Chuck Grassley

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, over the past three decades, prescription medicines have assumed a central and critical role in treating health care conditions. Every year, researchers make new discoveries that help patients cope with illnesses and improve their quality of life. Ensuring access to prescription drugs--to treatments that can help people maintain their health and avoid costly hospitalizations, for example--is a fundamental responsibility of our Federal health programs. We would not have worked as hard as we did to establish the first-ever Medicare prescription drug benefit if we did not believe this to be true. At the same time, we have a tremendous responsibility to be good stewards of taxpayers' dollars. I, for one, take that responsibility very seriously. In 2004, our nation spent $1.8 trillion on health care. Medicare spending accounted for 17 percent of that amount. In 2005, Medicaid spending is expected to reach $321 billion. The Federal government offers me and other Federal employees health coverage through the Federal Employees Health Benefits Program (FEHBP). The Department of Defense has TRICARE for military personnel, and the Veterans' Administration provides an important source of health care access to those who proudly served our country. Year after year, the costs of these and other Federal health care programs continue to rise. Year after year, we are forced to make difficult decisions to find ways to save money under these programs with the goal of sustaining them well into the future. In contrast to those decisions, the bill that I am introducing today was not difficult for me at all. By eliminating all Federal payments for certain ``lifestyle'' drugs, the legislation restores the fundamental concept of stewardship to prescription drug coverage under Federal programs. It is a pretty simple piece of legislation--no payment for drugs prescribed for sexual or erectile dysfunction under any Federal program, period. The Congressional Budget Office (CBO) estimated that Medicare and Medicaid alone will spend $2 billion on these drugs between 2006 and 2015. In my opinion, those dollars could be spent more wisely. When we crafted the Medicare Modernization Act of 2003, our bipartisan agreement sought to strike the most reasonable balance for Medicare beneficiaries and hard working taxpayers. We wanted to make sure that beneficiaries had access to life-saving and life-improving medicines. Now some certainly may argue that these ``lifestyle'' drugs can improve your life. I appreciate that view. However, we live in a world of limited resources, and in that world of limited resources coverage of these ``lifestyle'' drugs under Medicare--or any other Federal program, in my opinion--is inconsistent with that goal of balance. I am pleased to join with Senators Lott, Santorum, and Ensign in working to rectify that situation today and urge my colleagues to join us in cosponsoring this important legislation.

Mr. GRASSLEY

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

Mr. GRASSLEY. Mr. President, for several days now, the Senate has been debating two nominees for the Federal bench, Priscilla Owen and Janice Rogers Brown. I come to the floor to express my support for these two highly qualified women, and I also do it to urge my colleagues to support an up-or-down vote so that these folks know whether a majority of the Senate is consenting to their nomination by the President of the United States, in other words, confirm these two highly qualified judges. One of the most important roles that we Senators have is the responsibility of advising and consenting to individuals that the President has nominated to fill positions on the three levels of the Federal judiciary. But this responsibility has been threatened by actions of Democratic leadership. Of course, that has brought us to this extended debate, over several days now, about the role of the Senate as expressed in the Constitution about the handling of Federal judges nominated by the President. It seems to me the Constitution is very clear on the role of the Senate in this judicial confirmation process. Judicial nominees are chosen by the President with the advice and consent of this body. Until President Bush was elected, no one ever interpreted this requirement to mean anything but a simple majority vote of those present and voting in the Senate. For over 200 years, no judicial nomination, with a clear majority support in the Senate, had ever been denied an up-or-down vote on the Senate floor. This was the case regardless of whether a Republican or Democratic President was in office. This was the case, regardless of whether the Senate was controlled by Democrats or Republicans. Recently, in the last Congress, the Democratic leadership decided it was going to change the ground rules. The Senate Democrats rejected a 200-year-old Senate tradition of giving judicial nominees an up-or-down vote. By doing this, the Democratic leadership has rejected the Constitution, rejected the traditions of the Senate, and it seems to me as a result of the last election, when approving judges was very much an issue to the American electorate, they are now rejecting the will of the American people. The Democratic leadership targeted 16 of President Bush's 52 court of appeal nominees. They actually filibustered 10 and threatened to filibuster 6 more, a full 31 percent of President Bush's appellate court nominees being stymied. Because of this, President Bush has had the lowest percentage of his court nominees confirmed by any President in recent memory. What is this debate all about? It is basically a debate about what the Constitution requires of the Senate. It is a debate about fairness to the individuals who do not have an opportunity to see whether a majority of the Senate supports them and approves their appointment. And in the case of fairness to the individual nominees, they have been waiting for years to be confirmed. They have majority support in the Senate, but a minority of Senators is opposed to President Bush's appellate court nominees and, as a consequence, will not allow the Senate to give these individuals an up-or-down vote. The Democratic leadership will not allow the Senate to exercise its constitutional duty of advice and consent. The Democratic leadership will not allow even this one Senator to exercise my constitutional responsibilities. In a sense, this Senator from Iowa and 99 others are being denied an opportunity to carry out their constitutional responsibility. That is simply not right. The Constitution demands an up-or-down vote. Fairness demands an up-or-down vote. Some have claimed a rule change on this matter is a violation of Senators' free speech and minority rights. Let me make it very clear, we are not talking about changing rules in this process, we are talking about abiding by the practice of the Senate, until 2 years ago, over the 214-year history of the Senate. So no rule change, just doing what the Senate has always been doing, and no one has raised the issue before about a Senator's free speech and minority rights being violated. There is not anything out of the ordinary then about a majority wanting to exercise its right to keep Senate procedures the same as they have always been. For example, we were faced with problems in 1977, 1979, 1980, and 1987, problems that were visualized by the Senate majority leader at that time as stopping the Senate from doing what is constitutionally necessary for the Senate to do. In those years, Senator Byrd led a Democratic Senate majority in setting precedents to restrict minority rights. The Republicans, who were the minority party, did not respond by threatening the shutdown of the Senate or the stalling of legislation. On the other hand, the actions of the Senate Democrats now are an unprecedented obstruction, plain and simple. The Democratic leadership is not interested in additional debate on the nominees. This is not about minorities wanting to exercise speech and debate on the nomination as long as they might want. The Republican majority leader has offered the Democrats time and again as much time as they want for debate. Yet the Democratic leader indicated in so many words that the Democrats would not agree to any time agreement. The Democratic leadership has taken the position that it will not even allow an up-or-down vote on these nominees. The minority leader has indicated there is no time long enough for Democrats to debate these nominations. I clearly understand the importance of filibusters and would not want to see them done away with completely. However, it is also important to make a distinction between filibustering legislation and filibustering judicial nominations. The interests of the minority party are protected in the Senate. It is the only segment of our Government where minority points of view are protected. It has served a very good purpose over 200 years bringing about compromise. Filibusters are meant to allow insurance that the minority has a voice in crafting legislation. When working on a bill, it is possible to make changes in compromises to legislative language until you get the 60 votes needed under Senate rules to bring debate to a close. In the tradition of the filibuster on legislation, unlimited debate ensures that compromise can take place, protecting some of the desires of the minority. That minority might not be a partisan minority; that minority could be a bipartisan minority that wants to make sure certain changes are made in legislation. Judicial nominees, however, are very different than legislation. An individual such as Judge Brown or Judge Owen cannot be compromised some way so the filibuster, the way it is used in legislation, can be used to bring about compromise of an individual because you cannot redraft a person like you can redraft legislation to get over a filibuster, to get to finality so a majority can rule. In a sense, the minority is saying it is possible to use the filibuster to cut off the left arm of one of these nominees and put on a new arm so they are compromised to get to finality. That is ridiculous. It just does not work. But it also illustrates the rationale behind a filibuster applicable to legislation, not applicable to an individual. For judicial nominations, it is the Senate's responsibility to determine whether nominees are qualified for a position they are nominated to, and to say so through an up-or-down vote. Let a majority of the Senate decide if they are qualified. Throughout our Nation's history, it has only taken a majority of Senators to determine a nominee's qualification for the judge position they are appointed to. It seems to me after a 214-year history, that is history worth continuing. The reality about the Democratic leadership's filibuster is that the minority wants to block filling appellate court judgeships by requiring 60 votes to proceed to the nomination. But no other President has been required to get 60 votes for his judicial nominees. No other judicial nominee needed to pass the 60-vote hurdle of a supermajority. Many Federal judges on the bench today would have never made it, not with that sort of requirement. In fact, all Senators here got elected by a simple majority, 50 percent of the vote. If we had requirements for supermajority rule for Senators to be elected, a lot of Senators who are my colleagues might not be here today. Why are Senators now wanting to approve judges only if they get a 60-percent vote? The reality is no other Senate majority has been excluded from judicial confirmation process in 214 years. We need to restore tradition and the law of judicial process. We need to give these nominees the up-or-down vote the Constitution requires. We need to stop a systematic denial of our advice and consent responsibilities which have been shuttered by the use of the filibuster. I have been a Member of the Senate since 1981. Before I got to the Senate I served in the other body since 1974. I love the Senate. I have worked hard to be a very productive Senator. I want to do what is best for the Senate, for my constituents, and for my country. That is not different than the other 99 Senators most of the time. That is what we were all elected to do. The Republican majority leader is also trying to do what he thinks is the best thing for this country by moving to reestablish the over 200-year Senate tradition by giving judicial nominees the up-or-down vote. This is not going to destroy the Senate. It is in the tradition of the Senate and it is within the tradition of the Constitution. The 214- year history of this Senate speaks louder than just the last 2 years, but the last 2 years will trump the first 214 years if we do not take action to keep the advice and consent confirmation process within the tradition of the Senate. It is just plain hogwash to say that moving to make sure the rule is to give judicial nominees an up-or-down vote will hurt our ability to reestablish fairness in the judicial nominating process. It is not going to hurt minority rights. It establishes what we call regular order as it has been for 214 years. It will be fair both to Republicans and Democrats alike. All the majority leader wants to do is to have a chance to vote these nominees up or down. If these individuals do not have 51 votes, they will be rejected and should be rejected. But if these individuals do have 51 votes, then they should be confirmed. That is according to the Constitution. If a Senator disapproves of any one of these individuals, vote against the nomination. I have done that in the past. But do not deprive the people the right to support a nominee through their elected Senator. Some claim many judicial nominees were filibustered by Republicans, particularly when President Clinton was in office. That isn't accurate and that is a nice way for me to say it. Very few people either inside or outside this Chamber have been as involved in the issue of judicial nominations and the use of the filibuster as I have. As a long-time chairman of the Judiciary Subcommittee on the Federal Courts, I have a unique perspective on the debate and the use of filibusters. First, when the Democrats were in a majority in the Senate under President Reagan--and this goes back to my starting in the Senate in 1981--they blocked 30 of President Reagan's nominees and 58 of President Bush Senior's nominees. They did that in the Judiciary Committee. Now, that is not equivalent to a filibuster. I do not want to mislead anybody. Then, in the last few years of President Clinton's administration, many Republicans became disillusioned with the number of nominees the administration had sent to the Senate, and we felt our own Republican leadership was allowing out-of-the-mainstream nominees to be confirmed. This all came to a head with the nominations of Ninth Circuit Judges Paez and Berzon. Now, understand these people are serving as judges now. They were nominated to that position by President Clinton. Going back to this time of Judges Paez and Berzon, at that time we had a Democratic President and a Republican-controlled Senate. There was serious talk of filibustering these nominees. I have heard some Democrats and ill-informed pundits try to make the case that Paez and Berzon were filibustered. Well, they were not. The reality is, the Republican leadership, including the chairman of the Judiciary Committee at the time, argued that there had never been a filibuster of an appellate court nominee. The Republican leadership argued Republicans should not cross that Rubicon and set the precedent because then it would be used against Republicans in the future when we had a Republican administration. So it was decided at that time there would not be a filibuster and we would not set that precedent. There would be a cloture vote, yes, but everyone knew that cloture vote would prevail and the nominee would be confirmed by a majority vote. So the Members who wanted to filibuster decided to go along with the leadership's wise counsel even though these Members never trusted that the Democratic leadership would follow our example. I voted for cloture. I voted to get over 60 votes so we could move on with what we knew should have been done by the Senate. But I want you to know that I voted against these two nominees, Judges Paez and Berzon. And I was not alone. Other Republican Senators did the same thing. But in the end, unfortunately, those Members were right not to trust Democratic leadership because Democratic leadership has now crossed the filibuster Rubicon. We are not only being denied the ability to perform our constitutional duty in the judicial selection process, the move to filibuster is upsetting the checks and balances and the separation of powers principle our Nation is founded upon. The Democrats are the ones who are upsetting the checks and balances. They want to grind the judicial process to a halt for appellate court nominees so they can fill the bench with individuals who have been rubberstamped by leftwing extreme groups. Let me say something about the nominees, then, because these are the folks whom we are debating, these are the folks whose professional future, personal future is at stake by what we do here of allowing 51 votes when they will be approved or 60 votes when they will not be approved. Priscilla Owen and Janice Rogers Brown are both highly qualified individuals, with exceptional legal abilities. They are talented women, respected women, true pioneers. But they have been drawn into the web of the far leftwing special interest groups. These women have been called outside the mainstream by their opponents. They have been called unworthy for the Federal bench. They have been labeled, among other things, as ``activist,'' ``anticivil rights,'' and ``anticonsumer.'' These claims are not true. And the claims charged against other of President Bush's judicial nominees are just as false. All these outrageous claims have consequences. The travesty is Priscilla Owen and Janice Rogers Brown have been waiting for years to be confirmed. The travesty is other worthy nominees such as Miguel Estrada got tired of putting up with the antics of the Senate, a Senate untraditional of its first 214-year history, and just said: I am not going to fight it anymore. So Miguel Estrada withdrew his nomination. The travesty is that a nominee like Judge Pickering is trashed. The travesty is that the good name of a nominee like William Pryor is dragged through the mud. Ripping to shreds the reputation of these individuals with unfounded allegations is unacceptable. This tactic sends a clear message to good people who want to serve their country that they will have to endure outlandish and baseless attacks on their record and character if they ever want to be a Federal judge. The Democrats are doing this because they are using a far left litmus test to satisfy their leftwing--their leftwing that is out of the mainstream--special groups. So when the Democratic leadership says these nominees are outside the mainstream, they are basically saying these individuals have not been approved by their allies, the far left special interest groups. But judicial nominees should not be subject to a litmus test. They should not be subject to an ideology litmus test. A nominee should not be opposed, as Priscilla Owen and Janice Rogers Brown are being opposed right now, because they will strictly follow the law, be constitutionalists, rather than legislating from the bench some leftwing agenda. Moreover, history has proven the wisdom of having the President place judges with the support of the majority, not a supermajority, in the Senate. That process ensures balance on the courts between judges placed on the bench by Republican Presidents and those placed on the bench by Democratic Presidents. The current obstruction led by Senate Democratic leaders threatens that balance. Priscilla Owen and Janice Rogers Brown deserve an up-or- down vote. It is high time to make sure all judges receive fair up-or- down votes on the Senate floor, up-or-down votes for judicial nominees of both Republican and Democratic Presidents alike in the tradition of the Senate for 214 years, until 2 years ago. In my town meetings across Iowa, I hear from people all the time, Why aren't the judges being confirmed? If we do not take care of this issue this week, I am going to hear it in my 22 town meetings across northwest Iowa next week when we are not in session. I think most people understand the process is being politicized to the point that good men and women are being demonized and their records distorted at an unprecedented level. I hear from Iowans all the time that they want to see these nominees treated in a fair manner, and they want to see an up-or-down vote. The Democratic leadership likes to say the Republicans are the ones who are changing the rules. But that is not true. The Democrats are the ones who have engaged in extreme behavior and tactics, pulling out all the stops to defeat well-qualified nominees who would have majority support in the Senate if they were given an up-or-down vote. They are the ones who have distorted the rules to the point that the Senate is being denied its ability to fulfill its constitutional responsibility. And if Senator Frist has to do it, what he is doing is leaving the rules practiced exactly the way they were for 214 years. Filibustering judicial nominees may be touted as standing firm on principle. On the contrary, what it boils down to is an obstruction of justice. Let's do the American people a favor. Let's stop the theatrics and get back to the people's business. All the rallies and political spin doctoring are not clearing any court dockets, and they are not impressing the American public either. Let's debate the nominees and give our advice and consent. It is a simple ``yea'' or ``nay,'' when called to the altar to vote. Filibustering a nominee into oblivion is misguided warfare and the wrong way for a minority party to leverage influence in the Senate. Threatening to grind legislative activity to a standstill if they do not get their way is like being a bully on the school yard playground. Let's do our jobs. Nothing is nuclear about asking the full Senate to take an up-or-down vote on judicial nominees. It is the way the Senate has operated for 214 years. The reality here is the Democrats are the ones who are turning Senate tradition on its head by installing a filibuster against the President's judicial nominees. The Senate has a choice. We can live up to our constitutional duties to advise and consent to President Bush's judicial nominees or we can surrender our constitutional duty to the leftwing special interest groups who apparently control the Democratic Party. This Senator chooses to follow the Constitution. We need to return to a respectable and fair process. We need to return to the law and the Constitution. We need to return to the Senate's longstanding tradition. We need an up-or-down vote for these judicial nominees. In case there are some people sincerely led to believe that somehow appointing certain people with a strict constitutionalism to the courts is something to worry about, I would simply ask them to look at how history works in bringing balance to our judiciary throughout the history of our country. Think in terms of 8 years of a Republican President appointing maybe people who are strict constitutionalists to the judgeships--and not all of them are; but just say that they might all be--then you have 8 years of a Democratic president with people of an opposite point of view being appointed to the judgeships. That brings balance. But also think in terms of how it is difficult to predict down the road 25 years how judges are going to rule. Think of two of the foremost liberal people on the Supreme Court, Justice Souter and Justice Stevens. Who do you think appointed these most liberal members to the Supreme Court? Republican Presidents did. And then balance that with the two other most liberal members on the Supreme Court, Breyer and Ginsburg. Who appointed them? A Democratic President. You could make an argument that Republican Presidents have brought more balance to the Supreme Court than Democratic Presidents have. Then the other thing is, look at somewhere you thought they were going to be predictable where they would end up, and you have Justice Kennedy and you have Justice O'Connor, who were supposed to be very strict constructionists when they were appointed to the Supreme Court, but they go back and forth between the conservative wing of the Court and the liberal wing of the Court. So whatever worries the Democratic Senators of today, I wish they would take a look at history. Time answers a lot of these problems. Elections answer a lot of these problems. And we have a great constitutional system that has worked for so long over such a long period of time that in the final analysis everything is going to work out OK. I yield the floor.

Mr. GRASSLEY. That means I can speak until 1 o'clock; is that right?

Mr. GRASSLEY. Mr. President, I am going to speak on the judge issue that is before the Senate. I was wondering what the time constraints are.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, will the Senator yield for a question?

Mr. GRASSLEY. I thank the Senator.

Mr. GRASSLEY. And maintain the practice of the Senate as it has been for 214 years prior to 2 years ago.

Mr. GRASSLEY. So I think that ought to make it clear we are just talking about the unprecedented use of the filibuster within the last 2 years. We are not talking about changing anything in regard to filibusters on legislation because we understand that is where you can work compromises. You cannot really work compromises when it comes to an individual--is it either up or down. But you can change words, you can change paragraphs, you can rewrite an entire bill to get to 60, to get to finality, on any piece of legislation.

Mr. GRASSLEY. And we would have benefited very much from that. It would have given us an opportunity to get anything done that we could get 51 votes for doing, with no impediment, and we voted against that?

Mr. GRASSLEY. So when we just came back into the majority, after the 1994 election, there was an effort by Democrats to eliminate the filibuster?

Mr. GRASSLEY. For everything, including legislation.

Mr. GRASSLEY. We were the new majority.

Mr. GRASSLEY. One of the things that the public at large can get confused about is that we are going to eliminate the use of the filibuster entirely. I have seen some of the ``527'' commercials advising constituents to get hold of their Congressman because minority rights are going to be trampled. I, obviously, find that ludicrous. I know this debate is not about changing anything dealing with legislation. It is just maintaining the system we have had in the Senate on judges for 214 years. I wonder if the Senator would clear up that we are talking just about judicial nominees, and not even all judicial nominees, and nothing to change the filibuster on legislation.

Mr. GRASSLEY

Mr. GRASSLEY. Yes, so long as the commercial airline fuel transaction takes place on one of the secure airports listed by the Treasury, then, that also is my understanding.

Mr. GRASSLEY. Mr. President, after great effort by many people, the Senate is ready to move us one step closer to enacting legislation with the potential to impact all Americans in every state. Crumbling infrastructure and poor transportation choices impede our ability to live and do business, and the Senate clearly recognizes that fact. Our transportation bill utilizes more than $295 billion to ensure all Americans have access to efficient and reliable transportation as they go about their professional and personal lives. Among the many people whose hard work has made the difference, I must first thank the chairmen and ranking members of all the appropriating committees that have been involved in this process. Credit must also go to all members of my staff, who spent many hours sifting through the nuts and bolts of this bill. Kolan Davis, Mark Prater, Elizabeth Paris, Christy Mistr, Ed McClellan, Dean Zerbe, John O'Neill, Sherry Kuntz, and Nick Wyatt showed great dedication to the tasks before them. As is usually the case, the cooperation of Senator Baucus and his staff was imperative. I particularly want to thank Russ Sullivan, Patrick Heck, Bill Dauster, Kathy Ruffalo-Farnsworth, Matt Jones, Jon Selib, Anita Horn Rizek, Judy Miller, Melissa Mueller, Ryan Abraham, Mary Baker, and Wendy Carey. I also want to mention George K. Yin, the chief of staff of the Joint Committee on Taxation and his staff, especially the fuel fraud team of Tom Barthold, Deirdre James, Roger Colinvaux, and Allen Littman, as well as the always invaluable assistance of Mark Mathiesen, Jim Fransen and Mark McGunagle of Senate Legislative Counsel. This bill is infused with the spirit of bipartisan cooperation. Hopefully that spirit will survive the ongoing legislative process.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, it should be quite obvious from America's increasing dependence on foreign sources of oil that it has now reached a very critical threshold which calls for immediate action. This bill before us is part of our immediate action, as it has some things in it to increase our availability of domestic supplies of energy. Global oil prices and supplies remain beyond our reach, just as surely as our own demand here at home will remain constant. Abroad, oil prices and supplies are at best in a state of flux, very unpredictable. At worst, you could say that things are beyond our control. Our obvious goal in a lot of our energy legislation--some of it is part of this bill and part of the debate we had 2 years ago on the highway bill--is to get some of this under our control by having less dependence upon foreign sources of oil. In China, for instance, the competition for oil is unprecedented. So determined is China to protect itself and its burgeoning growth against global uncertainty, they have recently secured supplies from both Canada and Venezuela and are actively seeking oil from producers upon whom the United States has traditionally relied. Some experts suggest that we have now reached our global supply limits, perhaps even that we have exceeded them. If they are correct--and of course we hope they are not--we face more shortages and rising prices. The answer to these very real and vexing questions about the global security of supply and price for America's oil demands are far beyond this Senator and indeed even beyond this legislation before the Senate. However, I believe, with this amendment as part of the managers' package, we will go a long way toward reducing our domestic dependence upon oil dedicated to our transportation sector. We are gulping vast amounts of imported oil in an increasingly futile attempt to quench our thirsty addiction to petroleum. Today, our transportation sector accounts for two-thirds of the total United States demand. This forces us to import a whopping 60 percent of our petroleum needs. I remember a time when we thought it was inconceivable America would ever exceed even 50-percent reliance upon foreign oil. Yet, we have, and then we exceeded even that, until here we are today at more than 60 percent. What can we do now to alleviate the problem? How can we do so here at home? The President pointed something out when he spoke last week about the pressing needs to develop and implement comprehensive national energy policy, and I think it bears repeating if only through paraphrasing. President Bush indicated that technology would provide our Nation with the means to reduce our demand for petroleum-based fuel, thus reducing the high price of gasoline. The President also stressed we must embrace domestic alternative fuels as a critical midstep on the pathway toward hydrogen, which may well prove to be our ultimate fix. But the simple fact remains that a sustainable, affordable hydrogen program is still decades away. Transitioning America away from our entrenched dependency on foreign petroleum fuels to cleaner, cheaper domestic alternatives is occurring right now here at home. We should not be oblivious to it. I agree with the President that these domestic alternatives need to be embraced and encouraged. To that end, therefore, as chairman of the Finance Committee, I have developed a proposal entitled the ``Volumetric Excise Tax Credit for Alternative Fuels.'' It would be just like VEETC for ethanol and biodiesel that we passed last year, only extended to alternative fuels. This proposal would help significantly accomplish that goal of being less dependent upon foreign sources of energy. The VEETC proposal would provide for the expansion and modification of the Volumetric Excise Tax Credit for Alternative Fuels. Our proposal will expand last year's excise tax formula, as it relates to ethanol, to include an excise tax credit for all domestic alternative fuels which would displace imported petroleum. This is how it would work. Some fuels, such as natural gas, presently pay a partially reduced rate of excise tax into the highway trust fund. However, because these motor vehicles exact the same amount of damage to our roads and highways, my amendment would have them pay an increased rate of Federal excise tax into the highway trust fund. With this mechanism, the President's objective of displacing as much imported oil as possible is met. As importantly, the increased excise tax payments would go a long way toward increasing revenue into the highway trust fund for the near term and well into the foreseeable future. This is not a new concept. Congress passed, and the President signed into law, a similar provision last year providing the same treatment for ethanol and biodiesel. In an effort to further encourage other domestic alternative fuels, this new VEETC amendment that we will be taking up which enjoys broad bipartisan support, it constitutes a simple expansion on the part of the framers to include other alternative fuels which displace imported petroleum-based fuels. Adoption of the VEETC for alternative fuels would constitute a win-win. It puts more money into the highway trust fund, while at the same time promoting domestic sources of motor fuel. I yield the floor.

Mr. GRASSLEY

Mr. GRASSLEY. Yes.

Mr. GRASSLEY. Mr. President, can I have the attention of the Senator from West Virginia, please. The Senator from West Virginia does not need to respond to this, but I just want to make sure. First, I rise because about 6 o'clock yesterday afternoon, I promised the Senator from West Virginia that I would get back with him and hopefully have Senator Baucus with me to discuss whether we could go along with his amendment. I got the amendment over to my staff, as I promised I would, about that time, but it was 9:30 this morning before I was able to get the two staffs together. I never did get together with Senator Baucus so I could come over and visit with the Senator personally about it. We have found a cost argument, not an argument against the Senator's point of view on the substance of his amendment, but it is my responsibility as chairman of the Senate Finance Committee to find offset. Now, I do not say this to denigrate the Senator's efforts--the Senator does not have to worry about offsets; that is my job--but if I were going to go along with the amendment of the Senator, I would have the responsibility to find an offset. So I apologize, first, for not getting back to the Senator as I promised I would last night. But based upon some of the arguments that Mr. Inhofe gave but more importantly related to the work of my committee--and I cannot speak for Senator Baucus, but I think there is an agreement among our staff, and I do not want to put a figure on it without having the Joint Tax Committee actually score something, but this is a tremendously expensive amendment, not that it is not justified. I would have to come up with a fairly large figure that my staff tells me would be close to what we have already raised to bring more money into the transportation fund so that we can get more money for the Senator's State and my State, and more money even for the transit that is a basis for the Senator's argument because he does not have the mass transit--and we do not have the mass transit in Iowa as well, so Iowans would benefit from the Senator's amendment. But I just cannot find that money, and it would detract from all the money we previously had raised. I do not know what the course of action is, but I would have to take the position of advising people not to vote for the Senator's amendment.

Mr. GRASSLEY. Mr. President, I want to respond to the distinguished Chairman of the Budget Committee. Yesterday afternoon, my colleague responded to my defense of the merits of the Finance Committee title in Chairman Inhofe's substitute. Since Chairman Gregg's response came shortly before the session ended last night, I am responding this morning. I respect Chairman Gregg's efforts in his initial year as chairman of the Budget Committee. I congratulate him now as I have in the past on his victory in achieving a budget resolution. I was proud to support him in committee, on the floor, and in conference on the resolution. As a senior member of the Budget Committee, I take its role seriously. I respect the Budget Act and the importance of the tools of fiscal discipline that points of order and other enforcement devices bring to the legislative process. I also respect the key role of the Budget Committee chairman and his staff under the Budget Act. A careful and fair review of my statement will show that it is consistent with these long-held views. My statement did not claim that there was no valid Budget Act point of order against the Finance title of the Inhofe substitute. My statement did not question the authority of the Budget Committee chairman in raising the point order. My statement responded to several very specific assertions against the Finance Committee title. One assertion, made quite passionately by Chairman Gregg, was that the Finance Committee amendment was a product of accounting gimmicks. Another assertion was that the amendment was not offset. I responded to the two main assertions ad relied on the Congress' official tax policy scorekeepter, the Joint Committee on Taxation. Chairman Gregg is right that, under the Budget Act, it is the Chairman Budget Committee chairman that the Senate parliamentarian looks to determine whether a point of order is well-founded. The Joint Committee on Taxation, however, determines the scoring of revenue measures. I will not go into the other points of disagreement in our statements because the statements speak for themselves. In sum and substance, my statement defended the Finance Committee title on its scoring by the Joint Committee. My statement did not dispute that the amendment spending level was above those contemplated by the Budget Resolution or the spending level agreed to by the administration and congressional Republican leadership. Of course, Finance Committee jurisdiction extends only to the cash flow of the Highway Trust Fund. The Finance Committee title added additional cash inflow, trust fund receipts, and additional cash outflow, trust fund outlays. The Finance Committee title balances additional trust fund receipts and outlays. That was the job we were asked to do and we did it in a fiscally responsible manner.

Mr. GRASSLEY. Mr. President, I am not going to raise any more issues. I have expressed why I cannot support the amendment, and I will reserve any other action at the time we vote. I thank the Senator from West Virginia for being understanding of why I did not get back to him.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, it saddens me to report today that another young Iowan has fallen courageously in service to his country as part of Operation Iraqi Freedom. Sergeant David Rice, a fire support specialist with the 1st Battalion, 5th Field Artillery Regiment, 1st Infantry Division, died on April 26 when his vehicle overturned near Muqdadiyah. He was 22 years old. David grew up in Sioux City, IA, and attended East High School where he excelled in football, wrestling, and track and field. He joined the Army after graduating from East in 2001 and was on his second tour of duty in Iraq. David Rice is remembered by friends and family as a hard-working, quiet leader. In memory of Sergeant Rice, I would like to recognize today all of our military men and women, like David, who have been the quiet, dedicated leaders who have helped see our country through this difficult time. My prayers go out to the family of Sergeant David Rice, his father David, his mother Laurinda, and his sister Stevie. They should know that his leadership and sacrifice have not gone unnoticed but have earned him the gratitude of a Nation. Sergeant Angelo L. Lozada, Jr.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I want to take this opportunity to respond to the points raised to justify the budget point of order. The reason I want to do that now is because there are some things that are not clear about this legislation. I tried to make them clear in my remarks yesterday, but it is obvious that if they had been clear, there would not have been a budget point of order. One of the points made by the chairman of the Budget Committee and other Members of the Senate is that the Senate highway bill is larger than the President's request. It was alleged that Senate authorizers ``snuck in'' a change in their substitute, without a separate vote, to increase the bill's level of funding above $284 billion. Senate budget staff is correct that the amendment on the Floor that is pending is larger in size than the bill requested by the President. Senate leadership, all authorizing committees, and the Finance Committee were well aware of this fact and made a determination to offer a substitute amendment in excess of the President's request. This makes perfect sense and, of course, is in keeping with separation of powers and the fact that the President, under our Constitution, proposes and the Congress, under the Constitution, disposes. A majority of the Senate wishes to provide more infrastructure resources than the executive branch. The substitute bill, with increased funding, is completely offset or revenue-neutral. As a matter of fact, the bill contributes positively and substantially towards deficit reduction. As indicated in my statement yesterday, the administration and the budgeteers should focus on deficit reduction rather than on the top-line spending number. The Senate continues to offset legislation and, by so doing, exercises fiscal restraint, a fact being continuously ignored by some in this body. Another point made is that provisions passed in the JOBS bill last October--sometimes referred to as FSC/ETI bill--signed by the President in October, that somehow the provisions we had in that bill relating to fuel fraud did not increase general fund receipts or even things dealing with other tax provisions did not increase general fund receipts. I speak of acronyms that we used last fall that may not be familiar to people now that we are by that legislation. But we constantly talked about the ethanol provisions with the acronym, VEETC, volumetric ethanol excise tax credit, and fuel fraud provisions that were enacted in the JOBS bill which other Members of this body have alleged, and I quote here, ``have made the highway trust fund healthier by $2 to $3 billion annually only by definition, since merely moving around deck chairs has not changed the Federal Government's bottom line.'' That is a serious accusation considering how careful we were over a period of months last year not only to work on the VEETC provisions to bring in money to the Federal Government that was fraudulently not being paid but also to make sure that we did it in a fiscally sound way. This is my answer to that accusation. Last year the JOBS bill enacted ethanol and fuel fraud provisions that increased projected receipts to the highway trust fund by $17 billion during the period of the highway bill reauthorization, 2005 to 2009. These provisions were also included in last year's transportation bill but had to be enacted instead in the JOBS bill after it became clear that we would not get a conference agreement on the highway bill. That is an unfair accusation that somehow all this work that we went through is just moving around deck chairs but has not changed the Federal Government's bottom line. Seventeen billion dollars coming in during that period of time, $17 billion, some of which was being fraudulently avoided. Congress had good reasons to enact the ethanol changes in the JOBS bill. These changes helped to pay for a large bipartisan tax bill to provide tax relief to domestic American manufacturing. And these ethanol changes accompanied other energy incentives in that bill that had overwhelming support of both Chambers and both parties. Because of those ethanol changes, fuel excise tax receipts are now going into the highway trust fund. That means the Federal highway program now has more dollars available to it. It is just common sense. That is how trust fund accounting works. It seems that some would now allow us to ignore those accounting rules. Some would like us to pretend that those new fuel tax dollars are not in the trust fund. You can't change what are just plain facts of life. These funds are in the highway trust fund. This Congress should not pretend that a law enacted by a previous Congress did not happen. We are not using fuzzy arithmetic or fuzzy accounting. We are not just moving deck chairs around and not affecting the Government's bottom line. We are, in a very real way, affecting the Government's bottom line. And we are going to have, not only people who were avoiding paying taxes paying those taxes, but we are going to be able to have better transportation infrastructure, better highways by what we are doing. We should not ignore standard fund accounting rules because a minority of this Senate disagrees that taxes paid on a gallon of ethanol should not go into the highway trust fund. The administration did not object to these provisions as part of the JOBS bill last October. The President signed that bill and now the administration's own transportation proposals rely on these new trust fund receipts that were developed in a bipartisan way by the Senate Finance Committee. The changes that we made in the JOBS Act made good sense, common sense, but that comes out also as good policy. They raised money for the highway trust fund. We have every right--indeed, we have every obligation to the people who pay money into the road fund--to use those funds to improve America's highways. If you don't use trust fund money for highways or for other transportation reasons, you should not be taxing it in the first place. But once it is taxed, those people who are fraudulently not paying that tax are guilty and should pay that tax. Our provisions do that. Another claim by the Budget Committee is that the Finance Committee has not provided real offsets for increased burdens to the general fund. My colleague from New Hampshire, chairman of the Budget Committee, suggests that our bill offsets, including economic substance, are illusory. He is concerned that these offsets, which were also passed during the last Congress, will be dropped in conference. Now, the Joint Committee on Taxation, as we all know--maybe some of us forget--is the official scorekeeper on tax matters in the Congress, not the Congressional Budget Office. The Finance Committee has provided tax law changes that have been scored by the Joint Committee on Taxation as fully offsetting any increased burden to the general fund. The Joint Committee on Taxation is the official scorekeeper for revenue provisions under the Congressional Budget Act. It is not the Senate Budget Committee that is the scorekeeper; it is the Joint Committee on Taxation. Section 201(g) of the Budget Act restricts the Congressional Budget Office in a manner in which it carries out its responsibilities related to revenue legislation. Section 201(g) provides, in pertinent part: For the purposes of revenue legislation, which is income, estate and gift, excise, and payroll taxes, considered or enacted in any session of Congress, the Congressional Budget Office shall use exclusively during that session of Congress revenue estimates provided to it by the Joint Committee on Taxation. During that session of Congress, such revenue estimates shall be transmitted by the Congressional Budget Office to any committee of the House of Representatives or the Senate requesting such estimates, and shall be used by such committees in determining such estimates. This, then, should put to rest this debate about whether these offsets that are in my amendment and in Senator Baucus's amendment-- that is a bipartisan amendment--are real. They have been scored by the Joint Committee on Taxation, the official scorekeeper under the Congressional Budget Act for revenue purposes. I kind of think that maybe the Budget Committee is living in an ivory tower. It is particularly troubling that this nonsense attack--that the offsets are not real--comes from a committee that doesn't have to do any of the heavy lifting to find real offsets and real savings. But instead just find reasons to complain about some other committee's work. It must be nice to be able to just pick numbers out of thin air and try to claim the numbers are real or, in this instance, somehow not real, even though the Joint Committee on Taxation scores it as revenue- neutral, or better than revenue-neutral, as reducing the deficit. But it is the Finance Committee, not the Budget Committee, that actually has to do the hard work of finding, negotiating, and drafting the policies that can pass the Senate and create these real offsets. Yesterday, I said 40 percent of the new funding is hard trust fund money. Of course, the Finance Committee gets no credit for that effort, no credit at all. It is a ridiculous charge. It is so easy to throw rocks around here. How about dealing with constructing policy instead of throwing rocks? I would like to see some of that. The complaints we are hearing are from a committee that has no responsibility to find real numbers, real offsets, or real savings. It reminds me of an agricultural economist telling a farmer how to farm. I suggest that those who are sitting on the fence giving this farmer--and I am an Iowa farmer--stewardship advice about how to farm should get off the fence and get some dirt under their fingernails, and I will be happy to show them how to start the tractor. And I say this as a person who has been very loyal in my membership on the Budget Committee, as well as being chairman of the Finance Committee, because out of 48 amendments that were offered to destroy the budget that came out of the Budget Committee, I supported the chairman on 47 of the 48 amendments. Now, the suggestion was also made that we have used these revenue raisers in the previous Congress. None of the offsets included in the highway substitute have passed the Senate this year as part of any other legislation. Even if that were the case, those additional anticipated revenues are available until they are passed by both Houses and enacted into law. There seems to be an additional concern that the offsets used in this bill would not survive a conference with the House. As a person who worked for 8 years and 3 days--from when I first introduced the bankruptcy reform bill to when the President signed the bill a month ago--if I would have ever stopped because a bill passed the Senate but somehow didn't get to the President, we would never have a bankruptcy reform bill. But we passed that bill seven or eight different times-- the conference report, plus original legislation through the Senate. How you get things done in the Senate is by sticking with it--just don't give up. And we are doing that here. We continue to close corporate tax loopholes the same way. People on the Budget Committee are finding fault that we might pass the Senate and not get out of conference. That somehow means we are using a smokescreen. Let me suggest that on the JOBS bill last year, which I have already referred to several times in my remarks today, we passed through the Senate $39 billion of corporate tax loophole closers, and we ended up out of conference with $24 billion of that $39 billion. I don't think that is such a bad track record. If it had not been for the Senate and the bipartisan approach of the Finance Committee, we would not even have those $24 billion of loophole closers--money coming into the Federal Treasury. So you cannot just stop. Because these offsets, whether they be fraudulent use of tax dollars, nonpayment in a fraudulent way of gas tax money or other loophole closers--in all of these cases we have people finding ways to avoid paying their share of taxes that ought to be paid. One has to keep at it. There is a constant game around here of lawyers, accountants, and investment bankers that like to game our Tax Code. It is pretty hard to keep ahead of them, but I am determined, and Senator Baucus is determined, to keep ahead of them. So I am not going to have anybody tell me we are not legitimate when we pass things through the Senate that maybe cannot survive conference because eventually they do survive conference, and eventually they are signed by the President. The Senate cannot be subjected to the expectation of passage in the House as a standard for this body. The Senate has to focus on what is possible in the Senate, and differences will be resolved and reconciled with the other legislative body during the conference process. As an additional point, I note it was Ways and Means Chairman Bill Thomas, not the Senate Finance Committee, who first proposed codification of the economic substance doctrine, which is the largest revenue provision added in the substitute bill. I would also like to recite a little of the history of this matter so we will not presume that something maybe will not get through conference because maybe it did not get through conference last October, particularly when the chairman of the House Ways and Means Committee first brought up this issue. The Senate Finance Committee began its work on tax shelter legislation in 1999. During the years 2000 and 2001, the Finance Committee released three discussion drafts to stimulate public comment on the closing of corporate tax shelters. None of these drafts contains codification of the economic substance doctrine that we are using in this amendment before the Senate right now as an offset. In May 2002, the Finance Committee reported out the Tax Shelter Transparency Act of 2002, which formed the basis for the tax shelter disclosure rules enacted in last fall's tax bill. The Tax Shelter Transparency Act did not contain codification of the economic substance doctrine. In July of 2002, a mere 2 months after the Finance Committee reported out its bill, Chairman Thomas laid down H.R. 5095, the American Competitiveness and Corporate Accountability Act of 2002. This bill would have repealed the FSC/ETI regime and used the proceeds for corporate international tax reform. It was also the first time the Ways and Means Committee dipped its toe into the waters of tax shelter closing legislation. H.R. 5095 parroted the disclosure provisions of the bipartisan Senate Finance Committee-reported bill, but it went one step further--it called for codification of the economic substance doctrine. So where did folks get the idea around here that somehow economic substance doctrine codification is blue smoke, intended to mislead the Senate into believing that something is revenue-neutral when it is not because this bill is revenue-neutral as scored by the Joint Committee on Taxation. As an aside, I remind my colleagues that this additional money comes out of the hide of tax shelter promoters and tax shelter participants, not out of the pockets of the honest middle-class working men and women of America. This is not phony money, as maybe we were led to believe. This is good tax policy. In emphasizing that the Senate highway bill is bigger than that provided in the budget resolution, the following quote was used: ``[i]t appears the Finance Committee floor amendments include provisions quite similar to those general fund transfers that were included in last year's Senate-passed bill. Such general fund transfers do nothing to offset the deficit effect of the increased spending in that amendment.'' I want to say why that is hogwash. The Members of this body have indicated, and will vote their intent on this issue in just a few moments, to spend more than was included in the Senate budget resolution. No procedural games, gimmicks, or end runs will be needed to prove this point. As the distinguished chairman of the Senate Budget Committee indicated repeatedly during the budget process, if there are 60 votes for something, then so be it, and clearly more than 60 members of the Senate are in agreement about this budget point of order. But we do take issue with the fact that we were accused of sending an amendment to this Floor for consideration by 100 Members of the Senate that did nothing to offset the deficit effect of increased spending. The accusation is purely false and purposely misleading. Our substitute amendment replaced trust fund and general fund receipts and contributed substantially to the deficit reduction by more than $10 billion. Finally, to those critics of the Senate Finance Committee title, I reissue the challenge I put to them yesterday, that obviously was not listened to. It is the same challenge from last year. If they do not like our Finance Committee title, come forward and tell us they do not want any new money for their State from this highway bill. Alternatively, if they want to keep their State's extra money, find another way to get there that will yield 60 votes. I issued the challenge last year, I issued the challenge yesterday, and I reissue that challenge this very hour. Now, I did not get any takers last year, I did not get any takers yesterday, and I do not expect to get any takers today. So once again, it is easy to complain, but we are here to do the people's business and this amendment that came out of my committee is the people's business-- it is financially responsible, doing things to close corporate tax loopholes, to be fair to middle-class working men and women, to get the job done basically of improving our highway and transportation infrastructure.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I want to discuss a transportation bill that has been several years and several congressional sessions in the making. For a very long time now, Senator Baucus and I have worked with the various authorizing committees to prudently fund the highway and transit programs. Of course, this has not been an easy process. But last year, we found a way to fund the programs in a way that enabled every State of the Union to bring home more money for needed transportation, particularly for highways. Let me repeat that because it is important. Every Member of the Senate, including those who complained about our funding mechanism, did better under our plan last year. This year we face a different set of challenges. There are conflicts that arose in last year's conference that are still with us. The conflicts spring from three principles that have proven very difficult to reconcile. I will lay out those conflicts. The first principle is to get a highway bill that is an improvement over current policy. That is where overwhelming majorities are in both the House and the Senate. We need adequate funding for our transportation infrastructure. We need to do our best to meet the job, economic development, and transportation needs of the country. The authorizers say improved policy requires more trust fund money. The second principle from conference is deficit reduction. President Bush has rightly put deficit reduction as a key objective in general and applied it to the highway program in particular. Toward that end, the administration has pegged spending at $284 billion in spending over the applicable period. In conference, the House brought forward a third principle. They made it clear that they would not accept the use of general fund offsets to prevent deficit increases because of the highway bill. Over the last several years it has been frustrating to see some Members advance all these principles without acknowledging the inherent conflict. They say: Senator Grassley, we need more money for my State for roads or transit. At the same time, these same Members would say: Senator Grassley, why are you paying for it in this way or that way? So to any complainers, I issue the challenge that I issued last year: If you complain about the additional money that the Finance Committee has found for your State, explain to me how you would do it differently. Would you forgo that money for your State? If you have an alternative, explain to me how you would find the votes for your method of financing. I issued that challenge last year, and somehow I didn't get any takers. I expect complaints again this year despite the smaller numbers involved and don't expect anyone to take me up on the challenge. Whether folks want to admit it, as we begin floor debate and conference on this bill, it will become increasingly apparent that these three principles conflict. As one who has tried and continues to try to enact a highway bill into law, I have worked very hard to grow trust fund revenues in a way that doesn't increase the deficit or require general fund offsets. While we were able to devise a floor amendment that grows the trust fund without increasing the deficit, we were not able to do so without the use of any general fund offsets. We did get 40 percent of the way there using additional fuel fraud compliance measures. We are filling in most of the $5 billion gap with a small version of the refund proposal which the administration included in its fiscal year 2006 budget. Finance Committee investigations reveal that many of the refunds are based in fraud, and these steps will contribute to our efforts to close the tax gap. A very small amount of that gap is also bridged by changes to gas guzzler tax administration. We are still awaiting progress on additional fuel fraud measures and loophole closures and plan to fill in the $5 billion gap in conference. In the meantime, we are using other general fund offsets to do that. Almost none of these general fund offsets are new, as nearly all were included in the Senate-passed JOBS bill last year. Two notable provisions have been added. One of those provisions is intended to improve the administration of the Internal Revenue Service's offer-in- compromise program. The second involves a leasing tax shelter abuse in the transportation sector that we refer to by the acronym SILOs. These were the schemes that allowed big corporations to claim tax deductions for bridges, pipelines, and subways that are paid for with taxpayer dollars but with no risk for the leasing company. Congress passed the JOBS bill last fall and outlawed these SILOs but not without concessions to the interests of shelter promoters. Under that bill, SILO shelter promoters got more than a year to get their deals-in-process approved by the Department of Transportation. And, of course, I believe that is an outrage. We exerted great effort in Congress to shut down this abuse, but the transition relief in the JOBS bill is a sop to shelter promoters and an insult to American taxpayers. This amendment will end that abuse now, not a year from now. In committee, we marked up in alignment with the President's $284 billion figure. That was the deal the authorizing committees and this committee made with Leader Frist to get the bill to the floor. In our Finance Committee markup, I indicated my intent to work on the floor with Senator Baucus, the Senate leadership, and authorizers to grow the trust fund revenues in a manner that does not negatively impact the deficit. I believe we have incorporated a Finance Committee amendment that does just that. I also understand and agree with the House position that we should not mix general fund offsets and trust fund resources. To that end, I want the Senate to know that I commit to working further so that no general fund offsets are required to maintain a sufficient trust fund for the conference agreement. At the markup, I also asked and I continue to ask the administration to shift its focus away from the top-line $284 billion number and toward the principle of deficit reduction. The bill before the Senate, including our recently added amendment to grow trust fund receipts, is paid for in its entirety principally by cracking down abuse and closing loopholes. In fact, this bill, as currently drafted, actually contributes positively and substantially towards deficit reduction. I reemphasize that an exclusive focus on the top-line spending number viewed outside of a deficit reduction context will only lead to a repeat of last fall's conference gridlock. Gridlock in conference won't resolve the gridlock on our Nation's highways. So I ask all the key players at each end of Pennsylvania Avenue to focus on main street and work toward a fiscally responsible highway bill.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, the bill imposes an excise tax, equal to 100 percent of the acquisition costs, on the taxable acquisition of any interest in an applicable insurance contract. An applicable insurance contract is any life insurance, annuity or endowment contract in which both an applicable exempt organization and any person that is not an applicable exempt organization have, directly or indirectly, held an interest in the contract (whether or not the interests are held at the same time). An applicable exempt organization generally includes an organization that is exempt from Federal income tax by reason of being described in section 501(c)(3) (including one organized outside the United States), a government or political subdivision of a government, and an Indian tribal government. The bill provides that an interest in an applicable insurance contract includes any right with respect to the contract, whether as an owner, beneficiary, or otherwise. An indirect interest in a contract includes an interest in an entity that, directly or indirectly, holds an interest in the contract. Exceptions apply under the bill. An exception is provided if each person (other than the exempt organization) with an interest in the contract has an insurable interest in the insured person independent of any interest of the exempt organization. Another exception is provided if each person, other than an exempt organization, has an interest solely as a named beneficiary. An exception is also provided for a person, other than the exempt organization, with an interest as a trust beneficiary, if the beneficiary designation is purely gratuitous, or with an interest as a trustee who holds in a fiduciary capacity for an applicable exempt organization or another permitted beneficiary. The bill provides reporting rules requiring an applicable exempt organization or other person that makes a taxable acquisition of an applicable insurance contract to file a return showing required information. A statement is required to be furnished to each person whose taxpayer identification information is required to be reported on the return. Penalties apply for failure to file the return or furnish the statement, including, in the case of intentional disregard of the return filing requirement, a penalty equal to the amount of the excise tax that has not been paid with respect to the items required to be included on the return. The bill is effective for contracts issued after May 3, 2005. The bill requires reporting of existing life insurance, endowment and annuity contracts issued on or before that date, in which an applicable exempt organization holds an interest and which would be treated as an applicable insurance contract under the bill. This reporting is required within one year after the date of enactment.