Chuck Grassley

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, today the Senate adopted S. Res. 445, the Senate Intelligence and Homeland Security Oversight Reform resolution. This resolution will combine the oversight of most Department of Homeland Security functions and will provide jurisdiction over those functions to the Committee on Governmental Affairs, which will be renamed the Committee on Homeland Security and Governmental Affairs. I will vote in favor of S. Res. 445. This resolution will help advance the U.S. war on terror by consolidating and streamlining Senate oversight over the Department of Homeland Security. I'm confident that the Committee on Homeland Security and Governmental Affairs will serve an important role in promoting the safety and security of the people of the United States. As originally introduced, the resolution provided that the Committee on Homeland Security and governmental Affairs would not have jurisdiction over customs revenue functions. Instead, the drafters recognized that, going forward, it's important to keep the jurisdiction over customs revenue functions within the Finance Committee, the committee that has exercised jurisdiction over these issues for the past 188 years. Moreover, with the United States collecting over $23 billion annually in duties and trade related fees, the drafters realized that it's important that the U.S. customs agencies be able to perform their revenue functions efficiently. Retention of Finance Committee jurisdiction over these functions will greatly facilitate this objective. Senator Baucus and I introduced an amendment during debate on S. Res. 445 that clarified the language concerning customs revenue functions contained in the managers' resolution. Specifically, our amendment stated that the Committee on Homeland Security and Governmental Affairs will not have jurisdiction over the following functions performed by any employee of the Department of Homeland Security: any customs revenue function including any function provided for in section 415 of the Homeland Security Act of 2002; any commercial function or commercial operation of the Bureau of Customs and Border Protection or the Bureau of Immigration and Customs Enforcement, including matters related to trade facilitation and trade regulation; or any other function related to those that I just mentioned that was exercised by the U.S. Customs Service on the day before the effective date of the Homeland Security Act of 2002. In a colloquy between Senator Baucus and me on October 7, we more fully spelled out what is covered by our amendment and the reasons why our amendment was necessary. The Grassley-Baucus amendment was needed to elucidate non-security functions of the Bureau of Customs and Border Protection and the Bureau of Immigration and Customs Enforcement that necessarily should remain within the jurisdiction of the Finance Committee. Our amendment passed by voice vote on October 7. A transfer of customs revenue and commercial functions to the Committee on Homeland Security and Governmental Affairs would detract from that committee's main focus. Moreover, the removal of customs revenue and commercial functions from the jurisdiction of the Finance Committee would be disruptive to our efforts to advance a comprehensive international trade agenda for the United States. In adopting our amendment, the Senate wisely avoided both of these outcomes. agenda for the United States. In adopting our amendment, the Senate wisely avoided both of these outcomes. With passage of our amendment, the Committee on Homeland Security and Governmental Affairs will be better able to focus on its core objective, the protection of the United States from terrorist attacks. The staff of the new committee should be expected to be experts in the field of national security. They will work day-in and day-out to keep terrorists away from our shores and to protect Americans from attack. With their focus on national security concerns, it would be unrealistic to expect them to learn the technical details of our country's customs laws relating to revenue and commercial functions. The addition of customs revenue and commercial functions to their committee's agenda would only distract them from their central focus, national security. If that were to occur, Senate oversight of both the national security and international trade agendas of the United States would suffer. Our amendment also recognizes that removal of customs revenue and commercial functions from the jurisdiction of the Finance Committee would be disruptive to U.S. businesses, and thus harmful to U.S. economic interests. The Finance Committee has a long history--of some 188 years--of exercising jurisdiction over tariffs and trade. This long history, and the technical expertise it has helped engender within the committee, provides the Finance Committee with an exceptional ability to provide sound oversight in the Congress over our government's customs revenue and commercial functions. Not surprisingly, the U.S. business community has developed strong confidence in the workings of this committee. Moreover, these same businessmen and women have doubts as to whether the committee on Homeland Security and Governmental Affairs--with its focus on national security--would pay sufficient attention to trade compliance and revenue functions. The U.S. business community acted, and quickly, this week upon hearing rumors of possible legislation to strip jurisdiction over customs revenue and commercial functions from the Finance Committee. Let me read to you excerpts from letters sent to me this week on this issue. The National Retail Federation wrote that ``NRF's members are deeply concerned that moving jurisdiction for duty collection process issues from the Finance Committee would serve to reduce U.S. interest in preserving trade revenues, and require members of those committees to spend a great deal of time on revenue issues that are not central to the Government Affairs Committee's main jurisdictional interests. Of equal importance, the Senators who have served on Finance have developed expertise in these complex revenue issues that many members of the Homeland Security and Government Affairs Committee do not possess and would have to develop.'' In another letter, the National Customs Brokers & Forwarders Association of America stated that ``protecting our borders is vital. As we take measures to enhance security at our borders, however, we must also carefully weigh the consequences to the flow of international trade. . . . The Senate Finance Committee possesses the knowledge and expertise necessary to provide effective oversight over Customs' business facilitation issues. For over 200 years, the Finance Committee has been involved in the details of customs processing and their role is significant in assuring that the Senate gives due consideration to the practical consequences of security measures.'' The Business Coalition for Customs Modernization, which is composed of 24 major companies operating in the United States, voiced similar concerns. It wrote that ``granting jurisdiction over the business facilitation functions of the Customs Service to the Committee on Homeland Security and Government Affairs--a committee concerned primarily with security--will lead inevitably to commercial considerations being discounted heavily in the name of security, without thought about the effects on America's consumers. That will hurt the U.S. economy and undermine our strength and standard of living in the long run.'' As pointed out in these letters, as we move forward in enhancing our border security efforts, it is important to keep in mind that a large part of homeland security is economic security. And international trade is a critical component of our economic security. Exports alone accounted for 25 percent of U.S. economic growth from 1990-2000. Exports alone support an estimated 12 million jobs. Trade also promotes more competitive businesses--as well as more choices of goods and inputs at lower prices for U.S. consumers. If we impede trade, we impede our own economic growth and our own future well-being. A concrete example can be found by looking at one sector of the economy immediately following the events of September 11. Just 36 hours after the attacks, Daimler-Chrysler announced that it would close one of its assembly plants because it could not get the parts it needed to continue operations from Canada. Similar circumstances caused Ford to lay idle five of its assembly plants--each producing an average of one million dollars worth of cars per hour--for a week. Events like this make it clear that the United States must be at the forefront in developing the border technologies and enforcement, methodologies which will enable our economy to prosper and grow in the post September 11 world. We cannot afford to do any less. The Finance Committee has the experience and expertise to appropriately meet this challenge. And I'm pleased that the resolution we passed today acknowledges the unique role of the Committee. Finally, it only makes practical sense for the Finance Committee to retain jurisdiction over customs revenue and commercial functions. Rule XXV of the Standing Rules of the Senate provides that the Finance Committee is the committee to which shall be referred all proposed legislation, messages, petitions, memorials, and all other matters relating to reciprocal trade agreements and tariffs. It also provides that the Finance Committee has jurisdiction over customs. The reason that the Finance Committee has jurisdiction over reciprocal trade agreements, tariffs, and customs is precisely because all of these trade issues are all interrelated. Trade agreements set tariff levels, and customs personnel administer the U.S. laws relating to these tariffs. Therefore, as long as the Finance Committee has jurisdiction over reciprocal trade agreements and tariffs, this committee almost by necessity must have jurisdiction over customs revenue and commercial functions. For these reasons, I'm very pleased that the Senate voted this week for the Finance Committee to retain jurisdiction over customs revenue and commercial functions. In doing so, the Senate permitted the Committee on Homeland Security and Governmental Affairs to focus on its core objective of national security, and prevented a disruption to U.S. businesses that could result if such jurisdiction were removed from the Finance Committee. In addition, given the Finance Committee's jurisdiction over reciprocal trade agreements and tariffs, it only makes sense for this committee also to maintain its jurisdiction over customs revenue and commercial functions of the Bureau of Customs and Border Protection and the Bureau of Immigration and Customs Enforcement, even though these agencies are now housed in the Department of Homeland Security.

Mr. GRASSLEY

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

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, reserving the right to object, is it the Senator's anticipation that we go back and forth?

Mr. GRASSLEY. Mr. President, I am glad that we are finally getting up the FSC/ETI bill, the JOBS bill as it is sometimes referred to, because this bill will create jobs in manufacturing. As everyone knows, the World Trade Organization has ruled that our Foreign Sales Corporation extraterritorial income legislation that has been on the books for quite a few years is an illegal export subsidy and has authorized up to $4 billion a year in sanctions against U.S. exports. These sanctions actually began way back in the month of March this year. They now are at 12 percent and they are going to increase 1 percent each month that we do not repeal the existing law. By November, they will be at 13 percent, and Senator Frist rightly has called these ``Euro taxes'' on our exporters. It has been a long road to what I hope will be final passage of this legislation. Both bodies passed bills to deal with the Euro taxes. Both bodies struggled to get this to conference. Nothing has been easy, but we are at last in the final stages. Now that we are at the doorway of final passage, we cannot fritter away the opportunity to eliminate this tax put on our exports to Europe by the European Union. American workers, especially those in the manufacturing sector, put in the work necessary to make the U.S. the most productive economy in the world. We Senators have to employ the same work ethic. We have to match our constituents' work productivity. We cannot delay on this matter any longer. We cannot leave the job site without finishing our work. I will inform my colleagues of what happened during the conference this week. It was one of the most open and unusual conferences between the Senate Finance Committee and the Ways and Means Committee of the House that we have ever had. There were 18 House conferees and 23 Senate conferees. The conference chairman, Chairman Thomas of the Ways and Means Committee, started the ball rolling with a discussion draft. The discussion draft reflected the core elements of both bills. The main piece complied with our WTO obligation by repealing the Foreign Sales Corporation extraterritorial income regime. In its place, we provide a deduction for all manufacturers, big and small. That was a significant movement toward the Senate position. In one move, Chairman Thomas addressed the top Senate priority; that is, that all manufacturers receive the benefit of the deduction. The next piece of the discussion draft included a package of international tax reforms that will make America's manufacturers yet more competitive. This package reflects the priorities of both the Senate and the House bill. Finally, the discussion draft included identical and near identical provisions from both bills. Revenue neutrality was another important principle of the Senate bill, and I appreciate Chairman Thomas's cooperation on this Senate priority. Indeed, it was the bipartisan Finance Committee staff that refined the offsets that made this bill viable in the first place. After presentation of the discussion draft, each Member had an opportunity to put forth their priorities by filing amendments for the public conference. Finance Committee conferees recognized the similarity to the customs of the Senate Finance Committee markup, the way we have done it traditionally in the Senate Finance Committee. This process was very unusual for a conference. Normally, conferees go through a series of meetings and exchange of offers or some other elongated process. I have been a member of the Finance Committee for nearly 20 years, and I can tell my colleagues that in nearly all cases, conferees debate the issues in private. Nearly all of the toughest decisions come down to private negotiations between the two chairmen. Those decisions are reached after conferee input. In this conference, however, all discussions were aired publicly. Sometimes conferences take months. Sometimes they end without accomplishing anything before the adjournment of a Congress. We had neither option before us. We were in an unusual and sensitive situation because we are coming up now to adjournment of this Congress. Unusual situations require then unusual procedures. We had only a few days remaining to enact this measure. That is not much time, but we are here now before the Senate, and this bill has passed the House of Representatives already. The bottom line is that we have to move this measure to the President of the United States. I am fully committed to getting this bill done before we leave for the elections. I appreciate the House's willingness to open up this process and let transparency occur through the amendment process. I would also like to thank my Finance Committee conferees, particularly my friend and ranking member, Senator Baucus. We would not be here--in fact, we would not have even gotten this bill through the Senate without the bipartisan spirit of the Finance Committee members and Senator Baucus's efforts in that. That spirit remained in place as we took the final steps in the conference committee between the House and Senate. Both the House and Senate agreed on the basic structure of the bill and on the policy. In addition to the major movement to the Senate on the structure of the manufacturing deduction and revenue neutrality, many Senate priorities have been addressed. An expanded renewable electricity reduction credit is included. This was a high priority for Senate conferees Bingaman, Smith, Daschle, Hatch, Baucus, Snowe, Breaux, Lincoln, Conrad, Bunning, and Gregg. Chairman Thomas recognized this as an important bipartisan mark and included section 450 in his mark even though it cost over $2 billion to accommodate the Senate on this issue, within the spirit of revenue neutrality. We have a very good small business package as well included in the conference report. The bill before us extends small business expensing for another 2 years. The bill contains significant S corporation reforms. Even though the subchapter S corporation provisions were House provisions, they have historically been Senate priorities. We have probably the most comprehensive agricultural and rural community tax incentive package ever. I thank Chairman Thomas for including these Senate priorities in his mark. For everyone, there is a substantial overhaul of the fuel excise tax system, with a VEETC proposal, fuel fraud, and also biodiesel provisions. These provisions will mean more highway money for more States. According to Federal statistics for the current fiscal year, 37 of 50 States will receive more highway money because of the VEETC proposals in this bill. There will still be more highway money for all States from provisions in this bill by shutting down fraud when people do not pay the fuel tax that is required under existing law. VEETC and fuel fraud provisions are estimated to put over $24 billion into the highway trust fund. Now, I point out that this bill does not contain many special interest members' provisions. If my colleagues will recall, the JOBS bill passed the Senate 92 to 5. In part, the bill received such widespread support because many Member items were accommodated when this bill first went through the Senate. Literally dozens of narrow tax benefits were adopted in committee and also added on the floor. Those provisions also unnecessarily caused the bill to be defined as a special interest bill. Senator Baucus and I put out a staff analysis that showed only a small portion of the bill's revenue was absorbed by these individual Members' items. But that did not stop the criticism of those items, either by Members of the Congress or by the press writing about this bill, emphasizing things that were only a small part of the legislation. The House bill also, however, contained Member items. They were fewer in number, but very significantly defined. Most of those items enjoyed some Senate support. In addition to the press criticism, the President also made clear to me he would not support a bill that is heavily laden with so many of these narrow items. Neither side got everything they wanted. For example, the House made a huge concession by giving up its rate cut for only C corporations. They had invested $15 billion for this in small C corporations, and another $64 billion for large C manufacturing corporations. They relented on this point in order to accommodate the Senate concerns about extending the manufacturing rate cut to all manufacturers, regardless of whether they were C corporations, S corporations, partnerships, or individuals. We have heard harsh complaints about the conference bill from Senator Landrieu because the bill does not contain her reservist amendments. I would like to set the record straight on that point. The Senate voted in support of her amendment in conference. We approved it and presented it to the House for inclusion in the conference bill. The House rejected that amendment. The conference was open to the public. Everyone witnessed the vote. There were no back-room deals on the reservist amendment. Finally, as a premise, let me note we knew the House would not accept as much in revenue offsets.

Mr. GRASSLEY. Indeed, the bill before us is smaller in size by more than $30 billion than the Senate-passed JOBS bill. There has been some grumbling about how much the bill grew beyond the simple repeal of foreign sales corporations' extraterritorial income provisions. One of the reasons it grew is because the Finance Committee found sufficient offsets, most of which are loophole closers--loophole closers Senator Kerry spoke about in the debate, that he wanted to close. We did this to allow Members to have enough revenue to offset particular Senators' interests in this bill. This is also true of Senator Landrieu's reservist amendment. Not only did we support it but we found a way to pay for it. We modified the foreign housing exclusion for high-income U.S. employees working overseas. Unfortunately, the House rejected that offset, and in turn the specific amendment. I think the Senate is being distracted by too much emphasis upon particular specific Member priorities. I believe the core benefits of the bill should not be sacrificed to narrow items. The core benefits go to manufacturers. It is all about creating jobs in particular, particularly about creating jobs in manufacturing in America, where there has been some concern expressed in the Senate about outsourcing. So that is what this bill is all about. That is not to say we did not attempt to include a number of Members' issues from both sides of the aisle, and from both bodies of Congress. There was a balance that needed to be struck in order to get a compromise out of the conference committee. I committed to Chairman Thomas that I would defend the mark as a whole. Chairman Thomas made a similar commitment. That commitment enabled us to accommodate Member items that had broad support. Let's finish the job this week before we leave. There is no excuse for allowing partisanship to hold up this bill. I will remind everyone, one more time, this bill passed the Senate Finance Committee on a bipartisan vote, 19 to 2. Only two Senators, both on my side of the aisle, not on the Democrats' side, voted against this bill. Both of those Senators, however, put their own special concerns aside for the greater good, and are supporting this conference report. This is a bipartisan bill that reflects everyone's concerns, both Republican and Democrat. I will describe once again the history of this bill. The JOBS bill was a bipartisan bill from the ground up. The framework was laid by Senator Baucus when he was chairman of the Senate Finance Committee in the year 2002. In July 2002 we had a hearing to address the FSC/ETI controversy within the World Trade Organization. We have heard from a cross-section of industries that would be damaged by the repeal of the extraterritorial income laws we had on the books for the last few years. We also heard from U.S. companies that were clamoring for international tax reform, because our tax rules were hurting their competitiveness in foreign markets. Their foreign competitors were running circles around them because of our international tax rules. During this hearing, Senator Bob Graham of Florida and Senator Hatch expressed concerns about how our international tax laws were impairing the competitiveness of U.S. companies. After some discussion back there in the fall of 2002, we formed a blue ribbon commission to study this problem. We all decided that decisive action was more important than a commission. During that hearing, Chairman Baucus formed an international tax working group that was joined by Senator Graham, Senator Hatch, and this Senator, and was open to any other Finance Committee Senator interested in participating. The bipartisan Finance Committee working group developed a framework that formed the basis of the bill that is before us this very day. We directed our staff to engage in an exhaustive analysis of the many international reform proposals that have been offered. We sought to glean the very best ideas from as many sources as possible. Senator Baucus and I also formed a bipartisan bicameral working group, with the chairman and ranking member of the Ways and Means Committee, in an effort to find some common ground on dealing with the repeal of FSC/ ETI. That effort did not go so well. But it did inspire Senator Baucus and this Senator to continue our Senate bipartisan development of a FSC/ETI repeal and international tax reform package. We continued our efforts in cooperation with Senator Hatch and Senator Graham and a few other members of the Finance Committee who wanted to do what was fair and right in complying with the World Trade Organization ruling. We continued our bipartisan efforts when I became chairman--again, in the year 2003. In July 2003 we held two hearings on the FSC/ETI and the international reform issues. One hearing focused on the effect of our tax policies on business competition within the United States and the other on international business competition. These two hearings led to the bipartisan Senate bill that passed earlier, 92 to 5. Let me review what is in the bill before us, because most of it comes from our bipartisan Senate bill. The core part of the bill repeals the current FSC/ETI provisions that are in our current tax law and were ruled out of order by the World Trade Organization because they are contrary even to the laws of our own Congress. FSC/ETI reduces the income tax on goods manufactured in the U.S. and exported overseas by as much as 3 to 8 rate points. That is, if a corporation's tax rate is 35 percent, the tax rate on export income is somewhere between 27 and 32 percent instead of that maximum of 35 percent. It lowered the U.S. corporate rate on goods made in the United States and sold overseas to make us competitive because of the fact that the European Union and those countries do not export their value-added tax. The World Trade Organization has determined that the FSC/ETI is an impermissible export subsidy and has authorized the European Union to impose up to $4 billion a year of sanctions against U.S. exports until we get rid of FSC/ETI, which this bill does. Those sanctions begin March 1. They are up as high as 12 percent right now. They can go up as high as 17 percent. They can even go higher than that if the European Union institutes longer phase-ins. Our companies carry this burden because Congress has failed to act for 2 or 3 years. That is why we must pass this bill before we leave Washington for our campaigning. This should be a very serious concern of all Members because the sanctions are hitting commodity products such as agricultural goods, timber and paper, as well as other manufactured products. Presently, about 89 percent of the FSC-ETI export benefits go to the manufacturing sector. Repeal of FSC-ETI raises around $55 billion over 10 years. If that money is not sent back into the manufacturing sector, which this bill does, there will be a $50 billion tax increase on manufacturing. It is mathematically impossible for it doing anything else. That is why the bill before us takes all $55 billion of the FSC-ETI repeal money and sends it back to the manufacturing sector in the form of a 3-point tax rate cut on manufacturing income; in other words, that corporate tax of 35 percent being reduced down to 32 percent. This tax rate is for manufacturing in the United States. No company that manufacturers offshore will benefit from it. We start phasing in those cuts next year. The cuts apply to sole proprietors, partnerships, farmers, individuals, family businesses, multinational corporations, and foreign companies that set up manufacturing plants in the United States. In total, this bill provides over $76 billion of tax relief to our U.S.-based manufacturing sector to promote factory hiring in the United States--$76 billion not lost to the Federal Treasury because it is offset. This bill also contains another $7 billion for small businesses, local communities, inland shipping, and other local business concerns. There has been chatter in the press about the short-line railroad provision benefiting big railroad companies. That is not true. Short lines are the small spurs that run off of the main railway systems and generally connect to local community businesses such as our grain elevators and our small factories. They connect them to the main rail arteries. They are often owned by small rail companies or local community businesses. This short-rail provision is vital to farming and rural communities across America, as well as secondary cities that do not have the benefit of massive public rail systems. This bill also contains an agricultural and small business package which devotes $5 billion to our home communities. As I said before, this is probably the most comprehensive agricultural and rural community tax incentive package ever passed by the Congress. We also include international tax reforms, mostly in foreign tax credit areas, and most of which benefit the manufacturing sector. The international tax reforms largely fix problems our domestic companies face with the complexities of the foreign tax credit. These reforms are necessary if we are to level the playing field for U.S. companies that compete with our trading partners, particularly those companies that are in countries that have value-added tax and they don't export that tax like we export our income tax as part of our cost of production. You will hear arguments that the international reforms provide an incentive to move jobs offshore. Read the bill and you will find that is not true. We have carefully selected international reforms that do not provide offshore incentives. Our bill also includes a House version of the Homeland Reinvestment Act which will temporarily reduce tax on foreign earnings that are brought into the United States for investment here at home instead of overseas. The Senate version of this provision is the work of Senators Ensign, Boxer, and Smith, a bipartisan measure. We included a provision that allows naval shipbuilders to use a method of accounting which results in more favorable income tax treatment. There are enhanced depreciation provisions to help the ailing airline industry. The bill also expands the new markets tax credit to high outmigration counties. These credits help economic development in rural counties that have lost over 10 percent of their population. We have also included the Civil Rights Tax Fairness Act. We have a special dividend allocation rule which benefits farm cooperatives. We have other farm provisions that give cattlemen tax-free treatment if they replace livestock because of drought, flood, or other weather- related conditions--things all beyond the control of the farmer. We included a provision that allows payments under the National Health Service Corps loan repayment program to be exempt from tax. This is an important measure to enhance the delivery of medical services to rural areas that do not have the proper number of health practitioners. The bill before us contains several energy provisions that were voted out of the Finance Committee that had been previously approved by the full Senate in the JOBS bill. I have already spoken about VEETC, which is short for volumetric ethanol excise tax credit. This provision would add up to $14.2 billion of revenue to the highway trust fund over the 6-year life of the upcoming transportation bill now pending before Congress. This provision alone could create as many as 674,000 new jobs in America. The energy tax package also includes a new incentive for the production of renewable biodiesel--biodiesel made from soybeans--and hence, mixed at a 20-percent mixture with petroleum diesel, clean burning, no sulfur in that 20 percent, as an example of being environmentally friendly. Anyway, the biodiesel provision means jobs in our heartland. Renewable fuels have directly generated over 150,000 new jobs. In fact, in 2004 alone, this industry will add 22,000 new jobs. The bill also includes a provision to accelerate the production of natural gas from Alaska and the construction of a natural gas pipeline from Alaska to the lower 48 States. According to our own Department of Labor's Bureau of Economic Analysis, construction of the Alaska natural gas pipeline would create nearly 400,000 jobs in construction, trucking, manufacturing, and other service sectors. The bill provides all of this tax relief, nearly $140 billion worth, and yet is revenue neutral, meaning we reduce taxes over here, close corporate loopholes over here, raise a certain amount of money to make up for what is less taxation over here. It is revenue neutral--no additional money added, no additional dollars added to the national debt; not one dime to the Federal deficit. The tax relief in this bill is paid for by extending Customs user fees, shutting down abusive corporate tax shelters, and attacking the abusive tax strategy used by Enron, which we unearthed during my Finance Committee Enron investigation. Last October, the Finance Committee held hearings on the status of these abusive corporate tax shelter activities. During that hearing, we received anonymous testimony from a leasing industry executive describing how U.S. corporations are able to take tax deductions for the pair of sewer lines in the New York subway station. Let me explain ``anonymous.'' This meant the person was testifying before the committee. We knew who he was, but he was not identified to the public. But he knew what he was talking about. We have a situation where major corporations, through these abusive tax shelters, are claiming tax deductions on taxpayer-funded infrastructure, mostly by municipalities located both in the United States and overseas. Imagine our surprise on the Senate Finance Committee to learn that the U.S. taxpayer is subsidizing the cost of electric transmission lines in the Australian outback. No one believes that, but it showed up in our investigation. I could go on with a lot of other examples, but the bill before the Senate ends this corporate tax shelter abuse. It was shortly after the September 11, 2001, terrorist attacks that we saw the beginning of the exodus of U.S. companies moving their corporate headquarters to tax havens overseas, just setting up a shell corporation, basically just a mailbox, for the sole purpose of evading U.S. corporate taxes. It was the events of September 11, 2001, and the ensuing stock market plunge that provided companies with cost-efficient ways to get out of the United States. That is one thing, but to get out of the United States just to cheat on their taxes and leaving everything else in the United States--that is the problem. Members may recall the video I played for some members in which a big four accounting firm partner said that U.S. companies were resistant to this scheme out of some post-September 11 sense of patriotism and national duty. This big four accounting firm partner said patriotism would have to take a back seat when they see their improved earnings per share. Isn't that a nice thing to be talking about within 2 or 3 months after losing 3,000 Americans in the terrorist attacks on New York City and the Pentagon? In this bill before the Senate, patriotism is not taking a back seat. This bill includes measures to shut down this type of corporate expatriations that are there for the sole purpose of dashing from the country and stashing the cash, as opposed to those patriotic corporations that are staying in America and paying and playing here. I am not pleased with the effective date that came out of the conference, but this bill does shut down for the future more of these corporate tax shelter abuses that we call inversions. They are done. In fact, this bill represents the most comprehensive attack on tax shelters since 1986. There is a great deal of good in this bill. We can rescue the manufacturing sector. We can give companies less reason to outsource because the cost of capital--as one of the arguments for outsourcing-- will be less if this bill passes. We also end European Union sanctions. By passing this bill we can respond to the recent rise in gas prices through our encouragement of more renewable fuels, and we can shut down every known corporate tax shelter abuse. It is time to pass what is a very important bill to aid our manufacturing sector, remove tariffs off our farmers' backs, create jobs for our workers, and to place the Senate back on its footing, to do its job, and move legislation that benefits the American working men and women. I yield the floor and suggest the absence of a quorum.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I would be glad to take questions from the Senator from Oregon.

Mr. GRASSLEY. Yes, your understanding is correct. I would add that directly related expenses would include, but is not limited to, stewardship costs and directly related legal and accounting fees.

Mr. GRASSLEY. The applicable financial statement is the most recent statement that had been certified, and filed with the Securities and Exchange Commission if required, on or before June 30, 2003. However, in the event of a subsequent restatement of a financial statement that had been certified, and filed if required, on or before June 30, 2003, if the subsequent restatement contains a lower permanently reinvested amount, then the lower amount shall apply.

Mr. GRASSLEY. I thank the Senator from Oregon for his question. The rule and the statement of managers contain some ambiguity as to which deductions are disallowed. The intent of the rule is to disallow only deductions for expenses that relate directly to generating the dividend income in question.

Mr. GRASSLEY. Mr. President, I would be glad to take a question from the Senator from Oregon.

Mr. GRASSLEY. I agree that the drafting is not as clear as it might have been. However, it is very clear from all the legislative history that, by adding the new subparagraph, we intended to add a new class of property, business aircraft, to those assets which qualify for the additional year to be placed in service. We did not intend that aircraft which qualify under subparagraph (C) must also qualify under subparagraph (B).

Mr. GRASSLEY. I thank the Senator from Kansas for his kind words, and would be happy to respond

Mr. GRASSLEY

Mr. GRASSLEY. I concur entirely. And the Senator's last point-the importance of preserving oversight of the revenue functions, commercial functions, and commercial operations that are now delegated to CBP and ICE--leads directly to the main point of this colloquy; namely, the necessity of preserving the role of the Finance Committee as primary overseer of the customs revenue functions, the commercial functions, and the commercial operations associated with the customs duties now being performed by employees of the Department of Homeland Security. I want to thank my colleagues, Senator McConnell and Senator Reid, for working so constructively with me and Senator Baucus to address this priority. Together, we have clarified the scope of jurisdiction for the Committee on Homeland Security and Governmental Affairs as it relates to the commercial aspects of customs operations.

Mr. GRASSLEY. I appreciate the Senator's recollection of our efforts on this issue. I would add that following the hearing and our letter, we worked closely with the Committee on Governmental Affairs and with the Administration to develop text that would keep intact the commercial functions of the Customs Service. Under the final legislation, authorities vested in the Secretary of the Treasury relating to customs revenue functions remained with the Secretary of the Treasury unless delegated to the Secretary of Homeland Security. By order of the Secretary dated May 15, 2003 Treasury Order 100-16), the Secretary of the Treasury delegated to the Secretary of Homeland Security general authority over Customs revenue functions, subject to certain exceptions that preserved Treasury's oversight of the Customs Service with respect to policy matters and the authority to issue regulations and determinations.

Mr. GRASSLEY. I would like to engage in a colloquy with the ranking member on the Finance Committee, Senator Baucus, regarding provisions in Senate Resolution 445 pertaining to the jurisdiction of the Committee on Homeland Security and Governmental Affairs. In particular, I wish to address the provisions that exclude from the jurisdiction of that committee oversight of matters relating to the customs revenue functions, and the commercial functions and commercial operations, of the Bureau of Customs and Border Protection--CBP--and the Bureau of Immigration and Customs Enforcement--ICE.

Mr. GRASSLEY. I thank the Senator. Under section 411 of the Homeland Security Act of 2002, there is established a Commissioner of Customs, who shall be appointed by the President, by and with the advice and consent of the Senate. The Commissioner of Customs reports to the Under Secretary for Border and Transportation Security. The Commissioner of Customs shall oversee certain functions, including functions performed by the following personnel and associated support staff of the United States Customs Service on the day before the effective date of the Homeland Security Act: Import Specialists, Entry Specialists, Drawback Specialists, National Import Specialists, Fines and Penalties Specialists, attorneys of the Office of Regulations and Rulings, Customs Auditors, International Trade Specialists, and Financial Systems Specialists. Clearly, the responsibilities of the Commissioner of Customs encompass customs revenue functions, and commercial functions and operations, that are now assigned to employees of the Department of Homeland Security. So, in response to the Senator, I say yes, it is clear that referral of future nominees for the position of Commissioner of Customs, or any position or positions charged with responsibilities similar to those of the Commissioner of Customs, will continue to be made to the Finance Committee.

Mr. GRASSLEY. Mr. President, the chart attached to the January 24, 2003, letter of the General Counsel to the Chairman and Ranking Member of the Senate Finance Committee regarding the authorities vested in the Secretary of the Treasury that were exercised by the Commissioner of Customs prior to the effective date of the Homeland Security Act of 2002 may be accessed at the Finance Committee Web site under ``Legislation--January 2003''.

Mr. GRASSLEY. Yes, in fact there is a third clarification that's been added. The Committee on Homeland Security and Governmental Affairs will have jurisdiction over matters relating to the Department of Homeland Security, except with respect to any other function related to the customs revenue functions or to the commercial functions or commercial operations that were exercised by the United States Customs Service on the day before the effective date of the Homeland Security Act of 2002. Now, the Homeland Security Act directed the Secretary of the Treasury to identify, within 60 days after the date of enactment of the Act, those authorities vested in the Secretary of the Treasury that were exercised by the Commissioner of Customs on or before the effective date of the act. By letter dated January 24, 2003, the General Counsel at the Department of the Treasury transmitted that report to the Finance Committee. I ask unanimous consent that the General Counsel's letter and attached report be printed in the Record, in order to provide further guidance as to what is covered by this third clarifying provision. As comprehensive as this report is, I note that it serves to provide illustrative guidance and is not an exhaustive list of the functions or operations encompassed by the third clarification we've added.

Mr. GRASSLEY. Well, another example would be the Convention on Cultural Property Implementation Act, over which the Finance Committee would retain jurisdiction. That legislation authorizes the United States to enter into bilateral agreements to protect the cultural antiquities of a trading partner. Another example would include matters relating to the Automated Commercial Environment--or ACE--computerized entry system for imports. Again, the driving factor here is whether a matter is commercial or trade regulatory in nature; if so, the Finance Committee would retain jurisdiction over the matter notwithstanding that the matter may fall among the duties assigned to an employee of the Department of Homeland Security.

Mr. GRASSLEY. I would be pleased to do so. To begin, I think it's important to appreciate the context in which the clarifications have been made. Commercial customs functions are one element of the comprehensive international trade agenda of the United States. The various elements of international trade and trade policy are woven together so thoroughly that effective oversight of the whole necessitates oversight of the individual elements of trade. Now, of utmost importance to our broader purpose here today, we agree that preservation of Finance Committee jurisdiction in this manner will not in any way diminish the effective oversight of Department of Homeland Security functions by the Committee on Homeland Security and al affairs. Consequently, the clarifications we've added serve only to enhance effective oversight by the United States Senate of both the homeland security interests and the international trade interests of the United States. Now, the provisions we've added specify that the Committee on Homeland Security and Governmental Affairs will have jurisdiction over matters relating to the Department of Homeland Security, except matters relating to the following: first, any customs revenue function, including but not limited to the customs revenue functions enumerated in section 415 of the Homeland Security Act of 2002. For example, that would cover the assessment and collection of customs duties, antidumping and countervailing duties, duties imposed under the various safeguard provisions in our trade laws, excise taxes, fees and penalties due on imported merchandise. But these are only some of the many revenue functions associated with customs operations. I encourage my colleagues to refer to section 415 of the Act, and again I note that section 415 is illustrative and does not provide an exhaustive list of the customs revenue functions that will remain within Finance Committee jurisdiction. Second, matters relating to any commercial function or commercial operation of the Bureau of Customs and Border Patrol and the Bureau of Immigration and Customs Enforcement would be excluded from the jurisdiction of the Committee on Homeland Security and Governmental Affairs. That would cover, for example, matters relating to trade facilitation and trade regulation. But let's take a closer look at what that would mean. Last year I introduced the Clean Diamond Trade Act. That important legislation prohibits trade in conflict diamonds. Once introduced, it was referred to the Committee on Finance where we held a hearing and reported it to the full Senate with the benefit of committee's expertise. In the future, similar legislation to regulate imports or exports would also be referred to the Finance Committee.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I am pleased to join my colleague Senator Murkowski in sponsoring a resolution commemorating the annual ``Red Ribbon Week.'' Celebrated October 23-31, Red Ribbon Week encourages individuals, families, and communities to take a stand against alcohol, tobacco, and illegal drug use. I hope the rest of the Senate will join in supporting this resolution and support this very important campaign. The tradition of Red Ribbon Week and wearing and displaying red ribbons started back in 1985 following the assassination of U.S. Drug Enforcement Agency Special Agent Enrique Camarena. In an effort to honor his memory and unite in the battle against illegal drugs, friends, neighbors and students from his home town began wearing red ribbons. In 1988 the National Family Partnership took the celebration nationwide. Since then, the Red Ribbon campaign has reached millions of children, families and communities across the country, spreading the message about the destructive effects of drugs. In my State of Iowa, this year's theme for Red Ribbon Week is ``Take a Stand--Help Iowa Be Drug Free.'' Schools and community groups across the State are organizing a variety of activities including pledges, contests, workshops, rallies, theatrical and musical performances, and other family and educational events all designed to educate our children on the negative effects of drugs and promote a drug-free environment. Research tells us that if you can keep a child drug-free until they turn 20, chances are very slim that they will ever try or become addicted. This is why it is so important to maintain a coherent anti- drug message that begins early in adolescence and continues throughout the growing years. Such an effort must engage parents, communities, and young people. Red Ribbon week provides each of us the opportunity to take a stand by helping our children make the right decisions when it comes to drugs. More than 80 million people across the country are expected to participate in Red Ribbon Week. I urge my colleagues to join us in passing this resolution to demonstrate our commitment to raising awareness about drugs and encourage everyone to make healthy choices.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I rise today in honor of a fellow Iowan and a dedicated serviceman, Sergeant Joshua J. Skvor, of Cedar Rapids, IA. It is my sad duty to inform the Senate that Sgt. Skvor, a member of the Iowa National Guard, lost his life when the truck he was driving was involved in a collision with another vehicle north of Amana, IA. My deepest sympathy goes out to his family and friends. Sgt. Skvor was assigned to the Iowa Army National Guard's Headquarters and Headquarters Company, 234th Signal Battalion, stationed in Cedar Rapids. He is survived by his mother and father, Rachel and Joseph Skvor. They can be very proud of their son. Though not currently serving on Federal active duty, Sgt. Skvor had recently returned from a 14-month deployment in Iraq in support of Operation Iraqi Freedom. As we mourn his tragic loss, it is fitting that we pay tribute to his service to his country. He will be missed by his fellow soldiers as well as all those who knew him.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent that Wade Glover, a member of my Finance Committee staff, be granted the privileges of the floor during today's session.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, just over 10 months ago, we passed a bipartisan bill called the Medicare Modernization Act dealing more with the prescription drug issue than anything else. But regardless of what you want to call it, it is the most sweeping improvement in Medicare since its creation. The Medicare Modernization Act delivered on a promise, a promise to provide beneficiaries a much needed prescription drug benefit and to revitalize Medicare so beneficiaries can receive quality care and benefits into the future with no sunset. The Medicare bill passed with the support of a bipartisan coalition and more than 300 organizations ranging from the AARP to the U.S. Chamber of Commerce. Advocacy groups that did not necessarily support the bill then went on to form an organization called the Access to Benefits Coalition. They worked after passage of the MMA to ensure that low-income beneficiaries enroll in the Medicare drug card and get the real assistance to which every senior is entitled. Still, on the floor of the Senate, we hear partisan attacks against this Medicare bill, continuing yet 10 months since it was signed into law. This is much to the consternation of organizations such as the Access to Benefits Coalition, which is saying that partisanship ought to be set aside and we ought to concentrate on getting people into the benefits that are in the program, even if you don't necessarily agree with the legislation. Week after week, month after month, we have heard attack after attack against this Medicare bill. This is despite the fact that study after study shows the drug card program, for example--and that is only a small part of this most comprehensive improvement in Medicare in its 38-year history--is delivering real savings to beneficiaries. As I listen to these attacks, I am reminded that it is always easier to tear down than to build. But if you tear something down, it seems to me those tearing it down ought to have something to replace it. So what was their plan? I haven't heard about a plan for the future, so I have to look back. What were they suggesting at that time when they had an alternative plan? And this was when the Democratic Party controlled the Senate. They did have a plan to offer, but the Democratic leader bypassed the Finance Committee, where we developed bipartisanship, to bring their proposal to the floor because they didn't want a bipartisan program. They wanted their own program. They knew they couldn't get their own program. They wanted an issue for the 2002 election rather than a product. This alternative was drafted by Senator Graham and Senator Kennedy. Their bill was S. 2625. It had 30 Democratic cosponsors, including the Democratic leader. They offered two proposals as amendments on the Senate floor. Fifty Democrats voted in favor of the first proposal. Forty-five Democrats supported the second, which, I might add, was worse than the first. The Democratic Leader as well as Senator Kennedy and Senator Kerry supported both of these Democratic proposals. In stark contrast with the bill that the President signed last December, the Democratic proposal, Graham-Kennedy, had a drug benefit that was not permanent. Our legislation is permanent. That is right. Their proposal would have ended at about the time baby boomers were beginning to retire. What a promise: Prescription drugs, and in 2010 you have nothing. Chart No. 1 has the language of one section of their legislation. I read: No obligations shall be incurred, no amounts shall be appropriated, and no amounts expended, for expenses incurred for providing coverage of covered outpatient drugs after December 31, 2010. You can't be clearer than that. Seniors and individuals with disabilities deserve better than the false hopes of a drug benefit that expires after 6 years. But that is exactly what the first Graham- Kennedy amendment did. It simply rode off into the sunset after 2010, just at the very time that 77 million baby boomers start to retire. The fact that the Graham-Kennedy proposal offered a drug benefit that ended 6 years after it started ought to be unbelievable. You would never think that Senators would think of doing something like that--false promises, a costly program for a few years, and then it ends. But they sunset the benefit to hide the true cost of their proposal. At the time the Congressional Budget Office said it would cost over $100 billion each year to extend the Graham-Kennedy drug benefit past the sunset, $100 billion a year, and they had no plan to pay for this enormous cost. To make their drug benefit permanent, Congress would have had to cut all other Government programs by more than 10 percent or increase taxes on all working Americans by an amount equal to 2 percent or greater. That is the same as a tax increase of around $1,500. Besides vanishing in 2010, under the first Graham-Kennedy amendment, the Government could limit beneficiaries to just a single one-size- fits-all plan. The Secretary of Health and Human Services could have simply decided that you could get your coverage through that one plan-- period, no choice. Even more amazing, the first Graham-Kennedy amendment proposed a drug benefit that could only cover up to two brand name drugs in any therapeutic category. What does that mean? It means if your doctor prescribed a different brand name drug and it is not on the preferred list, then you don't get the plan to pay for it. I will give you some examples. Let's take high cholesterol. There are more than eight well-known brand drugs to lower cholesterol. The single Government plan under Graham-Kennedy could pick Lescol. Say your doctor prescribes Mevacor. Well, you would get no coverage at all. This scenario could have been repeated for arthritis, high blood pressure, any other chronic condition that many beneficiaries have. Does that sound like a plan that is incredibly fair? No. Well, that is the plan, and it is far more restrictive than what the private plans offer today. Certainly the new Medicare law has no such requirement. The first Graham-Kennedy amendment also set co-payment amounts in law--$10 for generics, $40 for brand drugs. To offer a lower copayment, the plan again had to ask for the Secretary's approval, a bureaucrat in the seniors' medicine cabinets for sure, not something that you are going to see under the bill that the President signed last December. In addition, just like thousands of drugs could have been shut out, Graham-Kennedy could have shut out thousands of pharmacies because it told the Government to set up a preferred pharmacy network under that one Government plan, and the Secretary had to establish the pharmacy access standards. In contrast, the bill the President signed set strict rules about pharmacy access to make sure that plans include beneficiaries' neighborhood pharmacies in their networks. So under their plan, there was one choice, with one formulary and one pharmacy network that may or may not cover the drugs beneficiaries need or allow them to use a pharmacy they want. Take it or leave it. Under Graham-Kennedy, that outcome was the strong possibility facing beneficiaries who have waited long enough for a prescription drug benefit. The MMA established a good program that the President signed last December. When I think about the Graham-Kennedy prescription for drug coverage, I cannot help but think of those little warning labels that you sometimes find on the side of your prescription bottle. In this case, it should have said this: Warning. This Graham-Kennedy plan may not help you at all because if you take a non-preferred drug, it won't be covered. You will only be guaranteed ``reasonable'' access to a pharmacy, and the Government will determine what is reasonable. Worst of all, if you need drug coverage after December 31, 2010, there won't be any plan for you or for anybody else. Again, 50 Democrats, including Senator Kerry, supported this. When that amendment failed, Senator Graham and Senator Kennedy came up with an alternative which, hard to believe, was worse. Most seniors would not have even gotten a basic prescription drug benefit under the second Graham-Kennedy plan because it wasn't a universal benefit. And we have a universal benefit signed by the President of the United States. So that's right, under the Democratic plan, the proposal did not offer a basic drug benefit to 70 percent of the seniors who had incomes above 200 percent of the Federal poverty level at that time. Seniors across the country would have been left behind. Let me show you. In my State of Iowa--and I am saying this to Iowans if the plan passed by the President doesn't fit just right, it is voluntary, so if they don't want to do it, they don't have to. But under the proposal offered the year before by the Democrats, 64 percent of the people in my State would not have had any basic program whatsoever; 67 percent left behind in Arizona; 72 percent left behind in Washington; and 70 percent left behind in Colorado. The second Graham-Kennedy amendment violated a fundamental tenet of Medicare--and that is a tenet of the legislation we passed--that it be universal. They called for disqualifying any beneficiary who earned $1--just $1--more than 200 percent of the Federal poverty level. So $1 was the difference between eligibility and ineligibility for this basic coverage. Under the bill that the President signed, all Medicare beneficiaries are eligible to participate on a voluntary basis in the Medicare prescription drug benefit. There is also a big gap in coverage. We also have been hearing from opponents of the bipartisan bill that passed the Congress and was signed by the President, about the gap in coverage. They refer to it as the donut hole. Again, looking at their second attempt--we have it here. After looking at this plan that was put forth, my only conclusion is that this concern about a gap is newly found because most beneficiaries would not have received any basic coverage under their plan. To qualify for catastrophic coverage, a beneficiary would have to pay $3,300 out of pocket. Talk about a hole. The majority of beneficiaries would not even get a donut. The Congressional Budget Office estimated that 66 percent of seniors would not meet their catastrophic coverage threshold in 2005. For a beneficiary who would meet the threshold, and based on average spending, it would take about 10 \1/2\ months--sometime around Thanksgiving Day--to get any help under the catastrophic benefit. You know that what most beneficiaries got under the second Graham- Kennedy plan is a 5-percent discount off of their drug costs until they spent $3,300. And they proposed setting the 5 percent discount in law. I might add that 5 percent is much less than discounts available under the Medicare-Approved Drug Discount Card Program. Study after study is showing higher discounts. A recent study by the Centers for Medicare and Medicaid Services (CMS) showed discounts of 12 to 21 percent, and in many instances, even more. Competition among the card sponsors is leading to higher discounts for beneficiaries. So much for the idea that direct Government involvement rather than market competition would get beneficiaries a better deal. That is not the end. On top of all this, the last version of Graham- Kennedy did not even really offer a Medicare drug benefit because states would have administered it under their Medicaid programs. An analysis conducted by the Centers for Medicare and Medicaid Services at that time showed that many States would have had to shoulder a sizable new financial burden if the Graham-Kennedy plan passed--a $70 billion unfunded mandate. Arizona, Arkansas, California, Colorado, Iowa, Louisiana, Montana, Oregon, South Dakota, Washington, and West Virginia were among the hardest hit States. At a time when States were already struggling, the second Graham- Kennedy approach would have left them with few other avenues except raising taxes to implement the drug benefit. So while the opponents of the new Medicare drug benefit have been here on this Senate floor yelling sometimes at the top of their lungs about it, this was their plan, which was supported by 45 Democrats including the Democratic leader and Senator Kerry. In addition, the second Graham-Kennedy plan--as well as the first-- did nothing to strengthen and improve the Medicare program. The Medicare bill we passed last year added new coverage choices and benefits. It addressed provider payments issues to make sure that beneficiaries have access to physicians and hospitals because otherwise a prescription drug benefit--or any benefit for that matter--would be meaningless. So I think we can clearly see that the Graham-Kennedy proposals were bad medicine. Mr. President, as I said, it is one thing to tear something down when you have a better plan. But, as you can see, this was their plan. Their first plan offered a drug benefit that was not a permanent part of Medicare and it had limited drug coverage, a one-size-fits-all benefit--take it or leave it. Their next plan didn't give 70 percent of seniors even basic coverage, it had a huge gap in benefits, and a Medicare low income benefit that wasn't even run by Medicare. To me, that was unacceptable in 2002 and it's unacceptable today. Instead, last year a bipartisan coalition worked to give beneficiaries a meaningful and permanent Medicare prescription drug benefit and a revitalized Medicare program. I yield the floor.

Mr. GRASSLEY. Mr. President, I ask unanimous consent for 15 seconds.