Stopping Overseas Subsidies Act of 2004

Mr. President, I would like to introduce today, with Senator Norm Coleman, a comprehensive tax reform bill called the Tax Shelter and Tax Haven Reform Act. This bill is intended to respond to the ever increasing tax shelter and tax haven abuses that are undermining the integrity of our tax system, robbing the Treasury of tens of billions of dollars each year, and shifting the tax burden from high income corporations and individuals onto the backs of the middle class. Abusive tax shelters and the misuse of tax havens must be stopped.

For more than a year, the Permanent Subcommittee on Investigations, on which I serve, has been conducting an investigation at my request into the design, sale, and implementation of abusive tax shelters. I initiated this investigation back in 2002, but it has since been carried out in a bipartisan fashion with the support of Senator Coleman, who is our current Subcommittee Chairman.

What the subcommittee investigation has found is that many of the abusive tax shelters were not dreamed up by the taxpayers who used them. Instead, most were devised by tax professionals, like accountants, lawyers, bankers, and investment advisors, who then sold the tax shelter to clients for a fee. In fact, as our investigation widened, we found hordes of tax advisors cooking up one complex scheme after another, packaging them up as generic ``tax products'' with boiler-plate legal and tax opinions, and then undertaking elaborate marketing schemes to peddle these products to literally thousands of persons across the country. In return, these tax shelter promoters were getting hundreds of millions of dollars in fees, while diverting billions of dollars in tax revenues from the U.S. Treasury each year.

In November 2003, our subcommittee held two days of hearings and released a report prepared by my staff which pulled back the curtain and provided an inside looks at how even some respected accounting firms, banks, investment advisors, and lawyers have become the engines pushing the design and sale of abusive tax shelters to corporations and individuals across this country. It was this investigative effort that inspired many of the provisions in the bill to combat abusive tax shelters and the professionals who promote them.

Another part of this bill results from subcommittee investigations examining how tax havens around the globe help taxpayers dodge their U.S. tax obligations, using corporate, bank, and tax secrecy laws to impede U.S. tax enforcement efforts. At one subcommittee hearing in 2001, a former owner of an offshore bank in the Caribbean testified that he believed 100% of his bank clients were engaged in tax evasion. He said that almost all were from the United States, described elaborate measures taken to avoid IRS detection of his clients' money transfers, and expressed confidence that the Government would defend client secrecy in order to attract business to the island. For the past few years, the IRS has made detection of offshore bank accounts used by individuals to conceal taxable income an enforcement priority, estimating that as many as 1 to 2 million U.S. taxpayers are hiding funds in offshore tax havens.

Corporations are also using tax havens to reduce their U.S. tax liability. A subcommittee hearing held in 2003, on an Enron tax shelter known as Slapshot, as well as Senate Finance Committee hearings on other Enron tax scams, show how corporations can utilize tax havens to avoid U.S. taxes. A GAO report recently released by Senator Dorgan and myself shows that nearly two-thirds of the top 100 companies doing business with the United States now have one or more subsidiaries in a tax haven. One company, Tyco International, has 115 tax haven subsidiaries. Data recently released by the Commerce Department further demonstrates the extent of U.S. corporate use of tax havens, indicating that, as of 2001, almost half of all foreign profits of U.S. corporations were in tax havens.

Over the years, subcommittee investigations have uncovered numerous instances of how U.S. tax enforcement efforts examining transactions, bank accounts, and other activities in tax havens have been delayed or impeded by tax haven secrecy laws and practices. This bill is intended to give the U.S. Government new tools to stop uncooperative tax havens from continuing to help corporations and individuals dodge their U.S. tax obligations.

Stop and think what is at stake here. Men and women in our military are putting their lives on the line every day for our Nation. They are in Iraq, Afghanistan, the Balkans, and now Haiti. To make sure we can provide them with the resources they need, all Americans need to contribute their fair share in taxes. Unfortunately, there are too many companies and individuals that finagle ways to avoid paying what they owe, despite the benefits they receive from this country. These tax dodgers deprive our Nation of billions of dollars in resources and add to the tax burdens of the rest of us.

Companies benefit from so much here in America: our stock market, telecommunications infrastructure, patent protections, educated workforce, research support, sophisticated financial systems, and basic law enforcement. Yet, too many companies run to use tax avoidance schemes based on abusive tax shelters and tax havens like a car speeding through a tollbooth, leaving the rest of us to pitch in the required fare and subsidize their free ride.

Corporate and individual tax dodges today take many forms. They include the following: Abusive tax shelters in which taxpayers use complex investment schemes with no real business purpose other than to evade tax; corporate inversions in which companies pretend to move their headquarters to an offshore tax haven just to avoid their U.S. tax bill; foreign tax havens in which taxpayers use bank accounts and shell entities in foreign tax havens to escape detection while dodging taxes; and structured financial transactions in which companies use shell entities in convoluted setups or improper transfer pricing schemes to avoid taxes. In most cases, these tax dodges are designed, sold and implemented by tax professionals who receive lucrative fees to help their clients avoid their tax obligations. To provide a better picture of some of these abuses, here are a few recent examples.

Perhaps the best-known corporate inverter is Tyco International, which operates out of New Hampshire and New Jersey, but claims a mailing address in Bermuda to avoid U.S. taxes. This tax dodge is a slap in the face of U.S. taxpayers, especially in light of the $300 million in Federal defense and homeland security contracts awarded to Tyco in FY 2002, as well as the months-long, taxpayer-financed prosecution of Tyco's former officers for diverting $600 million in corporate assets to their personal use. Tyco, once a proud U.S. corporation, has sunk to new lows in its attempts to avoid paying its U.S. taxes.

Corporate tax abuses aren't confined to large U.S. companies. One example of an abusive tax shelter being used by some small companies is called ``SC2,'' which was one of the tax shelters featured in our recent Subcommittee hearings and staff report. In this shelter, a closely-held corporation temporarily grants nonvoting stock to a tax- exempt charity and then allocates--on paper--a significant portion of the company's profits to that charity. Beforehand, the company takes steps to limit or suspend any obligation to actually distribute income allocated to its shareholders. The charity pays no tax on the paper profits allocated to it. When the original corporate owners eventually reclaim both the stock and undistributed profits, they claim that capital gains taxes, rather than higher ordinary income taxes, apply to the income previously allocated to the charity. The charity gets paid for its complicity, the corporate owners evade a lot of tax, and Uncle Sam is the loser.

A third tax shelter example involves a massive, $20 billion transfer pricing tax scam recently disclosed in a report issued by the bankruptcy examiner for Worldcom-MCI. The report states that Worldcom avoided paying hundreds of millions of dollars in state and Federal taxes over a four-year period, from 1998 to 2001, by claiming questionable expenses from related shell companies, including for a bogus intangible asset called ``management foresight.'' The

bankruptcy examiner, former Attorney General Richard Thornburgh, called on the company to sue its tax advisor and auditor, KPMG, for landing the company in this tax disaster, but Worldcom-MCI has, instead brazenly decided to continue using the tax dodge. This is the same company, by the way, that profits from billions of dollars in Federal and State contracts paid for--that's right--with taxpayer dollars.

The tax chiseling seems endless. Some of the tax ploys are arguably technically legal and require a change in law or regulation. Others appear blatantly illegal, yet elicit little or no penalty. Companies keep using them, and their competitors are put at a disadvantage unless they join in.

Too many respected accounting firms, financial institutions, and lawyers have joined in the sickening games by peddling tax dodges and taking a cut of the billions of dollars diverted from the U.S. Treasury. As IRS Commissioner Mark Everson has pointed out, accountants and lawyers should be the pillars of our system of voluntary tax compliance, not the architects of its circumvention.

This tax chiseling hurts average taxpayers, not only by leaving them with the burden of making up the lost revenues, but also by constricting resources for essential government programs. It is a lack of resources that results in the new Medicare drug prescription plan having a huge gap in coverage that denies elderly help with their prescription drug bills when they most need it. It's why our schools are burdened with unfunded mandates. It's why we have a giant and deepening deficit ditch threatening our children's economic well-being. The list of harmful consequences of tax dodging is long and disquieting.

The Tax Shelter and Tax Haven Reform Act we are introducing today contains a number of measures to put an end to these tax dodges:

To curb abusive tax shelters, the bill strengthens the penalties on tax shelter promoters and codifies the economic substance doctrine eliminating tax benefits for transactions that have no real business purpose or real economic impact apart from those tax benefits.

To crack down on the misuse of tax havens, we authorize Treasury to issue an annual list of ``uncooperative tax havens'' and suspend U.S. tax benefits for income attributed to those jurisdictions.

We also require the Treasury Department to issue standards for tax shelter opinion letters, and give the IRS new tools to take tough enforcement action against the accounts, lawyers, bankers and other financial professionals promoting or facilitating deceptive tax schemes.

Let me be more specific.

Title I of the bill strengthens a host of tax shelter penalties, which are currently so weak they provide no deterrent effect at all. Tow examples demonstrate the problem:

First, consider the penalty for promoting an abusive tax shelter, as set forth in section 6700 of the tax code. Currently, the penalty is the lesser of $1,000 or 100 percent of the promoter's gross income derived from the prohibited activity. That means in most cases, the maximum fine is $1,000. That figure is laughable, when many abusive tax shelters are selling for $100,000 or $250,000 a piece. Our investigation uncovered some tax shelters that were sold for $900,000 or even $2 million each, and instances in which the same cookie-cutter tax opinion letter was sold to 100 or even 200 clients. A $1,000 fine just doesn't cut it.

If further proof were needed, one document uncovered by our investigation contains the cold calculation by a senior tax professional at KPMG comparing possible tax shelter fees with possible tax shelter penalties if the firm were caught promoting an illegal tax shelter. This senior tax professional wrote the following: ``[O]ur average deal would result in KPMG fees of $360,000 with a maximum penalty exposure of only $31,000.'' He then recommended the obvious-- going forward with sales of the abusive tax shelter on a cost-benefit basis.

Proposals to increase the penalty for promoting abusive tax shelters have already passed the Senate three times and are included in the JOBS Act pending in the Senate. But these proposals are not tough enough to do the job that needs to be done. In general, they increase the penalty for promoting abusive tax shelters to a maximum of 50 percent of the promoters' gross income from the prohibited activity. Now, think about that. Why should anyone who illegally pushes an abusive tax shelter be allowed--if they get caught--to keep half of their profits? What deterrent effect is created by a penalty that allows promoters to keep half of their wages if caught, and all of them if they are not?

Penalities for those who peddle abusive tax shelters need to be a lot tougher. They should, first, make sure a tax shelter promoter is deprived of every penny of the profits earned from selling or providing legal advice on the shelter, and then pay a fine on top of that. Only that way is the promoter actually penalized for misconduct. Secondly, tax shelter promoters ought to face a penalty that is at least as harsh as the penalty imposed on the taxpayer who purchased their tax product, not only because the promoter is usually as culpable as the taxpayer, but also so promoters think twice about pushing tax schemes. Specifically, section 101 of the bill would increase the penalty on tax shelter promoters to an amount up to the greater of either 150 percent of the promoters' gross income from the prohibited activity, or the amount assessed against the taxpayer--including backtaxes, interest and penalties--for using the abusive shelter.

A second penalty provision in the bill involves what our investigation found to be one of the biggest problems--the knowing assistance of accounting firms, law firms, banks, and others helping taxpayers understate their taxes. Right now, under Section 6701 of the tax code, persons who knowingly aid and abet a taxpayer in understating their tax liability face a maximum penalty of $1,000 for assisting individual taxpayers and $10,000 for assisting corporate taxpayers. These paltry amounts provide no deterrent at all. Worse yet, the penalty applies only to so-called ``tax return preparers.'' Current law imposes no penalty at all on those who knowingly design and carry out the abusive tax shelter, so long as those persons don't actually prepare the taxpayer's return.

Section 102 of the bill would strengthen this penalty significantly, subjecting aiders and abettors to a maximum fine up to the greater of either 150 percent of the aider and abettor's gross income from the prohibited activity, or the amount assessed against the taxpayer for using the abusive shelter. And this penalty would apply to all aiders and abettors, not just tax return preparers.

These are just two of the penalties strengthened by the Tax Shelter and Tax Haven Reform Act. Others include stronger penalties for tax shelter promoters who fail to register a new shelter with the IRS or fail to provide the IRS with a client list when requested, and stronger penalties for taxpayers who fail to disclose a tax shelter on their tax return or fail to disclose an offshore bank account.

Title II also contains many provisions to combat abusive tax shelters, but first I want to mention Title III, which focuses on the economic substance doctrine, and Title IV which addresses offshore tax havens.

Title III of the bill would include in Federal tax statutes for the first time what is known as the economic substance doctrine. This anti- abuse doctrine was fashioned by Federal Courts asked to evaluate transactions which appeared to have little or no business purpose or economic substance apart from tax avoidance. It has become a powerful analytical tool used by courts to invalidate abusive tax shelters. At the same time, because there is no statute underlying this doctrine and the courts have developed and applied it differently in different judicial districts, the existing case law has many ambiguities and conflicting interpretations.

Under the leadership of Senators Grassley and Baucus, the Chairman and Ranking Member of the Finance Committee, the Senate has voted three times to codify the economic substance doctrine, but it has yet to be enacted into law. Since no tax shelter legislation would be complete without addressing this issue, Title III of this comprehensive bill proposes once more to include the economic substance doctrine in the tax code.

Sections 401 and 402 in the Tax Shelter and Tax Haven Reform Act also tackle the issue of tax havens by deterring use of tax havens that fail to cooperate with U.S. tax enforcement efforts. There are dozens of jurisdictions around the world that have enacted corporate, bank, and tax secrecy laws and then, in too many cases, used these laws to justify a failure to provide timely information to U.S. law enforcement about persons suspected of either hiding funds in the jurisdiction's offshore bank accounts or using offshore corporations and deceptive transactions to disguise their income or create phony losses to shelter their income from taxation.

Section 401 of the bill would tackle the problem by giving the Treasury Secretary the discretion to designate offshore tax havens as ``uncooperative'' and to publish an annual list of these uncooperative tax havens. The Treasury Secretary is intended to develop this list by evaluating the actual record of cooperation experienced by the United States in its dealings with specific jurisdictions around the world. While many offshore tax havens have recently signed treaties with the United States promising for the first time to cooperate with U.S. civil and criminal tax enforcement, it is undetermined what level of cooperation will actually result. For example, after one country signed a tax treaty with the United States, the government that led the effort was voted out of office by treaty opponents. Treasury needs a way to ensure that tax treaty obligations are met and to send a message to jurisdictions that impede U.S. tax enforcement. This bill will help Treasury get the cooperation it needs.

in addition to authorizing Treasury to publish an annual list of uncooperative tax havens, section 401 and 402 of the bill would deter use of uncooperative tax havens by imposing two types of restrictions on taxpayers doing business in the designated jurisdictions. First, taxpayers would be required to provide greater disclosure of their activities on their tax returns, including disclosing on their returns any payment above $10,000 to a person or account located in a designated tax haven. Second, the bill would disallow any tax benefits, such as foreign tax credits or deferral of taxation, for income attributable to a designated tax haven. These restrictions would provide the United States with powerful weapons to compel tax havens to begin to cooperate with U.S. tax enforcement efforts.

In addition to addressing the need to increase tax shelter penalties, codify the economic substance doctrine and deter use of uncooperative tax havens, the bill includes a number of measures in Title II that would address other aspects of abusive tax shelters. I'd like to discuss a few of these.

Title II of the bill includes a number of additional measures to crack down on abusive tax dodges. Section 201 of the bill would, in part, direct the Department of the Treasury to issue as part of Circular 230 new standards for tax practitioners issuing opinion letters on the tax implications of tax shelters. The public has traditionally relied on tax opinion letters to obtain informed and trustworthy advice about whether a tax-motivated transaction meets the requirements of the law. The investigation conducted by the Permanent Subcommittee on Investigations found that, in too many cases, tax opinion letters no longer contain disinterested and reliable tax advice, even when issued by supposedly reputable accounting or law firms. Instead, too many tax opinion letters have become marketing tools used by tax shelter promoters and their allies to sell clients on their latest tax products. In too many of these cases, financial interests and biases were concealed, unreasonable factual assumptions were used to justify dubious legal conclusions, and taxpayers were misled about the risks that the proposed transaction would later be designated an illegal tax shelter. Reforms are essential to address these abuses and restore the integrity of tax opinion letters issued by reputable firms.

Treasury recently proposed standards that would address some of the ongoing abuses affecting tax shelter opinion letters; however, the proposed standards do not take all the steps needed. Our bill would require Treasury to issue standards addressing a wider spectrum of tax shelter opinion letter problems, including: (1) the independence of the opinion letter writer from tax shelter promoters, (2) collaboration among letter writers resulting in joint financial interest, (3) avoidance of conflicts of interest that would impair auditor independence, (4) review and approval procedures by a firm for opinion letters issued in the name of the firm, (5) reliance on reasonable factual representations, and (6) the appropriateness of fee charges. By addressing each of these areas, Circular 230 could help reduce the ongoing abusive practices related to tax shelter opinion letters.

During the November tax shelter hearings before the Permanent Subcommittee on Investigations, IRS Commissioner Mark Everson testified that his agency was barred by section 6103 of the tax code from communicating information to other Federal agencies that would assist those agencies in their law enforcement duties. He indicated, for example, that the IRS was barred from providing tax return information to the SEC, Federal bank regulators, and the Public Company Accounting Oversight Board, or PCAOB, even when that information might assist a Federal agency in evaluating whether an abusive tax shelter resulted in deceptive accounting in a public company's financial statements, whether a bank selling tax products to its clients had violated the law against promoting abusive tax shelters, or whether an accounting firm had impaired its independence by selling tax shelters to its audit clients.

These communication barriers between our key Federal civil enforcement agencies are outdated, inefficient, and ill-suited to stopping the torrent of tax shelter abuses now affecting or being promoted by so many of our public companies, banks, and accounting firms. To address this problem, section 203 of the bill would authorize the Treasury Secretary, with appropriate privacy safeguards, to disclose to the SEC, Federal banking agencies, and the PCAOB, upon request, tax return information related to abusive tax shelters, inappropriate tax avoidance, or tax evasion. The agencies could then use this information only for law enforcement purposes, such as preventing accounting firms or banks from promoting abusive tax shelters or aiding or abetting tax evasion, and detecting and punishing accounting fraud related to illegal tax shelters employed by public companies. Improved information sharing for law enforcement purposes would greatly aid our agencies in their enforcement efforts.

The bill would also provide for increased disclosure to Congress. Section 204 of the bill would make it clear, for example, that companies providing tax return preparation services to taxpayers cannot refuse to comply with a Congressional document subpoena by citing a consumer protection provision in the tax code, section 7216, prohibiting tax return preparers from disclosing taxpayer information to third parties. Several accounting and law firms raised this claim in response to document subpoenas issued by the Permanent Subcommittee on Investigations, contending they were barred by the nondisclosure provision in section 721 from producing documents related to the sale of abusive tax shelters to clients for a fee. The accounting and law firms maintained this position despite an analysis provided by the Senate legal counsel showing that the nondisclosure provision was never intended to create a privilege or to override a Senate subpoena, as demonstrated in Federal regulations interpreting the provision. To clarify the law, the bill would codify the existing regulations interpreting section 7216 and make it clear that congressional document subpoenas must be honored.

Section 204 would also ensure Congress has access to information about decisions by Treasury related to an organization's tax exempt status. A 2003 decision by the D.C. Circuit Court of Appeals, Tax Analysts v. IRS, struck down certain IRS regulations and held that the IRS must disclose letters denying or revoking an organization's tax exempt status to the public. The IRS has been reluctant to disclose such information, not only to the public, but also to Congress, including in response to requests by the Permanent Subcommittee on Investigations. This

section of the bill would make it clear that, upon receipt of a request form a Congressional committee or subcommittee, the IRS must disclose documents, other than a tax return, related to the agency's determination to grant, deny, revoke or restore an organization's exemption from taxation.

Still another finding of the subcommittee investigation is that tax practitioners are circumventing current State and Federal constraints on charging tax service fees that are contingent on actual or projected tax savings. Traditionally, accounting firms charged flat fees or hourly fees for their tax services. In the 1990s, however, they began charging ``value added'' fees based on, in the words of a one accounting firm's manual, ``the value of the services provided, as opposed to the time required to perform the services.'' In addition, some firms began charging ``contingent fees'' that were based on a client's obtaining specified results from the services offered, such as projected tax savings. In response, many States prohibited accounting firms from charging contingent fees for tax work to avoid creating incentives for these firms to devise ways to shelter substantial sums. The SEC and the American Institute of Certified Public Accountants also issued rules restricting contingent fees, allowing them in only limited circumstances.

The subcommittee investigation found that tax shelter fees, which are typically substantial and sometimes exceed $1 million, are often linked to the taxpayer's projected tax savings or paper losses to be used to shelter income from taxation. For example, in three tax shelters examined by the Subcommittee, documents show that the fees were equal to a percentage of the paper loss to be generated by the transaction. In one case, the fees were typically set at 7 percent of the transaction's generated ``tax loss'' that clients could sue to shelter other taxable income. In addition, other evidence indicated that, in at least some instances, a tax advisor was willing to deliberately manipulate the way it handled certain tax products to circumvent the contingent fee prohibitions. One internal document at an accounting firm related to a specific tax shelter, for example, identified the states that prohibited contingent fees. Then, rather than prohibit the tax shelter transactions in those States or require an alternative fee structure, the memorandum directed the firm's tax professionals to make sure the engagement letter was signed, the engagement was managed, and the bulk of services was performed ``in a jurisdiction that does not prohibit contingency fees.''

Right now, the prohibitions on contingent fees are complex and must be evaluated in the context of a patchwork of Federal, State and professional ethics rules. Section 205 of the bill would simplify the existing prohibitions on contingency fees by putting into place a single enforceable rule, applicable nationwide, that would prohibit tax practitioners from charging fees which are ``contingent upon the actual or projected achievement of Federal tax savings or benefits, or of losses which can be used to offset other taxable income.''

Section 206 of the bill would establish that it is the sense of the Senate that additional funds should be appropriated for IRS enforcement, and that the IRS should devote proportionately more of its enforcement funds to combat rampant tax shelter and tax haven abuses. Specifically, the bill would direct increased funding toward enforcement efforts combating the promotion of abusive tax shelters for corporations and high net worth individuals and the aiding and abetting of tax evasion; the involvement of accounting, law and financial firms in such promotion and aiding and abetting; and the use of offshore financial account to conceal taxable income.

In a bipartisan letter that was recently sent to the Senate appropriations committee by Senators Coleman, Collins, Lieberman and myself, we wrote that, ``Tax enforcement is one area where a relatively small increase in spending can pay for itself many times over.'' Tens of billions in revenues that should support this country would actually reach the Treasury if we would hire adequate enforcement personnel, close the tax loopholes, and put an end to tax dodges.

It is past time to get serious about tax shelter abuses, uncooperative tax havens, and the tax dodgers who use them. This bill would send the message to tax dodgers that their shenanigans are unfair, unpatriotic, and unacceptable. We need to stop putting a disproportionate burden on the shoulders of the average American and make sure all taxpayers are paying their fair share.

I ask unanimous consent that a summary of the bill and the text of the bill be printed in the Record.

Mr. President, Our Nation's manufacturers can compete against the best in the world, but they cannot compete against nations that provide huge subsidies and other unfair advantages to their producers. I hear from manufacturers in my State time and time again whose efforts to compete successfully in the global economy simply cannot overcome the practices of illegal pricing and subsidies of nations such as China. The results of these unfair practices are lost jobs, shuttered factories, and decimated communities.

Our Nation's trade remedy laws are intended to give American industries and their employees relief from the effects of illegal trade practices. Yet, while U.S. anti-dumping laws can be currently applied to non-market economies, countervailing duty laws cannot. It is time that this was changed.

This is why I am introducing the ``Stopping Overseas Subsidies Act.'' This bill revises current trade remedy laws to ensure that U.S. countervailing duty laws apply to imports from non-market economies. It is simply not fair to prevent U.S. industries from seeking redress from these unfair trade practices because our trade remedy laws are outdated.

Over the past two decades, there have been significant economic changes in many of the countries classified as non-market economies. This is particularly true in China, one of our largest trading partners and the country with which the United States currently runs its largest trade deficit.

At the time our Nation's countervailing duty laws were approved in 1979, it was impracticable to apply these laws to China. In 1979, China's economy was still centrally planned, and most of its economic output was directed and controlled by the state, which set production goals, controlled prices, and allocated the country's resources. When an entire economy is controlled by the government, it is difficult, if not impossible, to determine what defines a government subsidy that causes harm to U.S. industries.

But beginning in the early 1980's and continuing today, China has undertaken major economic reforms. Today, China's economy is a far cry from being completely state-controlled. Government price controls on a wide range of products have been eliminated. Many enterprises and even entire industries have been allowed to operate and compete in an economic system that has elements of a free market. Many coastal regions and coastal cities in China have been designated as so-called ``open'' cities and development zones, where there is a free market and tax and trade incentives are offered to attract foreign investment. And, of course, china has taken steps toward fully integrating into the global trading system by joining to the World Trade Organization and by working toward the establishment of a modern commercial, financial, legal, and regulatory infrastructure.

The problem is not China's economic liberalization and modernization. The problem is this: now that China has the capacity to be a key international economic player, the country has repeatedly refused to comply with standard international trading rules and practices. And these violations include the use of subsidies and other economic incentives that are designed to give its producers an unfair competitive advantage.

The most glaringly obvious subsidy comes in the form of currency manipulation. By keeping the Chinese yuan pegged to the U.S. dollar at artificially low levels, the Chinese undervalue the prices of their exports. Not only does this practice provide their producers with a price advantage, but also it violates the International Monetary Fund and WTO rules. The Chinese government also reimburses many enterprises for their operating losses and provides loans to uncreditworthy companies.

Currently, U.S. industries have no direct recourse to combat these unfair practices. They instead must rely upon government-to-government negotiations or the dispute settlement processes of international organizations such as the WTO. While these channels might eventually lead to relief, it usually takes years to see results--and by that time, that industry could already be decimated.

Mr. President, unfair market conditions cannot continue to cause our manufacturers to hemorrhage jobs. No State understands this more than my home State of Maine. According to a study by the National Association of Manufacturers, on a percentage basis, Maine has lost more manufacturing jobs in the past three years than any other State.

There are many reasons for manufacturing job losses, including heavy tax and regulatory burdens. This is why I recently introduced a bill that would provide a variety of tax incentives for our Nation's manufacturers. However, without a level international playing field, tax reductions will not be enough to stop the flight of U.S. manufacturing jobs.

Industries across Maine that produce products ranging from paper to footwear to furniture are being harmed by unfair trade practices, and it is time that we put a stop to it. I ask you to join me in supporting the SOS bill to ensure that all countries are held accountable for their trade practices.

Mr. President, Our Nation's manufacturers can compete against the best in the world, but they cannot compete against nations that provide huge subsidies and other unfair advantages to their producers. I hear from manufacturers in my State time and time again whose efforts to compete successfully in the global economy simply cannot overcome the practices of illegal pricing and subsidies of nations such as China. The results of these unfair practices are lost jobs, shuttered factories, and decimated communities.

Our Nation's trade remedy laws are intended to give American industries and their employees relief from the effects of illegal trade practices. Yet, while U.S. anti-dumping laws can be currently applied to non-market economies, countervailing duty laws cannot. It is time that this was changed.

This is why I am introducing the ``Stopping Overseas Subsidies Act.'' This bill revises current trade remedy laws to ensure that U.S. countervailing duty laws apply to imports from non-market economies. It is simply not fair to prevent U.S. industries from seeking redress from these unfair trade practices because our trade remedy laws are outdated.

Over the past two decades, there have been significant economic changes in many of the countries classified as non-market economies. This is particularly true in China, one of our largest trading partners and the country with which the United States currently runs its largest trade deficit.

At the time our Nation's countervailing duty laws were approved in 1979, it was impracticable to apply these laws to China. In 1979, China's economy was still centrally planned, and most of its economic output was directed and controlled by the state, which set production goals, controlled prices, and allocated the country's resources. When an entire economy is controlled by the government, it is difficult, if not impossible, to determine what defines a government subsidy that causes harm to U.S. industries.

But beginning in the early 1980's and continuing today, China has undertaken major economic reforms. Today, China's economy is a far cry from being completely state-controlled. Government price controls on a wide range of products have been eliminated. Many enterprises and even entire industries have been allowed to operate and compete in an economic system that has elements of a free market. Many coastal regions and coastal cities in China have been designated as so-called ``open'' cities and development zones, where there is a free market and tax and trade incentives are offered to attract foreign investment. And, of course, china has taken steps toward fully integrating into the global trading system by joining to the World Trade Organization and by working toward the establishment of a modern commercial, financial, legal, and regulatory infrastructure.

The problem is not China's economic liberalization and modernization. The problem is this: now that China has the capacity to be a key international economic player, the country has repeatedly refused to comply with standard international trading rules and practices. And these violations include the use of subsidies and other economic incentives that are designed to give its producers an unfair competitive advantage.

The most glaringly obvious subsidy comes in the form of currency manipulation. By keeping the Chinese yuan pegged to the U.S. dollar at artificially low levels, the Chinese undervalue the prices of their exports. Not only does this practice provide their producers with a price advantage, but also it violates the International Monetary Fund and WTO rules. The Chinese government also reimburses many enterprises for their operating losses and provides loans to uncreditworthy companies.

Currently, U.S. industries have no direct recourse to combat these unfair practices. They instead must rely upon government-to-government negotiations or the dispute settlement processes of international organizations such as the WTO. While these channels might eventually lead to relief, it usually takes years to see results--and by that time, that industry could already be decimated.

Mr. President, unfair market conditions cannot continue to cause our manufacturers to hemorrhage jobs. No State understands this more than my home State of Maine. According to a study by the National Association of Manufacturers, on a percentage basis, Maine has lost more manufacturing jobs in the past three years than any other State.

There are many reasons for manufacturing job losses, including heavy tax and regulatory burdens. This is why I recently introduced a bill that would provide a variety of tax incentives for our Nation's manufacturers. However, without a level international playing field, tax reductions will not be enough to stop the flight of U.S. manufacturing jobs.

Industries across Maine that produce products ranging from paper to footwear to furniture are being harmed by unfair trade practices, and it is time that we put a stop to it. I ask you to join me in supporting the SOS bill to ensure that all countries are held accountable for their trade practices.

Mr. President, I rise today to introduce the Campus Care and Counseling Act along with my colleague from Ohio, Senator DeWine, my colleague from Oregon, Senator Smith and my colleague from New York, Senator Clinton. The recent rash of suicides on college campuses has highlighted a mental health crisis. Just this past week, Diana Chien, a 19 year old student at New York University ended her life by jumping off a building. Our own colleagues, the Senator from Oregon, suffered a tragic loss when his son, Garret, took his life last September. Suicides take the lives of over 4,000 children and young adults annually. It is now the third leading cause of death among 10-24 year olds. The rate of suicide has tripled from 1952 to 1995. How many more of our children will be lost before we take action to prevent their untimely demise? When will we start to say to them that there is an answer; that suicide is not the way out; that we can help them feel better; that they can live happier and healthier lives?

College is a time of great intellectual development--and it is also a time of exponential personal and interpersonal growth and change. When children go off to college, we need to be sure that they are going to a place that will help them reach their boundless potential. We also need to make sure that it will also support them through the transition to adulthood and during their greatest hour of need. Additionally, many more adults are going to college, and they too face challenges, particularly in balancing school, work, and family responsibilities. We can and should do more to address the significant lack in this area.

A Chronicle of Higher Education survey found that rates for depression in college freshmen have nearly doubled from 8.2 percent to 16.3 percent. Without treatment, the Chronicle reports that ``depressed adolescents are at risk for school failure, social isolation, promiscuity, self-medication with drugs and alcohol, and suicide.'' A 2003 Gallagher's Survey of Counseling Center Directors found that 85 percent of college counseling centers are reporting an increase in the number of students in need of services, 81 percent were concerned about increasing numbers of students with severe psychological problems, 67 percent reported a need for more psychiatric services, and 6.3 percent reported problems with growing demand for services without an appropriate increase in resources. Clearly, many students with serious needs do not have access to psychiatric or other mental and behavioral health services.

This is an issue that my office has been working on with the American Psychological Association since 2002. In light of the forthcoming debate on the Higher Education Act Reauthorization and the recent spate of college campus suicides, I am introducing the ``Campus Care and Counseling Act.'' This bill amends the Higher Education Act to authorize $10 million in peer-reviewed competitive grants to institutions of higher education to increase access and enhance mental and behavioral health services for our college students. Grants may be used for the prevention, screening, early intervention, assessment, treatment, management, and education activities related to mental and behavioral health problems. Taking into consideration that education creates awareness, these funds may also be used to educate parents, to hire staff, and to expand training. To address the stigma of mental illness, programs funded through this grant will need to focus their efforts on developing outreach strategies to reach those students most in need of services.

My colleagues in the Senate, this is an important bipartisan measure which will help to ensure that our nation's college students will have access to quality mental and behavioral health care so that they receive the help needed to not only survive through their difficult times in college, but also to excel and accomplish all that is within their reach. I want to also thank the American Psychiatric Association and other organizations for their assistance in shaping this legislation. I urge my colleagues to join myself and Senators DeWine and Smith in enacting this important legislation.

Mr. President, I ask unanimous consent that the text of this legislation be printed in the Record.

Mr. President, I am pleased to introduce legislation today designed to enhance child well-being in every State by collecting data on a State-by-State basis to provide information to advocates and policy makers about the well-being of children. My hope is that this legislation could be incorporated into a welfare reform reauthorization package. I believe that the Senate should reauthorize our welfare program, known as Temporary Assistance to Needy Families (TANF), and we should do it soon. But when we reauthorize TANF we must significantly invest in child care which is essential for parents to move from welfare to work, and to be successful on the job once they leave the official welfare rolls.

In 1996 this body took a bold step forward in reforming welfare. The driving force behind this reform was to promote work and self- sufficiency for families and to provide flexibility to States to achieve these goals.

States have used this flexibility to design different programs that work better for families who rely on them. Because of vast variation among State programs, there is an obvious need for research on child well-being for each State. We currently use the Survey of Income and Program Participation (SIPP) to evaluate the progress of welfare. It is an important national longitudinal study designed to provide rich, detailed data; the kinds of data most useful to academic researchers. It does not, however, provide States with good, timely data to help them more effectively accomplish the goals set forth in welfare reform.

This bill, the State Child Well Being Research Act of 2004, is intended to fill this information gap by collecting timely, State- specific data that can be used by policy-makers, researchers, and child advocates to assess the well being of children. It would require that a survey examine the physical and emotional health of children, adequately represent the experiences of families in individual States, be consistent across States, be collected annually, articulate results in easy to understand terms, and focus on low-income children and families.

The proposed legislation will provide data for all States, including small rural States like West Virginia. Further, this bill avoids some of the other problems that plague the current system by making data files easier to use and more readily available. As a result, the information will be more useful for policy-makers managing welfare reform and programs for children and families. When we reauthorize welfare reform, it will be essential for us to make a modest investment in research for every State.

Several private charitable foundations, including the Annie E. Casey, John D. and Catherine T. MacArthur, and McKnight foundations have written Chairman Grassley and Senator Baucus in support of such research. These foundations have offered to form a partnership to provide outreach and support and to guarantee that the data

collected would be broadly disseminated. This type of public-private partnership helps to leverage additional resources for children and families and increases the study's impact.

One of the most important ways that Congress can demonstrate its commitment to welfare reform and attempt to help States reach the goals outlined in 1996 is to incorporate a strong research component in the welfare reform reauthorization bill. Since each State has used its flexibility to creative innovative welfare reform programs, and many are quite different, we need State-by-State data on basic aspects of child well-being. I hope that my colleagues will support this bill so that we can give States the information they need to monitor and improve child well-being.