Paul Wellstone

Mr. WELLSTONE

Mr. WELLSTONE. They are welcome to come back home, in which case they are eligible for all of this.

Mr. WELLSTONE. That is correct.

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 Madam President, I ask unanimous consent the order for the quorum call be rescinded.

Mr. WELLSTONE. Madam President, I am not going to call up the amendment yet, unless the managers are ready to do so. If they are, I will. I call up amendment No. 4364. Madam President, I have spoken on this amendment and I wait for other Senators to come to the floor. It is a very simple amendment. What it would do is bar the funds in this bill from being used to enter into contracts with U.S. companies who incorporate overseas to avoid U.S. taxes. Madam President, I went over this amendment before. Let me add a couple of points so my colleagues know what my thinking is. As I said, I wanted to keep it very simple. I want to keep it very basic and very straightforward, and I think very fair. I think there are two issues here. One of them has to do with tax fairness or tax unfairness. I think it is absolutely maddening when people in our country see U.S. corporations using creative paperwork and then transforming themselves into Bermuda corporations so they do not have to pay their fair share of U.S. taxes. What I am saying is if these companies, post-December 31, 2001, have engaged in such a practice, and they no longer call themselves U.S. citizens, then they are not beneficiaries of U.S. defense contracts. My thinking about this is as follows: I am thinking to myself, we are all aware of 9/11 and what it meant to our country. I have given companies time to respond in the positive to 9/11 and be the best of good corporate citizens, be the best of good, patriotic corporate citizens. I even allowed some lag time after 9/11. But what I am saying is starting the beginning of this year, if any of these companies have engaged in the same sham practices so they do not have to pay U.S. taxes, they are not going to be the beneficiary of the public contracts. It really is that simple. We all make sacrifices. God knows, many Americans are making sacrifices today. The only sacrifice this amendment asks of Federal contractors is they pay their fair share of taxes like everybody else, and at the very minimum, given 9/11 and how strongly our country feels, no corporation from the beginning of the year on, engage in this kind of deceitful practice. This is a narrowly tailored amendment; this is not a tax bill. Not in the spirit of bragging but I will just say it, I know at least the first piece of legislation that eliminated this tax loophole I wrote, and we sent it to the Finance Committee. They did good work. The have done great work. They reported out a bill that basically eliminates this egregious loophole. But what I am saying is until that loophole is eliminated, and no company is able to engage in this practice, what a great message for the Senate to send. When the homeland defense bill comes to the floor, I will join forces with other colleagues--I am sure Senator Lieberman and others--and we will do something parallel to what was done, to my understanding, in the House of Representatives. But right now on this appropriations bill, knowing full well the House did not take any action, I am trying to be a legislator here. I thought to myself: I will narrowly tailor it. I will have it speak specifically to this 1-year appropriations bill. It will send a very unmistakable message. And I believe this amendment will command widespread support. I do not know whether we will have unanimous consent. The distinguished chair of the Defense Appropriations Committee tells me there is some opposition, in which case I am pleased to have the debate. Then we will have a vote after the debate. Again, this is the second time I have come to the floor. I want to be clear what this amendment is about and what it is not about. I hope there will be very strong support on both sides of the aisle for this amendment. I yield the floor.

Mr. WELLSTONE. I say to the chairman, that is correct. I make it clear the Secretary of the Treasury, in addition to listing those countries, if there is another country that he determines is using this site of incorporation primarily to avoid U.S. taxation, that is included.

Mr. WELLSTONE. That is correct. I thank the chairman.

Mr. WELLSTONE. I say to the distinguished chair, I do not really know. Since I am talking about from the beginning of this year on, I do not know how many companies are actually going to be affected by this. I do not reach back. I just simply say, post beginning of this year, it is completely inappropriate, given 9/11, given how everybody feels in the country. I don't know how many companies are affected. I want to put every company on notice if they continue in this practice they are not going to get the contracts.

Mr. WELLSTONE. Please.

Mr. WELLSTONE. The Senator is correct.

Mr. WELLSTONE. Madam President, I ask for the yeas and nays.

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

Mr. WELLSTONE. Mr. President, there are colleagues who may very well have some technical suggestions that don't change the import of this amendment one bit. I certainly invite their consultation and their support which would help strengthen the amendment. My understanding is that there may eventually be a vote to table the amendment. I do not know. If so, I want to make sure one more time that I am crystal clear about what this amendment does and what it doesn't do. It is a simple amendment. It bars any funds in this bill from being used to enter into contracts with U.S. companies that incorporate overseas to avoid U.S. taxes. It is really simple. Former U.S. companies that have renounced their citizenship--and Senator Inouye asked me about this--currently hold at least $2 billion worth of contracts with the Federal Government. It seems to me the companies that play by the rules and that pay their fair share of taxes should not be forced to compete with the bad actors that undercut the bids through a tax loophole. I am saying, put on notice all U.S. companies post-January 1: If you engage in this egregious practice post-9/11 and you set up some sham business in Bermuda, et al, and therefore you don't pay any U.S. taxes, you don't get any defense contracts. I do not know. Maybe Senators want to vote against this proposition. But I will tell you that this is pretty simple and it is pretty straightforward. These companies--and we know all about it--transform themselves into Bermuda companies, which are basically shell corporations. They don't have any staff. They don't have any offices. They don't have any business activity. They exist for the sole purpose of shielding income from the IRS. What these bad corporate former citizens do is exploit a specific loophole in current law so that the company is treated as a foreign company for tax purposes, and therefore they do not pay any U.S. taxes on the foreign income. This loophole gives tens of millions of dollars in tax breaks to major multinational companies with significant non- U.S. business. It also puts other companies that play by the rules at a complete disadvantage. No American company, colleagues, should be penalized by staying put. For now on--reaching back to the beginning of this year-- no American company should be penalized for staying put in our country while others decide they are going to renounce U.S. citizenship for a tax break. It is just simply unacceptable. I said it before, and I will say it again, there are a heck of a lot of businesses in Minnesota--small businesses and otherwise--that, No. 1, wouldn't do it even if they could; and, No. 2, surely they do not have all of the lawyers and accountants to show them how to do their books Enron-style and get away with not paying their fair share of taxes. So the only price all the good corporate citizens pay--of which there are many--is a higher tax bill. I think we should close this loophole this year. I think we should close the tax loophole this year. As I said before, I wrote a piece of legislation to do that. I have worked with the Finance Committee. The Finance Committee, through the bipartisan work of Senator Baucus and Senator Grassley, has reported out a good piece of legislation. And assuming it passes, this tax loophole will be gone. But it seems to me, while this piece of legislation is on the floor, for this 1 year, what a powerful and positive message for us to send which is, again, post-December 31, 2001--I don't even reach back--I give companies enough time to respond to 9/11, and say: Wait a minute, this is not the right thing to do or patriotic thing to do. But I will tell you something, post-December 31st of last year, if a U.S. company has set up a sham corporation, so it does not have to pay part of its fair share of taxes, it is not going to be eligible for defense contracts. It is really that simple. So, again, I don't see colleagues out here to debate this. I understand there is opposition. I say to both of my colleagues, Senator Inouye and Senator Stevens, I am certainly not trying to delay the passage of this overall Defense appropriations bill. I think I have a good amendment on the floor, and I look forward to debate or I would look forward to constructive suggestions from other Senators if they think there is a way to strengthen this amendment. I am not backing off on the basic proposition here. I am not backing off on the basic proposition. And the basic proposition, again--and I think we are going to do the same thing on the homeland defense bill. It was done in the House. In fact, it was broader, more sweeping on the House side on homeland defense. This is 1 year. This is Department of Defense appropriations. This is not a tax amendment that I have offered to this piece of legislation. That would not be appropriate. But I do think it is appropriate to put every single U.S. corporation on notice, forthwith, reaching back to the beginning of this year, given the unfairness of this, given the obviousness of the ways in which companies are not paying their fair share of taxes, and, more importantly, given all that has happened to our country post 9/11: You are not going to be able to do this any longer. And if you do, you are not going to then be able to come to the U.S. Department of Defense and get defense contracts. That is what this amendment says. It is simple. It is straightforward. I am, frankly, at a loss to understand the opposition. Senator Inouye asked me an important question. He wanted to go over some of the countries, some of the tax-haven countries that were listed here. And we went through them. But there is also additional language that says there could be other countries that the Secretary of Treasury determines have been used as a site of a corporation primarily for the purpose of avoiding U.S. taxation. So we really write it the right way. Then, of course, there is the waiver where the President may waive this with respect to any specific contract if the President certifies to the Appropriations Committees of the House and the Senate that the waiver is required in the interest of national security. I will tell you something: This is very straightforward. I thank my colleague from Hawaii for asking me these questions. I would love to adopt this on a 100-to-0 vote or to have a debate if colleagues want to come out here and speak against this amendment. I yield the floor and suggest the absence of a quorum.

Mr. WELLSTONE. I say to my colleague and whip that I appreciate his questions. If there is going to be agreement, we are going to pass this amendment on the floor of the Senate. I say great. The summary of this amendment is that it is appropriate for the Senate, Democrats and Republicans, to say today that if a U.S. company wants to bid for a contract for U.S. defense work, then it should not renounce its U.S. citizenship for a tax break. It is that simple. We are just putting everybody on notice: You are no longer going to be able to do that. You will not be able to make a bid for a contract for U.S. defense work if you are going to go out and renounce your citizenship for the purposes of getting a tax break. It couldn't be simpler. I am going to stay on the floor of the Senate or stand on the floor of the Senate and keep talking about this until we get a vote or until we get acceptance of this amendment. I ask unanimous consent to print in the Record a list of corporate runaways and fiscal year 2001 Federal contracts.

Mr. WELLSTONE. I thank the Senator.

Mr. WELLSTONE. I am pleased to.

Mr. WELLSTONE. Let me say to my colleague that there are two parts to this equation. The first part is the definition of ``tax haven countries.'' There is Barbados, Bermuda, British Virgin Islands, Cayman Islands, British Commonwealth of the Bahamas, Cyprus, Gibraltar, and so on. Then the additional language where, because we want to have flexibility, we also say: or any other country that the Secretary of Treasury--these countries listed in the amendment--are the main tax haven countries. In addition, the Secretary of the Treasury could determine that there is another country that has been used at the site of incorporation for the purpose of avoiding U.S. taxation. That is No. 1. The second part of this--to give the operational definition--is that this would be any U.S. company that set up this phony citizenship post--actually, December 31.

Mr. WELLSTONE

Mr. WELLSTONE. Mr. President, I send an amendment to the desk.

Mr. WELLSTONE. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with.

Mr. WELLSTONE

Mr. WELLSTONE. Mr. President, I speak today in opposition to the nomination of D. Brooks Smith to the Third Circuit Court of Appeals. I oppose the nominee because I believe serious questions have been raised regarding his ethical integrity and judicial temperament. Mr. Smith misled the Judiciary Committee in 1988 when he promised he would resign from the all-male Spruce Creek Rod and Gun Club. Despite his promise, and after the committee passed a resolution asserting that belonging to exclusive clubs where business is conducted constitutes invidious discrimination, Mr. Smith did not resign. In fact, he did not resign until 1999, when the position on the Third Circuit opened up. Mr. Smith appears to subscribe to a general judicial philosophy that neglects the rights of women, institutionalized persons, consumers, workers, prisoners and disabled persons. His judgments have been reversed by the Third Circuit Court of Appeals 51 times--a larger number of reversals than any of the Appellate Court Nominees who have come before the Judiciary Committee this Congress. Many of these reversals concerned decisions affecting civil and individual rights and indicate a disturbing lack of sensitivity and failure to follow established rules of law and appellate court decisions when it comes to those rights. I am particularly concerned about Mr. Smith's reported view that the Violence Against Women Act is unconstitutional. I believe the Act is a lifeline to women in danger around the country and find Mr. Smith's view to be extreme. He is not in my view a suitable judge to serve one level below the Supreme Court.

Mr. WELLSTONE

Mr. WELLSTONE. Mr. President, let me take a little bit of time then. I am sorry, I won't proceed if the Senator from Hawaii is ready to make his opening statement. I do not want to take much time. Let me just give my colleagues a sense of what the amendment is. I will try to do that because we come down to the floor and we try to get in order so we can also do some other things. What the amendment says is that none of the funds made available in this act may be obligated for payment on any new contract to a subsidiary of a publicly traded corporation if the corporation incorporated after December 31, 2001, in a tax haven country. Basically what I am talking about is the whole question of contracts that go out to companies that have incorporated overseas to avoid U.S. taxes. By the way, knowing this is not in the House bill, I tried to have a very moderate version which is really to not even reach back retroactively but to look at this prospectively. That is the amendment. My guess is there will be a lot of support for the amendment. Without the unanimous consent agreement, I will wait until after opening statements and then try to seek recognition. I suggest the absence of a quorum.

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

Mr. WELLSTONE. Mr. President, I will at least, even though I do not have assurance of being able to do the first amendment--I will just send the amendment to the desk. Usually what Senators want is for those of us who have amendments to come out here. I am just trying to get going here.

Mr. WELLSTONE. I suggest the absence of a quorum.

Mr. WELLSTONE. Mr. President and colleagues, I offer a very simple amendment that would bar any funds in this bill from being used to enter contracts with U.S. companies that incorporate overseas to avoid U.S. taxes. Let me repeat that. I rise to offer a very simple amendment that I believe will command a majority vote--I hope more than a majority vote--in the Senate that would bar any funds in this bill from being used to enter contracts with U.S. companies that incorporate overseas to avoid U.S. taxes. Former U.S. companies that have renounced their citizenship currently hold at least $2 billion worth of contracts with the Federal Government. I do not think companies that are not willing to pay their fair share of taxes should be able to hold these contracts. U.S. companies that play by the rules of the game, that pay their fair share of taxes, should not be forced to compete with bad actors that can undercut their bids because of a tax loophole. In the last couple of years, a number of prominent U.S. corporations, using creative paperwork, have transformed themselves into Bermuda corporations, purely to avoid paying their fair share of U.S. taxes. These new Bermuda companies are essentially or basically shell corporations. They have no staff. They have no offices. They have no business activity in Bermuda. They exist for the sole purpose of shielding income from the Internal Revenue Service. U.S. tax law contains many provisions designed to expose such creative accounting and to require U.S. companies that are foreign in name only to pay the same taxes as other domestic corporations. But these bad corporate former citizens exploit a specific loophole in current law so that the company is treated as foreign for tax purposes and, therefore, pays no U.S. taxes on its foreign income. The loophole gives tens of millions of dollars in tax breaks to major multinational companies with significant non-U.S. business. It also puts other U.S. companies unwilling or unable to use this loophole at a competitive disadvantage. No American company should be penalized staying put while others renounce U.S. citizenship for a tax break. The problem with all this is that when these companies do not pay their fair share, the rest of the American taxpayers and businesses are stuck with the bill. I think I can safely say that very few of the small businesses that I visit in Detroit Lakes, MN, or Mankato or Minneapolis or Duluth can avail themselves of the ``Bermuda Triangle.'' They cannot afford the big-name tax lawyers and accountants to show them how to do their books Enron-style, but they probably would not want to anyway if it meant renouncing their citizenship. So the price they pay for their good citizenship is a higher tax bill. I believe the Congress will close this tax loophole this year. There is growing support for doing so in the House. And I have introduced legislation to close this loophole, and the Senate Finance Committee has reported a version of this legislation, that I strongly support, that would do so as well. I say to the distinguished chair of the Appropriations Subcommittee on Defense, it is not appropriate for the Senate to close the tax loophole on this bill. This is not a tax bill, and I understand that. Frankly, I think the tax legislation that is going to pass is going to make it clear that any company that is located in Bermuda forthwith, no matter when they incorporated, they are not going to be able to do it any longer. They are not going to be able to do it. We are going to close that tax loophole. But what is appropriate for us to say today--and this is my moderate version; this is the Senator Wellstone moderate version--what is appropriate for us to say today is, if a U.S. company wants to bid for a contract for U.S. defense work, it should not renounce its U.S. citizenship for a tax break. I am simply applying this to any corporation that incorporated after December 31, 2001. I am not even reaching back. I am saying, look, everyone has had the time now to understand, first, the unfairness and the outrageousness of this from the point of view of who pays taxes, who pays their fair share of taxes; and, second, everybody has had the time to now understand what 9/11 meant to us, and any company, with that background, that now continues to engage in this egregious practice--after December 31, 2001, and in the future--that is going to basically say, ``We are renouncing our U.S. citizenship so we don't have to pay taxes,'' no longer will be eligible for any procurement. That really is what this amendment says. We all make sacrifices in a time of war. The only sacrifice this amendment asks of Federal contractors is that they pay their fair share of taxes like everybody else. I say to my colleagues--and I say to the distinguished chair of the committee--that, look, I want to go after this tax loophole. Believe me, we will eliminate it. We will do it through the tax committee. In the homeland defense bill on the House side, there is a tougher version that reaches back. But I know in the House Defense appropriations bill there is no such provision such as the provision I am offering today. So what I am saying to my colleagues--I guess I have a little bit more; maybe it is because I am a Senator; maybe it is because of party control, I don't know--I have a little bit more faith in what we will do here. What I am saying to my colleagues is, I am giving you the moderate version. I am giving you the most reasonable proposition. We are only saying to Federal contractors: Pay your fair share of taxes as does everybody else, and for now on--December 31, 2001, and forward--any of you companies, if you want to go to Bermuda and play this shell game and renounce your citizenship, then you are not going to get our defense contracts. You are not going to get any of the procurement. This is really simple. This is really basic. This is really straightforward. I think it would be a great shot across the bow and a really powerful message, a really powerful and positive message, by the Senate to go on record with a strong vote for this amendment.

Mr. WELLSTONE. Mr. President, I say to my colleague from Hawaii, I would be pleased to honor his request. I also know that our colleague, Senator Stevens, from Alaska has an important engagement at the White House and will not be here for a while anyway and requested that he be here before there be any vote. So we can set this amendment aside. The only thing I want to say to my colleague from Hawaii is, I am certainly pleased for the Finance Committee people to look at this amendment. We will continue the debate, and we will have a vote. We will have a recorded vote. I worked hard on what could be the most central, simple, compelling message that also is fair--maybe almost too fair, frankly--to some of these companies. This is the proposition. This is the proposal. So it is fine with me to put it aside, understanding full well that we will continue the debate and have an up-or-down vote.