E. Shaw

Mr. SHAW

Mr. SHAW. Mr. Speaker, I rise today to draw my colleagues' attention to an important piece of legislation, H.R. 2121, the Real Estate Investment Trust Simplification Act of 1995 [REITSA], a bill to amend portions of the Internal Revenue Code dealing with real estate investment trusts, or REIT's. The legislation responds to the need for simplification in the regulation of the day-to-day operation of REIT's. REITSA is cosponsored by Mr. Matsui, Mr. Crane, Mr. Thomas, Mrs. Johnson, of Connecticut, Mr. Zimmer, Mr. Portman, Mr. Stark, Mr. Jacobs, Mr. Levin, Mr. Cardin, Mr. Dunn, and Mr. Sam Johnson of Texas. In 1960, Congress created REIT's to function as the real estate equivalent of the regulated investment company, or mutual fund. As such, they permit small investors to participate in real estate projects that the investors could not undertake individually and with the assistance of experienced management. Over time, the REIT industry has matured into its intended role with the greatest stride made in this decade. This development of the REIT industry is a result of a number of factors. As important as any other were the changes Congress enacted in 1986 to the REIT rules themselves and the tax landscape in general. With respect to the general provisions, throughout the 1980's limited partnerships used the offer of multiple dollars of tax paper losses for each invested dollar to attract investors away from solid investments like REITs, which seek to provide investors with consistent distributions from economically feasible real estate investments but provide no opportunity to receive a pass-through of tax motivated losses. Accordingly, the elimination of those tax loss loopholes led investors to look for income-producing investment opportunities. Also included in the 1986 tax legislation were important modifications to the REIT provisions of the Code. Among the changes made as part of that modernization of the REIT tax laws, the first in a decade and most recent comprehensive revision of the REIT laws, the most significant was the change allowing REIT's to directly provide to tenants those services customary in the leasing of real estate as had been permitted to pension plans and other tax-exempt entities engaged in the leasing of real property. Prior to that change, a REIT was required to use an independent contractor to provide those services. These legislative changes and the lack of credit to recapitalize America's real estate produced a suitable environment for the substantial growth in the REIT industry and the fulfillment of Congress' original hopes for the REIT vehicle. From 1990 to present, the industry has grown from a market capitalization of approximately $9 billion to nearly $50 billion. Fueling that growth has been the introduction of some of America's leading real estate companies to the family of long existing, viable REIT's. As a result, the majority of today's REIT's are owners of quality, income-producing real estate. Thus, hundreds of thousands of individuals that own REIT shares through direct investment, plus the many more who are interest holders in the growing number of mutual funds or pension funds investing in REIT's, have become participants in the recapitalization of tens of billions of dollars of America's best real estate investments. Likewise, investors in mortgage REIT's have the opportunity to participate in the ever growing market for securitized mortgages, further contributing to the recapitalization of quality real estate. The benefits of the growth in the REIT industry were addressed in a recent Urban Land Institute White Paper titled ``The REIT Renaissance.'' That white paper concluded that ``[f]rom an overall economic standpoint, the real estate industry and the economy should be well served by the expansion of the REIT industry--the broadening of participation in real estate ownership, the investment in market information and research that the public market will bring, and the more timely responsiveness to market signals that will result from better information and market analysis.'' To assist the continued growth of this important industry, was developed to address areas in the existing tax regime that present significant, yet unnecessary, barriers to the use of the REIT vehicle. The proposals represent a modernization of the most complex parts of the regulatory structure under which REIT's operate, while leaving intact the basic underlying ownership, income, asset, and distribution tests introduced in the original REIT legislation. Summary of Key Provisions A. Title I contains three proposals to remove unnecessary ``traps for the unwary.'' These proposals would address current requirements that are not necessary to satisfy Congressional objectives, that carry a disproportionate penalty for even unintentional oversights, or that are impracticable in today's environment. Title I's overriding intention is not to penalize a REIT's many small investors by stripping the REIT of its tax status as a result of an act that does not violate Congress' underlying intent in creating the REIT vehicle. Section 101. Shareholder Demand Letter. The potential disqualification for a REIT's failure to send shareholder demand letters should be replaced with a reporting penalty. Under present law, regulations require that a REIT send letters to certain shareholders within 30 days of the close of the REIT's taxable year. The letters demand from its shareholders of record, a written statement identifying the ``actual owner'' of the stock. A REIT's failure to comply with the notification requirement may result in a loss of REIT status. The failure to send-so-called demand letters may result in the disqualification of a REIT with thousands of shareholders that easily satisfies the substantive test because of a purely technical violation. As a result of disqualification, a REIT would be compelled to pay taxes for all open years, thereby depriving their shareholders of income generated in compliance with all of the REIT rules. Fortunately, the Internal Revenue Service has not enforced any such technical disqualifications and instead has entered into closing agreements with several REITs. The proposal would alleviate the need to enter into such closing agreements on a prospective basis. H.R. 2121 provides that a REIT's failure to comply with the demand letter regulations would not, by itself, disqualify a REIT if it otherwise establishes that it satisfies the substantive ownership rules. But under these circumstances, a $25,000 penalty ($50,000 for intentional violations) would be imposed for any year in which the REIT did not comply with the shareholder demand regulations and the REIT would be required, when requested by the IRS, to send curative demand letters or face an additional penalty equal to the amounts related above. In addition, to protect a REIT that meets the regulations, but is otherwise unable to discover the actual ownership of its shares, the bill provides that a REIT would be deemed to satisfy the share ownership rules if it complies with the demand letter regulations and does not know, or have reason to know, of an actual violation of the ownership rules. Section 102. De Minimus Rule for Tenant Services Income. The uncertainty related to qualifying services for a REIT should be addressed by a reasonable de minimum test. In 1986, Congress modernized the REITs' independent contractor rules to allow them to directly furnish to tenants those services customary in the management of rental property. However, certain problems persist. Under existing law, a REIT's receipt of any amount of revenue as a result of providing an impermissible service to tenants with respect to a property may disqualify all rents received with respect to that property. For example, if a REIT's employee assists a tenant in moving in or out of an apartment complex (a potentially impermissible service), technically the IRS could contend that all the income from the apartment complex is disqualified, even though the REIT received no direct revenue for the provided [[Page E 1549]] service. Similar concerns might arise if a REIT provided wheelchairs at a mall on a no-cost basis. The disqualifications of a large property's rent could seriously threaten, or even terminate, the REIT's qualified status. Interestingly, at the same time a REIT could be severely punished for providing services to tenants or their visitors, the REIT rules properly provide that up to 5 percent of a REIT's gross income may come from providing services to non- tenants. Thus, under present law a REIT is better off providing services to nontenants than providing the same services to tenants. In addition to the potential disqualification of rents, the absence of a de minimus rule requires the REIT to spend significant time and energy in monitoring every action of its employees, and significant dollars in attorney fees to determine whether each potential action is an impermissible service. The uncertainty regarding the permissibility of services also requires that the IRS to expend considerable resources in responding to private ruling requests. To lessen the burden of monitoring each REIT employee's every action and to eliminate unnecessary disqualification of tenant rents, this bill provides for a de minimum exception. The exception would treat small amounts of revenue resulting from an impermissible service in a manner similar to revenue received from providing services to non-tenants, and protect the classification of rents from the affected property as qualifying REIT income. The de minimus exception is equal to 1 percent of the gross income from the affected property. The de minimus exception is based on gross income to be consistent with the REIT's income tests, and is set at 1 percent to reflect an amount large enough to provide the requisite safe harbor (note that it is 1 percent of the income from an affected property, regardless how small, and not all properties owned by the REIT), yet small enough not to encourage disregard of the independent contractor rule. Because many of the services in question will not result in a direct receipt of gross income, the bill provides a mechanism for establishing the gross income received relative to an impermissible service. The gross income is deemed at least equal to the direct costs of the service (i.e. labor, cost of goods) multiplied by 150 percent. For example, in the case of a REIT providing wheelchairs at a mall, the cost of the wheelchairs would be multiplied by 150 percent to achieve the gross income realized from the impermissible service. If that and any other gross income related to impermissible services provided to tenants of that mall does not exceed 1 percent of the malls gross income for the year, the impermissible service income would be classified as non-qualifying income. However, rents received from tenants of the mall would not be disqualified. A REIT's actions are still policed under this change. First, if a REIT's gross income from impermissible services exceed 1 percent of the gross income from the affected property, that income and the rents from that property would be disqualified as under current law. Second, as previously noted, a REIT's gross income from non-qualifying sources is limited to 5 percent of total gross income. Accordingly, gross income from impermissible sources that does not exceed the 1 percent threshold would be included in that small basket, thereby placing a second check on the REIT's activities. Section 103. Attribution Rules Applicable To Tenant Ownership. Unintended double attribution under section 318 should be minimized, while preserving the intended purpose of the attribution rule. The attribution rules of section 318 are interjected to ensure that a REIT does not receive rents from a 10 percent or more related party, in which case the rents are deemed disqualified income for the REIT gross income tests. While the intention of that rule is proper, a quirk in the application of section 318 to REITs as called for under section 856(d)(2) may result in the disqualification of a REIT's rent when no actual direct or indirect relationship exists between the REIT and tenant. Under section 318(a)(3)(A), stock owned directly or indirectly, by a partner is considered owned by the partnership. In addition, under section 318(a)(3)(C), a corporation is considered as owning stock that is owned, directly or indirectly, by or for a person who also owns more than 10 percent (in the case of REITs) of the stock in such corporation. Those attribution rules may create an unintended result when several persons who collectively own 10 percent of a REIT's tenant, also own collectively 10 percent of the REIT. So long as those persons are unrelated, because their individual interests in both the REIT and tenant do not equal 10 percent the REIT is not deemed to own 10 percent of the tenant. However, if those persons obtain interests, regardless of how small, in the same partnership the REIT will be deemed to own 10 percent of the tenant. This results from the partnership's deemed ownership of the partners' stock in both tenant and the REIT. Further, because the partnership becomes a deemed 10 percent owner of the REIT under section 318(a)(3)(A), REIT is deemed the 10 percent owner of tenant under section 318(a)(3)(C). In essence, the REIT becomes the deemed 10 percent owner of its tenant as a result of a variation of the partner-to- partner attribution that section 318(a)(5)(C) specifically was enacted to prevent. It is only through the combination of the partners' various interests in the REIT and tenant that a disqualification of the rents occurs. This is true regardless of the purpose for the partnership's existence. The partners may have no knowledge of the other's existence and may be partners in a huge limited partnership completely unrelated to the REIT. H.R. 2121 addresses this problem by modifying the application of section 318(a)(3)(A) (attribution to the partnership) only for purposes of section 856(d)(2), so that attribution would occur only when a partner holds a 25 percent or greater interest in the partnership. This threshold presumes that such a partner will have knowledge of the other persons holding interest in the partnership, and will have an opportunity to determine if those persons hold an interest in the REIT. By not suspending the double attribution entirely, the bill prevents the potentially abusive practice of placing a ``dummy'' partnership between the REIT and those persons holding interests in the tenant. B. Title II of REITSA contains two proposals that would assist in carrying out Congress' original intent to create a real estate vehicle analogous to regulated investment companies. Section 201. Credit For Tax Paid by REIT On Retained Capital Gains. Current law taxes a REIT that retains capital gains, and imposes a second level of tax on the REIT shareholders when later they receive the capital gain distribution. REITSA reform provides for the REIT rules to be modified to correspond with the mutual fund rules governing the taxation of retained capital gains by passing through a credit to shareholders for capital gains taxes paid at the corporate (REIT) level. This modification is necessary to prevent the unintended depletion of a REIT's capital base when it sells property at a taxable gain. Accordingly, the REIT could acquire a replacement property without incurring costly charges associated with a stock offering or debt. Section 202. Repeal of the 30 Percent Gross Income Requirement. H.R. 2121 calls for the repeal of the 30 percent gross income test because the effective management of a REIT's portfolio and is not needed to ensure that a REIT remains a long-term investor in real property. RICs have a similar anti-churning provision known as the ``short-short'' rule. The Tax Simplification and Technical Corrections Act of 1994 (H.R. 3419), as passed by the House of Representatives on May 17, 1994, would have repealed that rule for RICs. Unlike RICs, REITs also face the imposition of a 100 percent tax on property held for sale in the ordinary course of business (dealer property). Thus, repeal of the REIT 30 percent test would not open the playing field for REITs to become speculators in real property. Instead, the repeal helps to ensure that a REIT will not lose its status if a REIT sells non-dealer property when market conditions are most favorable. C. Title III of REITSA would simplify several technical problems that REITs face in their organization and day-to-day operations. Many of these proposals would build on simplifications that Congress has adopted over the years. Section 301. Modification Of Earnings And Profits Rules For Determining Whether REIT Has Earnings And Profits From Non- REIT Year. Only for purposes of the requirement that a REIT distribute all pre-REIT earnings and profits (``E&P'') within its first taxable year as a REIT, a REIT's distributions should be deemed to carry out all pre-REIT earnings before shareholders are considered to be receiving REIT E&P. Under existing law, a REIT must not only distribute 95 percent of its REIT taxable income to shareholders but it must in its first year distribute all pre-REIT year E&P. If the company mistakenly underestimates the amount of E&P generated while operating as a REIT it may fail to satisfy those requirements because the ordering rules controlling the distribution of E&P currently provide that distributions first carry out the most recently accumulated E&P. Thus, if a REIT distributes the pre-REIT E&P and the expected REIT E&P in its first REIT taxable year, the year-end receipt of any unanticipated income would result in the reclassification of a portion of the distribution intended to pass out the pre-REIT E&P. While REITs have methods available to make distributions after the close of their taxable year that relate back to assure satisfaction of the 95 percent income distribution requirement, those methods can not be used to cure a failure to distribute pre-REIT E&P after the close of the REIT's taxable year. Accordingly, by allowing the REIT's distributions to first carry out the pre-REIT E&P, the REIT could satisfy both distribution requirements by using one of the deferred distribution methods to distributed the unanticipated income discussed in the example. Section 302. Treatment Of Foreclosure Property. Rules related to foreclosure property should be modernized. For property acquired through foreclosure on a loan or default on a lease, under present law a REIT can elect foreclosure property treatment. That election provides the REIT with 3 special conditions to assist it in taking over the property and seeking its re-leasing or sale. First, a REIT is permitted to conduct a trade or business using property acquired through foreclosure for 90 days after it acquires such property, provided the REIT makes a foreclosure property election. After the 90-day period, the REIT must use an independent contractor to conduct the trade or business [[Page E 1550]] (a party from whom the REIT does not receive income). Second, a REIT may hold foreclosure property for resale to customers without being subject to the 100 percent prohibited transaction tax (although subject to the highest corporate taxes). Third, non-qualifying income from foreclosure property (from activities conducted by the REIT or independent contractor after 90 days) is not considered for purposes of the REIT gross income tests, but generally is subject to the highest corporate tax rate. The foreclosure property election is valid for 2 years, but may be extended for 2 additional terms (a total of 6 years) with IRS consent. Under H.R. 2121, the election procedure would be modified in the following ways: (1) the initial election and one renewal period would last for 3 years; (2) the initial election would remain effective until the last day of the third taxable year following the election (instead of exactly two years from the date of election; and (3) a one-time election out of foreclosure property status would be made available to accommodate situations when a REIT desires to discontinue foreclosure property status. In addition, the independent contractor rule under the election would be modernized so that it worked in the same manner as the general independent contractor rule. Currently a REIT may provide to tenants of non-foreclosure property services customary in the leasing of real property. However, this previous modernization of the independent contractor rule was not made to the rules governing the required use of independent contractors for foreclosure property. Section 303. Special Foreclosure Rules For Health Care Properties. In the case of health care REITs, H.R. 2121 provides that a REIT would not violate the independent contractor requirement if the REIT receives rents from a lease to that independent contractor as a tenant at a second health care facility. This change recognizes the limited number of health care providers available to serve as an independent contractor on a property acquired by the REIT in foreclosure, and the REIT's likely inability to simply close the facility due to the nature of the facilities inhabitants. In addition, the health care rules would extend the foreclosure property rules to expirations or terminations of health care REIT leases, since similar issues arise in those circumstances. Section 304. Payments Under Hedging Instruments. H.R. 2121 would extend the REIT variable interest hedging rule to permit a REIT to treat as qualifying any income from the hedge of any REIT liability secured by real property or used to acquire or improve real property. This provision would apply to hedging a REIT's unsecured corporate debenture. Section 305. Excess Noncash Income. H.R. 2121 would expand the use of the excess noncash income exclusion currently provided under the REIT distribution rules. The bill would (1) extend the exclusion to include most forms of phantom income and (2) make the exclusion available accrual basis REITs. Under the exclusion, listed forms of phantom income would be excluded from the REIT 95 percent distribution requirement. However, the income would be taxed at the REIT level if the REIT did not make sufficient distributions. Section 306. Prohibited Transaction Safe Harbor. H.R. 2121 would correct a problem in the wording of Congress' past liberalization of the safe harbor from the 100 percent excise tax on prohibited transactions, i.e., sales of property in the ordinary course of business. The adverse effect of accumulated depreciation on the availability of the safe harbor, which punishes REITs that hold their properties for longer terms, would be mitigated, In addition, involuntary conversions of property no longer would count against the permitted 7 sales of property under the safe harbor. Section 307. Shared Appreciation Mortgages (``SAM''). In general, section 856(j) provides that a REIT may receive income based on a borrower's sale of the underlying property. However, the character of that income is determined by the borrower's actions. The SAM provision would be modified and clarified so that a REIT lender would not be penalized by a borrower's bankruptcy (an event beyond its control) and would clarify that a SAM could be based on appreciation in value as well as gain. Section 308. Wholly Owned Subsidiaries. In 1986, Congress realized the usefulness of a REIT holding properties in subsidiaries to limit its liability exposure. H.R. 2121 would codify a recent IRS private letter ruling position providing that a REIT may treat a wholly-owned subsidiary as a qualified REIT subsidiary even if the subsidiary previously had been owned by a non-REIT entity. For example, this bill would allow a REIT to treat a corporation as a qualified REIT subsidiary when it purchases for cash and/or stock all the stock of a non-REIT C corporation.

Mr. SHAW

Mr. SHAW. The gentlewoman is absolutely correct, and as a matter of fact, tomorrow I am introducing a bill that is going to absolutely cut the underpinnings out of Most Favored Nation status for countries that do not cooperate with us in the war against drugs. I know the gentlewoman would want to take a close look at this particular bill, but FEMA must be left intact.

Mr. SHAW. Mr. Chairman, I thank the gentleman for yielding me this time. Mr. Chairman, I would like to congratulate the gentlewoman on a very well-purposed and very good program for which she is trying to get some money, but I would say, having lived through Hurricane Andrew down in south Florida, my kids having gone through hurricane Hugo in South Carolina, having looked at what has happened in California with the disastrous earthquakes, FEMA, leave it alone. FEMA is so important. It is an insurance policy. We in the Congress say we know that there are going to be disasters, we know we have to be ready, we know we have to sharpen our ability to be able to react to these national disasters. It is absolutely nothing less than good planning, and it is absolutely imperative that we hold this program together. The problem of drugs is absolutely out of sight. We need to talk more about it. We need to do more about it, but FEMA has absolutely nothing to do with it. It is absolutely nongermane to the subject matter which the gentlewoman and I are both concerned about. Let us leave FEMA alone. FEMA needs to be left intact. It is nothing less than good planning. I would hope that we would soundly defeat this amendment.

Mr. SHAW. I yield to the gentlewoman from Ohio.

Mr. SHAW

Mr. SHAW. I yield to the gentleman from West Virginia.

Mr. SHAW. I heard you.

Mr. SHAW. I did not say you were taking 10 percent. I said the illegal aliens are 10 percent of our prison population in Florida, and it is a responsibility of the Federal Government to at least reimburse all of the States of this country, not just Florida, all of the States, to reimburse them at least a share of this extra cost, because of a failed Federal responsibility.

Mr. SHAW. Mr. Chairman, I thank the gentleman for yielding me this time. Mr. Chairman, we heard this is a California problem. Nothing could be further from the truth. Three thousand illegal aliens each and every day violate our borders and come into the United States. This is a national disgrace. It has gone on through administration after administration, Congress after Congress: Yet we have not acted. Our own State cannot act because, under the Constitution, this is a Federal responsibility, and it is a failed Federal responsibility in which we have failed our States. Right now 10 percent of the prison population in my home State of Florida is made up of illegal aliens. The Governor, Governor Chiles, just within the last hour has told me $80.7 million a year this alien population is costing the State of Florida, and in addition to that, because of the fact that it is 10 percent of our jail population, we are going to have to build 4 or 5 new prisons at a capital cost of $80 million to $100 million. Why in the world is this a State responsibility? Not only because of this, but only because of the impact on our prisons, but the impact on our hospitals, on our school systems. Down in south Florida, the Jackson Memorial Hospital is overrun with illegal aliens, and yet we are taking that as a local responsibility to our own State funding to take care of these people. The impact is absolutely, absolutely incredible. For anyone to stand on this floor and talk about a Federal responsibility where we should take away 10 percent of the money that is not even funding half of the cost for the States today, I think, is very shortsighted and is overly parochial.

Mr. SHAW

Mr. SHAW. Mr. Chairman, I find myself more in agreement with the gentleman in the well than in disagreement. I would like to point out to the gentleman and ask him a simple question: If you had a bill that was trying to attack the same problem, one of them was scored as netting $800 million and the other was being scored as netting over $2 billion, which one do you think would have the most holes in it or the most loopholes? I am sure the gentleman would answer me, certainly the one for $800 million has a whole lot more loopholes than the one for over 2 billion. Do the gentleman agree with that?

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

Mr. SHAW. Mr. Chairman, if the gentleman will continue to yield, I would say to the gentleman then that I am sure with that type of good common sense and legal background as he has that he will support the Archer substitute.

Mr. SHAW

Mr. SHAW. Mr. Speaker, I thank the gentleman for yielding time to me. I would just like to say that the time has long passed for us to do what this action is calling us to do. We have a sacred trust that is from the people for the taxpayers that they pay into this Government. Accountability is, I think, primary, whether you are talking about ethics or whether you are talking about what we do with the people's money. It is absolutely necessary that all of us be completely accountable for those funds that are entrusted to us. We are at last, I think, brushing away a dinosaur of the past. And that is a dinosaur which did not have accountability here in the House for the funds that we are expending. I would like to congratulate the leadership on both sides of the aisle for the realization that now the time has come for accountability, that now the time has come to have an independent audit done of the House books. I would certainly urge a yes vote, as I am sure one is going to come probably without exception, because this is such a commonsense resolution. Again, I would like to commend the leadership on both sides of the aisle to seeing that this day has finally arrived.

Mr. SHAW

Mr. SHAW. Mr. Speaker, I rise today to introduce legislation to strengthen small and family-owned businesses. Recently we have grown more aware of the burdens that regulations and tax complexities place on small and family-owned businesses. It is time for us to enact legislation to help the businesses that are the driving force of the American economy. The S Corporation Reform Act of 1995 will provide such support. Today almost 1.9 million businesses pay taxes as S corporations and the vast majority of these are small businesses. The S Corporation Reform Act of 1995 is targeted to growing these small businesses by improving their access to capital, by preserving family- owned businesses, and by simplifying many of the outdated, unnecessary, and complex rules for S corporations. Under current law, S corporations face 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 turn to nontraditional sources of financing such as venture capitalists and pension funds because they are unable to offer inducements that partnerships or C corporations can offer. This has greatly hindered their growth as traditional sources of debt financing, such as commercial bank loans, can at times be hard to get, especially for smaller businesses. This bill would expand S corporations access to capital by increasing the number of permitted shareholders from 35 to 75, by permitting tax-exempt entities to be shareholders, and by allowing nonresident aliens to own S corporation stock. More importantly, S corporations would be allowed to issue convertible preferred stock opening the door to the venture capital market. Additionally, the bill helps preserve family-owned businesses by counting all family members as one shareholder for purposes of S corporation eligibility and better enabling families to establish trusts funded by S corporation shares. Under current law, multi- generational family businesses are threatened by the artificial 35 shareholder limit which counts each family member as one shareholder. S corporations also do not have access to the same estate planning techniques available to C corporation owners since there are restrictions on the types of trusts permitted to be shareholders of an S corporation. Another important feature of this bill is the flexibility it would offer to S corporations and their shareholders in structuring their business operations. Under the bill, S corporations would be allowed to hold wholly-owned corporate subsidiaries that would for Federal tax purposes be effectively treated as a division or branch of the parent company. From a compliance perspective, only one tax return would be filed by the corporations, which would significantly simplify the compliance burden imposed by present law. Further, the bill would eradicate a number of outmoded and arcane provisions some of which date back to enactment of the S corporation in 1958. For example, S corporations [[Page E 1434]] would be given the opportunity under the bill to clean up invalid or untimely S corporation elections. I encourage my colleagues to support this important and badly needed legislation that is vital to small and family-owned businesses' ability to grow and compete in the next century. I am submitting a section-by- section summary of the legislation and I ask unanimous consent that the text of the bill be printed in the Record.

Mr. SHAW

Mr. SHAW. I yield to the gentleman from Indiana.

Mr. SHAW. The chairman is absolutely correct. It was on March 2, 1945, that the Congress authorized the channel depth in this area of the Intracoastal Waterway to be 12 feet deep; however, over the years it was only dredged to 10 feet.

Mr. SHAW. Mr. Chairman, I move to strike that last word. I would like to take this opportunity to engage in a brief colloquy with the gentleman from Indiana [Mr. Myers], the chairman of the subcommittee, to clarify the intent of the subcommittee to appropriate $150,000 to fund the Corps of Engineers' study for a 9.1-mile section of the Atlantic Intracoastal Waterway in Palm Beach County, FL. I am very pleased that the subcommittee made the decision to fund this study, but due to the unique circumstances regarding this project, I believe it is necessary to clarify the congressional intent on how the Corps should proceed with this study.

Mr. SHAW. That is correct. However, the traditional definition of a reconnaissance study is not adequate to describe the focus that is needed by the Corps to study this portion of the Intracoastal Waterway.

Mr. SHAW. Mr. Chairman, I thank the chairman very much for allowing me to discuss this project with him to clarify that it is the congressional intent that this $150,000 appropriation be used for a reevaluation study. amendment offered by mr. volkmer

Mr. SHAW

Mr. SHAW. Mr. Speaker, I rise today to pay tribute to the Italian- Americans, pillars of our great Nation. Since the landing on the shores of this continent by a brave and daring sailor from Genova known to us as Christopher Columbus, Italian- Americans have played a vital role in forming our country. From the signing of the Declaration of Independence by the Italian William Paca, a declaration that contained the words ``and all men were created equal,'' it is no wonder that this great Nation should be named America, after the Florentine explorer Amerigo Vespucci. More than 23 million Italian immigrants have come to this country. They worked in the coal mines, they dug our subway systems, they planted our vineyards, and they were foremost in their appreciation of family values. Constantine Brumidi spent his life in America painting the inside of the dome of our Capitol--16 months of it on his back. They also formed the Garibalde Guard, a fighting unit made up of mostly Italian-Americans who scored victories in numerous battles from Bull Run to Appomattox; and Gen. Luigi di Cesnola, Civil War hero and winner of the Medal of Honor. The achievements and contributions of Italian-Americans continued into the 20th Century. Amadeo Giannini founded the Bank of America, turning it into the largest, privately-owned banking institution in the world. Angelo Siciliano became America's Charles Atlas, Silvestre Poli started 20th Century Fox, Amadeo Obici founded Planter's Peanuts, Theresa DeFrancischi posed for the Miss Liberty head on our silver dollars, Charles Bonaparte founded the FBI, Rudolph Valentine was the star of the silent screen, and war hero Sgt. John Basilone who was the only one in history to receive our Nation's two highest honors, the Medal of Honor and the Navy Cross. The tapestry of America is deeply woven with the contributions by Italian-Americans; Joe DiMaggio, Frank Sinatra, Vince Lombardi, Mario Andretti, Rocky Marciano, Frank Capra, Lee Iacocca, Guy Lombardi, Bila Grasso, and Supreme Court Justice Antonin Scalia, are just a few. The Italian contribution to America spans a history of 503 years. It is a contribution that has continuing residuals that benefit every American every day, and it should not be overlooked, but revered. Mr. Speaker, today I am happy to join the Governor of the great State of Florida, along with many county commissioners, city mayors and councils, in declaring the month of October 1995, as Italian Heritage and Cultural Month.

Mr. SHAW

Mr. SHAW. Mr. Speaker, today I, along with Congressman Rangel, am introducing the Securitization Enhancement Act of 1995. We are privileged to be joined by Representatives Zimmer, McDermott, Payne, Kennelly, Cardin, English, Sam Johnson, Hancock, Christensen, Neal, Crane, Thomas, Collins, Kleczka, Dunn, Houghton, Matsui, Nancy Johnson, Herger, Nussle and Portman in introducing this important legislation that will assist small business in gaining access to capital and promote safety and soundness in the Nation's banking system. It will do so by simplifying the tax rules governing the securitization of asset- backed securities in a user-friendly fashion. We also have an additional piece of good news. Whenever the Congress considers tax legislation, one of the first questions asked is how much will this cost. Fortunately, this legislation is revenue neutral and will not add to our budget deficit. Indeed, the bill actually raises $87 million over 5 years, $92 million over ten, without raising any taxes. This bill builds upon the success of legislation enacted by Congress in 1986--the Real Estate Mortgage Investment Conduit [REMIC] provisions of the Tax Reform Act of 1986--which specified the tax rules for securitizing home mortgages. The legislation creates a new tax vehicle similar to a REMIC known as a Financial Securitization Investment Trust [FASIT]. Unlike REMIC, which applies only to home mortgages, FASIT is available to all forms of debt, including small business, consumer, student and auto loans, among others. Our experience with REMIC suggests that facilitating securitization for such loans will greatly expand credit availability. The Benefits of Securitization.--Securitization is the process whereby banks and other lenders package relatively illiquid loans and turn them into highly liquid marketable securities that relay for their creditworthiness solely on the underlying loans or on other guarantees provided by the private sector. Assistant Secretary of the Treasury Richard Carnell has described the securitization process as follows: By ``securitization,'' I mean the process of transforming financial assets, such as loans, into securities that in turn convert into cash over time. One converts loans into securities by assembling a pool of loans and selling them to a special-purpose entity, often a trust. That entity then issues securities representing a debt or equity interest in the loan pool. The cash flow generated by the loans finances payments on the securities. (Statement of the Honorable Richard S. Carnell, Assistant Secretary for Financial Institutions, United States Department of the Treasury, on the Administration's Views on the Loan Securitization Provisions of the Community Development, Credit Enhancement, and Regulatory Improvement Act of 1994, Subcommittee of Telecommunications and Finance, Committee on Energy and Commerce, United States House of Representatives, June 14, 1994 at 1.) The advantages of securitization are several: First, because securitization increases the amount of information investors have about the risks involved in holding a pool of loans, investors become more comfortable with those risks and more willing to invest in the pool. Second, securitization makes it possible to segment the different categories or types of economic risk associated with a pool of loans. As a result, it is often possible to make a better match between various risks and the investors that are most knowledgeable about undertaking those risks. Third, by converting a pool of loans into a marketable security--even if that security is retained by the original lender--the loans become more liquid and therefore more valuable. Liquidity also makes for safer and sounder financial markets. Fourth, by increasing information, risk segmentation, and liquidity, securitization makes it easier for lenders and investors to achieve appropriate diversification of their portfolios. Diversification can also help prevent a localized economic problem--such as a sudden change in the price of energy, real estate, or other commodities crucial to a local economy--from dragging down all of an area's local financial institutions and potentially causing serious regional or national financial problems. Avoiding Future Credit Crunches.--We all remember the credit crunch of the late eighties and early nineties that so hurt small businesses throughout the country. While this problem has receded somewhat, it remains a serious one. However, while small business was finding credit hard to come by, home buyers experienced unprecedented credit availability during this same period. For example, in 1986 the total size of the home mortgage market was approximately $2.5 trillion, with about $500 billion in home mortgages being securitized or sold in the secondary market. Six years later, in 1992, the size of the home mortgage market had grown to $4 trillion, over half of which was securitized. Virtually 100 percent of all fixed rate home mortgages are now sold in the secondary market. Since 1986, the total supply of home mortgage money has been steadily increasing, even though the portion supplied without reliance on securitization has been declining both as a percentage, and, most recently, as an absolute amount. Clearly, without securitization we would not have had the large increase in credit availability in the home mortgage market that occurred since 1986. REMIC may well be the most successful and perhaps the least known success emanating from the Tax Reform Act of 1986. Simply put, REMIC prevented the credit crunch from infecting the home mortgage market, to the everlasting benefit of millions of homeowners throughout the country. FASITs and Small Business.--FASITs can do for other forms of debt, particularly small business loans, what REMIC accomplished for home mortgages. Securitization of other forms of non-mortgage debt is virtually in its infancy. In 1992 only about $120 billion in non- mortgage debt was securitized. Most of the debt involved revolving credit and auto loans. We know from experience with REMIC that there is almost a one-to-one ratio for increased securitization and increased credit availability. There is every reason to believe that the economic and business benefits of securitization will be seized upon by lenders and borrowers alike in these other areas. As the administration has pointed out, ``[s]ecuritization benefits borrowers by making credit cheaper and more readily available. . . . Securitization could help make small businesses less susceptible to problems in the banking system insofar as it gives those businesses access to national and international credit markets, through banks or other financial institutions.'' (Carnell statement, supra at 2-3.) Last year Congress enacted the Community Development, Credit Enhancement, and Regulatory Improvement Act of 1994. That legislation made a number of changes in the securities laws intended to facilitate securitization of small business loans. When that legislation was introduced a provision was included authorizing Treasury to issue regulations regarding the tax rules for such securitizations. This provision was dropped, but the need for clear tax rules to guide small business and other nonmortgage securitizations remains. FASIT completes the unfinished business of the Community Development Bank Act. As the Administration noted in its 1994 testimony: We believe that securitization has the potential to increase lending to small businesses. Offering loan originators the opportunity to sell pools of small business loans to investors should help free up resources that can be used to make more such loans. By making small business loans more liquid, securitization should make them more attractive to originate and to hold. Securitization should also bring new sources of funds to small- and medium-sized business lending by enabling investors who do not lend directly to small businesses--such as pension funds, insurance companies, trust departments, and other institutional investors--to invest in small business loans made by other financial institutions, including banks that are effective originators of such loans but that may not want to hold all loans originated on their balance sheets. (Carnell statement, supra at 6-7.) The administration further stated that: [S]ecuritization should reduce the cost of borrowing for small businesses. Small business borrowers pay higher interest rates for credit in part because their loans are illiquid. If an active secondary market for small business loans existed, interest rates in that marked would influence rates in the loan origination market. If rates and yields were high in the securitized loan market, banks and other loan originators would be eager to have more loans to sell. They would signal this interest to borrowers by slightly lowering their interest rates to them, inviting borrowers to seek more credit or permitting previously marginal borrowers to afford credit. (Carnell statement, supra at 7.) FASIT's and Safety and Soundness Concerns.--Although facilitating asset securitizations will, as the SEC noted, help small business gain access to needed capital, this legislation will also be of direct benefit to the taxpayer. We need only look back to the recent thrift crisis to see the tremendous costs to the taxpayer that can come about as a result of Federal deposit insurance. Had REMIC or FASIT been in place in the late seventies, it is unlikely that the taxpayer would ever have had to bail out thrift depositors. In the last seventies, thrifts found themselves holding low interest rate mortgages at a time when their cost of funds was skyrocketing. To counteract these financial pressures, thrifts sought additional powers to engage in potentially more profitable, but also more risky activities. When these efforts proved to be unsuccessful, many thrifts failed, and the taxpayer had to finance a bailout costing billions. Simply put, if banks can sell off their loans to the secondary market, the risk that the loans may possibly default is assumed by the capital markets rather than the taxpayer through the deposit insurance system. Had thrifts been able to sell off their low interest rate mortgages in the seventies, the mismatch between their earnings and cost of funds would have been avoided, and the taxpayer spared much later expense. FASIT, by facilitating securitization of non-mortgage debt, will allow for a much safer and sounder banking industry, and, at the same time, reduce the potential exposure now borne by the taxpayer in the event that such loans go bad. The Tax Treatment of Asset Securitization.--In many ways the FASIT legislation is the tax code counterpart to the SEC's actions to promote asset securitization. Like the SEC's actions, FASIT would eliminate much of the disparity in tax treatment between certain selected classes or types of assets, which are currently allowed to obtain direct access to the capital markets through statutorily sanctioned vehicles, and other types or classes of assets which do not yet enjoy that treatment under the tax law. FASIT accomplishes this through a generic rule, like the SEC's approach, which allows all types of loans to be securitized as long as appropriate structural limitations and safeguards are in place. By moving to a generic approach, FASIT represents a first step towards rationalizing the various pass-through vehicles that now exist in the Internal Revenue Code, including REMICs, REITs, RICs, and the like. Once the market becomes familiar with FASIT, it may well be possible, eventually, to do all forms of securitizations under the FASIT umbrella. However, given the already large markets that exist in these other areas such as REMIC, we believe it would be far preferable and much less disruptive to move gradually rather than precipitously to a one size fits all model. Current Law Tax Treatment of Asset Securitization.--To understand exactly what FASIT does, and why it is beneficial, it is necessary to understand a little about the way asset securitizations are structured under current tax law. Securitization of loans depends on the ability to pass through to investors all or a significant portion of the interest income that is earned on a pool of loans without the imposition of an intervening corporate tax. As a tax matter, this is essentially what occurs when a bank makes loans with funds that it has obtained from deposits or other borrowings. Corporate taxes are paid by the bank only on the portion of the interest income received that is not paid out as interest to its depositors or other creditors. Traditional securitizations typically involve the use of a special purpose financing vehicle as the holder of the loans, and issue debt securities instead of raising funds from bank deposits, but the tax principle is the same. That is, assuming that the financing vehicle is a corporation, corporate taxes are paid only on the portion of the interest income received that is not paid out to the holders of debt instruments issued by the entity. As a result, the key tax issue is determining how best to structure the transaction so that the securities qualify as debt, rather than as an ownership interest in the special purpose entity. With REMICs, or similar entities structured under the tax law as fixed investment trusts of partnerships, the task of securitizing loans becomes much easier because 100 percent of the income paid out to investors is passed through without the imposition of an intervening corporate tax. This complete pass-through treatment is available regardless of whether the securities are classified as debt or as equity. Thus, the problem of determining how best to structure a security so that it satisfies the business objectives of the parties and still qualifies as debt for tax purposes is eliminated. FASITs and Asset Securitization.--Like the REMIC provisions before it, the FASIT legislation will help make loan securitization easier by creating a new pass-through structure specifically designed for loan securitization. Unlike REMICs, FASITs will be available for all types of loans or other instruments treated as debt for Federal income tax purposes. Although the FASIT itself will not be subject to any tax, its net income will be included in the United States income tax return of its owner or owners, and thus will, in virtually all cases, be subject to corporate income tax. The only exception is a provision intended to facilitate small business loan securitizations, which allows businesses operated as partnerships or S corporations to retain ownership of FASITs used to securitize loans to their customers, such as trade receivables. Loans will be transferred or sold to the FASIT so that it can issue securities backed by loans it has acquired. As with REMICs, FASITs will be permitted to issue securities that qualify as debt of the FASIT for Federal income tax purposes even though they are issued in non-debt form for State law purposes. This latter point reflects the fact that the assets of the FASIT are the sole source of payments on the securities, and that any risk of loss on the assets that is borne by the owners of the FASIT has been limited to a reasonably estimable amount. At the same time, treating such certificates as debt of the FASIT for tax purposes means that the portion of FASIT income passed through to the holders of the certificates is not included in the FASIT income that is passed through to the corporate owners of the FASIT. The FASIT legislation makes the rules for qualifying securities as debt, based upon their economic substance, clearer and more straightforward. In so ding, FASIT makes the tax rules governing the most advanced type of securitization structures more accessible to a wider variety of issuers and their tax counsel, thus creating a more liquid and more efficient marketplace. In addition to making the applicable legal rules and standards more accessible, FASIT will also ease some of the common law rules that are generally perceived as governing these types of transactions. Under current case law, securities purporting to qualify as debt for tax purposes generally must have a high investment grade rating of ``A'' or better. Under the FASIT legislation, debt securities can be issued as long as they do not have a yield that is more than 5 percentage points higher than the yield on Treasury obligations with a comparable maturity, which will permit more subordinated debt securities to be issued. Even debt securities at the top end of that yield limitation are still fundamentally debtlike, as the 5 percentage point standard is borrowed from current tax law rules governing when certain high yield discount bonds will be subject to special rules deferring accrued interest deductions. (See, section 163(e)(5), Internal Revenue Code of 1986.) These rules effectively assume that obligations yielding 5 points more than Treasury bonds could and do qualify as debt. Thus, FASIT legislation will not be authorizing the issuance of debt securities that are fundamentally different from debt securities that are currently outstanding in the markets. The yield limitation, which limits how much income can be passed through to the holders of FASIT debt instruments, is important because all remaining income--the income associated with the true equity like risk of investing in a pool of loans--will be taxable to the U.S. banks or other U.S. corporations that retain or acquire the ownership interests of the FASIT. Securitization has been driven by economic, not tax considerations. Consequently, we have exercised great care to ensure that this legislation contains no loopholes or gimmicks. Strong antiabuse provisions are also included to prevent any gamesmanship. Not only is this legislation devoid of any loopholes, it actually raises $92 million over 10 years. When a loan or an asset is transferred by the bank to the FASIT, there is an immediate recognition of gain. For example, assume that a loan will generate $10 of income each year over a 10-year period. When the loan is transferred to the FASIT, the present value of the entire $100 of income generated by the loan is recognized. In effect, this phenomenon is identical to an acceleration of estimated taxes, and the result is that the revenues lost by relieving the burden of the corporate level tax on the entity level is more than offset. Mr. Speaker, this FASIT legislation promises to be a great benefit to the Nation's small businesses, which often have difficulty gaining access to needed capital. We have seen the tremendous success of REMIC in developing a secondary market for home mortgages. If FASIT is even half as successful as REMIC, we will have enacted the most important legislation in history for small business. In addition to helping small business and others gain access to capital, this legislation protects the taxpayer from being forced to finance possible future bailouts for the banking industry. This legislation will promote safety and soundness of the banking system and spread the risks of loans throughout the capital markets rather than allowing them to be concentrated in one area, with the Federal Government the ultimate guarantor. This legislation also simplifies the tax rules governing securitization of asset-backed securities and creates a single vehicle available for all forms of non-mortgage debt and, eventually, FASITs may even supplant REMICs as the vehicle of choice for all securitizations. Finally, unlike many worthy tax measures which seem beyond our grasp because of budgetary constraints, this legislation actually raises money without raising taxes. I am proud to have introduced this fine piece of legislation, and I urge my colleagues to join with me to see that FASIT is enacted in 1995.

Mr. SHAW

Mr. SHAW. Mr. Speaker, I rise today to introduce legislation which will help to address some very serious ambiguities currently found in the tax code relating to the availability of pension plans for Indian tribal governments and their employees. Under current law, there are no salary deferred pension plans for Indian tribal governments and their employees. As far as we can tell, Indian tribal governments are one of only a few employers which do not have such plans available to them. Further aggravating matters, several tribes have purchased plans provided for under section 403 (b) of the Code from insurance companies, only later to find that such plans were not intended for their use. Those retirement funds, affecting several tribes and thousands of tribal employees, are now in jeopardy. One of the chief reasons individuals elect to work for an employer is based on a strong employee benefits package. Although many tribes are now competitive in the area of salary and health care the laws of the Federal Government have prohibited tribes from offering any form of salary reduction pension plan--one of the most sought after benefits offered to prospective employees. This is a basic matter of equity. The proposal would provide that annuity contracts purchased by employees of Indian tribal governments qualify under section 403 (b) as tax-sheltered annuities. The Joint Committee on Taxation has estimated that this proposal would have a negligible revenue effect on Federal fiscal year budget receipts. I am pleased to introduce this legislation today and I ask for the consideration of my colleagues.

Mr. SHAW

Mr. SHAW. Mr. Speaker, this past weekend, the people of south Florida lost a valuable member of their community and I join them in mourning the loss of Jo M. Wright. I rise today to pay tribute to the memory of Jo for her unparalleled service and contributions to the people of south Florida. Jo was a dedicated community leader, a successful business woman, and a mother of six. For more than 30 years, she was an active member of the Florida Association of Realtors, the State's largest professional trade association. As a result of her outstanding participation and professionalism, she was named the Fort Lauderdale Realtor of the Year in 1976 [[Page E 1294]] and the Florida Realtor of the Year in 1985. In addition, Jo was an energetic political activist, participating in the development of the Realtor's Political Action Committee [RPAC], chairing the State Woman's Council of Realtors, and acting in a key capacity on numerous other government-appointed committees. She was appointed by the Truman administration to serve as a 1950 delegate to the White House Conference on Children and Youth and continued on to energetically serve at local, State, and national levels for the next 40 years. Jo's impressive achievements are easily documented. However, the high respect in which she was held by her peers is also worthy of recognition. Jo was a kind, strong woman whose positive impact will be felt far into the future.

Mr. SHAW

Mr. SHAW. Mr. Speaker, I rise today to bring to the attention of this body a very distinguished Floridian, Mr. David McIntosh, of West Palm Beach, FL. Mr. McIntosh was inducted into the University of Florida Athletic Hall of Fame on April 7, 1995, as a distinguished letterman. Mr. McIntosh was a quarterback for the Gators from 1964 through 1967. According to the Hall of Fame Criteria, a distinguished letterman is a letter-winner honored for major contributions to the university athletic programs through the investment of personal time, effort, and interest for many years, for distinguished service to and achievement in local, State, and national civic and charitable causes and for distinguished career achievements. Mr. McIntosh has served in many capacities at the University of Florida. He is in his 5th year as a member of the board of directors of the University Athletic Association, its vice president, a member of its finance committee, and the chair of its audit committee. Mr. McIntosh is a past president of the University of Florida National Alumni Association. He has been a member of the board of directors of the University of Florida Foundation for many years, serving as chair for four of its committees: investments, budget, audit, and strategic planning. He is a past member of the board of directors of Gator boosters. He serves on the College of Business executive advisory board and previously served on the advisory board to the School of Accounting and on the College's Real Estate Advisory Board. He also served as the cochair of the major gifts committee for the College of Business during the University's Campaign for Excellence. Mr. McIntosh has been very active in other capacities as well. He has served Palm Beach County as president of the United Way, the YMCA, the science museum, the Forum Club, and other organizations, as well as taking an active role in many other civic, charitable, and governmental causes on the local, State, and national level. Mr. McIntosh has served as the chief executive officer of the 100- lawyer south Florida law firm of Gunster, Yoakley, Valdez-Pauli & Stewart, P.A., for the past 11 years. Prior to that time, he practiced as a CPA with Coopers & Lybrand in West Palm Beach for 15 years. He has earned many forms of professional recognition in each of those capacities. Mr. McIntosh lives in West Palm Beach, FL, with his wife Leslie M. Ritch, and their 18-month old daughter, Madison Marie. He is indeed a source of pride for all graduates of the University of Florida.

Mr. SHAW

Mr. SHAW. Mr. Speaker, recently, America has been faced with great tragedy. America as a whole has been greatly affected by the bombing of the Edward R. Murrah federal building in Oklahoma City. I am sure you all join me in mourning the loss of those Americans whom we lost, and praying for this tragedy's survivors to recover as best they can from this injustice. The Metro Dade Urban Search and Rescue Team has been a great aid to the unfortunate victims of the Oklahoma City bombing, and I would like to take this time to thank them. As you may remember this is the same group of fearless workers who gave us Floridians so must support in recovering from Hurricane Andrew. Oftentimes, while grieving the loss of disaster's victims, we forget how courageous and fearless these team members are. I am not only grateful but very proud that you are member of my community. Thank you.

Mr. SHAW

Mr. SHAW. Mr. Speaker, all across America, in the small towns and great cities of this country, our heritage as a nation--the physical evidence of our past--is at risk. In virtually every corner of this land, homes in which grandparents and parents grew up, communities and neighborhoods that nurtured vibrant families, schools that were good places to learn and churches and synagogues that were filled on days of prayer, have suffered the ravages of abandonment and decay. In the decade from 1980 to 1990, Chicago lost 41,000 housing units through abandonment, Philadelphia 10,000, and St. Louis 7,000. The story in our older small communities has been the same, and the trend continues. It is important to understand that it is not just the buildings that we are losing. It is the sense of our past, the vitality of our communities and the shared values of those precious places. We need not stand hopelessly by as passive witnesses to the loss of these irreplaceable historic resources. We can act, and to that end I am introducing today, with my colleagues Mrs. Kennelly, Mr. McCrery, Mr. Neal, Mr. Zimmer, Mrs. Johnson of Connecticut, Mr. Gephardt, Mr. Goss, Mr. Moakley, Mr. Hutchinson, Mr. Torkildsen, Mrs. Maloney, Mr. Richardson, Mr. Hinchey, Mr. Clyburn, and Mr. Nadler, the Historic Homeownership Assistance Act. This legislation is patterned after the existing Historic Rehabilitation Investment tax credit. That legislation has been enormously successful in stimulating private investment in the rehabilitation of buildings of historic importance all across the country. Through its use we have been able to save and re-use a rich and diverse array of historic buildings: landmarks such as Union Station in Washington, DC, the Fox Paper Mills, a mixed-used project that was once a derelict in Appleton, WI, and the Rosa True School, an eight-unit low/moderate income rental project in an historic school building in Portland, ME. In my own State of Florida, since 1974, the existing Historic Rehabilitation Investment tax credit has resulted in 325 rehabilitation projects, leveraging $238 million in private investment. These projects range from the restoration of art deco hotels in historic Miami Beach, bringing economic rebirth to this once decaying area, to the development of multifamily housing in the Springfield Historic District in Jacksonville. The legislation that I am introducing today builds on the familiar structure of the existing tax credit, but with a different focus and more modes scope and cost. It is designed to empower the one major constituency that has been barred from using the existing credit-- homeowners. Only those persons who rehabilitate or purchase a newly rehabilitated home and occupy it as their principal residence would be entitled to the credit that this legislation would create. There would be no passive losses, no tax shelters, and no syndications under this bill. Like the existing investment credit, the bill would provide a credit to homeowners equal to 20 percent of the qualified rehabilitation expenditures made on an eligible building that is used as a principal residence by the owner. Eligible buildings would be those that are listed on the National Register of Historic Places, are contributing buildings in National Register Historic Districts or in nationally certified State or local historic districts, or are individually listed on a nationally certified State or local register. As is the case with the existing credit, the rehabilitation work would have to be performed in compliance with the Secretary of the Interior's standards for rehabilitation, although the bill would clarify the directive that the standards be interpreted in a manner that takes into consideration economic and technical feasibility. The bill also makes provision for lower-income homebuyers who may not have sufficient Federal income tax liability to use a tax credit. It would permit such persons to receive a historic rehabilitation mortgage credit certificate which they can use with their bank to obtain a lower interest rate on their mortgage. The credit would be available for condominiums and co-ops, as well as single-family buildings. If a building were to be rehabilitated by a developer for sale to a homeowner, the credit would pass through to the homeowner. Since one purpose of the bill is to provide incentives for middle-income and more affluent families to return to older towns and cities, the bill does not discriminate among taxpayers on the basis of income. However, it does impose a cap of $50,000 on the amount of credit which may be taken for a principal residence. The Historic Homeownership Tax Assistance Act will make ownership of a rehabilitated older home more affordable for homeowners of modest incomes. It will encourage more affluent families to claim a stake in older towns and neighborhoods. It affords fiscally stressed cities and towns a way to put abandoned buildings back on the tax roles, while strengthening their income and sales tax bases. It offers developers, realtors, and homebuilders a new realm of economic opportunity in revitalizing decaying buildings. Mr. Speaker, this bill is no panacea. Although its goals are great, its reach will be modest. But it can make a difference, and an important difference, in communities large and small all across this Nation. The American dream of owning one's home is a powerful force. This bill can help it come true for those who are prepared to make a personal commitment to join in the rescue of our priceless heritage. By their actions they can help to revitalize decaying resources of historic importance, create jobs and stimulate economic development, and restore to our older towns and cities a lost sense of purpose and community. I ask unanimous consent that the text of the bill and an explanation of its provisions be printed in the Record.