Jim McCrery

Mr. McCRERY

Mr. McCRERY. Madam Speaker, I thank the chairman of the Subcommittee on Social Security for yielding me this time. As I was listening to speakers here on the floor extol the virtues of this legislation, I was reminded of what I think is an old Chinese proverb that I am going to paraphrase, that victory has many fathers, defeat is an orphan. We are all claiming credit for this bill, which is good for us all to claim credit for something that the Congress is doing and makes sense. It is just common sense not to penalize seniors who make work. But the gentleman from Texas (Mr. Archer) is not the only one who took this as a personal project. When I first came to Congress in the spring of 1988 as a Member of the 100th Congress, I was adopted by my colleagues who were elected in the regular election which constituted the 100th Congress. And in one of our early meetings as a class, the gentleman from Illinois (Mr. Hastert), who was a member of our class, came up with the idea for a class project. And our class project was to introduce legislation and fight to repeal the earnings limit for seniors, for Social Security recipients. So we took that upon ourselves to do, and we introduced legislation. So I rise today to give the gentleman from Illinois (Mr. Hastert) and the class of the 100th Congress our due credit for pushing this issue for the last 12 years and, finally today, we gain victory here on the House floor. But surely every member of the Committee on Ways and Means who saw the benefit of finally doing away with this antiquated law deserves credit; and I do not mind at all Democrats, Republicans, everybody in the House coming to the floor and taking credit for doing this. It is certainly a happy day for seniors in this country, and I think a happy day for the Congress to finally do something that makes a lot of good old-fashioned common sense to all of us in this country but particularly our seniors, our Social Security recipients. I thank the Chair for yielding and encourage him to keep up the good work.

Mr. McCRERY

Mr. McCRERY. Mr. Speaker, I thank the gentleman for yielding time to me. Mr. Speaker, every time we bring a bill to the floor to cut taxes, the Democrats come up with the same old objection: ``Oh, it is a tax cut for the rich.'' The way they define rich, I just want all those folks out in America who are middle class to know that they are actually rich, because they are among those defined to be rich by the Democrats. So keep that in mind. Let me just enumerate a few provisions of this bill that are clearly not for the rich: a 100 percent health insurance deductibility for the self-employed. Those are not rich folks, those are folks that have started their own business and worked for years and years at those razor-thin margins to keep it going, and they do not get the same health care treatment as big corporations. This bill will do that. Community renewal, tax breaks to build the inner city and rural areas to try to provide jobs in those areas. That is not for the rich. A low- income housing tax credit. We are going to increase the amount of money available for low-income housing in this country. That is not for the rich. There is pension reform, and 77 percent of people on pensions are middle class and lower-income workers, not rich. Finally, if we want to talk about the estate tax, yes, if we count all the assets and the income of the folks who are affected by the death tax, we could think they are rich. The fact is that a great many of those folks, like farmers, like small business owners, are asset rich and cash poor. When they die, for their small business or their farm to keep alive, to keep going, we had better have death tax relief, or those small farms and small businesses are going to go away because their heirs are cash poor. They cannot afford to pay the tax, so they have to sell the farm or sell the business in order to pay the tax. That is not right. This bill will get us just a little way down the road towards correcting the inequity in the Tax Code of America.

Mr. McCRERY

Mr. McCRERY. Mr. Speaker, today I am introducing legislation, the Real Estate Flexibility Act of 1999, to remove a present-law tax penalty that confronts individual real estate investors who wish to sell debt-encumbered property. This legislation is important to our Nation's real estate markets. It would provide real estate investors with flexibility in managing tax liabilities while at the same time allowing debt-strapped property to be put to its highest and best use. An example will help to illustrate the need for this legislation. Assume that an individual investor owns commercial investment real property that is valued at $100 and that is encumbered by debt of $90. The individual's basis in the property is zero. Assume that the individual wishes to enter the residential real estate market and that a buyer offers to purchase his commercial property for fair market value. Under the terms of the transaction, the buyer will assume the $90 of debt and will pay the individual $10 in cash. Under current tax law, the individual will be taxed not only on the cash received, but also on the discharged debt. In this case, the tax paid by the individual on the sale--as much as $25 in this case (taking into account tax on unrecaptured depreciation)--will exceed the $10 in cash the individual actually receives. Thus, selling the property would force the individual to come up with cash out of pocket to pay the IRS. In light of this disincentive, many individuals in this situation do not sell. Rather, they sit and hold. As a result, the underlying property does not pass into the hands of new owners who may be more likely to make improvements and put the property to its highest and best use. In these circumstances, I believe an individual taxpayer should be given flexibility to pay this tax liability when he or she has the necessary cash. The Real Estate Flexibility Act of 1999 would allow individuals wishing to sell debt-encumbered property to elect to pay tax on the sale only to the extent of the cash received; the individual would have to reduce basis in other property to the extent that gains are not taxed. In our example, the individual would pay tax of $10-- i.e., the amount of the cash actually received--upon disposition of the commercial real estate and would reduce his or her basis in other depreciable property by the amount of untaxed gain on the commercial property. I ask my colleagues to join me in supporting this important legislation.

Mr. McCRERY

Mr. McCRERY. Mr. Speaker, I thank the gentleman for yielding me this time. A few moments ago our colleague, the gentleman from California (Mr. Waxman), was on the floor and said that the cuts in the BBA were irresponsible. Well, they certainly have gone further than most of us would have liked, but the fact is those cuts, that legislation, was a joint effort between Democrats and Republicans, the White House and the Congress, so we ought not be down here denigrating anybody for the good faith effort that was entered into to try to save the Medicare system. We now know that some mistakes were made; that some of the cuts went too far. That is the purpose of this legislation on the floor today, and we have worked together again, Democrats and Republicans, to try to repair that damage in the most responsible way. What is irresponsible, though, is to stand up and call for free drugs, free prescription drugs. Americans, senior Americans, know that drugs are not free. Prescription drugs are not free, and we ought not promise something that is impossible. We ought to be responsible about crafting a Medicare program that, yes, includes a prescription drug program but not to stand up here and say, let us vote for free prescription drugs. That is irresponsible.

Mr. McCRERY

Mr. McCRERY. Mr. Speaker, today my friend from Louisiana, Mr. Jefferson and I are introducing comprehensive legislation to address provisions of the tax code that have led to the decline of our domestic maritime industry. The last fifty years have seen a steady erosion of the size and capacity of the U.S.-flag merchant marine. In 1947, more than 2,300 ships flew the Stars and Stripes. That figure has shrunk by nearly 90% since then. Amazingly, there are now seventeen countries with larger merchant marine fleets. For those who have followed the decline of the U.S.-flag, it will come as no surprise that we have been eclipsed by such nations as Panama, Liberia, Cyprus, and Saint Vincent. These nations do not have enormous merchant marines because of their exports or imports. I am convinced that favorable tax treatment in those countries is directly responsible for the decline of our own merchant marine and the growth we have seen elsewhere in the world. This is a critical matter of both national security and economic growth. Unless we as a country respond quickly and effectively to this situation our United States-flag merchant marine--the nation's fourth arm of defense--will in all likelihood be unable to fulfill its historic mission of responding in times of war or other international emergencies. As I remarked earlier this year, as recently as the Persian Gulf War and the conflict in Bosnia, United States-flag commercial vessels and United States citizen crews respond quickly, effectively, and efficiently to our nation's call, providing the sealift sustainment capability necessary to support America's armed forces and to help protect America's interests overseas. In 1992, General Colin Powell, then-Chairman of the Joint Chiefs of Staff, told the graduating class of the United States Merchant Marine Academy at Kings Point that: ``Since I became Chairman of the Joint Chiefs of Staff, I have come to appreciate firsthand why our merchant marine has long been called the nation's fourth arm of defense . . . The war in the Persian Gulf is over but the mechant marine's contribution to our nation continues. In war, merchant seamen have long served with valor and distinction by carrying critical supplies and equipment to our troops in far away lands. In peacetime, the merchant marine has another vital role-- contributing to our economic security by linking us to our trading partners around the world and providing the foundation for our ocean commerce.'' The maritime industry is not only important to our nation's economic and military security. It is also of particular importance to my State of Louisiana. A recent report concludes that ``the ports of Louisiana and the maritime industry are crucial parts of the Louisiana economy.'' It calculates that in 1997, Louisiana realized a ``total economic impact [of] $28.1 billion'' from the activities of our State's ports, steamship and tug and barge companies, firms providing shore side services, and other entities engaged in the maritime, transportation and related service and supply industries. We should not allow these economic benefits to be lost to Louisiana, any other State or to our nation as a whole. I remain convinced that the best way to ensure that our nation continues to have the militarily-useful commercial vessels and trained and loyal citizen crews we need to support our interests around the world is to pursue policies enabling our maritime industry to flourish in peacetime. The place to start, without question, is the tax code. A review of foreign tax laws demonstrates that the decline in our merchant marine can be traced to the favorite tax benefits offered by other countries. In 1995, United States-flag vessel carriers presented testimony to the Congress which summarized the impact American tax laws have on American vessels and described, in terms as true today as they were then, how these laws favor foreign shipping operations: ``U.S.-based liner companies are subject to significantly higher taxes than their foreign-based counterparts . . . [A]s a result of shipping tax exemptions, deferral devices, and accelerated depreciation, many of our foreign competitors pay virtually no income taxes [and] neither do their crews under many foreign tax regimes. Yet here at home, even in our unprofitable years, we are subject to the Alternative Minimum Tax. Consequently, U.S.-flag operators must earn more in the marketplace than their competitors in order to earn the same amount for reinvestment or distribution to shareholders.'' Strengthening the economic viability and competitiveness of United States-flag vessel operations requires us to adapt the tax regime governing our merchant marine to the realities of today's international shipping environment. Earlier this year, I introduced H.R. 2159, which is intended to assist American vessel owners to accumulate the private capital necessary to build modern, efficient and economical commercial vessels in United States shipyards. It would do so by amending the existing merchant marine Capital Construction Fund (CCF) program. The existing program allows an American citizen to deposit the earnings from various United States-built, United States-flag vessels into a tax deferred CCF to be used solely to build vessels in American shipyards. The deferred tax is recouped by the Treasury through reduced depreciation because the tax basis of vessels built with CCF monies is reduced on a dollar- for-dollar basis. The provisions of H.R. 2159 are incorporated into the legislation we are introducing today. It will, among other things, allow earnings from the operation of United States-flag foreign built commercial vessels, and the amount of the duty arising from foreign ship repairs, to be deposited into a Capital Construction Fund in order to increase the amount of capital available to build vessels in our country. Equally important, my legislation will allow CCF monies to be withdrawn to build, in the United States, a vessel to be operated in the oceangoing domestic trades in order to further enhance the modernization and growth of this important segment of our maritime industry. It will further allow these funds to be used to acquire containers or trailers for use on a United States-flag vessel, and allows these monies to be used in conjunction with the lease of a United States-built vessel, or trailer or container, in order to better reflect the realities of current ship financing arrangements. Finally, in order to ensure that the full intended benefits of these changes and the Capital Construction Fund are realized, our legislation removes the Capital Construction Fund as an alternative minimum tax adjustment item. In addition, this bill will increase international competitiveness by allowing the owner of any United States-flag vessel engaged in the foreign trades to elect to fully expense United States-flag vessels in the year in which they acquired and documented under the United States- flag. Today, the United States has a ten-year depreciation schedule while foreign nations generally allow much more aggressive depreciation schedules. In addition, countries such as the Bahamas, Cyprus, Liberia and Panama which register a significant percentage of the world's shipping against which United States-flag vessels must compete are totally exempt from all income taxes. To increase the employment opportunities for American merchant mariners aboard American owned vessels engaged in the foreign trades, this bill would extend the existing foreign source income exclusion to merchant seamen. At present, this exclusion, contained in section 911 of the Internal Revenue Code, is available to Americans working outside the United States. As a result, it costs vessel operators considerably more to hire Americans than it costs foreign vessel operators to hire nationals from the many countries that limit or exempt income taxation imposed on their mariners. Clearly, one of the goals of the existing section 911 is to promote America's national interests through the employment of American citizens. Ensuring that the United States has a sufficient number of loyal, trained American merchant mariners to crew the government-owned and private vessels needed during war or other emergency is a key component of America's sealift capability. Extending section 911 to American mariners will, by increasing their opportunity for employment, augment America's available manpower and seapower force. Finally, the bill recognizes that the tax benefits otherwise available through the legislation can be rendered meaningless through the operation of the Alternative Minimum Tax (AMT). To further enhance the competitiveness of American flag vessel operations, our legislation repeals the AMT with respect to shipping income earned from the operation of U.S.-flag vessels in the foreign trades. Without this provision, the maritime industry might find that the other changes contemplated in this legislation are but hollow promises. Today, American vessels and American merchant mariners are forced to compete in an environment largely dominated by heavily subsidized and foreign state-owned fleets as well as fleets registered in flag-of- convenience countries that are effectively tax havens for these ships. As a result, U.S.-flag ships ply the oceans at a significant economic disadvantage. Further erosion of our seapower threatens America's defense capabilities and the economy of states like Louisiana. In response, we can and should take aggressive action in this area and the legislation being introduced today is a positive step in that direction. I intend to request Chairman Archer to schedule a hearing before the Ways and Means Committee next year to explore the ways in which the tax code hinders our competitiveness on the open seas. I look forward to working with Congressman Jefferson and all of my colleagues to see that meaningful tax relief is enacted for the maritime industry.

Mr. McCRERY

Mr. McCRERY. Mr. Speaker, I rise today, on behalf of myself and Representatives Boehner, Shaw, Herger, Baker, Ramstad, Sununu, Bachus, LaTourette, Oxley, Collins, Portman, Watkins, Hayworth, McInnis, Lewis, Pryce, Traficant, Sessions, Chambliss, Dickey, Cubin, and Hansen, to introduce the Employment Security Administrative Financing Act of 1999. As you know, the employment security system, established as a federal-state partnership more than 60 years ago, is the system employers use to provide unemployment insurance and a public labor exchange for workers. Since its inception, major structural changes to our country's economy have taken place as a result of rapid technological advances and the growth of globalized trade and investment. Adjusting to meet the demands of our changing economy, our nation's labor market has fundamentally changed as well. Therefore, the employment security system should be reformed to meet the demands of the changing labor market and to ensure that states are able to provide the services necessary for employment and re-employment services aimed at matching employers and qualified job-seekers. Mr. Speaker, a major focus of reform should be to improve the efficiency of the current administrative financing mechanism and to reduce the tax burden imposed on employers. Administration of the employment security system is financed by employers through the Federal Unemployment Tax Act (FUTA) payroll tax. Currently collected by the IRS, FUTA revenue is returned to the states through an annual appropriation allocated by the Department of Labor. Unfortunately, states aren't receiving a proportionate return on the FUTA dollars contributed by their employers. Since 1990, less than 59 cents of every FUTA dollar has been sent back to the states for the purpose of administering their unemployment system, and the percentage is shrinking. Now less than 52 cents is returned. As a result, states are being forced to either make up for the shortfall from their own general funds, impose new payroll taxes, or cut back on services provided to workers. Mr. Speaker, the Employment Security Administrative Financing Act is designed to address the problems that the current system continues to impose on the states and the FUTA taxpayers, while preserving and strengthening protections for workers. Specifically, the bill would: reduce the tax burden on large and small businesses by repealing the unnecessary, ``temporary'' 0.2% FUTA surtax imposed in the 1970's; eliminate inefficiencies experienced by employers by transferring responsibility for collection of the FUTA tax to the states; strengthen administration of the system by ensuring that states get a greater return on their employers' FUTA tax dollars and ensure greater accountability for the use of these funds; improve employment services with an emphasis on re-employing dislocated workers; combat fraud and abuse in the present system; and, increase state flexibility to administer their unemployment insurance and employment services programs to serve local needs. Mr. Speaker, without these reforms, the current system will continue to overtax and overburden employers, shortchange states, and, most importantly, underserve those who need it most--the involuntarily unemployed and those striving to move up the career ladder. Mr. Speaker, this is an important issue that Congress should consider. I look forward to working with others to bring about these much-needed, common sense reforms to the current system that will bring our employment security system into the 21st Century.

Mr. McCRERY

Mr. McCRERY. I yield to the gentleman from Arizona.

Mr. McCRERY. Mr. Chairman, I thank the gentleman from Arizona for his comments. To the gentleman from Texas (Mr. Sandlin) who spoke so fervently about employers not being liable, I would simply say that, as a lawyer, he knows, and I am a lawyer, and I know that lawyers are not prevented from suing anybody no matter what the wording of any statute is. I can guarantee him that some lawyers are going to sue employers because they sue everybody, everybody in sight that they think might be brought into court and have a settlement at hand. Those employers are going to have to fight that. Even though they may ultimately win under the wording of the statute, they are going to have to spend a lot of money fighting that lawsuit, and that is part of the problem. Let us talk about liability for just a minute. And I understand the American Medical Association is supporting Norwood-Dingell and not supporting Coburn-Shadegg, which is just beyond belief to me. The American Medical Association, as well as some of my colleagues who are supporting Norwood-Dingell, have been fighting for years for medical malpractice reform, saying that the liability system is out of control. And yet, by passing Norwood-Dingell, they would impose on health care plans the same out-of-control liability system they have been complaining about for years on doctors. I just do not get it. Mr. Chairman, besides the liability issue, though, which I think is clear, Norwood-Dingell does impose on health plans, the same out-of- control liability system that we have everywhere else, Coburn-Shadegg, on the other hand, puts some reasonable restraints on that liability system. But let us put that aside. Let us talk about the rest of the bill. I think my colleagues, especially on the free market side of the aisle, should be very concerned about the regulatory aspects of Norwood-Dingell. Their bill includes language stating that external appeals panels, for example, can consider as evidence government-issued practice and treatment policies and guidelines. This gives bureaucrats the potential to outline practice in this country; bureaucrats writing down how health care will be administered, not doctors. Unlike the Coburn-Shadegg substitute, Norwood-Dingell gives unfettered discretion to Federal bureaucrats to determine if health care workers suffered from inappropriate retaliation from their employer. This bill, the Norwood-Dingell bill, is too heavily regulatory. Vote against it and support the Coburn-Shadegg substitute.

Mr. McCRERY

Mr. McCRERY. Mr. Speaker, I was not going to talk on the conference report today, I spoke on the bill when it was on the floor earlier, but I got tired of hearing some Democrats say that we were jeopardizing Social Security and Medicare by giving a tax cut to the American people. That is just not true. The gentleman from Texas (Mr. Archer) and the gentleman from Florida (Mr. Shaw) had a Social Security plan that is fleshed out and demonstrates clearly that we only need $1.2 trillion of the almost $2 trillion Social Security surplus to solve the Social Security problem. That leaves $700 billion with which to pay down the debt, to help fix Medicare. Speaking of Medicare, what we do not need is to throw more money at it. We need fundamental reform. We also have a plan for that.

Mr. McCRERY

Mr. McCRERY. Mr. Speaker, I rise today primarily to thank the Chairman of the Committee on Ways and Means, the gentleman from Texas (Mr. Archer), to thank him for having the wisdom and the courage to put together a tax bill that addresses not just the high-profile popular calls for tax relief that grab the headlines and provide us politicians with applause lines, but a tax bill that provides tax relief to the business community in the United States in a way that will result in greater availability of capital in this country for investment, more jobs being created here, and more jobs being saved here. This is not only a responsible tax cut, it is a needed tax cut if we want American companies to be competitive in the world marketplace in the next century. Look, remember 2 years ago, when we Republicans cut taxes? We were called irresponsible then by the same people in the opposition party that are today calling us irresponsible for offering this tax cut. Remember their words? ``You cannot cut taxes and balance the budget.'' How many times did I hear that? Well, obviously they were wrong then. We did cut taxes and balance the budget. And they are wrong today. Mr. Speaker, I thank the gentleman from Texas for putting together an excellent tax cut and for helping American companies and American workers.

Mr. McCRERY

Mr. McCRERY. Mr. Chairman, I want to thank the gentlewoman from Connecticut (Mrs. Johnson) and the gentleman from Maryland (Mr. Cardin) for their hard work on this legislation and I particularly thank the gentlewoman from Connecticut for her kind remarks regarding my work on SSI, particularly the SSI for children program that we revised in the welfare reform bill a couple of years ago that was signed into law. The gentlewoman from Connecticut knows that I would not have been nearly as active in crafting those provisions were it not for a valued member of my staff, Ms. Angel Vallillo. Ms. Vallillo recently died of brain cancer. Part of the reason I am speaking now is to thank her parents, to thank Angel for the work that she has done on this very important subject. I remember very well following our victory in welfare reform and having recognized Angel's work in that bill on SSI, it was not long after that that Angel came to me with a report in her hand, as she often did, and said, ``You need to look at this.'' I said, ``What is it?'' She said, ``This is a new report by the GAO on SSI, and it talks about all the fraud, waste and abuse in SSI, and this is one of the highest risk programs in the Federal Government for fraud and abuse, even after all the work we did in the welfare reform bill.'' I said, ``Okay, I will take a look at it.'' Sure enough, the GAO wrote a fairly scathing report on fraud and abuse in the SSI program. So we set to work, Angel did mostly, on crafting some provisions to correct the fraud and abuse in the program. We have heard a lot here today about the foster care provisions of this bill and how good they are. I agree. They are. I am very thankful that we are able to make these changes in the law with respect to foster care. We are financing those good provisions on foster care with the savings that we are going to create through the changes in the SSI program. Mr. Chairman, I think that you, like I, hear all the time from folks back home, ``If you all would just cut out the fraud and abuse in the Federal Government, you could save enough money to balance the budget.'' Well, we have balanced the budget now partly because we have cut out a lot of fraud and abuse in the Federal Government, but there is still work to be done. This bill does that. It helps us to cut the waste, cut the fraud, the abuse in a very important Federal program, and with those savings, Mr. Chairman, we are going to re-create a foster care program that I think will do worlds of good for foster children in this country for years to come. I thank the gentlewoman from Connecticut for yielding me this time. Mr. Chairman, I rise to inform the Congress and the Nation of the debt we owe Ms. Angel Vallillo for her hard work in crafting the legislation before us today. Angel served for ten years on my staff, first as a campaign volunteer and ultimately as my legislative director until she died of a brain tumor on October 2, 1998. I know her parents, Mr. and Mrs. Raymond Vallillo of Shreveport, Louisiana, and all of her family and friends are as proud of Angel today as they were throughout her life and career. I have no doubt that Angel is watching over us as we consider H.R. 1802, the ``Foster Care Independence Act of 1999''. This important bill, which will help thousands of foster children make the transition to adulthood and independent lives, will pass the House today thanks to her hard work in drafting many provisions to end fraud and abuse in the Supplemental Security Income (SSI) program. Without those provisions and the savings they produce--by, for example, blocking benefits for prisoners and fugitives, improving recovery of benefit overpayments, and ensuring recipients are not hiding resources they should rely on-- this bill would not be on the House floor today. I will always remember Angel as a driving force behind the 1996 welfare reform law, and especially the provisions reforming the SSI program for children. As a caseworker in my district, Angel often saw this program perpetuate poverty rather than alleviate it. As a trusted legislative assistant, Angel helped me and all the Members of the Ways and Means Committee and, in the end, the House, the Senate and the President, make the changes needed. Thanks to Angel's skills and determination, welfare reform is working and an entire generation of children is being saved from lives of dependency. As a parent of two young children, I want to address a thought to Angel's parents. Regretfully, the evidence that raising children is difficult is all around us. Of all the goals we set for ourselves in life, for those of us blessed to be parents, the single most important goal is raising our children to be honest, moral, hardworking, and honorable citizens of this great country. As Angel's boss, colleague, mentor, and most importantly friend, I knew Angel about as well as you can know someone who is not in your own family. I want her parents to know that she exemplified the very best of everything we raise our children to be. I fervently hope my own children achieve the high standards set by Angel. Raymond and Marie, you are deeply honored as parents by the life and achievements of your wonderful daughter. Mr. Chairman, few Americans know the great privilege of serving in the people's House, and fewer still of actually developing major legislation that improves the lives of American citizens. But that is exactly what Angel Vallillo did with the few years God granted her on this earth. On behalf of my family and the families of the Fourth Congressional District of Louisiana, I join with all Members of the U.S. House of Representatives today in recognizing Angel's all too short lifetime of dedicated service.

Mr. McCRERY

Mr. McCRERY. Mr. Speaker, I rise today to announce the introduction of the United States-Flag Merchant Marine Revitalization Act of 1999. This bipartisan legislative initiative, which I am introducing along with Congressman Herger of California, Congressman Jefferson of Louisiana, and Congressman Abercrombie of Hawaii, is critically important to the modernization and growth of the United States maritime industry, our nation's fourth arm of defense. History has repeatedly proven--and Congress has repeatedly affirmed-- that the United States needs a strong, active, competitive and militarily-useful United States-flag commercial maritime industry to protect and strengthen our nation's economic and military security. In times of war or other emergency, as vividly demonstrated during the Persian Gulf War, United States-flag commercial vessels and their United States citizen crews respond quickly, effectively and efficiently to our nation's call, providing the sealift sustainment capability necessary to support America's armed forces overseas. In 1992, General Colin Powell, then-Chairman of the Joint Chiefs of Staff, told the graduating class of the United States Merchant Marine Academy at Kings Point that: Since I became Chairman of the Joint Chiefs of Staff, I have come to appreciate firsthand why our merchant marine has long been called the nation's fourth arm of defense . . . The war in the Persian Gulf is over but the merchant marine's contribution to our nation continues. In war, merchant seamen have long served with valor and distinction by carrying critical supplies and equipment to our troops in far away lands. In peacetime, the merchant marine has another vital role-contributing to our economic security by linking us to our trading partners around the world and providing the foundation for our ocean commerce. I am convinced that the best way to ensure that our nation continues to have the militarily-useful commercial vessels and trained and loyal United States citizen crews we need to support our interests around the world is to enact those programs and policies that will better enable our maritime industry to flourish in peacetime. I am equally convinced that one important way to do so is to provide a tax environment for our maritime industry which more closely reflects the favorable tax treatment other maritime nations provide to their own merchant fleets. The legislation my colleagues and I are introducing today will in fact strengthen the competitiveness of United States-flag vessel operations by providing a greater opportunity for American vessel owners to accumulate the private capital necessary to build modern, efficient and economical commercial vessels in American shipyards. This bill amends the existing merchant marine Capital Construction Fund (CCF) program contained in section 607 of the Merchant Marine Act, 1970 and section 7518 of the Internal Revenue Code of 1986. The existing program allows an American citizen to deposit the earnings from various United States built, United States-flag vessel operations into a tax-deferred Capital Construction Fund to be used exclusively in conjunction with an approved United States shipbuilding program. The deferred tax is recouped by the Treasury through reduced depreciation because the tax basis of vessels built with CCF monies is reduced on a dollar-for-dollar basis. In order to better reflect the significant tax-related disadvantages American vessel owners face as compared to their foreign competition, and to continue to ensure our nation has the most militarily useful and economically viable domestic maritime industry, this legislation would amend the existing CCF program to expand the type of earnings eligible to be deposited into a CCF and the purposes for which a qualified withdrawal can be made. Significantly, these amendments do not in any fashion alter or weaken the existing requirement that vessels build with CCF monies must be built in the United States and operate under the laws of the United States with United States citizens crews. Specially, this legislation amends the CCF program to: Allow earnings from United States-flag foreign built vessels to be deposited into a CCF in order to increase the amount of capital available to build vessels in an American shipyard; Allow CCF monies to be withdrawn to build, in an American shipyard, a vessel for operation under the United States-flag in the oceangoing domestic trades in order to further enhance the modernization and growth of this important segment of the maritime industry; Allow CCF monies to be withdrawn to acquire United States-built containers or trailers for use on a United States-flag vessel in order to better ensure that cargo moves on American vessels in a safe and efficient fashion; Allow CCF monies to be withdrawn in conjunction with the lease of a United States-built vessel, trailer or container in order to better reflect the realities of current ship financing arrangements; Allow a vessel owner to deposit into a CCF the duty arising from foreign ship repairs to ensure that the duty is used to the benefit of United States shipyards; and Remove the CCF as an alternative minimum tax adjustment item so that the full intended benefits of the program--the accumulation of private capital for the construction of commercial vessels in United States shipyards--are realized. The United States-Flag Merchant Marine Revitalization Act of 1999 is critically important to the modernization and growth of the United States-flag merchant marine and should be supported and enacted. It will generate significant commercial vessel construction in United States shipyards and help American flag vessel operators compete more equally with their foreign flag vessel counterparts.

Mr. McCRERY

Mr. McCRERY. Mr. Speaker, once again, I am introducing legislation to remedy a problem brought to my attention by the U.S. utility industry involving the taxation of foreign operations of U.S. electric and gas utilities. These firms were prohibited for many years from doing business abroad until the National Energy Policy Act (NEPA), enacted in 1992, removed that prohibition. With passage of NEPA, and as some foreign governments began privatizing their national utilities and increasing energy demands necessitated the construction of new facilities to fulfill the new capacity, U.S. utilities began to make foreign investments. Since 1992, U.S. utility companies have made significant investments in utility operations in the United Kingdom, Australia, Eastern Europe, and South America. Foreign utilities are particularly attractive investments from a U.S. viewpoint. They are not ``runaway plants'', but rather stimulate job creation in the U.S. in design, architecture, engineering, construction and heavy equipment manufacturing. When the subsidiary of an U.S. utility builds generating plants, transmission lines, or distribution facilities to serve its foreign customers, these most often come from U.S. suppliers. Given that the U.S. energy market is mature, overseas investments are a good way for U.S. utilities to diversify and grow, to the benefit of their employees and their shareholders. Unfortunately, the Internal Revenue Code penalizes these investments by subjecting them to double taxation. Under the foreign tax credit rules, the interest expense of a U.S. person is allocated in part to its foreign operations based on the theory of the ``fungibility of money.'' The allocation formula in Internal Revenue Code section 864 requires U.S. domestic interest expense to be allocated based on the value of the company's foreign and domestic assets. If a firm has mature (depreciated) U.S. assets and newly acquired overseas assets, like many U.S. utilities, a disproportionate amount of U.S. interest expense will be allocated abroad. The result is a very high effective tax rate on that foreign investment and a loss of U.S. foreign tax credits. Rather than face this double tax penalty, some U.S. utilities have actually chosen not to invest overseas and others have pulled back from their initial investments. One solution to this problem is found in the legislation that I am introducing today. Our remedy is to exempt the debt associated with a regulated U.S. utility business (the furnishing and sale of electricity or natural gas) from the interest allocation rules of Internal Revenue Code section 864. The proposal would allocate and apportion interest expense attributable to qualified infrastructure solely to sources within the United States. ``Qualified infrastructure indebtedness'' would be defined as debt incurred in a corporation's trade or business of furnishing or selling electricity or natural gas in the United States. Further, the rates for such furnishing or sale of electrical energy must be regulated or set by the Federal Government, a State, the District of Columbia or a political subdivision thereof. I am also aware that my colleagues on the Committee on Ways and Means, Congressmen Houghton and Levin, together with Senators Hatch and Baucus, have been leading a multiyear effort to reform the international tax laws. I am a strong supporter of that effort, which is intended in part to rectify the disconnect between our Nation's favorable trade laws and our tax laws, which too often penalize American firms wanting to expand into foreign markets. The problem of interest allocation has not yet been addressed in the Houghton-Levin legislation, but I strongly urge that this provision be included in any foreign tax reform bill introduced in the next Congress. Further, because the process of getting legislation enacted into law properly involves consultation with Treasury, the affected industry, and the bar, we encourage those with subject matter expertise in this area to review our bill. I believe my bill reflects the best thinking now available on how to address this serious problem, but we are certain that further reflection will yield even better for U.S. utilities attempting to invest overseas.

Mr. McCRERY

Mr. McCRERY. Mr. Speaker, I rise today to offer a tribute to three constituents, Shashunna Williams, Augustine Washington, and Bessie Deans, who were tragically killed in an automobile accident on their way back from a home health care training seminar. These three caring women are remembered by their family, friends, colleagues, and by their patients. Shashunna was 22 years old, the youngest staff member in the agency, and engaged to be married this summer. She was an observant health aide, attentive to her patients' needs, and determined to overcome any obstacles she encountered. She brought to her job a vibrant energy and genuine concern for others that was often displayed with a humorous twist. Bessie was 39 years old, and a certified nurse's aide since 1987. She was married and a devoted mother of two sons, whose sporting activities she regularly attended. Bessie was well known in the community and her caring spirit manifested itself in kindness above and beyond the call of duty. Bessie's dependability, loyalty to her patients, and her unfailing energy earned her the gratitude of all those to whom she came in contact. Augustine was 42, a mother of four, a grandmother, and a certified nurse's aide for over ten years. She excelled in caring for the elderly, who always praised her for her kindness and generosity. Augustine visited home health patients during the day and had a second full time job at a nursing home in the evening. Augustine was a team player, most dependable, and a fine example of a hard working, caring employee. Mr. Speaker, these three women exemplified the very best in their chosen field. We, in the Fourth District of Louisiana, share their families', colleagues', and patients' grief over their loss. I know they all will miss them terribly.

Mr. McCRERY

Mr. McCRERY. Mr. Speaker, today with my colleague, Wes Watkins from Oklahoma, I am introducing legislation that will clarify the U.S. tax treatment of foreign pipeline transportation income. This legislation is needed because current tax law causes active foreign pipeline transportation income to be unintentionally trapped within anti-abuse tax rules. These rules were originally established to prevent avoidance of tax on easily movable and passive income, not on active pipeline income. In fact, when these rules were first enacted, U.S. pipeline companies were not even engaged in international activities. Now, as opportunities in the international arena arise, pipeline companies are unfairly caught within the scope of the anti- abuse rules. As such, U.S. pipeline companies are finding themselves at a competitive disadvantage, vis a vis foreign companies. In order for U.S. companies to remain competitive, it is essential that U.S. tax law not unfairly tax U.S. companies' foreign operations. The legislation that Mr. Watkins and I are introducing today will correct this injustice. Under the Subpart F anti-abuse rules, current taxation is imposed on certain types of earnings whether or not a dividend is actually paid. The policy behind these rules is to currently tax income which is passive in nature or which is easily moved from one jurisdiction to another. One type of Subpart F income is foreign based company oil related income (FORI). FORI includes income derived outside the U.S. from the transportation of oil and gas. This general rule, in many cases, causes current income taxation on income that is not passive or manipulable. This adverse result is slightly mitigated by two narrow exceptions, the extraction exception and the consumption exception. Pipeline transportation income is neither passive nor easily movable, and therefore, should not be subject to these rules. Pipe location is based on where the natural resources and energy needs exist. Pipes cannot be placed just anywhere, nor once they are in place, can they be easily moved. Consequently, applying these anti-abuse rules for passive and manipulable income to active and hard to move income just doesn't make sense. In looking at the legislative history, it is clear that Congress intended the anti-abuse rules to reach the significant revenues derived by highly profitable oil related activities that were sourced to the low-taxed country as opposed to the country in which the oil and gas was extracted or ultimately consumed. The intent of these rules was not to target pipeline transportation income. In fact, when the rules were being considered and then put in place, pipeline companies were not engaged in international development activities. Rather, they were focused solely on domestic infrastructure investment. Today pipeline companies are continuing to actively pursue all development opportunities domestically. These opportunities, however, are somewhat limited. The real growth for the U.S. pipeline companies is not occurring in the international arena. These opportunities stem from fairly recent activities by foreign countries to privatize their energy sectors. Increased U.S. involvement in energy infrastructure projects will have tremendous benefits back home. More U.S. employees will be needed to craft and close these transactions. To build plants and pipelines, and to operate the facilities. New investment overseas will also result in new demands for U.S. equipment. Before these benefits can be realized, however, U.S. companies must be able to defeat their foreign competitors and win the projects. Unfortunately, current U.S. tax laws significantly inhibit the ability of U.S. companies to win such projects. It is time we change these laws if we are to ensure that U.S. companies remain competitive players in the international marketplace. A complete review and rewrite, however, will take a significant amount of time--time we can not afford to lose. In the interim, we believe there are incremental reforms to the international tax regime that we can and should take. One step in the right direction, and one that would have a minimal impact on the FISC, is to pass our legislation that would clarify the U.S. tax treatment of foreign pipeline transportation income. I ask my colleagues to join us in this effort to bring the current law in line with good tax policy. Let's ensure we keep America competitive in the global economy.

Mr. McCRERY

Mr. McCRERY. Mr. Speaker, I thank the gentleman from Louisiana (Mr. Tauzin) for yielding. Mr. Speaker, it is with mixed emotions that I appear on the floor today. On the one hand, I regret that our colleague, the gentleman from Louisiana (Mr. Livingston) will be leaving the House at the end of this week and, as my colleague, the gentleman from Louisiana (Mr. Tauzin) said, ending his long, distinguished public service. On the other hand, it is a pleasure for me to come to the floor and say some things about my retiring colleague, the gentleman from Louisiana (Mr. Livingston) perhaps that a lot of people do not know, and be able to share those experiences that I have had with him with the public. When I came to this body 10 or 11 years ago as a freshman, never having held public office before, I had a lot to learn. Bob Livingston I looked up to in more ways than one. He is a lot taller than I am, but also I had followed his distinguished career through the years and I knew that he was a person of substance, a person of character and learning, someone who, if he would, could teach me a lot about this body, how it works, how to get along here, how to get things done. I suspected that because of his stature in this body, being a fairly senior member even at that time of this body, and having the responsibilities that he had on the Committee on Appropriations and with his own district in the New Orleans area, that he would have little time for a new guy like me. Well, I was wrong. Well, I was right he did not have much time but I was wrong because he made time. He took the time to counsel me on numerous occasions. He took the time even to travel with me to my district. Then I did not realize what a sacrifice that was for a Member, any Member, much less a senior Member of the Committee on Appropriations, to take a day away from his family, away from his work, to go to some other Member's district for that Member's benefit, but he did it. He flew from Washington to Shreveport, Louisiana, to help us in Shreveport with an economic development project. Now that I realize, having been here awhile, what a sacrifice that was, it makes me appreciate that gesture on his part all the more. He is that type of individual. He is that type of human being, of person. He really goes beyond what is required of a Member of Congress. He really goes beyond what is required of a colleague, even a colleague from Louisiana, to help all of us. I am sure each Member of the delegation can relate a similar story about Bob Livingston bending over backwards to try to help us with something that we needed in the State of Louisiana. So he has been a real asset to me and my growth here in this chamber. He has been a real asset to his home district. He has been a real asset to the State of Louisiana and to this country. I will miss him. I know that Louisiana will miss him, and I would submit that the country will miss him as well. So it is with mixed emotions that I appear on the floor here today, but I have no mixed emotions about wishing my colleague from Louisiana, Bob Livingston, well. I wish he could stay with us a little longer but he thinks it is time for him to go, and he will do well in the private sector, I am sure. We look forward to seeing him here often, though, as he will still be able to share with us some of the wisdom and knowledge that he has gained over the years of his public service. So, Mr. Livingston, wherever you are, and wherever you will be, know that I have cherished getting to know you, cherished the knowledge that I have gained from my visits with you and hope that you will know that I and many others in this chamber will miss you. Bon voyage. Come back and see us.

Mr. McCRERY

Mr. McCRERY. Mr. Chairman, will the gentleman yield?

Mr. McCRERY. Mr. Chairman, I move to strike the requisite number of words. Mr. Chairman, the amendment that is before us really has very little to do with the legislation that is on the floor. In fact, I came and asked staff why this amendment was even germane to the legislation that is before us. And evidently there is a tangential germaneness because of the tie-in to CBO, but that very tie-in is the reason we ought to oppose this amendment, CBO. The amendment of the gentleman would require the Congressional Budget Office to make a subjective determination of whether a bill or provision in a bill weakens or strengthens any environmental or public health law. Mr. Chairman, the CBO is not equipped to make that kind of subjective determination. That is a matter for debate on this floor, debate in the committees of jurisdiction, not a matter for the CBO to determine and provide some subjective analysis that will be tacked onto a bill that somebody can read on the floor. CBO is there to provide objective economic analysis, which is what the underlying bill asked them to do with respect to any bill that might affect in an economic way the private sector. So this amendment, while we are not going to object to the germaneness, really has nothing to do with the underlying bill and it ought to be rejected because it asks the CBO to do something that CBO is not designed or equipped to do. Any debate on whether a bill affects adversely an existing public health policy or piece of legislation concerning the environment ought to be debated among the Members of the House here on the floor and in committee. So I would ask the Members to reject the Waxman amendment, A, because it has nothing to do with the underlying legislation; B, it adds nothing to the legislation; C, it is bad policy to ask the CBO to do something that they are not supposed to do, they are not designed to do. So please, Mr. Chairman, allow me to urge our colleagues to come to the floor, vote for common sense, let this underlying legislation pass, and reject the Waxman amendment because it simply has no place on this floor.

Mr. McCRERY. Mr. Chairman, I thank the gentleman from Maine (Mr. Allen) for yielding. The gentleman tried to make the case that CBO could make some sort of objective analysis. The gentleman's last phrase in his description of the requirements of the amendment were ``less stringent,'' any provision that makes ``less stringent'' the environmental or public health laws. I would submit to the gentleman that that phrase ``less stringent'' can be in the eyes of the beholder. As testified to, in fact, by CBO in hearings before the Committee on Rules on this amendment, CBO, the witness, said whether the benefits exceed the cost. But in many instances the benefits are in the eye of the beholder and are very difficult to pin down in any kind of a quantitative means. So CBO has testified that they are not equipped to do this, it is a subjective analysis, and that ought to be left to the Members of the House.

Mr. McCRERY

Mr. McCRERY. Mr. Speaker, today I am pleased to introduce on behalf of myself, Mr. Neal of Massachusetts and several of my other colleagues from the Ways and Means Committee, legislation to permanently extend the exception from Subpart F for active financing income earned on overseas business. U.S.-based finance companies, insurance companies and brokers, banks, securities dealers, and other financial services firms should be permitted to act like other U.S. industries doing business abroad and defer U.S. tax on the earnings from the active operations of their foreign subsidiaries until such earnings are returned to the U.S. parent company. Without this legislation, the current law provision that keeps U.S. financial services industry on an equal footing with foreign-based competitors will expire at the end of this year. Moreover, this legislation will afford America's financial services industry parity with other segments of the U.S. economy. Due to the international growth of American finance and credit companies, banks and securities firms, and insurance companies and brokers, this legislation is essential in securing the position of the U.S. financial services industry by making this provision a permanent part of the law and ending the potential impairment of these industries because of the ``on-again, off-again'' system of annual extensions that does not allow for fiscal certainty. Furthermore, Mr. Speaker, we believe the permanent extension of this provision is particularly important today as the U.S. financial services industry is the global leader and plays a pivotal role in maintaining confidence in the international marketplace. Also, recently concluded trade negotiations have opened new foreign markets for this industry, and it is essential that our tax laws complement this trade effort. Additionally, Mr. Speaker, while this legislation merely provides for a permanent extension of current law, the highly competitive and global nature of many of the businesses that will benefit from this legislation must continually be reassessed to ensure that U.S. tax policy does not hamper their ability to compete in the international marketplace. One such area to which I hope the Congress and Treasury department will give further attention is the business of reinsurance. This industry is placing more business outside of their home countries, a trend which continues and is accelerating. Many of these decisions are motivated by a variety of business reasons and the highly competitive global nature of the business itself. While some of the changes made last year were included to close down perceived tax avoidance schemes, we, in turn, should not create or perpetuate a restrictive tax regime that penalizes those who are doing legitimate business transactions and have significant business operations in those countries. In closing, we must not allow the tax code to revert to penalizing U.S.-based companies by allowing to occur the expiration of the temporary provision after this year and hope that this legislation can be given every possible consideration.

Mr. McCRERY

Mr. McCRERY. Mr. Speaker, I would like to recognize today my constituent, Gil Iberg, known by many as ``Big Band Mouth of the South.'' Gil Iberg has distinguished himself as a true connoisseur of big band music and has amassed an extraordinary collection of roughly 1,000 cassettes and 100 albums, containing the music of over 200 big bands. To make sure he misses no opportunity to add to his collection, Gil keeps a radio/cassette recorder on his bedside table so he can tape big band broadcasts. Gil learned to play the trumpet when he was young, following the footsteps of his father, who played a bass fiddle in a local band in his hometown of Highland, Illinois. Although he caught big band fever when he was young, he didn't start collecting records and tapes until the 1960s, when the popularity of the music began to wane. Afraid that he might lose access to the music he loved, Gil began to collect his own supply. Gil has also seen many big bands in person, including Glenn Miller's and Artie Shaw's ensembles. In the words of Gil himself, ``I could talk about big bands all day and all night. I live and breathe and eat big band music. I play big band music every day of the week, and I exchange tapes and letters with other big band buffs from all over the country.'' Mr. Speaker, please join me in commending Gil Iberg for following his dream and becoming an expert in his chosen hobby. In more of his own words, ``Some men fish or hunt. Some men golf. My thing is big bands. For me, there's nothing like it.''

Mr. McCRERY

Mr. McCRERY. Mr. Speaker, I rise in support of the articles of impeachment. Mr. Speaker, private sexual relations between consenting adults should be just that--private. If President Clinton had simply been revealed to have had an extra-marital affair, the U.S. House of Representatives would not be considering articles of impeachment. Unfortunately, the President's troubles arise from a number of actions quite different from private, consensual sexual encounters. Before the President even knew Monica Lewinsky, he was the defendant in a civil lawsuit filed by Paula Jones, a former Arkansas state employee, who claimed that, while she was a state employee, the governor of Arkansas, Bill Clinton, made a crude and unwanted sexual request of her. Ms. Jones claimed in the lawsuit that she was emotionally upset by the governor's action and that she suffered in her job as a state employee as a result of her refusal to grant the governor's request for her to perform a particular sex act with him. The subject of this lawsuit was not a consensual sex act, but an unwanted sexual advance by the male employer of a female. In any civil lawsuit, the plaintiff has the right to call witnesses to testify under oath as to the truthfulness of the claims being made in the lawsuit. Central to our civil justice system is the requirement that witnesses under oath tell the truth, unless such testimony would tend to incriminate them, in which case the witness can claim the 5th Amendment to the Constitution and refuse to testify. President Bill Clinton was called to testify in the discovery phase of the Paula Jones lawsuit. Under oath, President Clinton made a number of statements which have since been shown to be false. Taken together, these lies under oath were clearly calculated to thwart the Jones v. Clinton federal civil judicial proceeding. Upon the discovery of evidence indicating the President may have committed perjury, a federal criminal grand jury was charged with investigating the matter. President Clinton testified under oath before that grand jury and, once again, told a series of calculated lies. Good lawyers may quibble over whether the President's lies under oath constitute perjury, but I believe no reasonable, unbiased person would conclude that the President did not lie under oath. I am convinced that the lies under oath do constitute perjury, a felony criminal offense. In addition to the perjurious testimony given by the President, I am convinced, after carefully studying the evidence, that the President engaged in a pattern of obstruction while the Jones v. Clinton case was pending, and while a federal criminal investigation was pending, in order to thwart those proceedings. The pattern of obstruction consisted primarily of tampering with witnesses whom the President knew would likely be called to testify before the criminal grand jury. Those witnesses included Monica Lewinsky, his secretary, Betty Currie, and numerous White House aides. In summary, this impeachment proceeding is not about sex! It is about attempts to thwart proceedings in our civil and criminal justice systems. It is about the President committing perjury in a civil lawsuit which concerned not consensual sex, but a crude and inappropriate sexual advance made by an employer toward an employee. It is about the President committing perjury before a criminal grand jury. And it is about the president having so little regard for the rule of law that he even sought to have others commit the crime of perjury in order to protect himself. Those acts constitute an attack by the President on our justice system, serve to undermine the orderly administration of justice in this country, and are therefore impeachable offenses. As a lawyer, had I committed the offenses the President committed, I would be disbarred. Should the President be held to a lower standard than that expected of lawyers in this country? Surely not. It is important, if not critical, for the U.S. House of Representatives to approve articles of impeachment against President Clinton in order to send the message to the citizens of our Nation that the rule of law is a crucial part of the foundation of our society, and that no one, not even the President, no matter how popular he might be, is above the law.

Mr. McCRERY

Mr. McCRERY. Mr. Speaker, today, I am introducing legislation to remedy a problem brought to my attention by the U.S. utility industry involving the taxation of foreign operations of U.S. electric and gas utilities. These firms were prohibited for many years from doing business abroad until the National Energy Policy Act (NEPA), enacted in 1992, removed that prohibition. With passage of NEPA, and as some foreign governments began privatizing their national utilities and increasing energy demands necessitated the construction of new facilities to fulfill the new capacity, U.S. utilities began to make foreign investments. Since 1992, U.S. utility companies have made significant investments in utility operations in the United Kingdom, Australia, Eastern Europe, and South America. Foreign utilities are particularly attractive investments from a U.S. viewpoint. They are not ``runaway plants'', but rather stimulate job creation in the U.S. in design, architecture, engineering, construction and heavy equipment manufacturing. When the subsidiary of an U.S. utility builds generating plants, transmission lines, or distribution facilities to serve its foreign customers, these most often come from U.S. suppliers. Given that the U.S. energy market is mature, overseas investments are a good way for U.S. utilities to diversify and grow, to the benefit of their employees and their shareholders. Unfortunately, the Internal Revenue Code penalizes these investments by subjecting them to double taxation. Under the foreign tax credit rules, the interest expense of a U.S. person is allocated in part to its foreign operations based on the theory of the ``fungibility of money.'' The allocation formula in Internal Revenue Code section 864 requires U.S. domestic interest expense to be allocated based on the value of the company's foreign and domestic assets. If a firm has mature (depreciated) U.S. assets and newly acquired overseas assets, like many U.S. utilities, a disproportionate amount of U.S. interest expense will be allocated abroad. The result is a very high effective tax rate on that foreign investment and a loss of U.S. foreign tax credits. Rather than face this double tax penalty, some U.S. utilities have actually chosen not to invest overseas and others have pulled back from their initial investments. One solution to this problem is found in the legislation that I am introducing today. Our remedy is to exempt the debt associated with a regulated U.S. utility business (the furnishing and sale of electricity or natural gas) from the interest allocation rules of Internal Revenue Code section 864. The proposal would allocate and apportion interest expense attributable to qualified infrastructure solely to sources within the United States. ``Qualified infrastructure indebtedness'' would be defined as debt incurred in a corporation's trade or business of furnishing or selling electricity or natural gas in the United States. Further, the rates for such furnishing or sale of electrical energy must be regulated or set by the federal government, a State, the District of Columbia or a political subdivision thereof. I am also aware that my colleagues on the Committee on Ways and Means, Congressmen Houghton and Levin, together with Senators Hatch and Baucus, have been leading a multi-year effort to reform the international tax laws. I am a strong supporter of that effort, which is intended in part to rectify the disconnect between our nation's favorable trade laws and our tax laws, which too often penalize American firms wanting to expand into foreign markets. The problem of interest allocation has not yet been addressed in the Houghton-Leven legislation, but I strongly urge that this provision be included in any foreign tax reform bill introduced in the next Congress. Further, because the process of getting legislation enacted into law properly involves consultation with Treasury, the affected industry, and the bar, we encourage those with subject matter expertise in this area to review our bill. I believe my bill reflects the best thinking now available on how to address this serious problem, but we are certain that further reflection will yield an even better ??? for U.S. utilities attempting to invest overseas.

Mr. McCRERY

Mr. McCRERY. Madam Speaker, I rise in support of this tax bill. Madam Speaker, I commend Chairman Archer on the inclusion in this bill of the provision to modify and extend the present law treatment of active financial services income under Subpart F of the Internal Revenue Code. The provision permits U.S.-based finance companies, insurance companies banks, securities dealers, and other financial services firms to act like other U.S. industries doing business abroad and defer U.S. tax on the earnings from the active operations of their foreign subsidiaries until such earnings are returned to the U.S. parent company. In particular, I commend Chairman Archer and his staff for the resolution of two questions relating to the interaction of this subpart F provision. The first deals with active financial services income and the ability of the U.S. financial services industry to use so-called hybrid arrangements and other techniques to reduce their foreign taxes. The second clarifies whether the subpart F provision will work as intended if the Treasury Department fails to make current, effective conforming changes to existing regulations, such as the exception for same-country dividends and interest. Additionally, I understand that the provision to modify and extend the present law treatment of active financial services income under Subpart F contemplates that the Treasury Department will make current effective conforming changes to existing regulations that do not take account the exception provided by the provision. As an example, it is intended that debt instruments held by a U.S.-controlled foreign corporation, the income from which qualifies for the treatment provided by the bill, will be considered to be assets used in a trade or business for purposes of the regulatory requirements under the exception for same-country dividends and interest. There clarifications are necessary because in January of this year, the Treasury Department issued Notice 98-11, attacking the use of hybrid arrangements to reduce the foreign taxes of U.S.-owned foreign companies. Chairman Archer, along with a bipartisan majority of the Ways and Means Committee, strongly opposed the Treasury Department's action on Notice 98-11. In response to the concerns raised by Chairman Archer, in June of this year, the Treasury Department issued Notice 98- 35, the purpose of which was ``to allow Congress an appropriate period to review the important policy issues raised . . . and if appropriate address the issues by legislation.'' Notice 98-35 also anticipated, and explicitly provided for, the use of hybrid arrangements to reduce foreign taxes with respect to financial services income, and provided specific rules for this application during the interim. I am very pleased that the provision modifying and extending the subpart F exception for active financial services income was carefully drafted so that nothing in the provision would authorize or allow the exception to be denied because a hybrid arrangement, or any other technique available under foreign law, is used to reduce foreign tax.

Mr. McCRERY

Mr. McCRERY. Mr. Speaker, I commend Chairman Archer on the inclusion in this bill of the provision to modify and extend the present law treatment of active financial services income under Subpart F of the Internal Revenue Code. The provision permits U.S.-based insurance companies, banks, finance companies, securities dealers, and other financial services firms--like other U.S. industries doing business abroad--to defer the U.S. tax on the earnings from the active operations of their foreign subsidiaries until such earnings are returned to the U.S. parent company. The provision is vital to the global competitiveness of the U.S. financial services industry. In particular, I commend Chairman Archer and the staff for the resolution of the question relating to the interaction of this subpart F provision regarding active financial services income and the ability of the U.S. financial services industry to use so-called hybrid arrangements and other techniques to reduce their foreign taxes. In January of this year, the Treasury Department issued notice 98-11, attacking the use by U.S.-owned foreign companies of hybrid arrangements to reduce their foreign taxes. Chairman Archer, along with a bipartisan majority of the Ways and Means Committee, strongly opposed the Treasury Department's action on Notice 98-11. In response to the concerns raised by Congressman Archer, in June of this year, the Treasury Department issued Notice 98-35, withdrawing Notice 98-11. According to Notice 98-35, ``the purpose of this action [was] to allow Congress an appropriate period to review the important policy issues raised . . . and if appropriate, address the issues by the legislation.'' Notice 98-35 further provides specific rules with respect to the use of hybrid arrangements during the interim. In Notice 98-35, the Treasury Department wisely anticipated and explicitly provided for the use of hybrid arrangements to reduce foreign taxes with respect to financial services income. Concerns had been raised regarding whether the provision in this bill modifying and extending the subpart F treatment of active financial services income could be interpreted to limit in any way the ability to use hybrid arrangements to reduce foreign taxes. Of course, such a limit would be inconsistent with the position regarding active financial services income set forth by the Treasury Department in Notice 98-35. Moreover, such a limit would be inconsistent with the purpose of this provision, which is intended to improve the ability of the U.S. financial services industry to compete with its foreign counterparts. Because of the importance of this issue, I am very pleased that the provision modifying and extending subpart F treatment of active financial services income was carefully drafted so that nothing in the provision would authorize or allow this treatment to be denied because a hybrid arrangement, or any other technique available under foreign tax law, is used to reduce foreign tax.