E. Shaw

Mr. SHAW

Mr. SHAW. Mr. Chairman, I yield myself such time as I may consume. Mr. Chairman, we are here tonight at a quarter of eleven. Unfortunately, it is so late the offices are closed; the staff have gone home; there is only a handful of Members here on the floor tonight. I was tempted to call a point of order to bring the Members back in because I think this is really pitiful that Members are not here to listen to what we are talking about here tonight. But what we are talking about is campaign finance reform, and my amendment would be the most simple and, I think, productive type of campaign reform that we could possibly have, and that is just simply to say this, and it is so simplistic: Half of the campaign money that my colleagues receive has to come from their home State. I am not talking about colleagues' home districts. Much in the Calvert amendment, much was to do with the question of poor districts. I understand that, and I can well understand that. My district is 91 miles long and only 3 miles wide, but I think that it is not too much to say if we want to be able to take campaign finance away from K Street and back to Main Street with our own districts that we should be able to do so. We have found here, as incumbents and long-term incumbents such as me, we have found that it is so easy to raise money here in Washington that we are tempted to do so instead of going home and raising money in our own State, campaign in our own districts and our own States. And I think that if we are really going to be talking about campaign finance reform, me and all the incumbents who have found it so easy over the years to raise money here in Washington should be able to be required to say, hey, money is the mother milk of politics today. We should be able to require ourselves and anyone else running for office in a Federal election to be able to go home to their home State and raise half of their money. This is not too much to ask. I think it is a very, very reasonable amendment. I cannot see how anybody could possibly oppose it. And if someone could come up here and say to me that I have got a good reason to say this is bad, this should not be, I would yield them the time. I would say to the gentleman from California (Mr. Fazio) who is standing there and all the gentlemen over there who are going to jump up and talk about a poison pill, if they can tell me how this is bad, I would yield them the time. Does anybody want me to yield time because they can criticize the amendment? Or do they want to criticize it because it is a poison pill?

Mr. SHAW. Mr. Chairman, I demand a recorded vote.

Mr. SHAW. I yield to the gentleman.

Mr. SHAW. Mr. Chairman, I yield myself such time as I may consume. Mr. Chairman, I would briefly say in rebuttal to the gentleman I think what we are talking is trying to bring balance back to the American political system, and to stand there and argue that PACs may have some problem with this particular amendment is not a very good argument. What we are talking about, Mr. Chairman, is trying to bring the political system back to the people that we represent. Now to bring it back to just their congressional district creates a problem, and we understand that problem because there are some districts that are extremely poor. But to say that we cannot bring it back to a State, I do not think that we have any States that are that poor that they cannot support the people that they send up here to represent them. We think this is terribly important, Mr. Chairman, and I think that for us to turn our backs on the people that we represent and say that we are going to vote against this particular amendment, which just simply says to take back the political system back to the States, back to the people who have sent us here, it is very important and vital for us to remember where we came from and remember the people that sent us here. Mr. Chairman, I yield back the balance of my time.

Mr. SHAW. Mr. Chairman, if the gentleman is going to criticize the amendment and come out and say this amendment is bad, and we go back a long time, but I do not think the gentleman would do that.

Mr. SHAW. Mr. Chairman, I offer an amendment to the amendment in the nature of a substitute.

Mr. SHAW

Mr. SHAW. Mr. Speaker, Mr. Speaker, today I rise along with my colleague Mr. Stark and a broad bipartisan group of our colleagues from the Ways and Means Committee to introduce the Structured Settlement Protection Act. The Act addresses serious public policy concerns that are raised by transactions in which so-called factoring companies purchase recoveries under structured settlements from injured victims. Recently there has been dramatic growth in these transactions in which injured victims are induced by factoring companies to sell off future structured settlement payments intended to cover ongoing living and medical needs in exchange for a sharply-discounted lump sum that then may be dissipated, placing the injured victim in the very predicament the structured settlement was intended to avoid. As long-time supporters of structured settlements and the congressional policy underlying such settlements, we have grave concerns that these factoring transactions directly undermine the policy of the structured settlement tax rules. The Treasury Department shares these concerns. Because the purchase of structured settlement payments by factoring companies so directly thwarts the congressional policy underlying the structured settlement tax rules and raises such serious concerns for structured settlements and injured victims, it is appropriate to deal with these concerns in the tax context. Accordingly, we are proposing legislation to impose a substantial excise tax on the factoring company that purchases the structured settlement payments from the injured victim. The excise tax would be subject to an exception for genuine court-approved hardship cases to protect the limited instances of true hardship. The following is a detailed discussion of the bill's provisions. Background In acting to address the concerns over factoring companies that purchase structured settlement payments from injured victims the Treasury Department noted that: ``Congress enacted favorable tax rules intended to encourage the use of structured settlements--and conditioned such tax treatment on the injured person's inability to accelerate, defer, increase or decrease the periodic payments--because recipients of structured settlements are less likely than recipients of lump sum awards to consume their awards too quickly and require public assistance.'' (U.S. Department of the Treasury, General Explanations of the Administration's Revenue Proposals (Feb. 1998), p. 122). Treasury then observed that by enticing injured victims to sell off their future structured settlement payments in exchange for a heavily discounted lump sum that may then be dissipated: ``These `factoring transactions' directly undermine the Congressional objective to create an incentive for injured persons to receive periodic payments as settlements of personal injury claims.'' (Id., at p. 122 [emphasis added].) The Joint Tax Committee's analysis of the issue echoes these concerns: ``Transfer of the payment stream under a structured settlement arrangement arguably subverts the purpose of the Code to promote structured settlements for injured persons. (Joint Committee on Taxation, Description of Revenue Provisions Contained in the President's Fiscal Year 1999 Budget Proposal (JCS-4-98), (February 24, 1998), p. 223). The Treasury Department in the Administration's FY 1999 Budget has proposed a 20-percent excise tax on factoring companies that purchase structured settlement payments from injured victims. Under the Administration's proposal, ``any person purchasing (or otherwise acquiring for consideration) a structured settlement payment stream would be subject to a 20 percent excise tax on the purchase price, unless such purchase is pursuant to a court order finding that the extraordinary and unanticipated needs of the original recipient render such a transaction desirable.'' (Treasury General Explanation, at p. 122). The proposal would apply to transfers of structured settlement payments made after date of enactment. Description of the Act 1. Stringent Excise Tax on Persons Who Acquire Structured Settlement Payments in Factoring Transactions In its analysis of the Administration's proposal, the Joint Tax Committee notes the potential concern that in some cases the imposition of a 20-percent excise tax may result in the factoring company passing the tax along by reducing even further the already-heavily discounted lump sum paid to the injured victim for his or her structured settlement payments. The Joint Committee notes that ``[o]ne possible response to the concern relating to excessively discounted payments might be to raise the excise tax to a level that is certain to stop the transfers (perhaps 100 percent). . . .'' (Joint committee on Taxation, Description of Revenue Provisions Contained in the President's Fiscal Year 1999 Budget Proposal (JCS-4-98) (February 4, 1998), p. 223). Factoring company purchases of structured settlement payments so directly subvert the Congressional policy underlying structured settlement and raise such serious concerns for structured settlement and the injured victims that it is appropriate to impose on the factoring company a more stringent excise tax rate applied against the amount of the discount reflected in the factoring transaction (subject to a limited exception described below for genuine court- approved hardships). Accordingly, the Act would impose on the factoring company that acquires structured settlement payments directly or indirectly from the injured victim an excise tax equal to 50 percent of the difference between (I) the total amount of the structured settlement payments purchased by the factoring company, and (ii) the heavily-discounted lump sum paid the by the factoring company to the injured victim. Similar to the stiff excise taxes imposed on prohibited transactions in the private foundation and pension context-- which can range as high as 100 to 200 percent--this stringent excise tax is necessary to address the very serious public policy concerns raised by structured settlement factoring transactions. Unlike the Administration's proposed tax imposed on the purchase price paid by the factoring company, the excise tax imposed on the factoring company under the Act would use a more stringent tax rate of 50 percent and would apply to the excess of the total amount of the structured settlement payments purchased by the factoring company over the heavily- discounted lump sum paid to the injured victim. The excise tax under the Act would apply to the factoring of structured settlements in tort cases and in workers' compensation. A structured settlement factoring transaction subject to the excise tax is broadly defined under the Act as a transfer of structured settlement payment rights (including portions of payments) made for consideration by means of sale, assignment, pledge, or other form of alienation or encumbrance for consideration. 2. Exception from Excise Tax for Genuine, Court-Approved Hardship The stringent excise tax would be coupled with a limited exception for genuine, court-approved financial hardship situations. Drawing upon the hardship standard enunciated in the Treasury proposal, the excise tax would apply to factoring companies in all structured settlement factoring transactions except those in which the transfer of structured settlement payment rights (1) is otherwise permissible under applicable Federal and State law and (2) is undertaken pursuant to the order of a court (or where applicable, an administrative authority) finding that ``the extraordinary, unanticipated, and imminent needs of the structured settlement recipient or his or her spouse or dependents render such a transfer appropriate.'' This exception is intended to apply to the limited number of cases in which a genuinely ``extraordinary, unanticipated, and imminent hardship'' has actually arisen and been demonstrated to the satisfaction of a court (e.g., serious medical emergency for a family member). In addition as a threshold matter the transfer of structured settlement payment rights must be permissible under applicable law including State law. The Act is not intended by way of the hardship exception to the excise tax or otherwise to override any Federal or State law prohibition or restriction on the transfer of the payment rights or to authorize factoring of payment rights that are not transferable under Federal or State law. For example, the States in general prohibit the factoring of workers' compensation benefits. In addition, the State laws often prohibit or directly restrict transfers of recoveries in various types of personal injury cases, such as wrongful death and medical malpractice. The relevant court for purposes of the hardship exception would be the original court which had jurisdiction over the underlying action or proceeding that was resolved by means of the structured settlement. In the event that no action had been brought prior to the settlement, the relevant court would be that which would have had jurisdiction over the claim that is the subject of the structured settlement or which would have jurisdiction by reason of the residence of the structured settlement recipient. In those limited instances in which an administrative authority adjudicates, resolves, or otherwise has primary jurisdiction over the claim (e.g., the Vaccine Injury Compensation Trust Fund), the hardship matter would be the province of that applicable administrative authority. 3. Need to Protect Tax Treatment of Original Structured Settlement In the limited instances of extraordinary and unanticipated hardship determined by court order to warrant relief under the hardship exception, adverse tax consequences should not be visited upon the other parties to the original structured settlement. In addition, despite the anti-assignment provisions included in the structured settlement agreements and the applicability of a stringent excise tax on the factoring company, there may be a limited number of non- hardship factoring transactions that still go forward. If the structured settlement tax rules under I.R.C. Sec. Sec. 72, 130 and 461(h) has been satisfied at the time of the structured settlement, the original tax treatment of the other parties to the settlement--i.e., the settling defendant (and its liability insurer) and the Code section 130 assignee--should not be jeopardized by a third party transaction that occurs years later and likely unbeknownst to these other parties to the original settlement. Accordingly, the Act would clarify that if the structured settlement tax rules under I.R.C. Sec. Sec. 72, 130, and 461(h) had been satisfied at the time of the structured settlement, the section 130 exclusion of the assignee, the section 461(h) deduction of the settling defendant, and the Code section 72 status of the annuity being used to fund the periodic payments would remain undisturbed. That is, the assignee's exclusion of income under Code section 130 arising from satisfaction of all of the section 130 qualified assignment rules at the time the structured settlement was entered into years earlier would not be challenged. Similarly, the settling defendant's deduction under Code section 461(h) of the amount paid to the assignee to assume the liability would not be challenged. Finally, the status under Code section 72 of the annuity being used to fund the periodic payments would remain undisturbed. The Act provides the Secretary of the Treasury with regulatory authority to clarify the treatment of a structured settlement recipient who engages in a factoring transaction. This regulatory authority is provided to enable Treasury to address issues raised regarding the treatment of future periodic payments received by the structured settlement recipient where only a portion of the payments have been factored away, the treatment of the lump sum received in a factoring transaction qualifying for the hardship exception, and the treatment of the lump sum received in the non- hardship situation. It is intended that where the requirements of section 130 are satisfied at the time the structured settlement is entered into, the existence of the hardship exception to the excise tax under the Act shall not be construed as giving rise to any concern over constructive receipt of income by the injured victim at the time of the structured settlement. 4. Tax Information Reporting Obligations With Respect to a Structured Settlement Factoring Transaction The Act would clarify the tax reporting obligations of the person making the structured settlement payments in the event that a structured settlement factoring transaction occurs. The Act adopts a new section of the Code that is intended to govern the payor's tax reporting obligations in the event of a factoring transaction. In the case of a court-approved transfer of structured settlement payments of which the person making the payments has actual notice and knowledge, the fact of the transfer and the identity of the acquirer clearly will be known. Accordingly, it is appropriate for the person making the structured settlement payments to make such return and to furnish such tax information statement to the new recipient of the payments as would be applicable under the annuity information reporting procedures of Code section 6041 (e.g., Form 1099-R), because the payor will have the information necessary to make such return and to furnish such statement. Despite the anti-assignment restrictions applicable to structured settlements and the applicability of a stringent excise tax, there may be a limited number of non-hardship factoring transactions that still go forward. In these instances, if the person making the structured settlement payments has actual notice and knowledge that a structured settlement factoring transaction has taken place, the payor would be obligated to make such return and to furnish such written statement to the payment recipient at such time, and in such manner and form, as the Secretary of the Treasury shall by regulations provide. In these instances, the payor may have incomplete information regarding the factoring transaction, and hence a tailored reporting procedure under Treasury regulations is necessary. The person making the structured settlement payments would not be subject to any tax reporting obligation if that person lacked such actual notice and knowledge of the factoring transaction. Under the Act, the term ``acquirer of the structured settlement payment rights'' would be broadly defined to include an individual, trust, estate, partnership, company, or corporation. The provisions of section 3405 regarding withholding would not apply to the person making the structured settlement payments in the event that a structured settlement factoring transaction occurs. 5. Effective Date The provisions of the Act would be effective with respect to structured settlement factoring transactions occurring after the date of enactment of the Act.

Mr. SHAW

Mr. SHAW. Mr. Speaker, today I rise along with my colleague Mr. Stark and a broad bipartisan group of our colleagues from the Ways and Means Committee to introduce the Structured Settlement Protection Act. The Act addresses serious public policy concerns that are raised by transactions in which so-called factoring companies purchase recoveries under structured settlements from injured victims. Recently there has been dramatic growth in these transactions in which injured victims are induced by factoring companies of sell off future structured settlement payments intended to cover ongoing living and medical needs in exchange for a sharply-discounted lump sum that then may be dissipated, placing the injured victim in the very predicament the structured settlement was intended to avoid. As long-time supporters of structured settlements and the congressional policy underlying such settlements, we have grave concerns that these factoring transactions directly undermine the policy of the structured settlement tax rules. The Treasury Department shares these concerns. Because the purchase of structured settlement payments by factoring companies so directly thwarts the congressional policy underlying the structured settlement tax rules and raises such serious concerns for structured settlements and injured victims, it is appropriate to deal with these concerns in the tax context. Accordingly, we are proposing legislation to impose a substantial excise tax on the factoring company that purchases the structured settlement payments from the injured victim. The excise tax would be subject to an exception for genuine court-approved hardship cases to protect the limited instances of true hardship. The following is a detailed discussion of the Bill's provisions. Background In acting to address the concerns over factoring companies that purchase structured settlement payments from injured victims, the Treasury Department noted that: ``Congress enacted favorable tax rules intended to encourage the use of structured settlements--and conditioned such tax treatment on the injured person's inability to accelerate, defer, increase or decrease the periodic payments--because recipients of structured settlements are less likely than recipients of lump sum awards to consume their awards too quickly and require public assistance.'' (U.S. Department of the Treasury, General Explanations of the Administration's Revenue Proposals (Feb. 1998), p. 122). Treasury then observed that by enticing injured victims to sell off their future structured settlement payments in exchange for a heavily discounted lump sum that may then be dissipated: ``These `factoring transactions' directly undermine the Congressional objective to create an incentive for injured persons to receive periodic payments as settlements of personal injury claims.'' (Id. at p. 122 [emphasis added].) The Joint Tax Committee's analysis of the issue echoes these concerns: ``Transfer of the payment stream under a structured settlement arrangement arguably subverts the purpose of the Code to promote structured settlements for injured persons. (Joint Committee on Taxation, Description of Revenue Provisions Contained in the President's Fiscal Year 1999 Budget Proposal (JCS-4-98), (February 24, 1998), p. 223). The Treasury Department in the Administration's FY 1999 Budget has proposed a 20-percent excise tax on factoring companies that purchase structured settlement payments from injured victims. Under the Administration's proposal, ``any person purchasing (or otherwise acquiring for consideration) a structured settlement payment stream would be subject to a 20 percent excise tax on the purchase price, unless such purchase is pursuant to a court order finding that the extraordinary and unanticipated needs of he original recipient render such a transaction desirable.'' (Treasury General Explanation, at p. 122.) The proposal would apply to transfers of structured settlement payments made after date of enactment. Description of the Act 1. Stringent Excise Tax on Persons Who Acquire Structured Settlement Payments in Factoring Transactions. In its analysis of the Administration's proposal, the Joint Tax Committee notes the potential concern that in some cases the imposition of a 20-percent excise tax may result in the factoring company passing the tax along by reducing even further the already-heavily discounted lump sum paid to the injured victim for his or her structured settlement payments. The Joint Committee notes that ``[o]ne possible response to the concern relating to excessively discounted payments might be to raise the excise tax to a level that is certain to stop the transfers (perhaps 100 percent). . . .'' (Joint Committee on Taxation, Description of Revenue Provisions Contained in the President's Fiscal Year 1999 Budget Proposal (JCS-4-98) (February 4, 1998), p. 223). Factoring company purchases of structured settlement payments so directly subvert the Congressional policy underlying structured settlements and raise such serious concerns for structured settlements and the injured victims that it is appropriate to impose on the factoring company a more stringent excise tax rate applied against the amount of the discount reflected in the factoring transaction (subject to a limited exception described below for genuine court- approved hardships). Accordingly, the Act would impose on the factoring company that acquires structured settlement payments directly or indirectly from the injured victim an excise tax equal to 50 percent of the difference between (i) the total amount of the structured settlement payments purchased by the factoring company, and (ii) the heavily-discounted lump sum paid by the factoring company to the injured victim. Similar to the stiff excise taxes imposed on prohibited transactions in the private foundation and pension contexts-- which can range as high as 100 to 200 percent--this stringent excise tax is necessary to address the very serious public policy concerns raised by structured settlement factoring transactions. Unlike the Administration's proposed tax imposed on the purchase price paid by the factoring company, the excise tax imposed on the factoring company under the Act would use a more stringent tax rate of 50 percent and would apply to the excess of the total amount of the structured settlement payments purchased by the factoring company over the heavily- discounted lump sum paid to the injured victim. The excise tax under the Act would apply to the factoring of structured settlements in tort cases and in workers' compensation. A structured settlement factoring transaction subject to the excise tax is broadly defined under the Act as a transfer of structured settlement payment rights (including portions of payments) made for consideration by means of sale, assignment, pledge, or other form of alienation or encumbrance for consideration. 2. Exception from Excise Tax for Genuine, Court-Approved Hardship The stringent excise tax would be coupled with a limited exception for genuine, court-approved financial hardship situations. Drawing upon the hardship standard enunciated in the Treasury proposal, the excise tax would apply to factoring companies in all structured settlement factoring transactions except those in which the transfer of structured settlement payment rights (1) is otherwise permissible under applicable Federal and State law and (2) is undertaken pursuant to the order of a court (or where applicable, an administrative authority) finding that ``the extraordinary, unanticipated, and imminent needs of the structured settlement recipient or his or her spouse or dependents render such a transfer appropriate.'' The exception is intended to apply to the limited number of cases in which a genuinely ``extraordinary, unanticipated, and imminent hardship'' has actually arisen and been demonstrated to the satisfaction of a court (e.g., serious medical emergency for a family member). In addition, as a threshold matter, the transfer of structured settlement payment rights must be permissible under applicable law, including State law. The Act is not intended by way of the hardship exception to the excise tax or otherwise to override any Federal or State law prohibition or restriction on the transfer of the payment rights or to authorize factoring of payment rights that are not transferable under Federal or State law. For example, the States in general prohibit the factoring of workers' compensation benefits. In addition, the State laws often prohibit or directly restrict transfers of recoveries in various types of personal injury cases, such as wrongful death and medical malpractice. The relevant court for purposes of the hardship exception would be the original court which had jurisdiction over the underlying action or proceeding that was resolved by means of the structured settlement. In the event that no action had been brought prior to the settlement, the relevant court would be that which would have had jurisdiction over the claim that is the subject of the structured settlement or which would have jurisdiction by reason of the residence of the structured settlement recipient. In those limited instances in which an administrative authority adjudicates, resolves, or otherwise has primary jurisdiction over the claim (e.g., the Vaccine Injury Compensation Trust Fund), the hardship matter would be the province of that applicable administrative authority. 3. Need to Protect Tax Treatment of Original Structured Settlement In the limited instances of extraordinary and unanticipated hardship determined by court order to warrant relief under the hardship exception, adverse tax consequences should not be visited upon the other parties to the original structured settlement. in addition, despite the anti-assignment provisions included in the structured settlement agreements and the applicability of a stringent excise tax on the factoring company, there may be a limited number of non- hardship factoring transactions that still go forward. If the structured settlement tax rules under I.R.C. Sec. Sec. 72, 130 and 461(h) had been satisfied at the time of the structured settlement, the original tax treatment of the other parties to the settlement--i.e., the settling defendant (and its liability insurer) and the Code section 130 assignee--should not be jeopardized by a third party transaction that occurs years later and likely unbeknownst to these other parties to the original settlement. Accordingly, the Act would clarify that if the structured settlement tax rules under I.R.C. Sec. Sec. 72, 130, and 461(h) had been satisfied at the time of the structured settlement, the section 130 exclusion of the assignee, and section 461(h) deduction of the settling defendant, and the Code section 72 status of the annuity being used to fund the periodic payments would remain undisturbed. That is, the assignee's exclusion of income under Code section 130 arising from satisfaction of all of the section 130 qualified assignment rules at the time the structured settlement was entered into years earlier would not be challenged. Similarly, the settling defendant's deduction under Code section 461(h) of the amount paid to the assignee to assume the liability would not be challenged. Finally, the status under Code section 72 of the annuity being used to fund the periodic payments would remain undisturbed. The Act provides the Secretary of the Treasury with regulatory authority to clarify the treatment of a structured settlement recipient who engages in a factoring transaction. This regulatory authority is provided to enable Treasury to address issues raised regarding the treatment of future periodic payments received by the structured settlement recipient where only a portion of the payments have been factored away, the treatment of the lump sum received in a factoring transaction qualifying for the hardship exception, and the treatment of the lump sum received in the non- hardship situation. It is intended that where the requirements of section 130 are satisfied at the time the structured settlement is entered into, the existence of the hardship exception to the excise tax under the Act shall not be construed as giving rise to any concern over constructive receipt of income of the injured victim at the time of the structured settlement. 4. Tax Information Reporting Obligations With Respect to a Structured Settlement Factoring Transaction The Act would clarify the tax reporting obligations of the person making the structured settlement payments in the event that a structured settlement factoring transaction occurs. The Act adopts a new section of the Code that is intended to govern the payor's tax reporting obligations in the event of a factoring transaction. In the case of a court-approved transfer of structured settlement payments of which the person making the payments has actual notice and knowledge, the fact of the transfer and the identity of the acquirer clearly will be known. Accordingly, it is appropriate for the person making the structured settlement payments to make such return and to furnish such tax information statement to the new recipient of the payments as would be applicable under the annuity information reporting procedures of Code section 6041 (e.g., Form 1099-R), because the payor will have the information necessary to make such return and to furnish such statement. Despite the anti-assignment restrictions applicable to structured settlements and the applicability of a stringent excise tax, there may be a limited number of non-hardship factoring transactions that still go forward. In these instances, if the person making the structured settlement payments has actual notice and knowledge that a structured settlement factoring transaction has taken place, the payor would be obligated to make such return and to furnish such written statement to the payment recipient at such time, and in such manner and form, as the Secretary of the Treasury shall by regulations provide. In these instances the payor may have incomplete information regarding the factoring transaction, and hence a tailored reporting procedure under Treasury regulations is necessary. The person making the structured settlement payments would not be subject to any tax reporting obligation if that person lacked such actual notice and knowledge of the factoring transaction. Under the Act, the term ``acquirer of the structured settlement payment rights'' would be broadly defined to include an individual, trust, estate, partnership, company, or corporation. The provision of section 3405 regarding withholding would not apply to the person making the structured settlement payments in the event that a structured settlement factoring transaction occurs. 5. Effective Date The provisions of the Act would be effective with respect to structured settlement factoring transactions occurring after the date of enactment of the Act.

Mr. SHAW

Mr. SHAW. Mr. Speaker, today over 2 million businesses pay taxes as S corporations and the vast majority of these are small businesses. The S Corporation Revision Act of 1998 is targeted to these small business by improving their access to capital, preserving family-owned businesses, and lifting obsolete and burdensome restrictions that unnecessarily impede their growth. It will permit them to grow and compete in the next century. Even after the relief provided in 1996, S corporations face substantial obstacles and limitations not imposed on other forms of entities. The rules governing S corporations need to be modernized to bring them more on par with partnerships and C corporations. For instance, S corporations are unable to attract the senior equity capital needed for their survival and growth. This bill would remove this obsolete prohibition and also provide that S corporations can attract needed financing through convertible debt. Additionally, the bill helps preserve family-owned businesses by counting all family members as one shareholder for purposes of S corporation eligibility. Under current law, multi-generational family businesses are threatened by the 75 shareholder limit which counts each family member as one shareholder. Also, nonresident aliens would be permitted to be shareholders under rules like those now applicable to partnerships. The bill would eradicate other outmoded provisions, many of which were enacted in 1958. The following is a detailed discussion of the bill's provisions.

Mr. SHAW

Mr. SHAW. Mr. Speaker, I would like to take this opportunity to bring to the attention of my colleagues the distinguished career of a friend, fellow Floridian and outstanding community leader. I am speaking of Robert ``Buddy'' Lochrie, Jr., who will retire from his position as Vice Chairman of Sun Trust, South Florida, N.A., at the end of the month. Buddy is the third generation of a prominent family in Broward County, Florida. His grandfather, John Lochrie, began annual visits in 1917, built a home in 1923 and developed several citrus groves west of Fort Lauderdale and Fort Pierce. In 1928 he joined the group which organized the Broward Bank and Trust Company and became its first president, a position he held until his death in 1937. Buddy's father, Robert B. Lochrie, was a director of the bank for forty-two years, and a founder and director of each affiliate bank. He was one of the founders of Broward Banchares, Inc., of which he served as chairman from 1970 to 1976. Both John Lochrie and Robert B. Lochrie served as officers without compensation, other than regular directors' fees. Buddy was elected to the boards of three affiliated banks in the Broward group in 1968, while serving as assistant to U.S. Congressman Paul G. Rogers in Washington, DC. In 1970, he was asked to join the company to handle regulatory, governmental and community affairs. Subsequently, he served as Executive Vice President, Treasurer and as a member of the board. After the merger with Sun Banks of Florida in 1983, he became Chairman and CEO of SunBank, South Florida and Vice Chairman when this bank and the Palm Beach SunBank merged. During his career, Buddy has served as Chairman of the Florida Bankers Association Federal Legislative Committee and a director of the American Bankers Association Political Action Committee, as well as chairman of the Banking Division of the state association. Statewide activities have included serving on the boards of the Florida Trust for Historic Preservation, the Judicial Nominating Commission and the Florida Christopher Columbus Commission, as a Trustee of the Florida State Ringling Museum of Art. From 1993 to 1996, Buddy served on the Board of Community Health Purchasing Alliance (CHIPA), District 10, at the request of the Governor of Florida. CHIPA was set up by the State Agency for Health Care Administration to expand health insurance coverage to small business owners and their employees. Buddy has been Chairman of the Broward Center Performing Arts Foundation since its inception more than twelve years ago. During his tenure, the Foundation has raised more than twenty-three million dollars to support the Center and its programming. This achievement set a new milestone in the amount of money raised for a single purpose building campaign in Broward County. Buddy's local community involvement also includes: Chairman of Fort Lauderdale Downtown Development Authority, Chairman of the Broward Chapter of the National Conference of Christian and Jews, Vice Chairman of the South Florida Community Television Foundation (Channel 2), Broward Chair of the Archbishop's Charities Drive, Vice Chairman of the Broward Workshop, Board Member of the Urban League of Broward, Board Member of the United Way of Broward County, Board Member of Fort Lauderdale Chamber of Commerce, Board Member Florida Philharmonic Orchestra, Board Member of South Florida Sports Authority, Board Member of Museum of Art, Member of the Opera Guild, Member of the Port Everglades Association. Buddy is married to Susan Fry of Fort Lauderdale, and this year they celebrated their thirty-first wedding anniversary. They have three children. Two sons, Robert and Glenn, were born in Washington, DC, and a daughter, Katherine (Kate), was born in Fort Lauderdale. All three children have made Broward County their permanent home. Susan and Buddy share many of the same civic interests. Susan is a guidance counselor at Central Park Elementary and was recognized in 1997-1998 as guidance Counselor of the Year for Broward County. This is indeed a record of outstanding achievement and community involvement. I wish Buddy and his family much happiness and success in the future.

Mr. SHAW

Mr. SHAW. I thank the gentleman for yielding. Mr. Speaker, this amendment is the product of long and difficult negotiations with the Senate on final agreement which brings together two important provisions that will greatly improve the Nation's child support enforcement program. The first provision reduces the harsh penalties imposed on States whose child support data processing system does not meet the Federal requirements. The reduced penalties, however, will still constitute the largest penalties ever imposed on States for failing to meet Federal requirements in the child support program. This provision is a slightly amended version of the bill which was approved by this House under suspension of the rules this past March. The major change is that the States that implement certified data processing systems later than required by Federal law will receive a more generous penalty reduction in the year their system is certified. To pay for that slight penalty reduction, penalties imposed on States that are 4 or more years late in building certified data systems are actually increased under this legislation. The second provision completely replaces the outmoded and inefficient incentive system in the child support program. This new system, which was approved by the House under suspension of the rules on March 29, 1997, rewards States for effective and efficient performance in five critical areas of child support enforcement. All sides agree that this new incentive system will boost State performance and thereby help mothers and children. The Congressional Budget Office has determined that the amendment is budget neutral and imposes no unfunded mandates on the States. My great disappointment in this compromise amendment is that we could not convince the Senate to agree to the excellent provision that was authored by the distinguished gentleman from Maryland (Mr. Cardin). He and his staff have worked tirelessly to create an effective procedure for penalizing aliens who have overdue child support. I want to assure the gentleman from Maryland that we will continue to fight for his superb proposal until it is finally enacted into law. Finally, I wish to acknowledge the work of my good friend, the gentleman from Michigan (Mr. Levin), and his colleagues on the other side of the aisle. We have worked hand in hand throughout this process. We have also received invaluable assistance from the Department of Health and Human Services. The result of all of this bipartisan cooperation is wonderful legislation that will substantially improve the Nation's child support program. Mr. Speaker, I ask unanimous consent that the legislative history be put into the Record.

Mr. SHAW. Mr. Speaker, I ask unanimous consent (1) that the managers on the part of the House be discharged from further consideration of the bill (H.R. 3130) to provide for an alternative penalty procedure for States that fail to meet Federal child support data processing requirements, to reform Federal incentive payments for effective child support performance, to provide for a more flexible penalty procedure for States that violate interjurisdictional adoption requirements, to amend the Immigration and Nationality Act to make certain aliens determined to be delinquent in the payment of child support inadmissible and ineligible for naturalization, and for other purposes, and (2) to take from the Speaker's table the bill, H.R. 3130, with the amendments of the Senate thereto, and to (A) concur in the amendment of the Senate to the title with an amendment, and (B) concur in the amendment of the Senate to the text with an amendment.

Mr. SHAW. Mr. Speaker, I ask unanimous consent that all Members have 5 legislative days in which to revise and extend their remarks and include extraneous material on the House amendment to the Senate amendment to H.R. 3130.

Mr. SHAW

Mr. SHAW. I thank the chairman for yielding time to me, Mr. Speaker. I would like to thank the gentleman from Texas (Chairman Archer), the gentleman from Ohio (Mr. Portman), and the gentleman from New York (Mr. Rangel), all that had anything to do with forming this much-needed legislation in the Committee on Ways and Means in the House of Representatives, in which I am proud to serve, which was very aggressive in bringing about this legislation. This legislation really was born here in the House and moved forward. The Senate had some very good hearings and then we, of course, went to conference. Now we have come up with a really fair, much fairer, process in dealing with the Internal Revenue Service. I think so many people did not realize that prior to this legislation, any conference they had with their certified public accountant was not at all privileged, and that their accountant could be subpoenaed to testify against them in a court of law. Now we have just about given the same privilege that an attorney has, an attorney- client privilege, to an accountant-client privilege. I think that is tremendously important. The doublet is something we cherish here in America.

Mr. SHAW

Mr. SHAW. Mr. Chairman, I thank the gentleman for yielding me the time. Mr. Chairman, we have heard a lot about how these wealthy families are running these particular sugar operations. I happen to be the representative of the largest sugar producer in the world, but I cannot support the continued price-fixing by this government of sugar. If Members have sugar farmers in their district living on the land, I can understand their opposing the Miller amendment. If Members have this as a prime industry within their own State, within their own area, I can fully understand that. We do that every day in this body. But one thing I cannot understand is not taking into consideration the downstream effect of this price fixing by the Federal Government. We have heard from the gentlewoman from New York about the closing of Domino Sugar. We have heard from various other Members about how it affects the working American. The sugar industry today, as far as the farming, is highly mechanized, very highly mechanized. What we are talking about, and we have already Members saying that this is not a subsidy. Baloney, it is not a subsidy. It is a subsidy required and placed upon the consumers of this country. It is a hidden tax. It is an insidious price-fixing by the Federal Government that makes us less competitive on the goods that we produce from sugar itself. We heard the gentleman from Texas (Mr. Stenholm) talk about the cost of production was 18-point-some cents. What the Miller amendment does is not do away with the total price structure; it drops it one penny, still well above the cost of production. There is still plenty of profit there. So let us get this vote straight. This vote and this amendment is pro-consumer. The Miller amendment is pro-environmental. This is a very important environmental vote. I can tell my colleagues, just go down to my Everglades and see the effect of runoff from the sugar industry. I urge my colleagues to vote ``yes'' on the Miller amendment.

Mr. SHAW

Mr. SHAW. Mr. Chairman, I thank the gentleman for yielding to me. I would like to join with him in thanking the committee for what they have put in this particular bill with the shore protection, as the gentleman from New Jersey just was speaking to, but most particularly I think to really impress upon the committee that it is most important on these Everglades projects to move at least substantially towards the Senate markup document at this time, knowing that there is not going to be enough money to get back to the President's budget. But these are very important projects. The Kissimmee River going back to the natural flow into Lake Okeechobee and then south through the Sharks Slough to the Florida Bay, this is tremendously important to the Everglades and should be of utmost importance to this committee and this Congress. I would also like to point out that one of the facilities that would be lost if we do not at least go towards the Senate would be the Melalueca Quarantine Facility, which is tremendously important.

Mr. SHAW

Mr. SHAW. Mr. Chairman, I can appreciate the gentleman's position at this late date, coming in, particularly, with the new language. But I thank him for his consideration of this new language, and I thank him for holding fire at this particular time. And also I would like to thank the gentleman from New York (Mr. Nadler). I think this is a very, very good addition to the bill that is on the floor.

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

Mr. SHAW. Mr. Chairman, I yield myself such time as I may consume. I would urge the passage of this most important amendment. There is no greater responsibility that people have in their lives than to take care of the children and help support the children that they have helped bring into this world. I think it sets the priorities right, and this offers a mechanism by which this money can be made available for the support of the children. Mr. Chairman, I yield back the balance of my time.

Mr. SHAW. Mr. Chairman, I offer an amendment.

Mr. SHAW. Mr. Chairman, I yield myself such time as I may consume. I rise to offer the Shaw-Camp-English amendment that is central to the Committee on Ways and Means' work on the collection of child support. Under the leadership of the gentleman from Pennsylvania (Mr. Gekas), the Committee on the Judiciary has succeeded in not only maintaining existing child support priorities but in creating a new priority to help custodial mothers who are owed child support after bankruptcy. While the legislation creates a post-bankruptcy priority for child support, it does not contain a procedure for the enforcement of same. We are afraid that credit card companies will outperform mothers, especially poor mothers, in securing the father's money, the very money that Congress has determined should go first to the mothers and to the children. Our amendment is really just a perfecting amendment to the amendments already adopted by the Committee on the Judiciary. If the credit card companies obtain payments from the parents who owe past due child support, the companies are required to hold the payments and distribute the payments to the custodial mothers if they surface at a later date and invoke their legal claim to the money already obtained by the companies. This amendment would protect the limited number of custodial mothers who are owed child support but who are not in the Federal child support program and whose children's father was involved in a bankruptcy. These mothers and their children are at risk of losing money, and they cannot afford to lose this important support. This amendment, as modified, varies from the original amendment that was made in order by the Committee on Rules. In doing so, I eliminated the need of the trust, which was provided in that particular bill, which has caused great heartburn, and I think rightfully so, to some of the banks and credit card companies that would be holding these particular funds. We also reduced from 5 years to 2 years the period of time in which these claims have to be made and we also require, as a condition for this liability, that they have actual notice of the claim of the parent. I think this is a very reasonable amendment, and I would urge its adoption. Mr. Chairman, I reserve the balance of my time.

Mr. SHAW. Mr. Chairman, I ask unanimous consent that the amendment be modified in the form that I have placed at the desk and which was, just a few minutes ago, supplied to each side.

Mr. SHAW. Mr. Chairman, I yield 1 minute to the gentleman from Michigan (Mr. Camp), coauthor of the amendment.

Mr. SHAW. Mr. Chairman, I yield 1 minute to the gentleman from Pennsylvania (Mr. English), the other coauthor of the amendment.

Mr. SHAW

Mr. SHAW. Mr. Speaker, I rise today with great pleasure to honor Sister John Norton Barrett, who is celebrating her 50th anniversary as an Adrian Dominican sister. Through her faith, dedication and service, Sister John Norton has become one of the pillars of South Florida. She is widely recognized in our community for her dedication to excellence and her achievements in education. In 1948, when Sister John Norton entered the Adrian Dominican Congregation, she had a heartfelt passion to serve the Church and the community through education. She graduated from Siena Heights College and later continued her studies at Barry University where she received a Master's Degree in Administration and Supervision. She began her teaching at St. Mary's Elementary School in 1949 and by 1957 was principal of St. Matthew's School in Jacksonville. In 1963, she moved down to Miami Beach as principal of St. Patrick's High School. In 1966 Sister John Norton joined the faculty of St. Thomas Aquinas High School. She served at St. Thomas for over thirty years as mathematics teacher, vice principal and principal. After her retirement, she continued her work for St. Thomas as director of the Development Office. Her tireless efforts and strong leadership have made St. Thomas Aquinas High School one of the top Catholic schools in the nation. The many awards and achievements for St. Thomas include the U.S. Department of Education Exemplary School Award as a Blue Ribbon School of Excellence for both 1985 and 1996. This year, alone, the high school boasts 21 National Merit Semifinalists and 26 Commended Students. One of Sister John's most significant contributions to our community was the establishment of a community service program for St. Thomas Aquinas' students. This program, with the enthusiastic support of the students, requires that students dedicate 20 hours of service to needs in our community. As a result of this program, tens of thousands of service hours are given to the Broward County community each year. Personally, Sister John Norton has been awarded the Primum Regnum Dei Ward from the Archdiocese of Miami in honor of her devoted service to the Lord and his Church. She has also received the Silver Medallion Brotherhood Award from the National Conference of Christians and Jews for her efforts in encouraging good human relations among all people. Mr. Speaker, throughout the United States there are unfortunately too few individuals who dedicate their lives to education and community service. For fifty years, Sister John Norton has worked tirelessly for these causes, and we in South Florida are truly grateful. I am sure I speak for all my colleagues in congratulating Sister John Norton Barrett as she celebrates her golden jubilee as an Adrian Dominican sister.