead of taking action, this Congress has done absolutely nothing. The problem continues to get worse for millions of Americans who will be caught by the alternative minimum tax and are now being caught. It is this ``now being caught'' that I wish to emphasize, because when I speak about those now being caught by this alternative minimum tax, I am referring to those families who make estimated tax payments and who will be making their second payment for this quarter this Friday. Last year, 2006, 4 million families were hit by the alternative minimum tax. This was 4 million too many. Of course, it is considerably better than what we know for the year we are in right now, when 23 million Americans, mostly middle class, will be hit by the alternative minimum tax. The reason we are experiencing this large increase this year is that in each of the last 6 years, Congress has passed legislation that temporarily increased the amount of income exempt from the alternative minimum tax. These temporary exemption increases have prevented millions of middle-class Americans from falling prey to the alternative minimum tax until now. While I have always fought for these temporary exemptions, I believe the alternative minimum tax ought to be permanently repealed because it was never meant to hit the middle class--and it is hitting the middle class--and because the class of people it was intended to hit, the superwealthy, are finding ways of getting around what was thought to be a bright-light idea in 1969. It is hitting maybe a few hundred people, finding that superrich class not even paying the tax. So it isn't serving the purpose it was intended to serve, and it will hit middle-class Americans who were never intended to be hit by it by 23 million this year. One reason I have previously given for permanent repeal is it may be difficult for Congress to revisit the alternative minimum tax on a temporary basis every year, as we have for each of the last 6 years. From January 1 of this year until now, when the second quarterly payment is going to be made, proves me right, because nothing has been done. So the new Congress has yet to undertake any meaningful action on the alternative minimum tax. Several proposals have been tossed around by the other body, meaning the House of Representatives. I have discussed a few of them in my earlier speeches. I generally find these proposals lacking but completely agree with my colleagues that something needs to be done, at least I seem to agree. Despite assurances that the alternative minimum relief is an important issue, nothing has actually been put forward as a serious legislative solution. This chart I am going to put up reflects how the alternative minimum tax has been handled by this Congress so far. It is kind of a smoke- and-mirrors example that I use because we have had numerous proposals talked about, but that is all, just talk. An academic discussion is not in any way a serious substitute for real action this Congress ought to take, as tomorrow people making their quarterly payments will attest to. I have also come to realize the best way to learn about new proposals that deal with the alternative minimum tax is not to check for the new legislation in the Congressional Record but to check the daily newspaper. In the course of reading the Washington Post last Friday, I came across another trial balloon--I emphasize ``trial balloon''--for a new idea about the alternative minimum tax that was printed in the business section of the newspaper. A lot of people were out of town on Friday, so I ask unanimous consent that the article entitled ``Democrats Seek Formula to Blunt Alternative Minimum Tax'' be printed in the Record.